COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING - COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, March 2, 2005, 10:40 a.m. BILL 050003 - An Ordinance adopting the Operating Budget for Fiscal Year 2006. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DAVID COHEN COUNCILMAN JACK KELLY COUNCILMAN JAMES F. KENNEY COUNCILMAN JUAN F. RAMOS COUNCILMAN FRANK RIZZO COUNCILMAN FRANK DI CICCO COUNCILWOMAN JANNIE L. BLACKWELL COUNCILMAN MICHAEL A. NUTTER COUNCILMAN DARRELL L. CLARKE COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN BRIAN J. O'NEILL - - - V A R A L L O Incorporated Litigation Support Services 1835 Market Street, Suite 600 Philadelphia, PA 19103 215.561.2220 215.567.2670 2 Whole - 3/2/05 - No. 050003 P R O C E E D I N G S - - -
Good morning. This is the public hearing of the Committee of the Whole regarding the operating budget for fiscal year 2006. I would ask Mr. McPherson to please read the title of Bill No. 050003. MR. McPHERSON: Bill No. 11 050003, an Ordinance adopting the Operating Budget for Fiscal Year 2006.
Ms. Wilkerson. Good morning. Please identify yourself for the record and proceed with your testimony.
I'm Joyce Wilkerson, Chief of Staff to Mayor John Street. Thank you for the opportunity to provide testimony regarding the fiscal year 2006 operating budget for the Office of the Mayor. The total amount requested for the 3 Whole - 3/2/05 - No. 050003 Mayor's office from the General Fund for FY06 is $4,376,236, an increase of $230,463 over fiscal year 2005 estimated obligations. million is for employee compensation and purchases of services, material, supplies and equipment. million for 47 positions and represents an increase of $70,000 over FY2005 estimated obligations. The 47 positions constitute an increase of one position over the authorized level for 2005, and the requested Class 100 appropriation reflects a two percent increase. Both increases reflect the addition of 172,000 for three staff members for the revitalized Board of Ethics, partially offset by reductions elsewhere in Class 100. There are also increases of 135,000 in Class 200 appropriation and $25,000 in the Class 300/400 appropriation, which are entirely in support of the work of the Board of Ethics. I am pleased to report that the City's investment in our federal and state 4 Whole - 3/2/05 - No. 050003 lobbying teams continue to pay healthy dividends in an environment that places critical sources of revenue in continuing jeopardy. Our team helped the City secure more than $10 million in '05 appropriations earmarked in support of such initiatives as the new CORE scholarship program, West Philadelphia Streetscape, North Delaware Riverfront Development and Operation Safe Streets. The team also fought hard to protect the City's interests in transportation reauthorization legislation, homeland security, work force investment, Empowerment Zone and other matters. Meanwhile, our team in Harrisburg was critical in advancing the City's position with respect to gaming legislation and strengthening of PGW. The state team also helped win the enactment of three key pieces of legislation that authorize the City to charge up to $25 for police accident reports, authorize City Council to impose a penalty of up to $5,000 for short-dumping and authorize Council to 5 Whole - 3/2/05 - No. 050003 increase fines and penalties for violating City ordinances, rules and regulations in stages from the current maximum of $300 up to the new maximum of $2,000. The principal remaining portion of the General Fund total, $200,000 in Class 500, is for the City scholarships. This amount will continue the Mayor's office scholarship program for Philadelphia students who attend classes at area colleges and universities. The program is distinct from the CORE program inaugurated with the graduating high school class of 2004, through which system-wide scholarship assistance has been made available to every eligible graduating senior. Funding for that program in the amount of 4 million is included in the Finance Department's FY06 Class 200 budget. 2 million, representing an increase of $323,000 from FY2005 estimated obligations and an increase of $14,000 from the FY2005 original appropriation. The grants are principally from the federal government to 6 Whole - 3/2/05 - No. 050003 support the Mayor's Commission on Aging. The grants will enable funding to assist older adults with job counseling, training and placement, and health insurance counseling. As you will recall, beginning in FY05, grant funding for the Mayor's Commission on Literacy was transferred to the Free Library. The Mayor's Commission on Literacy was moved physically and organizationally to the Free Library in the fall of '04, and the Library is moving forward with the process of integrating the Mayor's Commission on Literacy with its Reader Development Program to support a more seamless delivery of services and literacy providers. You will be hearing from the Mayor's office of Community Services, Housing and Community Development, Labor Relations and MOIS on their fiscal 2006 operating budget request later in these hearings.
Thank you for your support, and I'll be happy to answer any questions.
Thank you. 7 Whole - 3/2/05 - No. 050003 The Chair recognizes Councilwoman Tasco.
On of the budget detail, 135,000 is allocated for vendors for the Ethics Panel. What is the purpose for these funds?
They've been identified by the Ethics Commission. I don't have the detail on what it is that they propose. I think it's when they want to do investigations, they have equipment that they'll be needing, but I can get a more detailed breakdown of exactly how those dollars are intended.
The Ethics Panel is selecting its own staff. I believe they are conducting interviews for an Executive Director. That's in process now. The Administration is not directly involved in 8 Whole - 3/2/05 - No. 050003 that.
Thank you. I believe you're requesting $332,000 for the creation of the Ethics Panel. Can you tell us -- I know that that is an executive order -- exactly what will their responsibility be?
The Ethics Board is responsible for monitoring the implementation of the ethics executive order. It receives in response to requests for guidance from members of the Administration on ethical issues that come up. The Ethics Commission is involved in reviewing proposed legislation that the Administration has proposed for ethics issues. I believe they also will be investigating certain complaints made. 9 Whole - 3/2/05 - No. 050003
Thank you. The Chair recognizes -- well, Councilman Nutter is on the phone. I, along with, I'm sure, every member of Council has been receiving tons of mail, and I guess only you will be able to answer the question. Will the Administration be extending the $750 bonus to DC 33 and 47 to non-represented employees?
Yes. The Administration directed yesterday, and I believe it's reported today, that exempt and non-represented employees will be getting the 750 bonus and the two percent FY06 increase. We are also in the process of restructuring a lot of positions, changing responsibilities, and in connection with that, there may be future adjustments made, but at this point, we've directed that there be the bonus paid. We expect that that will be paid out sometime in March, and then the two percent I believe is a July increase.
Thank 10 Whole - 3/2/05 - No. 050003 you. Councilman Nutter, your light was on. Do you have any questions?
Back in the area where Councilman Tasco was, could you share a little bit more information about the budget for the Ethics Board? How did you determine that particular amount?
That's what was requested by the Ethics Board. Therese Lily, the Chairman, requested that, and I can send up to you this morning the detail of that. We didn't try to argue it down. They are a new organization. They made a best-guess estimate on what the needs would be of the organization and we have submitted that in connection with our budget.
And you made mention that they're in the process of a search or interview process for Executive 11 Whole - 3/2/05 - No. 050003 Director?
Within the last month or two. I don't know exactly. I can get you that information.
And do you know if there was any type of advertisement? Are they doing it on their own? Was there a firm hired to help them with the search?
And I guess lastly on that, do they have a timetable for when they're looking to bring someone on?
I'll get you that information. I don't have the timetable for that.
Lastly, on of Section 2 in the operating budget book, is it fair to say, I guess, in conjunction with now having an Ethics Board, we are about to become members of the Ethics 12 Whole - 3/2/05 - No. 050003 Officer Association? Do you know which one that is?
Well, does that mean that we were members of it and we've dropped our membership?
Is that the name of the organization or is that just kind of a placeholder?
I'll get you the information on that. I don't know if that's the exact name of the organization.
I know there are a couple around. I have not heard of that one. So far, the decision is that we will not maintain membership in that organization?
There's been no 13 Whole - 3/2/05 - No. 050003 request to fund membership in that organization. The whole question of dues is one of the things that becomes a challenge as we reduce the City's resources. Out of the Mayor's office alone, we spend in excess of close to $70,000 on dues throughout the entire City. There's probably in excess of a few million dollars spent on dues, and we're continuously reviewing, asking questions about membership. And without a request, a specific request, I wouldn't fund something like that.
So if the Ethics Board decided at a subsequent point that they might want to participate in something like that, it would either come from that item or possibly from their own resources?
That's correct. They have discretion, you know, dollars that aren't connected to either payroll or computers, and they could make that funding decision to fund something like that.
Okay. Thank you. 14 Whole - 3/2/05 - No. 050003 Thank you, Madam Chair.
You're welcome. The Chair recognizes Councilman Rizzo.
Thank you, Madam President. Chief of Staff, on numerous occasions, I think two -- not numerous; on two occasions, I've communicated in writing to the Mayor's office about what you just discussed, the bonus to non-represented employees. As of today, I have not gotten an answer. So I would assume that I'll get that in writing?
It's very difficult. I don't know why. But we send thing things down there. It would have been nice to know about that prior to hearing it here today, especially since it goes back almost a month now or more. I'll provide you with copies of the communications.
Thank you, 15 Whole - 3/2/05 - No. 050003 Madam President.
You're welcome. The Chair recognizes Councilwoman Miller.
Thank you, Madam President. Good morning, Ms. Wilkerson. I have two questions, one regarding the CORE scholarships. Did we figure out what went wrong and why it took so long to get the payments out to the various colleges, and will that happen in the future?
Dianne Reed, Budget Director. It took a little bit of time to transfer the money from Council to the Finance Department so that we could pay from City accounts, but those did get out before Christmas.
Right. Well, will it happen again when you give those 16 Whole - 3/2/05 - No. 050003 out?
If the funding is kept in the Finance Department, we can do that more expeditiously.
Because I think I read some place it is going to be in the Finance Department, correct?
Okay. Because we were getting calls. I think it's a good program, but we were getting calls. And I have another question about this revitalized Board of Ethics. What did the Board of Ethics do? I wasn't here. I mean, I'd like to know what this Board actually does.
I'm going to ask Joe Grace, who is liaison from the Mayor's office to the Board, to address that more specifically.
Good morning, Madam President. Good morning, Council members. 17 Whole - 3/2/05 - No. 050003 Joe Grace, Deputy Secretary for External Affairs. The Board of Ethics that currently is in existence was appointed and reinvigorated by Major Street by executive order in August, in August of 2004. Prior to that, there was a Board of Ethics in existence in the City for some time, for many years. It had fallen somewhat into disuse, and the intention of the Mayor in promulgating the executive orders 001 and 002 of 2004 was to reinvigorate the Board of Ethics. He named five new members and appointed a Chair, and that Board has been at work since then, as our Chief of Staff testified earlier.
But what does it do? I mean, it just creates laws or policy or what? How do they interact with Council members? I'm missing that.
As our Chief of Staff testified, one of the things the Board of Ethics has done has been to look at ethics legislation before it has been transmitted to this Council. Another thing that the Board 18 Whole - 3/2/05 - No. 050003 has done has been to issue several opinions already concerning how the executive order on gifts and meals should be followed and adhered to in the City. In addition to that, the Board of Ethics is looking at streamlining the financial disclosure form, the statement of financial disclosures that City officials are required to file to make the form less confusing. In addition to that, the Board is looking at ways to facilitate campaign finance reports to be placed on the City's website to foster more disclosure and transparency. In addition to that, the Board reviews, as our Chief of Staff testified, complaints or questions that come in, Councilwoman, about the existing ethics rules and the Mayor's executive orders from Administration employees on how they can follow correctly those ethics rules and ethics executive orders.
The executive order only governs the administrative part, 19 Whole - 3/2/05 - No. 050003 the executive part of government, and so it doesn't have a real role.
Certainly. The Chair recognizes Councilwoman Tasco.
The current constitution of the Ethics Board has been in existence since mid August 2004, Councilwoman, following the Mayor's executive order.
There was a Board of Ethics that had fallen largely into disuse, Councilwoman. There were not really regular 20 Whole - 3/2/05 - No. 050003 meetings and there really was not any regular activity that we could discern being conducted.
Well, there is existing language in the Philadelphia Code that regulates ethics in the City. The intention of legislation that was introduced by members of City Council, as well as transmitted up by the Major in September was to create a more specific and definite code of ethics.
There's existing language in the Philadelphia Code that regulates ethics and ethical issues, yes.
One of the things that was recommended by the 21st 21 Whole - 3/2/05 - No. 050003 Century Forum was that we pull together all the pieces of ethics legislation so that people can find it in one place, create an omnibus code, and based upon that recommendation, the work of the Ethics Committee, we formulated legislation that would pull together a lot of what already exists, and that's what the Administration transmitted. There's also been one other source of guidance. The Law Department has lawyers who take responsibility for rendering guidance on ethical issues, and so even when there was not a very active Ethics Board, the Law Department has staff to whom people within government, across government, can direct questions. It wasn't a board, but there always been that repository of guidance.
What exposure do the employees of the City get regarding the current existing code of ethics?
Well, employees regularly inquire, both before the Mayor's executive order and since the Mayor's 22 Whole - 3/2/05 - No. 050003 executive order and the new Board of Ethics was put into place, of the counsel and the Law Department with questions about what they can and cannot do, Councilwoman, with regard to the existing language in the Philadelphia Code concerning ethical conduct.
So the language tells them that there's an ethics code and they should be mindful of them and where they could find them?
The counsel in the Law Department will attempt to answer those questions when employees from the Administration come to the Law Department and ask, can we do this or can we not do this.
But they have to ask; there's no training or education or information when someone is hired by the City, whether they be civil service or non-civil service appointees, there is no 22 process to provide them with information about a code of conduct?
Well, two things, if I may, concerning that. The Inspector 23 Whole - 3/2/05 - No. 050003 General, who is under the Office of the Mayor, I know regularly does accountability training with employees in each City department who are designated as, I think it's, Accountability Officers, as Integrity Officers. So that one employee, one designated employee, in each City department is aware of what the existing rules are and can then be a resource within each City department to be able to, to the best of their ability, answer those questions as employees have them, in addition to the counsel that the Law Department would provide if asked.
After the Mayor issued the executive order, there were -- I know the Managing Director called meetings. We had cabinet meetings where we reviewed the executive orders with cabinet members, the executive order and also other guidance. And I don't know exactly how it was moved through departments, but I can get you that information, because we did have meetings discussing it with people.
Well, what 24 Whole - 3/2/05 - No. 050003 role does the -- what is it called?
Inspector General. What role will he play with the Ethics Committee, Ethics Board, the new revitalized Ethics Board? What is the relationship between he and she and that agency?
Councilwoman, it's a close working relationship. Inspector General Gill has been a part of the revived ethics process from the very beginning from when the Ethics Committee of the Review Forum under Judge Chen began its work, as our Chief of Staff has testified. The Inspector General has been a part of every step of the way, had significant input into any recommendations, including a proposed code of ethics that went to the Mayor and became legislation transmitted up here in September. The Inspector General has 25 Whole - 3/2/05 - No. 050003 participated in meetings of the new Board of Ethics, the revived Board of Ethics, since August. I don't know if he's been at every meeting, but I think he's had a designee at several meetings. In short, there's already a close working relationship between the Board of Ethics and the Inspector General.
Who might file a complaint with the Board of Ethics, and do you know if any complaints have been filed recently?
When it comes to complaints, I think we probably should check with the Law Department. I paused because people ask questions of what they can and cannot do. In terms of complaints, I think we should really check with the Law Department and get back to you.
I'd rather have the Ethics Board talk about what its workload is, the nature of the inquiries.
Are they going to testify? Whole - 3/2/05 - No. 050003
Thank you. Ms. Wilkerson, can you tell us who our federal and state lobbyists are and how much they get paid?
I'll have Mr. Burrell, who is Secretary of External Affairs, come up and talk about it in more detail. The information is on Section 2.
Good morning, Madam President and members of City Council. We retain several law firms who do our federal lobbying in Washington. Among them are Patton and Bogs --
Patton and Bogs, Whitten and Diamond, the Linkage Group. What's the other one? I can never remember all of the names. The American Continental Group.
I think they are. American Continental Group and Congressman Bob Borsky, former Congressman Bob Borsky. Each of them are paid on a monthly retainer basis. Both Patton and Bogs and Whitten and Diamond were reduced this year from roughly $15,000 a month to Patton and Bogs down to $11,000 per month, Whitten and Diamond down to $8,500 per month. American was reduced from $7,500 a month down to $5,000 per month. Congressman Borsky remains at $5,000 per month, and the Linkage Group, which is a minority firm, was increased from $3,500 per month to $5,000 per month. And they do our Washington lobbying. We probably reduce like -- I don't have the numbers right on the 28 Whole - 3/2/05 - No. 050003 top of my head, but reduced this year's, the upcoming budget year, the current budget year in fact, by over $100,000, and those numbers will remain constant going into next year. In Harrisburg, if you want me to give you in Harrisburg --
It's not right before me, but I'm sure they're listed. But I can give them to you quickly.
Wojack firm. Wojack and Associates represents us. Former Senator Joe Loper represents us, and Ernie Bearfield represents us in Harrisburg. The Wojack firm was reduced from roughly $19,000 a month to $10,000 a month in the current year, and that would carry forward. Ernie Bearfield, who was a minority firm, was increased from $4,000 per month to $5,000 per month, and Senator Loper was reduced from $7,500 a month to $5,000 per month. And they represent us in Harrisburg. 29 Whole - 3/2/05 - No. 050003
Okay. I see that they are outlined on . Is there anywhere else or any other department that we would find that there were lobbyists?
I don't have them. We can get you the breakdown, but those lobbyists, those are our principal lobbyists. The funding for their contracts does not all come out of the Mayor's office. Some of it comes out of other departments, and we could identify that for you.
I believe that -- I'll do a sweep of all the departments. I think that the Water Department may have lobbyists dealing directly with water-specific issues. The gas company also has some lobbyists. But I can get you a call from the other departments any additional lobbying resources.
Thank you. That would be appreciated. The Chair recognizes Councilwoman Blackwell.
Thank 30 Whole - 3/2/05 - No. 050003 you, Madam President. I, too, were requesting additional information about the ethics. Not that the money listed is not a lot of money, but given our budget constraints, we're concerned about their role as well and how, given all the ethics hearings we are having, how they would relate or interact with other ethics boards being discussed. Can you tell us that?
This is something the Administration put in place last August. I think that if there is an alternative ethics mechanism put in place with an alternative board, we would certainly reconsider what it is that we've proposed, established and are currently funding.
Your testimony lists three staff persons at $172,000. What about if a new department is created; what is the total cost? Will they be placed some place where there are not additional costs, or what are we talking about here? 31 Whole - 3/2/05 - No. 050003
That was the staff cost. There are additional dollars for -- I think it's 135,000 in Class 200 and in Class 300 dollars that also support the 6 Board of Ethics. 7 The Administration considered 8 various alternatives. We said, Well, we could 9 have the Law Department staff the Ethics 10 Board, but we thought it was important that 11 there be sufficient distance from the 12 Administration. We have not sought to control 13 the Board. It has its own staff and operates 14 with independence. 15
I 16 would only say that certainly, I don't know, I 17 think we're kind of ethics'd out, but that's 18 my personal position. And given all the needs 19 we have and all the cuts, I certainly would be 20 one who would be interested in so many other 21 cuts that we're facing in terms of the City. 22 But certainly I respect the Mayor and the 23 Administrations's issue on this, but I 24 certainly would certainly hope that you will 25 consider all of the other needs that we're 32 Whole - 3/2/05 - No. 050003 dealing with and our feeling in that regard, especially we talked earlier about, for example, increase in license fees for mom and pop businesses and that sort of thing. I think that a lot of us have other concerns that we are more serious about than creating another board to monitor the cuts we already have. Thank you, Madam President.
The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam President. Good morning. Ms. Wilkerson, you testified that the largest portion of this request, Class 100 appropriation, includes $3.406 million for 47 positions. Are the three Ethics Board positions, they make up part of that 47?
Yes. COUNCILMAN DiCICCO: How does the 44, taking those three out, how does the 44 positions compare to previous years? Has there been any increase in the Mayor's budget in terms of positions? 33 Whole - 3/2/05 - No. 050003
Actually, our numbers have gone down from the year before. Last year there was an increase -- because based on a need and also the recommendation of the Transition Forum, we increased the size of the office of the Inspector General. When we looked at how the office of the IG was staffed here, looked at it in comparison to other jurisdictions, took a look at what our needs are, we increased that level. But I think if you look over time, you'll see a decrease. We've also transferred positions. Literacy was transferred over to the Library and so we lost those positions, but I don't -- those are probably not reflected in the 47, though. COUNCILMAN DiCICCO: I was just curious the 44 -- I'm using that as the base number currently -- how that compared to previous years. You said it actually may reflect a decrease from last year. I was just wondering, is there an increase or a decrease from the year 2000? 34 Whole - 3/2/05 - No. 050003
I can get you a chart that shows the numbers from 2000 to the present. COUNCILMAN DiCICCO: Does this reflect any overtime? Is this anticipated overtime or is this just straight out salary?
There's no -- COUNCILMAN DiCICCO: There are no positions that are eligible for overtime in this?
Nobody is paid overtime in the Mayor's office. COUNCILMAN DiCICCO: I just wanted to check. Thank you. I have no further questions at this time.
Okay. Ms. Wilkerson, I'd like to get back to my issue about the lobbyists. You mention in your testimony that the City's lobbying team in Harrisburg was critical in advancing the City's position with respect to gaming legislation and the strengthening of PGW. 35 Whole - 3/2/05 - No. 050003 How has the City's position with regard to the gaming been advanced? Isn't it true that under the existing gaming legislation the City has no say regarding the citing of the slot collars, certainly has no 7 say about the zoning? I mean, how were we advanced in that particular --
Two important things to take a look at, and, that is, where we started with respect to the legislation and now where we are with respect to implementation. When this legislation started, there was no commitment to the City of Philadelphia to have the gaming facility in Philadelphia whatsoever. Philadelphia was competing in the effort to potentially win one of the race track licenses that were going to be -- the new race track licenses that were going to be authorized around the Commonwealth. So that we started out with the potential of having only a race track in the City of Philadelphia, if we could successfully compete for that. Through the process, we were able to 36 Whole - 3/2/05 - No. 050003 come out at the end of the process by having no race track but two gaming facilities that are going to be slotted in the City of Philadelphia, working out the understanding that a certain amount of revenues would be directed to the City to be able to reduce the wage taxes here in the City. We were able to be a part of the lobbying effort that increased the local share, both local in terms of the home of the gaming site, plus the county from two percent to four percent. So that we believe that the ultimate outcome of the decision to locate two freestanding gaming facilities in the City of Philadelphia which have the potential to produce roughly $120 million, if they're as successful as projected, to write down wage taxes and have us getting four percent off the top of the gaming revenues that will come into the City. We were successful as a part of those discussions in getting the state to agree to take over ultimate responsibility for the expansion of the Pennsylvania Convention 37 Whole - 3/2/05 - No. 050003 Center and to assume responsibility for the operating expenses of the Convention Center, which are currently ours. We were unsuccessful in the legislation of being able to have the right to determine the local zoning laws to apply, but those rules are applied to us in the same way which they are applied across the Commonwealth. There is no jurisdiction that has the right to implement their own local zoning laws as relates to it. We were successful in the end of getting the 60-day provision in the legislation that allows the City to be able, once applications are received, to have 60 days to give to the Gaming Control Board our interpretation and our views with respect to the impact of potential sites on the zoning issues and site control issues as relates to the City. So although we would have preferred to be able to use local zoning laws with respect to site decisions, we are pleased with the outcome of the legislation in Harrisburg. 38 Whole - 3/2/05 - No. 050003
Thank you so much for that explanation. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. Either Chief of Staff Wilkerson or Secretary Burrell, one or both of you were responding to questions earlier with regard to the professional services on the lobbying side on of Section 2. I know some information was requested earlier. Could you additionally provide to the Chair brief information with regard to who the principals are for the various firms that are listed on , as well as a brief description of the services that they provide?
Obviously the to-be-determined 135 for the Ethics Panel, we don't need that.
Secondly, a couple weeks ago at the five-year plan 39 Whole - 3/2/05 - No. 050003 hearing, there was discussion when the Chief of Staff and Mr. Ginnetti were at the table and there was a listing made of upcoming bond deals for the City. NTI I think had just closed the week before. The Airport is still to come, Water, Juvenile Justice Center, the Library and, of course, come the annual summer trans. At the end of the series of questions, Mr. Ginnetti and Chief of Staff Wilkerson indicated that from, I guess, either the Finance office ultimately information is sent over to the Mayor's office with regard to who will be on the various teams. And, lastly, it was mentioned that yourself, Secretary Burrell, was involved in that process. Could you give us a little bit of information to explain how the decision-making is made with regard to who is on what team or on what deal and some of the details of how that process works?
I think that in fact the City Treasurer and the Finance 40 Whole - 3/2/05 - No. 050003 Director are best able to describe in great detail how decisions are made to do transactions. Other than the GO transaction and the tran, which are regular and recurring deals that are done every year by the City, often times the refunding deals are a result of proposals that are brought to the City by specific underwriting firms, whether that's Goldman Sachs or Morgan Stanley or whoever it might be. They come with opportunities in which the City may be able to reduce its overall debt service outlay, and those transactions are evaluated by the Finance Department. The responsibility for that has been moved now from the Treasurer's office into the Finance office, but all of the determinations about whether to do a transaction or to do a deal by the City of Philadelphia are made in the Finance Director's office. Once they have put together what those transactions would be, they then propose a team. They will evaluate the talents and the capabilities of underwriting firms, of 41 Whole - 3/2/05 - No. 050003 lawyers, of financial advisors, and they will put together a team usually that consists of a senior book runner and two co-senior managers. We try, in almost every instance, to make sure that either the senior book runner or one of the co-senior managers is a minority-owned and controlled firm or a woman-owned and controlled firm. They will put together a selling group, which may have anywhere from four to eight members in it, depending upon the size and the complexity of the deal. They will propose law firms and the bond counsel for the City and underwriters counsel. Virtually in all of those transactions we will have a majority firm and a minority firm that would be co-counsel in those deals. Those proposals, once determined by the Finance Department, are then sent to the Mayor's office, particularly into my office, and I will evaluate those deals usually from the perspective of making sure that the opportunity to participate with the City has been reasonably and responsibly spread around 42 Whole - 3/2/05 - No. 050003 among for those folks capable of doing this business with the City. And I would add that I think that the process by which we go through is no different than the process that goes through at the School District, at the Parking Authority, at the Pennsylvania Convention Center Authority and SEPTA and other places that do financing transactions in the City.
When the information comes over to, as you characterize, the Mayor's office and your office in particular, do you have information with regard to the cost of the transaction or the fees that will be charged for the work that the members of the team are providing?
Very often some of the costs of these transactions don't get resolved, particularly the legal fees, don't get resolved until the transaction is completed, because you don't know what the complexity of the deal is going to be on the front end. Law firms collect their time. They come, they work with the Finance Director 43 Whole - 3/2/05 - No. 050003 and with the Financial Advisor to determine whether those fees are responsible. Near the end of the deal, those fees will be agreed upon. The bond counsel fees obviously get paid by the City. Underwriters fees get paid by the underwriter. The transaction itself does not come to me. We rely upon the Finance -- in the past it's been the Treasurer and the Finance Director. We rely upon the Finance Director to make determinations about the cost of the deal. They will negotiate with the underwriting firm what they will sell the bonds at, whether it's $2 a bond, $3 a bond. Those financing transactions, underwriters fees get paid out of the proceeds from the sale of the bond. They get a fee per bond. The fee for the underwriters will be negotiated. The senior underwriter usually gets a consulting fee, which would be negotiated, and the City has a Financial Advisor that works with us on each of the transactions that will establish what we think is a responsible bond fee to pay for the sale 44 Whole - 3/2/05 - No. 050003 of the bonds, the responsible fees for the transactions, and the Financial Advisor, along with the Finance Director, will negotiate those fees in what we think are competitive and fair in the marketplace.
These bond transactions, are any of the various principles of competitive bidding utilized in putting these deals together?
They are competitive in the nature, Councilman, that particularly outside of the trans and the GO in a sense that we are often -- the Finance Director and the Treasurer in the past are often, along with our Financial Advisor, entertaining pitches by competing underwriting firms, often times competing pitches on similar transactions, whether it's in the Water Department, whether it's at the Airport, wherever it might be. So that they are always evaluating proposals that are given to them. Almost never are they simply putting together a team and saying, We're going to go do this transaction. Almost always they are 45 Whole - 3/2/05 - No. 050003 receiving competing proposals from the underwriting firms how they would go about doing this business. In the first year of the Administration, as has been in the case, I think, in the Wilson Goode Administration and in the Ed Rendell Administration, we sent out requests for qualifications to all of the underwriters who have traditionally done business with the City of Philadelphia. They responded to those requests for qualifications. They were evaluated. That information is available in the Finance Director's office. I cannot tell you how the Finance Director uses that information. I can tell you that we did go out and get that information in the first year of this Administration.
And I do understand that. I guess from the other side of it, for instance, with the upcoming Airport transaction, just as the list was given to us a couple weeks ago, that seems to be the next 46 Whole - 3/2/05 - No. 050003 to come. What I would ask or suggest by way of competitive bidding, was that transaction put out or advertised in such a way to say the City of Philadelphia is expecting to come to market for various airport needs -- I think the amount was $150 million. There may be another one of $180 million -- and then receive responses back from whoever wants to respond to that and then compete for that work. Is that a process that we utilize?
That is not a process that is utilized, Councilman, but I would say that there were at least three proposals that were given to the Airport and to the Finance Department to do that transaction. It was not simply the selection of one. It was from among three or four proposals that were given to them to do the transaction. Decisions were made as to how best to do that transaction.
Is there any reason not to do it in the way that we just discussed? 47 Whole - 3/2/05 - No. 050003
I think there is no reason not to do it in the way in which we do it, sir.
I am comfortable with the way in which we go about the business of selecting financial advisors and underwriters to do transactions for the City of Philadelphia. Are there other ways that you can do it? Yes.
Okay. Is there any particular disadvantage to the City to put out a transaction and ask people to respond to it and then compete for that business?
I think there are a number of things that have the potential to be negatives in that process. I think we are better served by having competing underwriting firms bringing us their best deals and us choosing from among those deals. I think that you will often find that the competitive process sometimes results 48 Whole - 3/2/05 - No. 050003 in a higher price per bond when you simply open it up to competition than if you are negotiating with a series of people and evaluating those proposals on a real-time basis. I think that, in my judgment, it is a competitive process the way it works today.
But it sounds like it's a process that is somewhat driven by -- and I'm very clear, you're not doing transactions just for the sake of doing transactions, but it seems, to some extent, to be driven more by the pitches and the creative ideas that are put forward on somewhat of an episodic or from-time-to-time basis as opposed to, I guess, a more affirmative and direct process that says we want to do this transaction, we are pleased to receive pitches, ideas, proposals about this transaction from as many people as possible. But I am slightly, I guess, maybe not understanding why we would end up in a less competitive situation if you end up utilizing the same negotiating strategy or tactics with any number of firms that might respond. 49 Whole - 3/2/05 - No. 050003
In my judgment, Councilman, we are better served to have people who are in the marketplace day in and day out all over the country looking at transactions and looking at the market and determining the timing of when it is most effective to be in that marketplace to do financings coming to us with competing proposals. In my judgment, the important issue is, is the City of Philadelphia in a way entertaining competitive proposals and not simply choosing one because they have a preferred position over another, but choosing from among competitive proposals. In every transaction that we do, the only -- I don't want to limit it. The Finance Department can speak about this better, but there are a limited number of transactions that we do that are simply driven by our decision on an annual basis that that's what we're going to do. Many of our other refinancings and opportunities are driven by market opportunities. 50 Whole - 3/2/05 - No. 050003 I think we're well served by having underwriters regularly and on a recurring basis talking with our financial advisors, talking with the Finance Department. And then once they've made a determination as to what deals they want to do, they have an understanding of what's available to us in getting it done.
Just a couple last questions. I think your position is very clear. I think you would disagree, it sounds like, with the suggestions or recommendations of, as Chief of Staff mentioned in a previous question, the recommendations of -- the 21st Century Review Forum seem to be more in the direction of competitive bidding process for any number of transactions for the City, but I think there was specific mention in some of their work made with regard to bond financing deals. You disagree with their view on this particular topic?
As I testified, Councilman, I believe that you can do this 51 Whole - 3/2/05 - No. 050003 really different competitive process than the one that currently exists. I believe the current process is in fact competitive, and I would be open, and I'm sure the Administration would be open, to discussions about ways to do it more effectively and better than we currently do. But it is not as simple as people make it out to be.
I understand. Is there a list of firms on -- I think you referred to a request for qualifications have been done in the earliest days in the first term. Is there a list of, I guess, qualified firms to work on transactions?
But, I mean, is there a list? I mean, are you aware that a list has been developed? Is there such a list?
I'm aware that in the first year of this Administration, we sent 52 Whole - 3/2/05 - No. 050003 out a request for qualifications, and those requests for qualifications were received and reviewed. I cannot tell you what the Finance Department did with them, but I will find out for you what they did with them. I do not have available on my desk a list of firms that I think that we consider to be the qualified list of firms to do business.
I do not. But I've been practicing law for 30 years, and probably two-thirds of those years I either have been working in this industry either as a lawyer or as an executive, so I have a sense of who the players are in the industry and what some of their capabilities are.
Okay. Could you provide to the Chair, if such a list exists for the various entities that perform services in this area, if you could make arrangements for such a list to be forwarded to the Chair, as well as a list of all of the bond deals that have been done by the City 53 Whole - 3/2/05 - No. 050003 since 2000 to present, with the names of the firms that participated in each of the deals, what their role or title was, as well as the fees generated by those firms for their work in those transactions. Can you get that information?
You're welcome. The Chair recognizes Councilwoman Blackwell.
Thank you. Thank you, Madam President. I wanted to follow up on information that we received from the Chief of Staff. Do you offhand know about this Historic Property Repair Program and the Vacant Property Management Information System, the status of those or if we're doing anything or not? Or you can get back to me on it.
I'll get back to you with updates. I know that VPMIS is 54 Whole - 3/2/05 - No. 050003 moving. They've done -- I can't talk through all the IT projects, but I'll get you a report with an update on that and also on the other Historic Properties Program.
Thank you. Are there any other questions from members of the Committee? (No response.)
Our next witness? MR. McPHERSON: Mayor's office of Labor Relations.
Good morning. Please identity yourself for the record.
My name is Bill 25 Grab. I'm the Director of Labor Relations. 55 Whole - 3/2/05 - No. 050003 I'm here with Delia Gorman and Joseph Tolan, the Deputy Directors of Labor Relations, to present the Office's request for fiscal year 2006 operating budget. The Office of Labor Relations coordinates labor relations programs affecting the City's unionized Civil Service work force. This includes Lodge 5, the FOP, International Association of Fire Fighters, Local 22, AFSCME District Council 33 and District Council 47. The Office of Labor Relations works with the City managers, union representatives and their members in collective bargaining, labor relations administration, dispute resolution 16 and labor management cooperation. We are requesting $490,025 in the fiscal year 2006 General Fund Budget. This represents a decrease of about $7,000 from our fiscal 2005 estimated obligations. Our fiscal year 2006 operating budget request breaks down as follows: $451,945 to support seven filled positions; $19,204 for the purchase of services, which is about $9,000 less than our 2005 estimated 56 Whole - 3/2/05 - No. 050003 obligations; and $18,876 for materials, supplies and equipment. Our fiscal year 2006 performance goals are attached for your information. The collective bargaining agreements with District Council 33, District Council 47 and the FOP expired on June 30, 2004. The City conducted collective bargaining with the three unions in accordance with the requirements of Act 111 and Act 195. As a result of an Act 111 interest arbitration panel, the FOP was awarded a four-year contract, which expires on June 30, 2008. After numerous contract extensions, the City and District Council 47 settled in October of 2004, and settlement was reached with District Council 33 in December. Currently the agreement with the Fire Fighters expires on June 30, 2005. We have commenced collective bargaining for a successor agreement. As of last Friday, the Fire Fighters declared impasse in those negotiations and the Act 111 interest arbitration process has begun. 57 Whole - 3/2/05 - No. 050003 Additionally, we're involved in the contract award for the FOP, which has a re-opener with health insurance issues, and the parties have begun this process. The Office of labor Relations is responsible for handling District Council 33 and District Council 47 grievances that are not resolved in the operating departments. Combined, the AFSCME District Council submitted 124 grievances to our office in fiscal year 2004. Grievance issues range from reprimands, one-day suspensions, to interpretation of contract language. For the same period of time, the hard-working and dedicated staff of the office disposed of 139 grievances. Another Office of Labor Relations service measure is conducting labor relations training for City employees. Our training emphasis is to help managers and supervisors function effectively in a unionized environment by providing them with strategies for administering the labor contracts in their work places. 58 Whole - 3/2/05 - No. 050003 During last year, we set a goal of 140 employees to train in 2006. We plan to increase that total to 200. The new collective bargaining agreements with both AFSCME District Councils continue the Redesigning Government Initiative Program, or RGI. This is a labor and management cooperation program designed to improve services to citizens and reduce the cost of City government. RGI committees have worked successfully in Recreation, Revenue, L&I, Health, Police and Department of Human Services. Currently the committee is working in the Board of Revision of Taxes. The Board is in the process of upgrading its technological systems to take advantage of improvements in hardware and software. Part of this process involves redesigning how work gets done. BRT has partnered with both District Council 33 and District Council 47 through the RGI process to involve employees in this redesign of their work. 59 Whole - 3/2/05 - No.
050003 Thank you for this opportunity to present our budget request for fiscal year 2006, and we are available to answer questions.
Thank you, Mr. Grab. You mentioned in your testimony the contract awarded for the FOP included a re-opener on health insurance issues effective July 1, '05. Can you explain how this process will work?
The award continued the authority of the panel, the 2004 interest arbitration panel. They continued to have authority over this issue. And we will go back to the panel with both sides presenting ways of cost containment and describing trends in health insurance during that period.
Can you tell us what is included in the five-year plan healthcare increases, if anything?
I believe there are increases. I know for District Council 33 and District Council 47 it would be ten percent 60 Whole - 3/2/05 - No. 050003 for the first year. I believe it's around nine percent.
Very well. Thank you. The Chair recognizes Councilman Nutter.
Right; Gorman. You made mention of collective bargaining issues, and what I'd like to better understand is, what is the Office's role in the negotiation process and who else is 61 Whole - 3/2/05 - No. 050003 involved in negotiating the various contracts with our four labor unions?
Well, we'll go back to the negotiations this past year. Let me get my years right here. In 2003, in the summer, end of the summer, beginning of fall of 2003, the Office goes and around talks to all the departments, boards and commissions or major departments, boards and commissions to see what their issues are when collective bargaining to find out what the managers of the City need. We then take this information and we work with the Law Department and with the Mayor's Chief of Staff in developing the City's proposals. Excuse me; and the Finance Department and the Managing Director's office to develop the City's proposals for negotiations. We will present that to the District Councils as our proposals. They'll present their proposals and then we'll present ours.
Now, this is August of 2003 anticipating a contract 62 Whole - 3/2/05 - No. 050003 expiring June 30, 2004?
The formal presentation to the union probably isn't until around January or February of 2004.
That's what I thought. Okay. Take me from that point through the end of the contract. What happens and what's the role of the Office?
We coordinate and participate in the negotiations with the unions. We basically work with a team of people from Finance, Personnel, Managing Director's office, Law Department and some outside attorneys to --
Now, when 63 Whole - 3/2/05 - No. 050003 it gets down to the point where it always gets down to, which is pretty much right at the end --
Well, I know that. So what I'd like to understand is, are you the individual that negotiates the contract with whoever your counterpart or lead negotiator is on behalf of the unions?