COUNCIL OF THE CITY OF PHILADELPHIA2 COMMITTEE ON FINANCE Room 400, City Hall Philadelphia, Pennsylvania4 Wednesday, May 13, 2009, 1:20 p.m. Bill 090321 - To authorize a new issuance of6 Water and Wastewater Revenue Bonds. Bill 090322 - Constituting Ninth Supplemental Ordinance to General Gas Works Revenue Bond.8 Bill 090323 - Constituting Tenth Supplemental9 Ordinance to General Gas Works Revenue Bond. Bill 090324 - Gen. Obligation Bonds Issuance. Bill 090325 - Approving FY10 Capital Budget for expenditures for capital purposes of PGW.12 Res. 090334 - Application to HUD for13 homelessness prevention services funds. Bill 090350 - Authorizing City Treasurer to deposit funds in City National Bank.15 Bill 090351 - Authorizing City Treasurer to16 deposit funds in TD Bank National Association. Bill 090352 - Agreement with Wachovia Bank, N.A. for provision of payroll banking services.18 COUNCILMEMBERS PRESENT:19 Marian B. Tasco, Chair W. Wilson Goode, Jr. Jannie L. Blackwell Bill Green20 Blondell Reynolds Brown William K. Greenlee Frank DiCicco James F. Kenney21 - - -22 V A R A L L O Incorporated23 Litigation Support Specialists 1835 Market Street, Suite 60024 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.267025 2 5/13/09 - FINANCE - 090321-25, 334, 350-521
Good2 afternoon. We'll now call the Committee3 on Finance to order, and we'll ask the4 clerk to please read the first bill to be5 heard.6
Resolution 090334,7 a resolution approving the City's8 Substantial Amendment to the Year 349 Consolidated Plan, (FY 2009) and10 application to the United States11 Department of Housing and Urban12 Development for approximately $21,486,00013 in funding for homelessness prevention14 services under HUD's Homeless Prevention15 and Rapid Rehousing Program pursuant to16 funds made available through the American17 Recovery and Reinvestment Act of 2009.18
Is there19 anyone here to testify on this bill?20 (Witness comes forward.)21
Good afternoon. My22 name is Dainette Mintz, and I am the23 Director of the Office of Supportive24 Housing. The primary objective of OSH is25 3 5/13/09 - FINANCE - 090321-25, 334, 350-521 to plan and coordinate Philadelphia's2 response to homelessness. 12 Homelessness prevention is an13 activity of the Emergency Shelter Grant14 Program. 20 Currently, under a memorandum21 of understanding with OHCD, the Office of22 Supportive Housing administers the23 Emergency Shelter Grant. The ARRA funds24 are new homeless housing and prevention25 4 5/13/09 - FINANCE - 090321-25, 334, 350-521 funds that require an amendment to OHCD's2 consolidated plan. As with the ESG, the3 Office of Supportive Housing will4 administer the HPRP funds. 10 The public comment period was11 April 9th through April 23rd. 25 6 5/13/09 - FINANCE - 090321-25, 334, 350-521 Between March 31st and April2 23rd, OSH convened weekly meetings with3 the three work-group subcommittees on4 prevention, diversion, and rapid5 rehousing. 12 On April 23rd, coinciding with13 the end of the public comment period, the14 Administration transmitted a resolution15 to Council, which was introduced by16 Councilwoman Marian Tasco, for a17 Substantial Amendment to the Year 3418 Consolidated Plan and application. This19 is Resolution No. 13 In response to public comments,14 OSH clarified that HPRP funds will target15 all households citywide that need16 short-term assistance to stabilize their17 housing. 5 OSH staff will assess new6 households seeking emergency housing at7 Ridge Avenue Men's Shelter and Apple Tree8 Family Center and make appropriate9 referrals to prevention or rapid10 rehousing services11 As necessary, OSH staff will12 engage a landlord or a family member in13 remediation to stabilize households while14 connections to housing or services are15 being made. 5 million includes11 $1 million to cover security deposits and12 first month's rents for single households13 existing shelter and drug treatment14 programs and entering the Philadelphia15 Housing Authority or Pathways Housing16 First programs17 In response to public comments,18 HPRP funds will cover housing19 stabilization services to provide20 households with supports to maintain21 housing beyond the 18-month cap of22 assistance, as indicated in the HUD23 guidance. 11
Thank you12 for your testimony.13 Are there any questions?14 Councilwoman Blackwell.15
Thank16 you very much, Miss Mintz.17 And to members of the18 committee, as you know, this is my issue,19 so we have been in many discussions with20 OSH and Miss Mintz on this and other21 programs that, thank God and President22 Obama, that the stimulus dollars have23 allowed us to take advantage of.24 And, certainly, we can say that25 13 5/13/09 - FINANCE - 090321-25, 334, 350-521 we believe this is a good program and2 that we're happy to support it.3
Thank you.7 Any other questions?8 (No further questions.)9
Thank you10 very much for your testimony. I think11 your briefing satisfied some of the12 questions that Councilmembers may have13 had, or would have had, today.14
Bill No. 090321, an18 ordinance constituting the Twelfth19 Supplemental Ordinance to the Restated20 General Water and Wastewater Revenue Bond21 Ordinance of 1989, as supplemented;22 authorizing the Bond Committee to issue23 and sell, either at public or private24 sale, Water and Wastewater Revenue Bonds;25 14 5/13/09 - FINANCE - 090321-25, 334, 350-521 authorizing agreements to provide credit2 enhancement and payment and liquidity3 sources for such Bonds; authorizing the4 Director of Finance to take certain5 actions with regard to the sale of such6 bonds, the investment of proceeds7 thereof, and the City's continuing8 disclosure obligation; setting forth the9 use of proceeds; covenanting the payment10 of interest and principal; and11 supplementing the Restated General Water12 and Wastewater Revenue Bond Ordinance of13 1989, all under certain terms and14 conditions.15
)18 COMMISSIONER BRUNWASSER: Good19 afternoon, Councilwoman Tasco and members20 of the Committee on Finance. 25 15 5/13/09 - FINANCE - 090321-25, 334, 350-521 And we're appearing before you2 this afternoon to testify regarding Bill3 No. 090321 to authorize a new issuance of4 Water and Wastewater Revenue Bonds in an5 amount up to $350 million. 15 Last summer, prior to current16 economic difficulties, the bond rating17 agency Standard & Poor's upgraded the18 Water Department's credit rating to the A19 stable level, citing stable financial20 performance, sound debt service coverage,21 improved system maintenance, and more22 comprehensive fiscal monitoring systems23 In their most recent reports24 last month, all three bond-rating25 17 5/13/09 - FINANCE - 090321-25, 334, 350-521 agencies confirmed their respective A,2 A3, and A- ratings while also3 complimenting the Department's financial4 and regulatory performance5 In my written testimony, I have6 more fully described the planned use of7 the authorization to partially fund the8 Water Department's FY 2009 through 20149 Capital Budget. 23 The total PENNVEST financing is24 almost $215 million. 10 In conclusion, I hope that I've11 been able to adequately outline the12 necessity of continuing to make funding13 available for our Capital Improvement14 Program. 20 We're also working with the21 Budget Office to ensure that the Water22 Department's Capital Budget for FY 200923 through 2014 is properly amended to24 provide for the appropriation and25 19 5/13/09 - FINANCE - 090321-25, 334, 350-521 expenditure of the PENNVEST projects2 Thank you for your3 consideration and this opportunity to4 testify. Mr. 7
Thank you,10 Madam Chair.11 Commissioner, has the Office of12 Economic Opportunity set any13 participation goals related to14 disadvantaged businesses for these15 capital projects?16 COMMISSIONER BRUNWASSER: Not17 yet. This is -- most -- this bond18 authorization is required for existing19 projects, and those projects have already20 met some of the goals.21 But the PENNVEST projects are22 very recent, and these are23 shovel-ready -- for the most part, are24 shovel-ready projects that we've had on25 20 5/13/09 - FINANCE - 090321-25, 334, 350-521 the drawing board but have not yet been2 advertised.3 So we will, obviously, work4 with the OEO Office to reach those goals5 that are set.6
To reach7 what goals?8 COMMISSIONER BRUNWASSER: The9 OEO goals for these capital projects.10
What are the11 OEO goals?12 COMMISSIONER BRUNWASSER: They13 are various percentages.14
Can you15 define any of the percentages?16 COMMISSIONER BRUNWASSER: It17 depends, I think, on the project to some18 extent, but I think, generally speaking,19 they're --20
So you don't21 know.22 COMMISSIONER BRUNWASSER: I've23 seen -- I've seen goals and I've seen24 diff -- I've seen different goals for25 21 5/13/09 - FINANCE - 090321-25, 334, 350-521 different projects at times.2
Did you3 agree with the goals on the various4 projects?5 COMMISSIONER BRUNWASSER:6 Pardon?7
Did you8 agree with the goals on the various9 projects?10 COMMISSIONER BRUNWASSER: Yes.11
But you12 don't remember them.13 COMMISSIONER BRUNWASSER: I14 think I know them, but I don't -- but I'm15 not positive.16
Can you17 submit those goals to the Chair before we18 vote on this bill finally?19 COMMISSIONER BRUNWASSER: Sure.20
Let me23 just follow up on that question.24 Do you participate in setting25 22 5/13/09 - FINANCE - 090321-25, 334, 350-521 the goals for each of the projects, or is2 that left up to someone else in the3 Department?4 COMMISSIONER BRUNWASSER: I5 think it's a combination, yes. I think6 it's a combination because, you know,7 depending on some of the projects, I8 think we have a pretty good track record9 historically of doing pretty well with10 that.11 We have -- I have another12 assistant in the back who could probably13 speak to that better than I.14
Could you15 have them come forward --16 COMMISSIONER BRUNWASSER: Yes.17
-- and18 tell us what the process is for setting19 the goals and who participates?20 (Witness comes forward.)21 COMMISSIONER BRUNWASSER: To my22 right is Brian Mull, who is in charge of23 our Capital Program.24
Good afternoon.25 23 5/13/09 - FINANCE - 090321-25, 334, 350-521 Brian Mull, Capital Program Manager,2 Water Department.3 Could you repeat the question,4 please?5
We're6 trying to figure out how do you set the7 goals. Who is at the table when you8 determine the goals for each of the9 projects? And how do you determine those10 goals? How are the decisions made?11
On a typical Capital12 Program project, we work closely with the13 OEO. We submit the project to them. We14 put in what we feel, based on past15 performance and past history. We feel16 that there is participation available for17 the project.18 And then the OEO reviews that19 contract, and they will meet with us, and20 we come to a determination of goals that21 are appropriate.22
What areas23 of the contracts can you -- is your24 outreach -- I mean, what positions, what25 24 5/13/09 - FINANCE - 090321-25, 334, 350-521 jobs are available for a diverse2 workforce?3
Any -- any of the4 jobs are available for participation --5 prime contracting, laying of pipe,6 excavation, trucking, supplies. That7 is -- we've seen -- we've seen a wide8 variety of participation over the -- over9 the years.10
Do you let11 the contracts, or do they go through the12 Procurement Department?13
The15 contracts, are they let through the Water16 Department or through the Procurement17 Department?18
They're let through19 the Procurement Department. We follow20 the same procedures as the Streets21 Department and Public Property and the22 Airport.23
But the24 goals are set within the Water25 25 5/13/09 - FINANCE - 090321-25, 334, 350-521 Department?2
And then they are6 either adjusted up or down, depending on7 the OEO.8
I just have11 one quick follow-up to that and then I'll12 ask my question.13 Has OEO ever lowered the goals14 you set?15
If they25 26 5/13/09 - FINANCE - 090321-25, 334, 350-521 have, just provide that information to2 the Chair.3 So I have a question about4 PENNVEST, and I'm trying to understand5 what the process normally is, 'cause I'm6 new around here, for grants-funding for7 things or low-interest loans.8 Is there any requirement when9 you apply for those loans or prior to10 applying for a grant or a loan that, in11 the PENNVEST process, that you have12 submitted to the legislative body for at13 least review of what it is you're going14 to go in and ask for?15
When you're18 applying for, like, a PENNVEST loan or a19 grant, is there any requirement that you20 come before -- by the grant-making or21 loaning body that you come before the22 legislative body and get our, at least,23 review prior to submitting an24 application?25 27 5/13/09 - FINANCE - 090321-25, 334, 350-521
No. The -- the2 PENNVEST loans are -- are -- will be3 designated as a funding source in the4 budget, so you see it then.5 And our budget is being amended6 to show these PENNVEST loans since we did7 not anticipate these PENNVEST loans when8 the budget was first created, the 20109 budget was first created.10
So you'll14 be -- so this has nothing to do with the15 budget or the appropriation; this is just16 an authorization to do the borrowing?17
Okay. And19 when are we going to see amendments to20 that budget, do you know, for that21 budget; that will be today?22
Because25 28 5/13/09 - FINANCE - 090321-25, 334, 350-521 here's the problem, and it's happening2 with the stimulus money, and it shouldn't3 happen in any category, I don't think,4 and I can only speak for myself.5 But I'm going to stop voting6 for stuff if City Council is not7 consulted in advance of a grant8 application or in advance of a loan9 application, then you are essentially10 bringing us money where we have no choice11 but to appropriate it pursuant to that12 department or the Administration's13 priorities, when there could have been a14 different use for that money; say, green15 roofs on schools, which could divert16 water instead of digging holes in streets17 or whatever.18 So, like, you're -- you're19 going out there with what you want to do,20 without ever consulting with this21 legislative body and then essentially22 asking us to be a rubber stamp, 'cause we23 haven't had a dialogue beforehand.24 So, in the future, please25 29 5/13/09 - FINANCE - 090321-25, 334, 350-521 contact us and let us know what's2 available, what you're applying for, so3 that you can at least have some informed4 input from this body prior to coming to5 us for approvals for things that are now6 just a fait accomplis.7
Well, I believe that8 the amount of the loan request has not9 increased; it's only where that funding10 source comes from.11
What we're15 appropriating for is something that16 hasn't been discussed with us.17
We have that in the18 Capital Budget, the line items in the19 Capital Budget as far as are where we're20 spending the money on --21
Right, but we're24 only amending for the funding source.25 30 5/13/09 - FINANCE - 090321-25, 334, 350-521 The amount is not changing.2
Okay. So3 all of this has been disclosed to us in4 the Capital Budget.5
It's all -- it's all6 in the Capital Budget. We're not7 amending the amount of the Capital8 Budget.9
Well, forget13 what I said then.14 But in -- you know, there's a15 CJAB grant and a bunch of other things in16 other departments, which has nothing to17 do with you guys, where people are making18 decisions about how it gets allocated19 without coming to us. And I just wanted20 to make sure that you were providing us21 that information in advance.22 Thank you.23
Any other24 questions?25 31 5/13/09 - FINANCE - 090321-25, 334, 350-521 Councilwoman Brown.2
Thank you,3 Madam Chairwoman.4 Commissioner, you indicated in5 your testimony that the Water Department6 does have a strong track record when it7 comes to MBE/WBE participation; was that8 your testimony?9 COMMISSIONER BRUNWASSER: Yes.10
I would11 ask that when you prepare for the12 submission of the OEO goals for this13 particular project that you also provide14 us with a track record of the last two15 years as well.16 COMMISSIONER BRUNWASSER: Sure.17
Any other20 questions or comments?21 (No further questions.)22
Thank you23 very much for your testimony.24 We have -- I guess, the City25 32 5/13/09 - FINANCE - 090321-25, 334, 350-521 Treasurer will come forth, or the Finance2 Department to talk about Bill 090350.3 Would the clerk read the next4 bill.5
Bill No. 090350, an6 ordinance amending Chapter 19-200 of the7 Philadelphia Code, entitled "City Funds -8 Deposits, Investments, Disbursements," by9 amending Section 19-201, entitled "City10 Depositories," by authorizing the City11 Treasurer to deposit funds in City12 National Bank, under certain terms and13 conditions.14 (Witnesses come forward.)15 TREASURER RHYNHART: I'm16 Rebecca Rhynhart, City Treasurer.17
Could we18 read all three of those bills? Why don't19 we read all three of those bills and20 you'll testify on them all.21 TREASURER RHYNHART: Yes.22
Bill No. 090351, an23 ordinance amending Chapter 19-200 of the24 Philadelphia Code, entitled "City Funds -25 33 5/13/09 - FINANCE - 090321-25, 334, 350-521 Deposits, Investments, Disbursements," by2 amending Section 19-201, entitled "City3 Depositories," by authorizing the City4 Treasurer to deposit funds in TD Bank5 National Association, under certain terms6 and conditions.7 Bill No. 090352, an ordinance8 authorizing the Office of the City9 Treasurer, on behalf of the City, to10 enter into an agreement with Wachovia11 Bank, N.A. for provision of payroll12 banking services to the City, under13 certain terms and conditions.14
Thank you.15 TREASURER RHYNHART: Good16 afternoon, Councilwoman Tasco and members17 of the Committee on Finance. I'm Rebecca18 Rhynhart, City Treasurer for the City of19 Philadelphia. I'm here to testify on20 behalf of Bill No.'s 090350 and 090351.21 Bill No. 090351 amends Chapter22 19-200 of the Philadelphia Code by23 amending Section 19-201, entitled "City24 Depositories," authorizing the City25 34 5/13/09 - FINANCE - 090321-25, 334, 350-521 Treasurer to deposit funds in TD Bank,2 under certain terms and conditions.3 Commerce Bank is currently an4 authorized depository. The bill5 maintains continuity of banking for6 accounts held under Commerce Bank due to7 corporate sale of Commerce to TD Bank8 N.A.9 Bill No. 090350 amends Chapter10 19-200 by amending Section 19-201,11 entitled "City Depositories," by12 authorizing the City Treasurer to deposit13 funds in City National Bank. City14 National Bank meets the requirements to15 become an authorized depository, and the16 Administration supports this bill.17 There has also been a technical18 amendment introduced -- I'd like to19 introduce a technical amendment, which20 Derrick should have given out in the back21 of your packets, which just renumbers --22 fixes a numbering problem as well as23 clarifies the name of City National Bank24 to specify that it's City National Bank25 35 5/13/09 - FINANCE - 090321-25, 334, 350-521 in New Jersey, 'cause there is another2 City National Bank.3
Well, why4 don't you read the amendment.5 TREASURER RHYNHART: This6 concludes my testimony on these two7 bills. I'm happy to answer any questions8 that you may have.9
Good13 afternoon.14 TREASURER RHYNHART: Good15 afternoon.16
With regard17 to the amendment, the name is actually18 "City National Bank of New Jersey"?19 TREASURER RHYNHART: It's "City20 National Bank," but there's one in21 California also, I believe, so the Law22 Department changed it just to have23 parentheses, New Jersey.24
And so25 36 5/13/09 - FINANCE - 090321-25, 334, 350-521 they're headquartered in Jersey?2 TREASURER RHYNHART: That's3 right.4
And do they5 have offices in Philadelphia?6 TREASURER RHYNHART: They do7 have one office in Philadelphia, at 17th8 and Market Street.9
And are they10 expected to create other locations in11 Philadelphia?12 TREASURER RHYNHART: I'm not13 sure about that at this time, but they do14 have that one branch that they -- I think15 they opened that in 2007.16
Yes.19 Councilman Green, do you have questions?20 Any other questions?21 Okay. So that's the amendment22 to that bank, to make sure that we know23 it's in New Jersey.24 TREASURER RHYNHART: Right.25 37 5/13/09 - FINANCE - 090321-25, 334, 350-521
And not2 California.3 TREASURER RHYNHART: Right.4 right.5
Okay,6 thank you.7 All right. Are you going to8 testify on the next one?9 TREASURER RHYNHART: Sure.10
Okay, go14 ahead.15 TREASURER RHYNHART: Good16 afternoon, Councilwoman Tasco and members17 of the Committee on Finance. I'm Rebecca18 Rhynhart, City Treasurer for the City of19 Philadelphia, and I'm here to testify on20 behalf of Bill No. 090352.21 Bill No. 090352 will authorize22 the Office of the City Treasurer, on23 behalf of the City, to enter into an24 agreement with Wachovia Bank for25 38 5/13/09 - FINANCE - 090321-25, 334, 350-521 provision of payroll banking services to2 the City.3 Bill No. 060387, as adopted by4 City Council, requires the City Treasurer5 to conduct an RFP process to select a6 City payroll depository. That bill also7 requires that no contract be executed8 with a selected vendor until it has been9 approved by City Council by ordinance.10 In response to an RFP for11 payroll depository services, six12 financial institutions submitted13 proposals. The responses were reviewed14 by an evaluation team that included15 representation from OEO, the City16 Treasurer's Office, the Budget Office,17 and DOT.18 After reviewing the six19 responses submitted, the evaluation team20 determined that four of the applicants21 met the minimum criteria to provide22 payroll depository services. They were:23 Wachovia, PNC, Bank of America, and24 Commerce Bank.25 39 5/13/09 - FINANCE - 090321-25, 334, 350-521 Based upon the selection2 criteria for the RFP, the committee3 ranked the banks. Wachovia received the4 highest ratings and was selected to be5 the vendor. The contract has now been6 negotiated.7 This concludes my testimony,8 and I am happy to answer any questions9 that you may have.10
Thank you,13 Madam Chair.14 Good afternoon again,15 Treasurer.16 TREASURER RHYNHART: Good17 afternoon.18
As the19 author of Bill No. 060387, let me clarify20 the legislative intent of that bill.21 The legislative intent of that22 bill was twofold: One, the fact that I23 had a serious problem with Wachovia's24 fair lending and community investment25 40 5/13/09 - FINANCE - 090321-25, 334, 350-521 track record. That has somewhat been2 remedied by a change they've made.3 The second problem was the fact4 that this seemed to be a single-source5 contract that should not have been a6 single-source contract. In fact, there7 were probably multiple institutions -- I8 believe there were probably multiple9 institutions that were actually qualified10 to hold that contract, yet it was being11 single-sourced for no apparent reason.12 And that's a problem on many different13 levels.14 So a series of questions I will15 ask you will deal with the second part of16 that problem as well as part of the17 first.18 TREASURER RHYNHART: Okay.19
The first20 is -- and I had asked you this question21 in previous hearings -- how many banks22 are qualified to hold City payroll23 deposits?24 TREASURER RHYNHART: There are25 41 5/13/09 - FINANCE - 090321-25, 334, 350-521 four that are qualified.2
There are3 four that are qualified. What is the4 status of Wachovia with regard to the5 takeover, or however you want to describe6 it, by Wells Fargo?7 TREASURER RHYNHART: Wachovia,8 for the time being, is keeping the name9 of Wachovia. They have the same parent10 company. And they have -- Wachovia's11 told me that it will be several years12 before a system changes, if any, will be13 known. And so, they're going very slow14 in any type of transition process.15
So this16 contract is with Wachovia.17 TREASURER RHYNHART: That's18 right.19
And will20 Wachovia continue lending within the City21 of Philadelphia during the period of this22 contact?23 TREASURER RHYNHART: Yes.24 Continuing lending meaning --25 42 5/13/09 - FINANCE - 090321-25, 334, 350-521
Making2 small-business loans?3 TREASURER RHYNHART: Yes.4
Home5 mortgages, home-improvement loans?6 TREASURER RHYNHART: That's7 my -- that's our understanding.8
Under the9 name of Wachovia?10 TREASURER RHYNHART: I'm sorry?11
Under the12 name of Wachovia?13 TREASURER RHYNHART: That is my14 understanding, although I'd have to15 double-check on that.16
How long is17 this contract for?18 TREASURER RHYNHART: This19 contract is for one year, with three20 possible one-year extensions.21
And I guess22 that begs the next question: Why don't23 we have a copy of the contract?24 TREASURER RHYNHART: Oh, you25 43 5/13/09 - FINANCE - 090321-25, 334, 350-521 should have all received a copy of the2 contract attached to the bill.3 You don't have it?4
I searched5 for it; I couldn't find it.6 TREASURER RHYNHART: That was7 not meant to happen. I -- you were8 supposed to get it a week or so ago.9
Well, why10 the three one-year renewals?11 TREASURER RHYNHART: I'm sorry?12
Why the13 three one-year renewals, as opposed to14 coming back to Council?15 TREASURER RHYNHART: It's the16 standard contracting for the City, and17 probably the Law Department could speak18 more on that, but it's a one-year19 contract and has the possibility of three20 one-year renewals if the Administration21 chooses.22
But the23 purpose of -- as the author of Bill No.24 060387, the purpose was for Council to25 44 5/13/09 - FINANCE - 090321-25, 334, 350-521 have to approve the payroll depository.2 TREASURER RHYNHART: Mm-hmm.3
And approve4 any contract to payroll depository and to5 have that flexibility. And, to some6 extent, under the Philadelphia Home Rule7 Charter, it's actually City Council that8 authorizes depositories. That is9 actually totally within our authority,10 and that authority actually rests with us11 to pick depositories.12 TREASURER RHYNHART: Mm-hmm.13
After that14 point, the City Treasurer has the ability15 to decide, and the Administration, which16 depositories to deposit money in, but it17 is our authority to actually designate18 depositories, creating a classification19 of payroll depositories.20 It's a question I've asked you21 previously. Why aren't we, in some way,22 authorizing all four depositories that23 are qualified to hold payroll deposits?24 TREASURER RHYNHART: I think25 45 5/13/09 - FINANCE - 090321-25, 334, 350-521 the answer to that question lies in the2 problem with splitting up payroll. So3 right now --4
I'm not5 suggesting that we split up payroll.6 TREASURER RHYNHART: Okay.7
I'm8 suggesting that we authorize --9 TREASURER RHYNHART: -- okay.10
All four11 depositories that are actually deemed12 qualified --13 TREASURER RHYNHART: Okay.14
-- through15 the RFP process and that we only do a16 one-year contract and that we renew that17 contract based upon whether we believe18 that we should continue to put payroll19 deposits there.20 TREASURER RHYNHART: Okay. So21 that we would have this conversation in22 one year again; is that what you're23 proposing?24
About where25 46 5/13/09 - FINANCE - 090321-25, 334, 350-521 tens of thousands of our employees and/or2 pensioners will have their money3 deposited, whereby we are establishing a4 banking relationship with them.5 TREASURER RHYNHART: Mm-hmm.6
And possibly7 with a bank that's not going to continue8 lending and possibly with a bank that's9 not going to continue to exist.10 And, furthermore, if at some11 point, during those years, TD -- I'm12 sorry, Wachovia becomes Wells Fargo, this13 contract is not with Wells Fargo, and14 Wells Fargo did not participate in the15 RFP process.16 TREASURER RHYNHART: Mm-hmm.17
So that's18 unfair to those people who are qualified19 to hold payroll deposits that are20 currently depositories. That Wells Fargo21 could, in fact, inherit some business22 that it's not supposed to be allowed to23 be inherited, and that was the whole24 purpose behind the bill I did a few years25 47 5/13/09 - FINANCE - 090321-25, 334, 350-521 ago, Bill 060387.2 (Witness comes forward.)3
Good afternoon,4 Councilman. I'm François Dutchy, with5 the City's Law Department.6 The Administration -- our7 interpretation of the legislation, I8 mean, as it reads, is that prior to the9 City entering into a contract for these10 services, we were required to bring that11 contract to Council for approval.12
I had this13 conversation with the Mayor's Chief of14 Staff.15
I agree the17 Administration has absolutely followed18 the letter of the law.19
My position21 is, and having had this conversation22 several months ago with the Mayor's Chief23 and with Miss Rhynhart, for me, as --24 that's why I described the legislative25 48 5/13/09 - FINANCE - 090321-25, 334, 350-521 intent at the beginning of my comments.2 I believe that every bank,3 every City depository that is qualified4 to hold payroll deposits should somehow5 be authorized to hold payroll deposits,6 and that any contracts, as the7 legislation says, should have to come8 before Council and possibly should have9 to come before Council on each -- at each10 renewal.11
So you're looking12 for an ordinance to authorize the four13 banks that were deemed qualified by the14 Administration to --15
And it could16 be a separate ordinance from this17 contract ordinance.18
So I'm20 looking for all four that are qualified21 to hold payroll deposits, to be22 authorized to hold payroll deposits by23 City Council.24
And then for2 the contract not to extend beyond a year,3 so that contract has to come to City4 Council, and for the same reasons that5 I've done all of this, and that is: To6 continue to review fair lending and7 community reinvestment performance.8
And I've10 made that clear to the Administration, so11 the fact that we're at this point right12 now, people shouldn't be surprised.13 TREASURER RHYNHART: We'll14 discuss that.15
Under the21 Charter, do we have to approve one-year22 extensions? And do we have to approve23 the contract; and if the contract doesn't24 have a one-year extension in it, then you25 50 5/13/09 - FINANCE - 090321-25, 334, 350-521 can't have a one-year extension?2 I'm asking the Law Department3 person here.4
Okay. So7 the one-year extension that are a part of8 this contract --9
-- if we11 were to authorize this contract without12 those one-year extensions in it, would13 you be permitted to do one-year14 extensions without coming back to15 Council?16
Well, but for the22 -- yes, just for the purposes of the23 Philadelphia Code as well as Chapter24 17-1400 of the Code, which would require25 51 5/13/09 - FINANCE - 090321-25, 334, 350-521 if there were no renewal provisions in2 the contract, we would not -- well, we3 wouldn't be able to do it without doing a4 process. Coming to Council is a separate5 issue.6 But, yes, if there were not --7
Unlike the19 normal case where you can do one-year20 contracts less than a year.21
Was your25 52 5/13/09 - FINANCE - 090321-25, 334, 350-521 response that, under the renewal process,2 you'd have to come back to Council?3
Councilman Green's4 question was, if the renewal provisions5 were not in this contract, would we have6 to come back to Council? And that answer7 is yes.8
I understood9 that part. I thought he asked a10 subsequent question, and I thought your11 response was that under the bill from12 three years ago, you have to come back13 under the renewal process, but you don't.14
I'm talking17 about under the contract, the actual18 contract.19
Right. If this20 contract stays -- if the contract that's21 here is approved by Council, we would not22 have to come back to Council to exercise23 those renewal provisions.24
My request25 53 5/13/09 - FINANCE - 090321-25, 334, 350-521 is simply twofold; you can decide how to2 address it.3
It's, one,5 that any legislation that we pass,6 whether this bill can be amended or7 whether the contract can be amended, have8 that payroll depository come back to be9 approved on an annual basis, one.10 And that, two, legislation be11 drafted that authorizes all of those12 depositories that are qualified as13 payroll depositories -- formally as14 payroll depositories.15
Thank you.21 Would you the City have any22 objection if we just approved this23 contract without the renewals so that you24 have a year to address Councilman Goode's25 54 5/13/09 - FINANCE - 090321-25, 334, 350-521 issues?2 TREASURER RHYNHART: We could3 do that.4
So the6 renewals are in the contract, which we7 don't have; it's in the Clerk's Office.8 You will have to amend the exhibit?9
Thank you.15 Any other questions?16 (No further questions.)17
I think18 that's it. Thank you very much.19 TREASURER RHYNHART: You're20 welcome.21
You did22 testify on TD Bank, didn't you?23 TREASURER RHYNHART: Yes.24
Okay,25 55 5/13/09 - FINANCE - 090321-25, 334, 350-521 thank you.2 Now you have General Obligation3 Bonds?4 TREASURER RHYNHART: Do you5 want me to stay up here?6
Bill No. 090324, an8 ordinance authorizing the issuance of one9 or more series of General Obligation10 Bonds to provide funds to refund certain11 outstanding General Obligation Bonds of12 the City of Philadelphia; authorizing the13 Mayor, City Controller, and City14 Solicitor, or a majority of them, to sell15 the bonds at public or private negotiated16 sale; setting forth the purposes for17 which the proceeds of the bonds will be18 expended; providing for the maturities19 and for other terms and conditions and20 for the form of the bonds; providing that21 bonds may be redeemable prior to22 maturity; providing sinking funds for the23 bonds and for appropriations to the24 Sinking Fund Commission for the payment25 56 5/13/09 - FINANCE - 090321-25, 334, 350-521 thereof; authorizing agreements to2 provide credit enhancement or payment or3 liquidity sources for the bonds, and4 agreements to manage interest costs and5 certain other actions.6 TREASURER RHYNHART: Okay.7
Thank you.8 Would you identify yourself for the9 record and proceed with your testimony.10 TREASURER RHYNHART: Sure.11 Rebecca Rhynhart, City Treasurer.12 Good afternoon, Councilwoman13 Tasco and members of the Committee on14 Finance. I am Rebecca Rhynhart, City15 Treasurer for the City. I am here to16 testify on behalf of Bill No. 090324.17 Bill No. 090324 will authorize18 the City to issue one or more series of19 General Obligation Bonds to provide funds20 to refund the City's General Obligation21 Bond Series 2007B in a principal amount22 not to exceed $320 million, exclusive of23 cost of issuance, swap termination fees,24 costs of liquidity, and certain other25 57 5/13/09 - FINANCE - 090321-25, 334, 350-521 items.2 The City's outstanding General3 Obligation Bonds Series 2007B are4 variable-rate bonds with FSA as the bond5 insurer and Dexia as the liquidity bank.6 Both the bond insurer and the liquidity7 bank have experienced market difficulties8 leading the bonds to have higher interest9 rates.10 The plan of finance is to issue11 $100 million of the bonds in12 variable-rate mode because we have13 received a letter of credit from Wachovia14 Bank. The remaining bonds will be issued15 as traditional fixed-rate bonds, and the16 corresponding portion of the swap will be17 terminated.18 Municipalities across the19 country have been experiencing higher20 interest rates on variable-rate bonds as21 bonds insurers and certain banks have22 been downgraded. This is not the result23 of anything to do with the24 municipalities' actions but is the result25 58 5/13/09 - FINANCE - 090321-25, 334, 350-521 of investor concern over the bond2 insurers and some banks due to their3 subprime mortgage exposure and rating4 downgrades.5 FSA, which insured the issue6 that the Administration is seeking to7 refund has been downgraded from AAA to8 Aa3. Dexia, the bank who purchases the9 bonds, if there are no other buyers10 downgraded from AAA to A1.11 Investor concern about the bond12 insurer and the liquidity bank has13 increased interest rates on these bonds.14 The bonds are now trading at an all-in15 interest cost of over 6.8 percent. In16 addition, if no investor wants to buy17 these bonds when they reset weekly, the18 bonds are purchased by the liquidity bank19 Dexia.20 This has happened several21 times, the most recent time a month ago.22 When this happens, the bonds change from23 having a 30-year amortization to having a24 7-year amortization, which increases each25 59 5/13/09 - FINANCE - 090321-25, 334, 350-521 semiannual payment. If the bonds go to2 the liquidity bank again, the first3 unbudgeted acceleration payment could be4 as high as $22 million and could occur in5 November.6 The refunding bonds would be7 issued so that the City would not incur8 additional costs related to this market9 problem. If the City does not take any10 action, the City is exposing itself to a11 variable rate of interest, which could12 rise to the maximum rate of 12 percent13 and to possible acceleration payments.14 Because of this, it is in the best15 interest of the City to refund the16 outstanding bonds.17 This concludes my testimony.18 Please note that we are not19 requesting a suspension of the rules for20 this bill.21 I'm happy to answer any22 questions that you may have.23
Any24 questions?25 60 5/13/09 - FINANCE - 090321-25, 334, 350-521 Councilman Goode.2
Let's5 finish this one.6 No questions on this bill?7 (No questions or comments.)8
Thank you9 very much.10 TREASURER RHYNHART: Thank you.11
Councilman12 Goode wants to go back to Bill 090352.13 TREASURER RHYNHART: Okay.14
Just very15 quickly. Since I had only a second to16 look through the contract, even the17 second that I looked through the18 contract, I saw that there are no19 participation rates set by the Office of20 Economic Opportunity.21 TREASURER RHYNHART: Actually22 within the contract, you mean?23
Yeah.24 TREASURER RHYNHART: Okay. I25 61 5/13/09 - FINANCE - 090321-25, 334, 350-521 don't... I can look into that. I don't2 know that that was something that we had3 requested to be part of the contract.4
Madam5 Chair.6 COUNCILWOMAN TASCO:7 Councilwoman Brown.8
Why do we9 have to request OEO information at this10 juncture in the Mayor's administration11 and given that every City department from12 the budget process was required to13 provide to us OEO goals?14 TREASURER RHYNHART: No, I'm15 sorry. I -- in the Wachovia contract, I16 wasn't aware of that.17 In terms of participation on18 bond deals and other things, that I'm19 fully aware of.20 But let me -- maybe the Law21 Department can speak to that.22
No, I'm23 not done yet.24 TREASURER RHYNHART: Okay.25 62 5/13/09 - FINANCE - 090321-25, 334, 350-521
We2 probably need to make it universally3 clear that anybody who wants to do any4 business with the City of Philadelphia5 for any reason, under any circumstance,6 need to know at the door that members of7 this body are going to be asking about8 OEO goals, and it starts with leadership9 at the top of each department.10 TREASURER RHYNHART: Okay.11
It16 specifically says, "... provided the City17 acknowledge and agree that participation18 ranges for this contract have not been19 established and are, therefore, not20 required for compliance by the provider."21 Doesn't make any sense to me.22 I could be wrong, but I think it's23 probably impossible that there aren't any24 goods and services that are procured by25 63 5/13/09 - FINANCE - 090321-25, 334, 350-521 someone holding payroll deposits that2 should not have goals for participation3 by disadvantaged businesses.4 TREASURER RHYNHART: We'll look5 into that.6
As the Treasurer7 stated earlier, OEO did participate in8 the selection process. And the -- any9 goals that would have been set would have10 come from OEO.11
I don't12 understand the phrase "would have come13 from OEO." We've gone through this14 throughout the budget process --15
-- where17 departments up and they point to OEO and18 essentially say that OEO, in effect,19 didn't make us set goals or didn't tell20 us to raise the goals, or OEO was okay21 with it.22 The simple question is: Are23 there goods and services that are24 procured under the auspices of this25 64 5/13/09 - FINANCE - 090321-25, 334, 350-521 contract that could create opportunities2 for disadvantaged businesses? And if3 there are, then the fact that OEO gave4 this particular provider a pass is still5 not acceptable.6
Maybe you10 thought that because you were doing11 business with an entity that you didn't12 think about including -- or looking at13 who they do business with.14 TREASURER RHYNHART: Right.15
You know,16 they're controlling millions of dollars,17 of City dollars --18 TREASURER RHYNHART: Mm-hmm.19
-- of a20 diverse workforce. And who do they buy21 their pads and pencils and cups from?22 TREASURER RHYNHART: Right.23
Do they24 have a diverse vendor system? What are25 65 5/13/09 - FINANCE - 090321-25, 334, 350-521 their employees? What do the employees2 look like?3 TREASURER RHYNHART: Right.4
All of5 those things have to be taken into6 consideration when we do business with7 businesses.8 TREASURER RHYNHART: Okay.9 I'll definitely look into that, and we'll10 get back to you on it.11
On your15 General Obligation Bonds, I guess we've16 got to ask about the participation on17 that.18 TREASURER RHYNHART: Sure. On19 the General Obligation Bonds, we have --20 the financial advisors are PFM Acacia.21 Acacia is women-owned.22 And then bond counsel, we have23 Cozen.24 And then co-bond Council was25 66 5/13/09 - FINANCE - 090321-25, 334, 350-521 (indiscernible) & Tucker, a minority2 firm, but they dissolved recently.3 So I'm not involved in bond4 counsel selection, but François is. I5 don't think a selection has been made yet6 there.7 And then in terms of the8 underwriters, let me just pull that.9 On the GO deal --10
Did you11 submit that information to the Chair?12 Was that information provided to the13 Council?14 TREASURER RHYNHART: No, but15 I'm happy to provide that.16
Usually17 when you bring a bond deal to the18 Council, you bring that information19 attached to it.20 TREASURER RHYNHART: Sure. It21 was in the briefing book, but I can22 definitely provide it again.23
Well, you24 know, everybody doesn't make the briefing25 67 5/13/09 - FINANCE - 090321-25, 334, 350-521 book, so we'd like to have it when we2 have the hearing.3 TREASURER RHYNHART: Sure.4 I'll make sure to do that next time.5
Thank you.6 So you haven't completed your7 team yet?8 TREASURER RHYNHART: So in9 terms of the underwriters, Merrill Lynch10 is the book runner, but then we have11 Seibert as one of the co-seniors, which12 is a minority firm. And we also have13 Loop as a comanager.14 So we have several minority-15 and women-owned firms on this16 transaction.17
I'm sorry.23 I missed the underwriters.24 TREASURER RHYNHART: Merrill25 68 5/13/09 - FINANCE - 090321-25, 334, 350-521 Lynch is the book runner. We have2 Seibert and CitiGroup as co-seniors. And3 then four comanagers: Loop, Jannie, RBC,4 and PNC.5
Okay. And6 so why would -- why did we conclude or7 why did the committee conclude that PNC,8 which does offerings of this size all the9 time, as senior or somebody like that,10 whose employees are in Philadelphia,11 who -- if they were to make more on this12 deal, the money would be spent in13 Philadelphia? Why do we keep giving14 these deals to New York firms rather than15 Philadelphia-based firms that are capable16 of doing these deals?17 TREASURER RHYNHART: Well, the18 selection committee looks at a variety of19 factors: The ability to sell the bonds20 in this difficult department, whether21 they have retail or not 'cause that's a22 necessity right now, and presence in23 Philadelphia as well.24 So PNC is leading our Juvenile25 69 5/13/09 - FINANCE - 090321-25, 334, 350-521 Justice Center deal as the book runner,2 which is scheduled for in a few weeks to3 go to market.4 You know, some of these -- some5 of these other banks do have Philadelphia6 offices, such as Merrill and CitiGroup,7 but we look at a variety of factors and8 take all of that into consideration.9
They don't10 really have many investment banking11 offices or that kind of function or12 trading desks here or things that these13 other firms do.14 TREASURER RHYNHART: Mm-hmm.15
And I've16 never understood the need to spread it17 around, give Merrill this deal, this18 deal. Okay, Local Bank, we'll give you19 one deal; this is it here. That's there.20 The next time you come before21 us with a GO, in advance, I'd like to22 understand what process the selection23 committee went through and whether or not24 you're looking at what I think need to be25 70 5/13/09 - FINANCE - 090321-25, 334, 350-521 relevant factors.2 Just as we were talking about3 what we put in contracts in terms of4 minority- and women-owned participation,5 I think a major factor in the selection6 process should be companies that are7 capable of doing the work that have more8 employees in Philadelphia than everybody9 else and also have the employees who are10 actually doing this type of work in11 Philadelphia.12 So, I mean, maybe we can look13 at an ordinance where that's a14 requirement for the selection criteria,15 and an explanation has to be given to us16 in detail about why those factors weren't17 more favorable than the other factors18 that were considered. I guess that's19 something I'll look at.20 Thank you.21 COUNCILWOMAN TASCO:22 Councilwoman Brown.23
You24 indicated in your testimony that there25 71 5/13/09 - FINANCE - 090321-25, 334, 350-521 are a number of factors that you look at.2 TREASURER RHYNHART: That's3 right.4
Do you5 rate or stack or point to those factors6 like Philadelphia-based, MBE/WBE, et7 cetera?8 TREASURER RHYNHART: Mm-hmm.9 We do discuss those factors when we meet.10
Is11 Philadelphia-based one of those factors?12 TREASURER RHYNHART: Yes, it13 is.14
Okay,15 then. Thank you very much.16 TREASURER RHYNHART: Thank you.17
I think we20 go through this process every eight21 years. Maybe at some point in time, one22 of these administrations will get it.23 Thank you very much.24 Any other questions?25 72 5/13/09 - FINANCE - 090321-25, 334, 350-521 (No further questions.)2
Thank you3 very much.4 TREASURER RHYNHART: Thank you.5
Next we6 have PGW. You all ready? You heard all7 of these questions asked up here? You8 ready or do you want to come back?9 (Laughter.)10
If you're11 not ready to answer these hard questions,12 you better decide to come back another13 day.14 Capital Budget first. Well,15 let's do that -- that's harmless -- right16 now, but we're going to ask some17 questions about that too.18
Bill No. 090325, an19 ordinance approving the Fiscal Year 201020 Capital Budget providing for expenditures21 for the capital purposes of the22 Philadelphia Gas Works (including the23 supplying of funds in connection24 therewith) subject to certain constraints25 73 5/13/09 - FINANCE - 090321-25, 334, 350-521 and conditions, and acknowledging receipt2 of the Forecast of Capital Budgets for3 Fiscal Years 2011 through 2015.4
Good5 afternoon. Would you identify yourself6 for the record and begin your testimony.7
Good afternoon,8 Chairwoman Tasco and members of the9 committee. My name is Janet Parrish.10 I'm the Executive Director of the11 Philadelphia Gas Commission. And seated12 to my right is Craig White, who's the13 Executive Vice President and Acting Chief14 Operating Officer of the Philadelphia Gas15 Works.16
I'm here today to18 testify on behalf of the Philadelphia Gas19 Commission whose recommendations to City20 Council with respect to the Fiscal 1021 Capital Budget are reflected in the bill22 and a copy of the Gas Commission's23 resolution in order, which reflects the24 action that the commissioners took at25 74 5/13/09 - FINANCE - 090321-25, 334, 350-521 their meeting on April 13th. It is also2 attached to my written testimony as an3 appendix.4 Both the Gas Commission and PGW5 have submitted written testimony; I'm not6 going to read that.7 I would just briefly highlight8 the fact that the Gas Commission, in sum,9 made adjustments to the budget submitted10 by PGW, which have a net effect of11 reducing the initial budget proposal by12 about $2 million, from about $74 million13 to about $72 million. And those are14 identified in the attachments to my15 testimony.16 PGW's testimony touches on some17 pieces of the budget and components of18 the budget in more detail. Just to19 highlight a couple of issues, if I may.20 The recommended budget does21 reflect the Commission's continued22 support of an 18-mile annual cast-iron23 main replacement program, as PGW24 transitions to a new main replacement25 75 5/13/09 - FINANCE - 090321-25, 334, 350-521 prioritization model.2 Also, the Commission is3 recommending conditional funding be4 approved for several collections-related5 and business transformation initiatives,6 which PGW proposes to implement but7 aren't yet sufficiently developed to8 warrant an immediate spending9 authorization in the Commission's view.10 And, finally, I would note that11 the budget reflects a continued deferral12 of certain facilities investments pending13 an evaluation of a recent real estate14 optimization study, which is being15 evaluated currently, and pending16 development of a more concrete plan that17 may be developed and brought to the PGW18 Board initially and then, of course, to19 the Gas Commission and to Council.20 PGW does hope to downsize its21 real estate footprint, if you will, but22 there are no specific proposals being put23 forward as of yet. We'll probably see24 that reflected in future budgets.25 76 5/13/09 - FINANCE - 090321-25, 334, 350-521 And so, finally, I would simply2 ask that we are requesting a suspension3 of the rules so that first reading can4 occur at the next session of Council.5 And I would be happy to answer in his6 questions you might have.7
Mr. White,8 do you have anything you would like to9 say?10
No. I think11 Executive Director Parrish more than12 adequately identified...13
Just one19 simple question. What do you think I20 might want to know?21
I think you want to22 know that our target for MBEs is 15 to 1823 percent. And last year, we hit 1424 percent; and the year before, 14 percent.25 77 5/13/09 - FINANCE - 090321-25, 334, 350-521
There12 would be some who might argue that that's13 two different things.14
Yeah, I would argue15 the same, Councilwoman. The numbers that16 I received over the Blackberry after I17 heard the discussion --18 (Laughter.)19
-- with the Water20 Department was aggregated. But, yes,21 they include both.22 But when we put a contract out,23 we ask for criteria at both levels.24
I see.25 78 5/13/09 - FINANCE - 090321-25, 334, 350-521 All right. So if you ask for criteria at2 different at both levels --3
I'm providing you8 the actual aggregated number. That's all9 I have before me today.10 I can certainly provide you11 with that number disaggregated between12 the MBE and the WBE, and I'd be happy to13 provide it.14
Thank you23 very much.24 You all are swift.25 79 5/13/09 - FINANCE - 090321-25, 334, 350-521 Next we have Bills...2
Bill No. 090322, an3 ordinance constituting the Ninth4 Supplemental Ordinance to the General Gas5 Works Revenue Bond Ordinance of 1998 (the6 "1998 General Ordinance"); authorizing7 the City to sell, either at public or8 private sale, Gas Works Revenue Bonds,9 Eighth Series, to pay the cost of10 refunding or redeeming certain11 outstanding Gas Works Revenue Bonds and12 other Project Costs; authorizing the City13 to obtain credit enhancement and14 liquidity for all or a portion of the15 Eighth Series Bonds; authorizing the City16 to enter into or amend one or more17 Qualified Swap Agreements or to relate18 all or a portion of a different series of19 outstanding Gas Works Revenue Bonds;20 making certain determinations and21 covenants relating to Gas Works Revenues22 and payment of interest and principal;23 and authorizing covenants and actions in24 order that the Eighth Series Bonds shall25 80 5/13/09 - FINANCE - 090321-25, 334, 350-521 not be arbitrage bonds; all under certain2 terms and conditions.3 And Bill No. 090323, an4 ordinance constituting the 10th5 Supplemental Ordinance to the General Gas6 Works Revenue Bond Ordinance of 1998 (the7 "1998 General Ordinance"); authorizing8 the City to sell, either at public or9 private sale, Gas Works Revenue Bonds,10 Ninth Series, to pay the cost of certain11 capital projects and other Project Costs;12 authorizing the City to obtain Credit13 Facilities for the Ninth Series Bonds;14 making certain determinations and15 covenants relating to Gas Works Revenues16 and the payment of interest and17 principal; and authorizing covenants and18 actions in order that the Ninth Series19 Bonds shall not be arbitrage bonds; all20 under certain terms and conditions.21 (Witness comes forward.)22
Good23 afternoon. Would you identify yourself24 for the record, please, and proceed with25 81 5/13/09 - FINANCE - 090321-25, 334, 350-521 your testimony.2
Good3 afternoon, Councilwoman Tasco and members4 of the Committee on Finance. I'm Joseph5 R. Bogdonavage. I'm the Senior Vice6 President for Finance at PGW. And with7 me, to my right, is Mr. 15 These bonds were issued at that16 time on a -- on a -- we're refunding17 fixed-rate bonds. And PGW, along with18 the City, recognized that there may be a19 savings potential by taking these bonds20 into a variable-rate mode and also backed21 by a standby purchase agreement. 21 The original transaction, as it22 was contemplated, was issuing bonds at a23 about 3-3/4 percent currently. 5 percent for those bonds. 11 Investors had stopped buying12 variable-rate weekly reset bonds at that13 point in time. 15 PGW, along with the City, took16 positive steps to try to rectify this17 situation, and, as a result of that,18 asked for a mandatory tender of all bonds19 last January. 22 The problem with doing that is,23 there is an accelerated payment provision24 in the documents that requires, in July25 84 5/13/09 - FINANCE - 090321-25, 334, 350-521 of 2009, a semiannual payment of ten2 semiannual payments. About $31 million3 would need to be made. 5 percent for these13 variable-rate bonds. They have all been14 tendered back. 20 And, currently, our plan of21 finance is that we're going to refund all22 311+ million dollars of the bonds. We23 would like to keep about 200 million in a24 variable-rate mode that will be reset25 85 5/13/09 - FINANCE - 090321-25, 334, 350-521 weekly. 18 In addition to that, PGW19 currently has about $30 million of Fifth20 Series Bonds that are unhedged for an21 interest rate. 25 86 5/13/09 - FINANCE - 090321-25, 334, 350-521 In addition to cleaning up the2 transaction, we're looking to issue about3 $106 million of traditional fixed-rate4 bonds. 10 In addition to that, we would11 terminate the swap that was on these12 bonds that is tied up with the fixed13 rate. 6 million of the14 transaction. 17 The most recent information18 that we have is that the market has19 gotten a little better for the City and20 PGW's behalf. 2 The cost right now is somewhere3 around 43, $44 million. 17 In addition, what we're also18 looking to do is close this transaction19 hopefully early in July. 3 In addition to that, PGW is4 currently looking at finalizing all of5 the transactions. 8 But the plan of finance has9 bond counsel of Blank Rome. It also has10 co-bond counsel of André Dessant. 12 Co-underwriter counsel is Kelly Monaco13 Naples. 16 The lead investment bank on the17 transaction is Goldman Sachs. 21 PGW, along with the City, tries22 to get as much minority participation on23 these transactions as possible. 3 In addition to the transaction,4 PGW, on Bill 090323, is asking for an5 authorization to sell up to $150 million6 of new money. 9 The bond will probably be sold10 within about nine months. One of the11 reasons for the delay -- although we're12 asking for authorization now -- is PGW's13 current bond rating of BBB- has not had a14 whole lot of investor availability in the15 marketplace. 24 The bill, as it was introduced25 90 5/13/09 - FINANCE - 090321-25, 334, 350-521 for the refunding, was an amount not to2 exceed $435 million, I think. That was a3 worst-case scenario. 15 Both of those transactions are16 probably not going to happen now. 25 91 5/13/09 - FINANCE - 090321-25, 334, 350-521 So that we'll take care of not2 having the availability or authorization3 to sell bonds without coming back to4 Council. 12 Currently, PGW has been13 spending about 70 or 72 million dollars a14 year in capital infrastructure15 improvements. 9 In addition, as part of the10 ordinance, Black & Veatch, the11 feasibility consultant, did provide a12 report to the Director of Finance. That13 report was filed with the City Council14 and is available for your perusal. 3
Thank you,6 Madam Chair.7 Why are there no investment8 banks that are local?9
The City, as10 part of the process that PGW entered into11 with the City is, we put out an RFP for12 underwriters.13
We did get15 some substantial responses from many of16 them, including some of the City banks,17 but my recollection is one of the18 basically City banks, PNC, did not want19 to participate in any of the transactions20 with PGW at that time.21 So we did sit down with the22 City Treasurer, go through the same23 process that she described earlier, where24 we actually go through and rate some of25 94 5/13/09 - FINANCE - 090321-25, 334, 350-521 the underwriters.2 And there was some upheaval in3 the marketplace at that time. Two of the4 bigger investment banks, being Merrill5 Lynch, was in negotiations for merging6 with Bank of America. And also, Wachovia7 was in negotiations with Wells Fargo.8 So we had the uncertainty of9 whether or not they were still going to10 be in that business. So we did go11 through an evaluation process and ended12 up selecting Goldman Sachs as the lead13 investment bank.14
And when you15 do those ratings, do you do that -- how16 do you do that? Do you do that in17 writing?18
We have19 basically with the City, we sit down with20 the Law Department, and we look through a21 series of five or six different matrices22 that we look at, one of which is being23 whether or not they participate in24 activities in the City, how they25 95 5/13/09 - FINANCE - 090321-25, 334, 350-521 generally relate to retail sales of2 bonds, also looking at some of the hedge3 funds, whether they participate --4 whether they have minority participation5 in the firms.6 So we do go through that whole7 process to evaluate whether or not --8
Please12 provide all analysis that you've done of13 all the PGW bonds. And, Miss Rhynhart,14 of the General Obligation Bond issues to15 the Chair for our review.16 TREASURER RHYNHART: I would17 like to add just one point on this.18 One of the major things we're19 looking at is who -- what banks are most20 qualified to sell bonds in this difficult21 market. What we want is the lowest22 interest cost to the City.23 So, you know, that was a big24 part in PGW and as well as other deals25 96 5/13/09 - FINANCE - 090321-25, 334, 350-521 that we looked at over the last few2 months, because of how difficult the3 market has been.4 So I just wanted to make sure5 that that was clear.6
I mean I7 completely understand that, but I also8 don't necessarily agree with the9 assessment -- that's why I'd like to see10 the material -- that local banks couldn't11 provide the same offering.12 Many of them do have retail13 operations, some of them have trading14 desks in the City. And if you were to15 pay a teeny bit more in interest, you16 might have actually more taxes to make up17 for that in the local economy.18 And I just don't know what kind19 of detailed analysis you want to do, so I20 look forward to looking at the notes, and21 we can talk about it later.22 So I -- you mentioned an23 interest rate of 7-1/4 for -- what series24 was that?25 97 5/13/09 - FINANCE - 090321-25, 334, 350-521
We probably9 have an aggregate of about 7 percent on10 the refunding issue.11
So12 basically, now with the Sixth Series,13 that's 6-plus percent?14
So it's17 costing us 3/4s of a percent to refinance18 these bonds?19
The remaining24 amortization period was 21 years, I25 98 5/13/09 - FINANCE - 090321-25, 334, 350-521 think, on those bonds, so we're not2 extending that at all; we're just3 maintaining the same amortization period4 on the bonds.5
That is8 correct.9 Our plan is that we will get10 into the marketplace. And, as the City11 Treasurer points out, we may have to go12 out in subseries because we don't know if13 the marketplace can absorb $300 million14 at one issue in one fell swoop as we go15 out into the market.16 So they may have to be issued17 in subseries over the course of the next18 two to three months. But, hopefully, the19 transaction will close in July of 2009.20
Okay. So21 this decision to have JP Morgan bring22 them all in really impacted -- did that23 impact the current year's operating24 budget?25 99 5/13/09 - FINANCE - 090321-25, 334, 350-521
Yes. The2 current operating budget, as it was3 approved by the Gas Commission, included4 an interest cost. It did not assume this5 additional interest that we're now paying6 since these bonds have been tendered back7 and are now currently bank bonds.8 Also, the budget at the time it9 was prepared did not contemplate about a10 300 basis point differential between PGW11 paying a fixed rate of about 3.7 percent12 and only earning about 50 basis points or13 a half a percent. So that's the other14 3-1/4 percent.15 So that the budget did not16 contemplate that at that point in time.17 This is one of the reasons, along with18 some other issues, that we went to the19 PUC back in December of 2008 and asked20 for an extraordinary rate increase, which21 was granted by the PUC in the tune of22 about $60 million, because we had23 uncertainty over whether or not we would24 have to make the full swap termination25 100 5/13/09 - FINANCE - 090321-25, 334, 350-521 payment and also to cover the ongoing2 interest costs that had almost doubled at3 that point in time.4
Thank you6 very much.7 When you come the next time for8 an offering, we would like to see in9 writing the participants on the deal.10
Well, let13 me just ask you this question. The bond14 engineers report by Black & Veatch15 assumes that the $60 million emergency16 base rate increase approved by the PUC in17 December will be made permanent and stay18 in place through the five-year forecast19 period.20 What would the dollar-amount of21 the rate decrease PGW customers should22 expect to receive as a result of lower23 interest costs PGW would experience if it24 is able to implement the proposed25 101 5/13/09 - FINANCE - 090321-25, 334, 350-521 distribution system improvement charge?2
Very good3 question, Councilwoman. This currently4 is being discussed by the Commonwealth5 legislature.6
Our8 anticipation of approval, although it may9 be about 12 to 18 months before it's10 implemented, if the (indiscernible) were11 to go into place the way it's12 contemplated by PGW, PGW would not be13 issuing its own bonds at that point in14 time.15 We would probably go through16 the City's conduit agency, either PAID or17 PIDC, who would issue those bonds. Their18 bonds ratings are substantially better19 than PGW's.20 There may not be an excessive21 coverage requirement. PGW's current22 revenue bonds have a one-and-a-half times23 coverage requirement over principal and24 interest. It may be as low as 1.1 at the25 102 5/13/09 - FINANCE - 090321-25, 334, 350-521 time.2 But when we're looking at that,3 the reductions that we would anticipate4 would probably be, on an average customer5 residential customer bill on a yearly6 basis, somewhere between $15 and $207 would be the reduction in the customer8 bill.9
And at10 what point -- when would they begin to11 see that decrease?12
Upon the13 issuance of this new debt by the14 third-party conduit issuer. We're15 probably looking for something out maybe16 at least 18 months to two years before17 this would happen.18
Well, I19 just got this information the other day20 about this. I really haven't had time to21 discuss it, and I will discuss it, but I22 won't take up too much time here today.23 But I understand that it24 would -- the ratepayers would pay an25 103 5/13/09 - FINANCE - 090321-25, 334, 350-521 upfront cost for this?2
The way it's7 envisioned by PGW operating, if the8 Commonwealth approves the (indiscernible)9 legislation, it would be approved by the10 PUC, and we would be looking to have a11 irrevocable rate increase to cover this12 fixed component of the principal and13 interest for the third party so that the14 ratepayer would be paying upfront money15 towards the principal and interest for16 these new bonds.17 But since our assumption is18 that they would go out at about 50 to 7519 basis points or almost 3/4 of a point20 less, that the aggregate amount that the21 customer would be paying would be about22 $15 to $20 on an annual basis less.23 But upfront, if PGW had to24 issue these bonds, we would be increasing25 104 5/13/09 - FINANCE - 090321-25, 334, 350-521 our long-term debt, which is contrary to2 our plan, but the customer would be3 paying a reduced amount upfront compared4 to what PGW's interest costs would be.5
Okay.6 We'll have a further discussion about7 that with the Gas Commission very8 shortly.9
Yes. PGW10 will be providing its operating budget11 shortly, and we look forward to making a12 presentation, Councilwoman.13
Thank you.14 Okay. I think we're finished.15 You have this amendment to Bill16 090322, right? Okay. Let's go here.17 The Chair recognizes18 Councilwoman Blackwell to report out19 Resolution 090334 -- I'm sorry, I'm20 sorry.21 This ends our public hearing.22 We will now go into the public meeting.23
Thank24 you, Madam Chair.25 105 5/13/09 - FINANCE - 090321-25, 334, 350-521 I move that Resolution No.2 090334 be reported out of committee with3 a suspension of the rules.4 (Motion duly seconded.)5
It has6 been moved and seconded that Resolution7 090334 be reported out of committee with8 a favorable recommendation and a9 recommendation for a suspension of the10 rules so this bill can be heard at11 Council's next session.12 All in favor will say aye.13 Is there any opposition?14 There being none, this motion15 is carried.16 The Chair recognizes17 Councilwoman Blackwell to report out Bill18 090321.19
I move20 that Bill No. 090321 be reported out of21 committee with a favorable recommendation22 and also a recommendation for a23 suspension of the rules so that it might24 be heard at our next session Council.25 106 5/13/09 - FINANCE - 090321-25, 334, 350-521 (Motion duly seconded.)2
It has3 been moved and seconded that Bill No.4 090321 be reported out of committee with5 a favorable recommendation and that the6 rules of Council be suspended so that7 this bill will be heard at Council's next8 session.9 All those in favor will say10 aye.11 Is there any opposition?12 There being none, the motion is13 carried.14 The Chair recognizes15 Councilwoman Blackwell for a motion on16 Bill No. 090350.17
Thank18 you.19 I move that Bill No. 090351 --20 no, 350 be --21
There24 sure is.25 107 5/13/09 - FINANCE - 090321-25, 334, 350-521
Madam3 Chair, I move that the amendment to Bill4 No. 090350 that has been circulated and5 received by members of the committee be6 adopted.7 (Motion duly seconded.)8
It has9 been moved and seconded that the10 amendment to Bill 090350 be adopted.11 All in favor will say aye.12 Any opposition?13 There being no opposition, the14 motion is carried.15
Madam16 Chair, I move that Bill No. 090350, as17 amended, be reported out of committee18 with a favorable recommendation and also19 that the rules of Council be suspended so20 as to permit first reading at our next21 session of Council.22 (Motion duly seconded.)23
It has24 been moved and second that Bill No.25 108 5/13/09 - FINANCE - 090321-25, 334, 350-521 090350, as amended, be reported out of2 this committee with a favorable3 recommendation and a recommendation that4 the rules of Council be suspended so as5 to have this bill read at the next6 Council session.7 All in favor will say aye.8 Any opposition?9 There being none, the motion is10 carried.11 The Chair recognizes12 Councilwoman Blackwell for a motion on13 Bill No. 090351.14
Thank15 you, Madam Chair.16 I move that Bill No. 090351 be17 reported out of committee with a18 favorable recommendation and also a19 recommendation that the rules of Council20 be suspended so as to permit first21 reading at our next session.22 (Motion duly seconded.)23
It has24 been moved and seconded that Bill No.25 109 5/13/09 - FINANCE - 090321-25, 334, 350-521 090351 be reported out of committee with2 a favorable recommendation and that the3 rules of Council be suspended so that4 this bill can be heard at the next5 Council session.6 All those in favor will say7 aye.8 Any opposition?9 There being no opposition, this10 bill is approved motion is carried.11 Bill No. 090352 will be held12 until June 2nd at which time a hearing at13 1 p.m.14 Councilwoman Brown, Bill15 090324.16
Madam17 Chair, I move that Bill No. 090324 be18 reported out of committee with a19 favorable recommendation.20 (Motion duly seconded.)21
It has22 been moved and seconded that Bill No.23 090324 be reported out of committee with24 a favorable recommendation.25 110 5/13/09 - FINANCE - 090321-25, 334, 350-521 (Motion duly seconded.)2
All in3 favor will say aye.4 Any opposition?5 None being heard, the motion is6 carried.7 The Chair recognizes Councilman8 Green for Bill No. 090325.9
Madam Chair,10 I move that Bill No. 090325 be reported11 out of committee with a favorable12 recommendation and that the rules of13 Council be suspended to permit first14 reading at the next session of Council.15 (Motion duly seconded.)16
It has17 been moved and properly seconded that18 Bill No. 090325 be reported out of19 committee with a favorable recommendation20 and a request that the rules of Council21 be suspended so that this bill can be22 heard at Council's next session.23 All those in favor will say24 aye.25 111 5/13/09 - FINANCE - 090321-25, 334, 350-521 Any opposition?2 The bill's carried.3 The Chair recognizes Councilman4 Greenlee for the amendment to Bill No.5 090322.6
Thank7 you, Madam Chair.8 I move the adoption of the9 amendment to Bill No. 090322.10 (Motion duly seconded.)11
All in12 favor of the amendment?13 Those opposed?14 There being no opposition, the15 motion is carried.16 The Chair recognizes Councilman17 Greenlee to report Bill No. 090322 out of18 committee.19
Thank20 you, Madam Chair.21 I move that Bill No. 090322, as22 amended, be reported out of this23 committee with a favorable recommendation24 and that the rules of Council be25 112 5/13/09 - FINANCE - 090321-25, 334, 350-521 suspended to allow for first reading at2 our next session of Council.3 (Motion duly seconded.)4
It has5 been moved and seconded that Bill No.6 090322, as amended, be reported out of7 this committee with a favorable8 recommendation and that the rules of9 Council be suspended so that this bill10 can be read at Council's next session.11 All those in favor will say12 aye.13 There being no opposition, the14 motion is carried.15 The Chair recognizes Councilman16 DiCicco to report out Bill 090323.17 COUNCILMAN DiCICCO: Thank you,18 Madam Chair.19 I move that Bill No. 090323 be20 reported out of this committee with a21 favorable recommendation and that the22 rules of Council be suspended so as to23 permit first reading at our next session24 of City Council.25 113 5/13/09 - FINANCE - 090321-25, 334, 350-521 (Motion duly seconded.)2
It has3 been moved and seconded that Bill No.4 090323 be reported out of committee with5 a favorable recommendation and that the6 rules of Council be suspended so that7 this bill can be heard at Council's next8 session.9 All those in favor will say10 aye.11 Is there any opposition?12 There being none, the motion is13 carried.14 Thank you all very much.15 This Council meeting is16 adjourned.17 (Proceedings end at 2:57 p.m.)18 * * *19 114 C E R T I F I C A T E2 I HEREBY CERTIFY that the4 proceedings of the City of Philadelphia5 Council Committee on Finance are contained6 fully and accurately in the stenographic notes7 taken by me on Wednesday, May 13, 2009, and8 that this is a true and correct statement of9 same.10 __________________________________14 JOSEPHINE CARDILLO15 Registered Professional Reporter16 (The foregoing certification of this21 transcript does not apply to any reproduction22 of the same by any means, unless under the23 direct control and/or supervision of the24 certifying reporter.)25