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