Okay. Thank you, Commissioner. COMMISSIONER KAMMERDEINER: You're welcome.
Thank you. The Chair recognizes Councilman Clarke.
Thank you, Madam President. Good morning. COMMISSIONER KAMMERDEINER: Good morning.
My annual questioning about non-utilization tax. 77 3/26/07 - WHOLE - BILL 070114, ETC. Where are we? COMMISSIONER KAMMERDEINER: Probably the same place we've been all along.
So I guess you've just made the decision that you're not going to do it? COMMISSIONER KAMMERDEINER: We have not had the court remove the order on the stay on collecting on that tax.
Because you didn't ask. COMMISSIONER KAMMERDEINER: I guess I haven't asked, no. I have not asked. I don't know if the Law Department has done anything with it.
Just tell me you're not going to do it. Just say, Councilman, stop asking me every year, because I'm not doing it. I'm the Revenue Commissioner. And then we can just go on our separate ways. COMMISSIONER KAMMERDEINER: I think a lot of the other things that are 78 3/26/07 - WHOLE - BILL 070114, ETC. happening in that whole marketplace make it a very difficult thing to put into effect, but we should probably talk about it again.
Why is it difficult? COMMISSIONER KAMMERDEINER: Well, first off, the implementation on it is difficult in terms of what properties are not being utilized.
Commissioner, see, you're getting ready to insult my intelligence. We had that conversation for the last two years. COMMISSIONER KAMMERDEINER: And I still don't have a database that I can work from.
Last year we had MOIS here. We had people from the Office of Housing. They indicated that the software is capable of now determining to probably a 99 percent certainty that that property is vacant. COMMISSIONER KAMMERDEINER: And 79 3/26/07 - WHOLE - BILL 070114, ETC. L&I is still working with MOIS in terms of identifying a vacancy indicator that will go in the system. We had conversations as recently as about a week ago about some of the data from Revenue that feeds into their identification of vacancy. And so I don't think they have everything as in place as they thought they would by this point in time.
Commissioner, I can go in my office right now and go on the computer based on the information that was submitted as a result of a relationship with the University of Pennsylvania and determine that a property is vacant. COMMISSIONER KAMMERDEINER: On a one-by-one property basis perhaps. I just know that MOIS is still working on the issues relating to vacancy and property utilization and do not yet feel that they have a complete stable listing that's appropriate to be used. I'll talk with them again and 80 3/26/07 - WHOLE - BILL 070114, ETC. see whether they think that what they have now with the additional information that they just requested from us both in terms of tax liens, real estate tax liens, and water liens will get them to the point that they can reliably give --
I was told that they could do that last year. They sat right here and said that they could determine that there's no water connection, no water service, no 13 electrical service, no gas service. COMMISSIONER KAMMERDEINER: They don't have all of it in place.
Commissioner, they said that last year. COMMISSIONER KAMMERDEINER: I can only tell you that it's just been recently that they've asked us for the data. So I know that they don't have it all in place. And they were still talking with PECO and PGW about getting their data. So I can only tell you that as recently as a few weeks ago they did 81 3/26/07 - WHOLE - BILL 070114, ETC. not have all of it in place.
Madam President, I'm assuming we're going to do callbacks?
When we do callbacks, can I have the Revenue Commissioner, License and Inspection Commissioner, Kevin Hanna from OH. Who else do I need to have there? COMMISSIONER KAMMERDEINER: MOIS.
And MOIS and the Law Department, since you say that they didn't act or nobody asked them to act to withdraw. COMMISSIONER KAMMERDEINER: I don't know if anybody did. They may have taken in that at this point.
All right. Because either before I leave or you 82 3/26/07 - WHOLE - BILL 070114, ETC. leave or maybe we both survive the next Administration and come back for four more years, this is something that we need to do. I mean, you have -- particularly you mentioned today's market. I have to think that the property values going up as dramatically as they are, the ability for people to move properties and get them back on line is much more enhanced, but they continue to sit on vacant properties, create blighting conditions, speculating in neighborhoods. And I think that we need to be in a position to impose an additional penalty on these people who continue to allow these properties to blight our neighborhoods, because there's no reason for, given the significant change in the market and the value in some of these communities, for people to be allowed to continue to sit on these vacant properties with no real sense of urgency to do something with them. So we have the callback. I 83 3/26/07 - WHOLE - BILL 070114, ETC. guess basically what I'm trying to do is give you time to talk to the pertinent parties so when you all come back at the same time, we get to the bottom of it. COMMISSIONER KAMMERDEINER: Okay.
Thank you. Thank you, Commissioner. Thank you, Madam President.
You're welcome. Councilman DiCicco, did you want to be notified -- recognized? COUNCILMAN DiCICCO: Thank you. It's a new question. Somewhat of my annual question. On the issue of real estate tax collections, I believe we spoke about this last year. I have a summer home at Ventnor in New Jersey and my real estate taxes are collected quarterly. Once a year I am sent a bill, an invoice, with four coupons on it, no return envelope. I have to supply the envelope, which is 84 3/26/07 - WHOLE - BILL 070114, ETC. not a big deal. Wouldn't it make more sense for us to collect quarterly because we get a cash flow sooner rather than later? COMMISSIONER KAMMERDEINER: Actually, we'd get it later. Right now we get the payment at he beginning of the year for the entire year, and if we did quarterly payments, they would either have to be made starting the year before so that they ended in March of the tax year or we would have some of the payment come in later than we currently get it. So that is an issue and a problem in terms of switching from our current annual payment to a quarterly payment. Plus, we have a significant portion of our population that has a mortgage escrow account. The mortgage companies pay us in February to take advantage of the one percent discount, and if we were dealing with quarterly payments, I would suspect that most of them would want to go to quarterly 85 3/26/07 - WHOLE - BILL 070114, ETC. payments to us as well instead of getting all of that at one time in the early part of the year. We've looked at it. We know that with so many other things, we went to monthly billing on water in order to minimize the impact of a quarterly bill. So surely the annual real estate bill, which is significantly higher, we would benefit from going to -- the individuals would benefit, the individual taxpayers would benefit -- COUNCILMAN DiCICCO: Much more user-friendly. COMMISSIONER KAMMERDEINER: -- from being able to spread it out. We've looked at that on a number of occasions and run into the problem of budget years. If you had four quarterly payments in the tax year, two of them would be in the next budget year. And making the transition from one to the other would either mean advance on the advanced payment by paying in the prior 86 3/26/07 - WHOLE - BILL 070114, ETC. year or a way to bridge into the next budget year the first time through. After you do it, it would be regularized. It's the problem of getting there. And we haven't had the luxury of extra funds available to provide that kind of bridge. COUNCILMAN DiCICCO: But if we were able to get there, would it make sense then? COMMISSIONER KAMMERDEINER: It could make sense for the individuals. We'd have some issues we'd have to look at in terms of how we would handle it logistically. It would mean four billings instead of one for anyone who opted to go into the installment payment. COUNCILMAN DiCICCO: But in New Jersey, there is no -- I mean, you could pay it off all at once if you choose, but it's basically left to the individual to make that decision. COMMISSIONER KAMMERDEINER: Right. That's what I'm saying, we would have additional mailings to the people 87 3/26/07 - WHOLE - BILL 070114, ETC. who would choose. Because we know from our experience if you send out the four coupons like you said you get from the New Jersey entity that you're dealing with, most of our people would come to us and want an additional coupon when the time came. They seem not to hold on to those coupons very well. So we would find it more effective to send them a bill for them to pay at that point. It means additional billing and postage that we don't currently have, because right now we send one and we'd have to send four. COUNCILMAN DiCICCO: But the only additional postage and mailing would be if the person didn't pay. COMMISSIONER KAMMERDEINER: For that segment. COUNCILMAN DiCICCO: Yeah, for that segment. COMMISSIONER KAMMERDEINER: Right. But that could be 100,000 or 200,000 payers.
So it could be a large 88 3/26/07 - WHOLE - BILL 070114, ETC. number. COUNCILMAN DiCICCO: I mean, I would think that most -- it's a lot easier as a taxpayer for me to break it up quarterly than getting hit at the end of the year with the full -- COMMISSIONER KAMMERDEINER: Well, in this case, it's not the end of the year. It's the beginning of the year, which is what most people lose sight of. COUNCILMAN DiCICCO: What I mean is not in one lump payment. It's easier for me to spread it out four times a year. If it's $4,000, it's a thousand, thousand, thousand, four times a thousand, as opposed to coming up with the full $4,000 once a year. It's the same principle with the water bills. We thought we'd make it easier to spread it out monthly as opposed to quarterly, or I think at one time -- COMMISSIONER KAMMERDEINER: I understand and I appreciate that from an 89 3/26/07 - WHOLE - BILL 070114, ETC. individual. From the standpoint of the City in getting all of those funds now at the beginning of the year, the challenge is for the budget and the cash flow in terms of having that money coming in at a later date. And I don't think many taxpayers would be very happy with paying in -- I'll just use this year as the example -- in 2007 for their 2008 tax when they've already paid their 2007 bill. Again, it's the transition problem doing it the first time. COUNCILMAN DiCICCO: Right. Thank you. Thank you, Madam President.
You're welcome. Commissioner, I can't tell you how this $707 million or thereabouts bothers me in delinquent real estate taxes, and I know you indicated that some of them are maybe 20 years old. Why would we not do something about those properties, have them put up for 90 3/26/07 - WHOLE - BILL 070114, ETC. sheriff's sale? How many are put up for sheriff's sale because of delinquency? COMMISSIONER KAMMERDEINER: I don't know what the numbers are now. They had been about 100 a month, but I'm not sure where we're standing right at this point. The actual sheriff's sale process is managed by the Law Department. But the number that are put up for sheriff's sale and the number that actually go to sale are different because there are collections during the notice periods coming up front, and so I'd have to get their numbers to give you something more exact. But it is approximately 100 a month that start the process, that go through the title search, the notices to owners, and a significant amount of payment comes in on those properties to stay the sheriff's sale. And the pipeline for those sheriff's sales through the Prothonotary's Office and the courts and the Sheriff's Office itself is 91 3/26/07 - WHOLE - BILL 070114, ETC. fairly narrow. They can't handle too many more properties.
So would you say that some individuals will pay when it's indicated that the sheriff's sale is going to occur? COMMISSIONER KAMMERDEINER: That's right.
And that's the last you hear from them? COMMISSIONER KAMMERDEINER: And then they don't pay until we sheriff their property again, yes.
The entire system is wrong, that we should be looking at a delinquency rate of over $700 million. I think it's sad. COMMISSIONER KAMMERDEINER: The 700 I don't believe is all real estate tax, or is that only a real estate tax number that you were quoting to me? I'm not sure.
It's the aggregate. 92 3/26/07 - WHOLE - BILL 070114, ETC. COMMISSIONER KAMMERDEINER: Okay. I'll get some additional information for you on the breakdown of the various taxes and some of the things that are happening with it as a back-up.
I don't care what kind of taxes there are. We should be doing something more than we're doing. Councilman DiCicco. COUNCILMAN DiCICCO: Thank you. What portion of the $707 million is directly related to the real estate tax? COMMISSIONER KAMMERDEINER: I'm going to have to look at what Councilwoman Verna is referring to for the date and time on that, but I would say probably at least half of it is real estate. COUNCILMAN DiCICCO: I've been told it's in the vicinity of about 500 million. COMMISSIONER KAMMERDEINER: 93 3/26/07 - WHOLE - BILL 070114, ETC. It's close to that, yeah.
I believe that's in the annual report, Commissioner, if you wanted to look at that on . COMMISSIONER KAMMERDEINER: When you're saying the "annual report," you mean the Budget and Brief or are you talking about the capper?
The City's annual report. COMMISSIONER KAMMERDEINER: Okay. I'll look at that and then provide some additional background for you.
Thank you. Are there any other questions or comments from members of the Committee? (No response.)
Thank you very much, Commissioner. COMMISSIONER KAMMERDEINER: Thank you. 94 3/26/07 - WHOLE - BILL 070114, ETC.
Thank you. MR. McPHERSON: City Treasurer's Office.
Good morning. Please identify yourself for the record and proceed with your testimony.
Sure. It's a pleasure to be before you again for another budget season. Good morning, Madam President and members of City Council. I am John Nacchio, the City Treasurer for Philadelphia. I appreciate this opportunity to testify before you about the FY2008 Operating Budget appropriations requested for this office. The total requested for FY2008 budget appropriation of 770,304 is an increase of $9,753 from FY2007. The FY2008 highlights by proposed expenditures are as follows: The Class 100 personnel projected expenditure of 95 3/26/07 - WHOLE - BILL 070114, ETC. $672,992 is the largest part of this budget and represents 87 percent of the Treasurer's Office proposed budget. This includes positions, two of which 6 re-establish the financial management and 7 analysis positions previously funded 8 prior to FY2005. The Class 200 amount is 9 73,088, and the combined Class 300 and 10 400 amount is $24,224 resulting in no 11 change from the FY2007 budget and 12 estimated obligations. 13 In FY2006, City Council enacted legislation that is moving the Office in a new direction to address economic issues of community reinvestment and disparities in lending practices. In FY2007, the City Treasurer's Office will, for the first time, commission an annual study examining the City's authorized depositories listed in Chapter 19-200 of The Philadelphia City Code. This study is in recognition that the lending practices of financial institutions have a measurable impact on the City's tax 96 3/26/07 - WHOLE - BILL 070114, ETC. base, quality of life and overall economic viability and competitiveness in the region and world economy. Further, in FY2007, City Council approved new legislation to establish an RFQ/RFP process for the payroll accounts of the City. The legislation requires that the City enter into a contract process for these accounts. The contracts must be approved by City Council by ordinance. The establishing of an RFP/RFQ process is underway in FY2007. I remind you that under the City Charter, the City Treasurer's Office primary function is to provide treasury management for the City's cash. The treasury management function has two principal components. One is the administration of cash collected by the Revenue Department for deposit and then distributed electronically to disbursement accounts to cover daily payments issued by the City either by 97 3/26/07 - WHOLE - BILL 070114, ETC. check or ACH or other electronic transmissions. The second practice of the City of Philadelphia is not to keep cash -- excuse me. The second function is to maximize returns and to grow the cash base of the deposits. The investment practices of the City of Philadelphia and the City Treasurer is not to keep cash that is not required for payments on deposit at banks where yields are usually low, but rather to place these funds in investments within the authorized limits set by Chapter 19 of the Code and established in the City's Investment Policy. This practice both preserves the principal and adds to the bottom line with cash as additional interest revenue to the City. Operationally, each year the Treasurer's Office oversees the disbursement of over millions of payments to approximately 30,000 employees, 33,000 pensioners, 19,000 vendors, 9,800 election workers, 3,800 foster parents. 98 3/26/07 - WHOLE - BILL 070114, ETC. Also, the Treasurer's staff manually initiates electronic payments of approximately 6,000 wire transfers and manages the coordination of over 900,000 Automatic Clearing House, ACH, payments. The office also monitors the related back-room processing and reconciling of about 100 bank accounts associated with the multi-layer and tiers of banking transactions that result in about three billion book entries and the related list of itemized cost elements associated. 5 billion of investments, involving daily market trading.
The City holds these investments in segregated trust accounts for funds resulting from the issuance of general obligation and revenue bonds. These trust accounts require daily investment analysis and direction by the Treasurer's Office to provide liquidity for cash disbursement and maximizing the return. 99 3/26/07 - WHOLE - BILL 070114, ETC. As a special point, I highlight the City's voluntary enrollment of direct deposit of pay programs in both the active employee payroll and pension payroll system continues to grow. By way of a breakdown, 74 percent of our active employees participate in the City's direct deposit program, as do over 80 percent of our pensioners. Similarly, the Automated Clearing House, ACH, payment program for City vendors was implemented in June 2000. This program is similar to the City's direct deposit of pay program, except that the City makes direct deposit payments to vendor accounts electronically rather than printing and mailing paper checks. The number enrolled has steadily increased each year and now there are over about 1,300 vendors who participate in this program. In FY2007, the City Treasurer's Office has continued to migrate to a new platform of up-to-date banking 100 3/26/07 - WHOLE - BILL 070114, ETC. technologies. This includes Internet online banking, increasing use of electronic transactions, organizing bank accounts into recognizable client clusters, and employing and deploying to all City departments modern banking technology. In addition, a special initiative for departmental banking, which is not under the City Treasurer, was the formation of a user group called M-BUC's. This user group approach involves over 150 employees and has been helpful to understand banking relationships and to provide a platform to inform and exchange with departments the best practices for their individual banking needs and provide guidance on fraud and theft protection. In FY2007, I particularly point to the contributions made by MOIS, the Mayor's Office of Information Services, for new computer programs for standardizing processes that has resulted in new designs of payroll and vendor 101 3/26/07 - WHOLE - BILL 070114, ETC. checks. Standardizing electronic files transmitted to banks and financial institutions and improving the uniform printing of checks by adopting new standardized formats has increased fraud prevention and added to more effective and efficient operations. The Office of the City Treasurer continues to advocate that all paper checks be minimized as a method of payment as a long-term objective. This is both for a modern effective process that is consistent with national objectives and for the City's continuity of government plan for emergency preparedness in the event of a catastrophic event. The preference for direct deposit and ACH enrollment has been encouraged through education and promotion of the message that is the most simple, safe and secure form of payment. This concludes my written testimony, and I'll be happy to take any questions. 102 3/26/07 - WHOLE - BILL 070114, ETC.
Thank you. The Chair recognizes Councilman Goode.
I note in your testimony -- and actually I was already aware of it -- that you have put two more lending studies under contract.
Can you tell me when those lending studies will be completed?
We're on an aggressive schedule with 2005 and 2006, and both studies are to be completed right now by the end of December of this year.
I'm assuming the 2005 study will be completed before that. 103 3/26/07 - WHOLE - BILL 070114, ETC.
We're looking for by June of this year. Hopefully by May, but June is where we're targeting.
The contract was actually signed just about, I think, three weeks ago. I think it was three weeks ago.
I would say we had a great kick-off with the team. I'm really excited, enthusiastic about the team that's been put in place and I think 104 3/26/07 - WHOLE - BILL 070114, ETC. that we should get a very good product.
And while the National Community Reinvestment Coalition was not selected, are the two studies expected to conform to the two previous studies done by NCRC?
One of the requests that we made was that there be a continuity between the NCRC studies and the new studies. So they've examined those two studies and hopefully we can get some continuity between them.
The approach to the study most likely will be slightly different in presentation. One of the points that we brought out was to have clarity so that they would be more informative to Council, the Administration and to the public. So the format resulting is intended to be more user-friendly in statistical presentation, and hopefully that will be 105 3/26/07 - WHOLE - BILL 070114, ETC. what the product will present.
Well, there will be more charts and more captions of summary, data that will present the information so that you and I and the public can understand it a lot better.
I get it. Thank you. When will the RFQ/RFP for payroll deposits be completed?
Right now we have a process in place. I've been meeting with MOIS, the Finance Department, and it appears that we've gathered enough of the information. As I pointed out before, I don't totally have the resources to keep this on a quick schedule, but we have been making process in terms of that. Hopefully in this year when the RFI goes out to the depositories, we could also ask them information about their interest in payroll and their capability. And 106 3/26/07 - WHOLE - BILL 070114, ETC. that RFP/RFQ process most likely at this time probably couldn't begin before the fall of September, I would think.
Just because, as I stated, resources in my office to support that activity of developing the complexity in developing the RFP is not there. I have two vacancies in the administrative area and I haven't been able to use consulting services. So there's a lot of technical aspects in the payroll process having to do with file 15 transmissions, fraud prevention, et cetera, which are currently in place which we would need to preserve in our new bank accounts, and we want to make sure that we don't miss any of those points.
Well, my question of when is not really answered then, because you've consistently told me that late spring, maybe over the summer, now you're pushing it back to fall. What 107 3/26/07 - WHOLE - BILL 070114, ETC. is the actual answer to the question of when? Is there a target in mind and a specific month in mind in which you would like to release an RFP/RFQ?
In last year's testimony and other testimony on other bills, I had made the effort that we would still move towards the July target that was said originally in the bill and to get a process in place, and the indication of, again, the complexities in the payroll -- one discussion I was having with MOIS in particular is trying to get that technical piece separated from the banking part so that in the future that the selection of the bank is not connected to the technologies in transmitting files so that we would be universal. Actually, that would also preserve our continuity of government in case of a catastrophe, because as 9/11 proved out, having it in the --
Mr. Nacchio, the original bill had the date of July 108 3/26/07 - WHOLE - BILL 070114, ETC. 1st, 2007 in it.
I took that date out so that it would be flexible, and I'm still being flexible, but how close to July 1st are you going to be able to come?
Well, again, my target is between that July and September to get the RFP out. I would think that even the process of selecting the bank and getting the contract before Council --
My question is really just when the RFP/RFQ is going out. So you're saying between July and September you should get an RFP/RFQ out?
Thank you. The other question, which is somewhat related to this, when will the City be ready to divest funds from Wachovia? 109 3/26/07 - WHOLE - BILL 070114, ETC.
When will the City be ready to divest funds from Wachovia?
When the legislation is approved and we'd have to work on a plan if they're removed as a depository to move forward on moving the deposit process to another institution that's on the list.
The resources available to actually move it in a timely fashion upon it being passed by Council and signed by the Mayor are unlikely to be in place. Just the banking community 110 3/26/07 - WHOLE - BILL 070114, ETC. itself setting up accounts usually takes about three months and the programming probably as much as six months. So I would have great difficulty in saying that the City could comply immediately if that were to occur.
So my question originally was when will the City be ready to divest funds from Wachovia. I need a date.
I can't answer that part. I can only answer that upon the approval of the legislation, that we would make the --
It would take at least that long as long as the City was able to mobilize the resources to have that happen.
I'm going to ask you a similar question. I introduced --
I want to say, 111 3/26/07 - WHOLE - BILL 070114, ETC. the serious matter of being the custodian of the City funds is that if we should just drop the services of Wachovia on a certain date, all of the things connected to them have to be reconnected somewhere else, and to do that with surety and confidence and not miss anything would be an assist to the City as opposed to anything that would be in reaction to the bank itself. The City of Philadelphia on a daily basis, the deposits -- there are a lot of electronic connections from the state.
Mr. Nacchio, I introduced this bill 14 months ago, on February 2nd, 2006. Is it fair to say that the Administration was not going to be able to pass it?
Well, I will say that as the City Treasurer I've examined on an almost weekly basis what our prepared plan would be for this and made others in the Administration and other 112 3/26/07 - WHOLE - BILL 070114, ETC. departments aware of the pieces that would need to be changed.
But I introduced the bill on February 2nd, 2006. At what point did the Administration start preparing to divest funds from Wachovia?
To my knowledge, the Administration has not prepared any plans to move or divest from Wachovia.
So you're waiting for us to pass the bill before you're prepared to move the money?
I would say that's on the Administration's side. On the City Treasurer's side, again, I have examined all of the implications and we have a basic understanding of what needs to be done and how we would have to move forward. But the resources to actually do it in a real-time basis, I don't really see them in place.
Well, let me ask this question a different way, then, 113 3/26/07 - WHOLE - BILL 070114, ETC. since you separate yourself from the Administration in your comments. At what point since February 2nd, 2006 did you start preparing to divest funds from Wachovia?
I would say almost immediately. It was my responsibility to understand what the implications were, and I have been examining all those. Even to the daily pick-ups with the pick-up of the deposit with companies like Brinx, et cetera, what would happen if we moved to another bank and how that pick-up would occur.
And in previous testimony, you've said that you would be ready because that legislation originally had a July 1st, 2007 date as well and you said that you were aiming to be ready by July 1st, 2007. At what point, assuming that this bill is going to be passed, will you be ready?
The best I can answer is that getting the accounts in 114 3/26/07 - WHOLE - BILL 070114, ETC. place at other institutions usually from their own requirements with the Patriot Act and the processing usually takes one to three months to assemble those, and the programs -- my experience with MOIS has been similar in changing some of the processing. It usually takes that kind of time frame to do it in a secure manner. So at the best effort, if this were at the top of everyone's list during that period, it would have to be within that three- to six-month period.
Mr. Nacchio, in previous testimony, you informed us that prior Administrations chose Wachovia and its predecessors as the holder of payroll deposits simply because they were the largest and prior Administrations dating back decades ago thought that they were the only ones capable of handling the deposits. Since that time, it has changed. There are several banks in town that probably can handle that, but it 115 3/26/07 - WHOLE - BILL 070114, ETC. seems that what was a -- I won't call it a contract, but arrangement for Wachovia to handle payroll accounts and to handle other investment business used to be at the sole discretion of the Treasurer's Office and/or Finance Department and the Mayor's Office, and they chose Wachovia for arbitrary reasons and its predecessors for arbitrary reasons and chose Wachovia simply because they wanted to choose Wachovia. The continued statement that it's going to be very hard to move the money, it seems that the Administration, the Finance Department and possibly the Treasurer's Office is saying we can't move the money. Are you saying we can't move the money or are you saying you don't know when?
In reflection of your question, I believe the City's decision to go with Wachovia was because of its decision to go with First Union, which was prior CoreStates and PNB, et 116 3/26/07 - WHOLE - BILL 070114, ETC. cetera. So the series of decisions was always based on the size of the bank matching the institution of the government. And certainly we know that there's a history of banking in Philadelphia which actually was established as the first bank of the country here, and that process, in and of itself, made Philadelphia very rich in its banking history, and the continuity of that banking was the hometown bank matching the government's size. And you're correct that in recent years the explosion of banks that have come to the City of Philadelphia is unbelievable. I'm really proud as a Philadelphian to see so many bank names coming to Philadelphia because they're interested in Philadelphia.
And not to cut you off, but I'll be introducing a bill on Thursday to add Citibank to the list of City depositories as well.
Okay. Yes. And 117 3/26/07 - WHOLE - BILL 070114, ETC. Citibank is another one that's going to be joining the community in Philadelphia. So the number of banks in doing banking in Philadelphia has increased. Yes to the answer about the question about payroll. There are now banks that will be able to handle that portion of our banking business. Certainly Wachovia still, in my opinion, has a footprint which satisfies the City employee best because of its distribution through the City as opposed to Citibank or the recent addition of Sovereign Bank.
But that's not true in comparison to Citizens Bank, which has more branches than Wachovia.
Again, it's a technicality. I understand that Citizens because they have ATMs at like Acmes, et cetera, that their branching services is considered as part of that. So that's how the numbers were reflective, is their distribution through the community is through that ATM network. That's what I 118 3/26/07 - WHOLE - BILL 070114, ETC. understand. But if they're equal --
NCRC as part of its study actually studied the branching patterns and actually dealt with the number of branches for all the City depositories, and the numbers just show that Citizens Bank actually has more branches and there are some others that are fairly close to Wachovia's branching pattern. Not that Wachovia doesn't have a good branching pattern, but Wachovia does not have the only branching pattern that could serve the City, not to mention that particularly in the case of the payroll deposits legislation, it calls for the authorization or the possible authorization of more than one bank. So there's nothing to suggest that, for example, the payroll deposits couldn't be done at PNC and Citizens or some combination of other banks that couldn't 119 3/26/07 - WHOLE - BILL 070114, ETC. fulfill the same purposes as having Wachovia because of branching patterns. In fact, if we choose to have payroll deposits through more than one bank, then we're actually expanding the branching patterns for our employees and pensioners in a way. So, in fact, whether Wachovia has the most amount of banks or not, we still probably should be looking at other banks as well to further expand the branching patterns.
It's one of the things that I've included in the request for information from banks, is their establishment of branches throughout the City. Although it's not any part of the compliance for the City Code, it is important in terms of putting them in context. I will take a look at Citizens' information banking.
But I just want to make this important part: The City 120 3/26/07 - WHOLE - BILL 070114, ETC. has chosen a bank like Wachovia because of the services it has provided over the years and its predecessors, and there has never been a dissatisfaction with those services.
That's not what you said five minutes ago. Five minutes ago you said that you chose Wachovia because its predecessor was First Union and its predecessor was CoreStates and its predecessor was -- you said that they inherited the account. You've said that in previous testimony. You didn't say you chose Wachovia because it was the best or because you weren't dissatisfied. You said you chose it because it inherited the account. You've already said it for the record there has never been competition. You never looked at the capacity of other banks that do the job. You never looked at the capacity of combinations of other banks to do the job.
To my knowledge, 121 3/26/07 - WHOLE - BILL 070114, ETC. the City has never had a problem with the predecessor banks in terms of processing the payroll. And there's been a complex layer or tier of technologies that have been related to that processing that must be executed on the days prior to the processing of the payroll, which require --
Mr. Nacchio, let me run through the list of City depositories, excluding Wachovia.
PNC, Citizens, Commerce, United Bank, Mellon Bank, Bank of America, Advance Bank, Republic Bank, as of this Thursday I believe Sovereign Bank and we're looking to add Citibank. Do you really mean to tell me that we have to do business with Wachovia or that it's just difficult to transfer the money?
Well, there's two parts again. It's the technology attached to payroll processing for direct 122 3/26/07 - WHOLE - BILL 070114, ETC. deposit and the secure processing of the files that go --
Let me ask a different question. Can we do it? I know you don't want to do it. It's clear that you don't want to do it.
That's because the City is satisfied with the services. Yes, it can be done, but it cannot be done in the immediate state.
And you don't seek to do it, so we're going to have to make you do it if we want to do it?
Well, I just want to say it's not technically possible for it to be done immediately. It needs to take some time, because that's just the way the process is established even with the bank.
So are you 123 3/26/07 - WHOLE - BILL 070114, ETC. preparing to do it or not?
If you can't tell me on the record that you're preparing to do it by a certain date, I have no choice other than to run the bill 8 to make you do it or to make you prepare to do it.
Okay. The best response to that is, the only preparation I can do is in terms of planning of what would happen if.
So your position and the Administration's position is quite simply that we don't want to do it, we don't think it needs to be done, we've given some thought to it, but we're not going to actually give you a date and time in which we can say we'll be ready to do it if it needs to be done?
I believe the Administration is on record saying that the resources aren't available in this Administration to be able to make a move 124 3/26/07 - WHOLE - BILL 070114, ETC. of this kind prior to December.
I don't think so. I don't think the Administration has been on record on this matter at all, but let me say this: If you're looking for where to get the money, just eliminate the Minority Business Enterprise Council.
If you're looking for where to get the money, eliminate the Minority Business Enterprise Council.
Well, I want to say with the payroll accounts, there's probably like a $200,000 or more charge that would be incurred if we went to another bank, and covering that expense is not budgeted anywhere. So if we move to a bank that is not holding other 125 3/26/07 - WHOLE - BILL 070114, ETC. accounts of the City, there's a difficulty in how that will be funded. Also, if the main depository goes to another bank, too, it's the processing capability of that bank and whether the connections that we have to those Wachovia accounts can be reconnected in a timely way. I will say that the State of Pennsylvania, I believe we're the third or fourth or second vendor of the State of Pennsylvania and a number of the row offices at the state have our bank account number. That will require every City department that has a relationship with them to change that processing. So you have like DHS, which has like a hundred million dollars or so coming in. If that gets -- I don't want to say gets lost in the mail, but it gets lost in the electronic mail if that's not followed through in that process.
Mr. Nacchio, I'm very clear. There's no need for any 126 3/26/07 - WHOLE - BILL 070114, ETC. further questions, no need for any further answers. What it comes down to, if you can't give me a date -- at one point you said six months. If you can't give me a date, then I'll have to provide the date for you.
Right. I'm going to say if you provide the date -- because I certainly don't have the total resources to implement what it is that needs to be done.
You're welcome. The Chair recognizes Councilman Rizzo.
Thank you, Madam President. I have been a customer of Wachovia for a long time and I've never 127 3/26/07 - WHOLE - BILL 070114, ETC. had a problem with my pay. That's just a point that --
It comes in Friday. I've never had a problem with it ever. And it's interesting, of all the years I've been in this job, I've gotten a lot of communication from City employees about different things. I have never once, all the banks, I've never heard a complaint about people not getting paid on time. So I think you guys do a great job over there. Maybe City Council is treated differently, but I've never had a problem, and I hope the same experience that I have, the Water Department, the Police Department and all of the departments have as good an experience with the scheduled payday. I mean, in 12 years almost, bang, it's 128 3/26/07 - WHOLE - BILL 070114, ETC. every other Friday like clock work. And I don't mean to say that has anything to do with Wachovia or any of the banks that people choose to get their direct deposits. But that interests me. A lot of the corporations around town -- and I know a couple personally -- that you have no option, you must sign up. If you're a new employee, you have to go to direct deposit. There is no paper check. Are we there yet with that? I mean, shouldn't that be a prerequisite to employment, that you must direct deposit?
For the last several years, I've explored that through the City government, and what I've been getting back is that we can't mandate it, and that's one of the reasons we haven't moved forward with that as a requirement for City employees. But the State of Pennsylvania, the federal government, they have required it, and the State of Pennsylvania the way they kind of got around it was, they required it but 129 3/26/07 - WHOLE - BILL 070114, ETC. didn't mandate it and then the people could opt out, which made it more difficult, which means you got almost 100 percent participation. Is it the best way to go? As you said, corporations, et cetera, find it to be the most cost-efficient, effective way to deliver the pay. It is the best way in the case of an emergency when we can't print checks and we can't distribute them, that electronically the processing can continue so that wherever you are, whatever happens to the municipal government, whatever, it can still happen. And that's what happened in 9/11. There were corporations which were actually out of business, but the payroll was still paid.
Well, I think you should ask the Law Department again. I mean, 20 years ago there were reasons certain people didn't want the money to go directly into their account. They wanted to have, I guess, more 130 3/26/07 - WHOLE - BILL 070114, ETC. control. Correct me if I'm wrong. Do you have to be a customer of a certain bank to get direct deposit or can you direct deposit even one that's not a depository?
Absolutely not. You can be the customer of any bank in any part of the country. It doesn't have to be a bank; it can be a financial institution, like a credit union. Actually, probably the credit union has the lion's share of our direct deposits. It can also be with like a broker, like Merrill Lynch, et cetera. So as long as it's an account where a deposit can occur, you can sign up.
Terrific. Would you ask the Law Department, because that might be a good way to transition into this, that new employees, that they're highly encouraged to go to direct deposit?
And that's 131 3/26/07 - WHOLE - BILL 070114, ETC. exactly what we do. We try to teach all the HR people as soon as a new employee signs up, that they're handed a direct deposit slip so that they can sign up. Pensioners are our favorite, because any pensioner who comes into the office who had lost a check in the mail, they're willing to sign up, and that's why pensioners are actually the higher percentage than employees over the years, because of that fact.
Well, don't intentionally hold their paychecks up for a couple days.
In fact, when you talk about service, we do pride ourself in the fact that the execution of that clock-work process has been in place and it's been working efficiently, effectively, and we can turn around payments. And recently with Positive Pay, which is a feature that we sent to 132 3/26/07 - WHOLE - BILL 070114, ETC. the bank and issue file, which has the payee's name, the check number and the dollar amount, we can actually turn around replacement checks in a quicker time, because we know the information is there.
And it's definitely a savings to the City, correct, direct deposit?
It's savings not only in the fact that we can actually save money, but it's a time savings that you can devote to something else that you need to devote your time to.
Could you ask the Law Department to give you some input on whether going forward you can actually mandate direct deposit and provide the response to the Chair? Because I think that would be very supportive of you. I can't imagine that corporations that I know that -- you don't have any choice. You have to bring in -- maybe that's part of the problem. 133 3/26/07 - WHOLE - BILL 070114, ETC. Sometimes the people that ask you to sign up ask you some complicated questions with the routing number, what's the batch number, what's the XYZ code. I think all you need to bring in is a check, void a check and all the information is right on the check that your folks need to establish direct deposit, right?
That's correct. Early on I believe that even myself, I was suspicious of the fact that the City would be holding information about my bank account and that somehow someone would get access to it. But to my knowledge, we haven't had that problem. And certainly the way the program has been working, even if your account has changed and the ACH payment, which is the direct deposit, bounces, we issue a paper check probably within hours to 48 22 hours so that you don't lose out that way 23 either for whatever reason. 24
So I think that would be a good lead-in for the 134 3/26/07 - WHOLE - BILL 070114, ETC. future to see what we can do especially with new hires to get them to go the direct deposit route, and maybe at that same time somebody says, Look, I'm a young guy, I don't have a checking account. Well, there's a great time to establish one. I'm sure we have like the credit union that would work with them to get them signed up.
Well, Councilman, even for the unbanked, there's things like debit cards. You can actually deposit to a debit card, too. There's other possibilities for people who have credit problems who don't have bank accounts. Although sometimes people talk about spouses, they don't want them to know about their deposits, but those are like inside kind of relation kind of reasons why people haven't signed up. But even the banks that we have worked with, they would work with the unbanked to set up those accounts. So we could get 100 percent participation. 135 3/26/07 - WHOLE - BILL 070114, ETC.
I only need one more minute. The -- again, I don't know the technical name. Maybe you can tell me, because someone asked the question to me. When a person's pay is taken each pay period for support or whatever, I don't know what they call that. The courts take money from --
Child support. Is there an expense to the City for that service? Is that an expense to you to deal with some of those mandates where money is taken out of their pay?
Well, recently -- I believe that's Skidoo (ph), and there is additional processing that they've required. Actually, just like the rest of the federal and state governments, they're moving towards electronic processing. So, yeah, they've asked for new programs. Is it more cost? It's probably just a change in process. Yeah, 136 3/26/07 - WHOLE - BILL 070114, ETC. we do have to account for it and manage it separately.
Well, we print out lists that are kind of like mailed. They've requested for it to be electronically. That's been --
Well, Mr. Phillis seems like he's willing to do a lot of great stuff.
He's refreshing. Maybe that's another "Mr. Phillis project" for you to take on since he's open to -- and seriously, he said something to me that was very important, that when you look at this globally, how it can affect this 137 3/26/07 - WHOLE - BILL 070114, ETC. department, it might benefit you but it could affect two, three, four other departments and really realize some cost savings. And so maybe you could hit him with that one again --
-- to see if you can get that automated, because that sounds like -- there's still departments in this City that have index cards. I haven't seen one of those in a long time, but I bet you have some over there.
You're welcome. Are there any other questions or comments from members of the Committee? (No response.)
This Committee will stand in recess until tomorrow, Tuesday, March the 27th at 10:00 a.m. Thank you very much. (Committee of the Whole adjourned at 12:25 p.m.) - - - 139 CERTIFICATE I HEREBY CERTIFY that the proceedings, evidence and objections are contained fully and accurately in the stenographic notes taken by me upon the foregoing matter on March 26, 2007, and that this is a true and correct transcript of same. ______________________________ MICHELE L. MURPHY RPR-Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)