My response to that is it is not possible to anticipate every request, but I will restate what our request is and our preference is that in fact the committee report out these bills today.
I understand that, but you could anticipate some requests. If there had actually been a discussion of any of this prior to the hearing, I would have been glad, as I often do, I would be more than glad to tell you what I would like to have before a hearing as opposed to asking for it in a hearing. So, no, I don't charge you with the burden of anticipating every request. What I do ask is that people take the opportunity to ask people what they want and then see whether it can be provided. Thank you.
It is important that we need to show a sign of good faith and movement to Harrisburg on a piece of legislation that has not even been enabled yet, where the legislation has not been finally drafted or introduced? So we are being asked to show signs of good faith on an issue that 673 3/21/02 - Continuing FY '03 School Budget Testimony doesn't seem to be moving with any speed at all in our state capitol. I have a question for Mr. Tuteur, if I may. It is my understanding and experience that a 30-year bond offering, sir, is usually done in an attempt to pay for capital projects. Is that a pretty accurate statement?
And the reason for the 30 years is we try to identify the real life of that capital project and therefore expand or extend the payments on that capital project over its useful life. Isn't that in fact --
In fact, you would have to have capital projects of that length in order to do 30-year bonds.
What is your expert opinion on the use of 30-year financing notes to fund deficit financing for periods of less than three years? Do you think it makes sense despite what your client may want you to do and have you ever seen it done before? 674 3/21/02 - Continuing FY '03 School Budget Testimony
In response, Councilman Kenney, to your first question, yes, it makes sense, and here is the reason why: As our letter, which we will submit to Council President Verna, indicates, there will be -- and as Mr. Doosey testified earlier, the tax laws require -- let me back up a minute. When you do deficit financing, as you pointed out, it is not capital financing. It is not for a protect. It is to cover a deficit. If you do that utilizing tax-exempt bonds, which is what is contemplated here, the tax laws don't permit you to keep those bonds out any longer than you need to. That is to say, if the School District had the good fortune ten years from now to have a huge surplus, we couldn't keep those bonds out for 30 years. What we pointed out in our letter and what Mr. Doosey testified to is to the extent that the School District runs surpluses above and beyond the working capital needs, there will be extraordinary calls of these bonds at regular intervals, probably annually, so that if we have the good fortune to run surpluses, these bonds will not be outstanding for 30 years. However -- 675 3/21/02 - Continuing FY '03 School Budget Testimony
Are you aware of any surpluses that this district has run in its history?
I'm not, but let me just finish my point. However, the benefit of taking it out 30 years is to give you the relief, if you need it, of having a 30-year obligation. If you have a five- or a ten-year obligation, which of course would have a much higher attended debt service to it on an annualized basis, and you don't have the ability to pay it because you don't have the surpluses, then I would suggest to you, sir, that we are in a much worse position.
The thing that I don't understand outside of this extremely peculiar situation is if I went to a bank -- and, as a matter of fact, Mr. Neville has testified himself the other day that what we are being asked to do is tantamount to putting your groceries on your credit card, which I don't think any financial adviser would ever advise anybody to do. So if I went to a bank outside of this particular situation and said that I wanted to borrow a hundred million dollars spread out over 30 years because I was running a business 676 3/21/02 - Continuing FY '03 School Budget Testimony that needed that hundred million dollar deficit financing over the course of the next two and a half years, do you think the bank would lend it to me?
So why would we ask the taxpayer to lend through their good faith and credit a similar situation on what seems to be a very expensive and really not a very sensible idea?
My suggestion to you is that there is a difference between running a business, and you are absolutely right, no bank would lend you the money.
And that's why the School District of Philadelphia is in the position it is, because running a government is different from running a business, and while I understand you have not put us in the situation and you are giving testimony on your opinion, it seems to me extremely shortsighted and extremely financially nonsensical to take this debt out 30 years when in fact 30-year borrowings are normally for capital projects and we are talking about getting fiscal breathing room for two and a half to three years. It seems like an awful amount of money to spend on the back end of 677 3/21/02 - Continuing FY '03 School Budget Testimony debt service for this short window of opportunity. Perhaps you disagree.
So you think in your expert opinion that borrowing 750 -- paying $750 million over 30 years makes sense in this particular circumstance?
No, I think in my expert opinion, sir, structuring the transaction so that you have the flexibility, albeit expensive -- nobody is going to suggest that 750 -- certainly I'm not going to suggest that $750 million is not a lot of money.
If you are a taxpayer in the City of Philadelphia, which I assume you are, you are going to be contributing to the payment of that.
Congratulations, if it happens. I have just a few questions for Mr. Dubow. Thank you for coming back over, Mr. Dubow. I appreciate your patience. 678 3/21/02 - Continuing FY '03 School Budget Testimony
I assume as budget director you have had the opportunity to run various scenarios, as you probably do on a daily basis, as to what the City is incurring in debt, what debt service payments are going to be required or anticipated, what other revenue estimates are projected to be, and through the course of the years, three years, five years, kind of run these scenarios in your head regarding what the City's fiscal condition would be based on various variables that may occur during the course of any given year. Is that pretty accurate? Do you kind of think about those things?
Yes. Let me identify myself for the record. I'm Rob Dubow, City's budget director. Yes, that's accurate.
Have you had the opportunity to determine or run this kind of hypothetical scenario in your own head relative to the borrowing or encumbering of the City taxpayers for this kind of debt over 30 years in anticipation of the possibility or potential that all the things 679 3/21/02 - Continuing FY '03 School Budget Testimony that we anticipate receiving through the course of this hearing, $75 million from the Commonwealth, a final fix on the statewide funding formula for schools, and considering the fact that the government would like to see the schools stay open without disruption, have you been able to determine what effect this borrowing could have on the City's long-term fiscal health in the worst case scenario?
To go back to our discussion from yesterday, the way we have looked at it on the City's side is what we have committed to do is make a $45 million a year payment and we built that into our plan and, as we discussed, that makes things a lot tighter for us and gives us a lot less flexibility.
Well, in the worst case scenario, if none of the items that we are anticipating happening from Harrisburg happens or if some of them happen, say the $75 million happens, my understanding is the $75 million, it's a one -- according to testimony yesterday I think from Mr. Doosey, I'm not sure, the $75 million request to Harrisburg is basically a one-time request. It isn't? So the commitment -- explain to me what the 680 3/21/02 - Continuing FY '03 School Budget Testimony $75 million is. Is that going to be in perpetuity?
The $75 million is the assumption of the parties. The City's ongoing commitment for $45 million is contingent on the State's commitment for an additional $75 million. While that would have to be appropriated annually by the Pennsylvania House, the $75 million is included in the Governor's executive budget starting at 75 million, increasing to $82 million in the '05 fiscal year.
But unlike the City's Act 46 problem, the second $45 million being the $20 million grant and the millage, that would be perpetualized by virtue of Act 46; is that correct?
And even though the commitment is there for the 75, it is still on an annual basis a budget item that needs to be voted on as an individual item, correct?
So if hypothetically the legislature changes or the Governor changes in the next three to five years, there is a possibility not Philadelphia's contribution, but there is a 681 3/21/02 - Continuing FY '03 School Budget Testimony possibility the State contribution might not happen, whether it is 75 or 82 or the progressive eighty-five ninety? Let me make it simpler. We are locked into $45 million a year in perpetuity; they are not, correct?
Are they under the same constraints that we are under Act 46 for any money they give us this year? Are they under the same constraints?
So that goes through a separate individual budget process each and every year. Hopefully we will be successful, but the possibility exists that we may not?
No, I'm not asking you to quantify the risk. I'm asking you to give me what is actually true as far as our ability to anticipate what may be coming from Harrisburg in the next one, two, three, five, seven years.
Frankly, I don't think 682 3/21/02 - Continuing FY '03 School Budget Testimony anyone can anticipate with certainty.
Well, I'll tell you what the SRC or the school board can anticipate from the City, is at least $45 million a year in perpetuity. Is that accurate?
So there is a difference between that situation and what is coming out of Harrisburg?
Mr. Dubow, in the event that down the road the $75 million is somehow obstructed or waylaid or that the long-term solution of statewide funding of schools across the state is not forthcoming, what effect does this additional encumbrance have on the City's budget if we want to keep the schools open?
Let me make sure I understand your question. You are saying if sometime down the road --
The year after. If the 75 million stops and there is still no solution 683 3/21/02 - Continuing FY '03 School Budget Testimony statewide to the funding and we are still encumbered and we have a desire to keep the schools open.
Are you saying if the State does not live up to its commitment --
I cannot speculate as to what they will do. Obviously if the entire pot that goes into the School District is lower, there is some risk for the City.
In order for us to keep those schools open, we would have to have an increase in revenue in some way, wouldn't we? We would have to have more money. Well, we certainly wouldn't have to have less money.
That's right, councilman, but that presumes that the City could attempt to do this on our own and we can't and we have always been on record as saying that.
I know you don't want to do it on your own, but you are asking us to encumber the City for 30 years to almost do it on our own. This is a question for Mr. Dubow because 684 3/21/02 - Continuing FY '03 School Budget Testimony what I need to know is if we attempt under the worst case scenario with this new encumbrance to keep our schools open, it is going to acquire additional dollars; is that not correct?
Well, there are two assumptions you are making. One is that the deal won't fall apart and one is that we would be willing to put in money we don't have, and we have consistently said that we won't do that.
So the schools are closed, or they wouldn't be able to open?
We are talking about the situation you talked about yesterday.
Right. And what I'm asking you is what the potential solution to that situation is. Is it an attempt or a need to increase revenue from a City source to keep the schools open? We are willing to borrow $750 million to keep the schools open for two and a half years. I assume if we hit a wall down the road we are going to want to keep the schools open too, so we are going to need increased revenue.
You are asking what the solution is. Our answer to that is that the State 685 3/21/02 - Continuing FY '03 School Budget Testimony has a responsibility.
Rob, with all due respect, the State has always had a responsibility. The State has had a responsibility for 25, 30, 40 years. No one is arguing that. I'm talking about the practical nature of what it is that you're asking us to do, and the practical nature is that we will need more money from our City source to keep the schools open or they close.
You are asking me to speculate on what if we do something we said we are not going to do. That's essentially what you are asking me to do because we said we are not doing that.
We. We. We are the School District. We are the taxpayers. We are paying as taxpayers of the City of Philadelphia for whatever it is the School District or the SRC is asking us to do. You can separate from the Act 46 and the SRC's creation. The bottom line is that the 686 3/21/02 - Continuing FY '03 School Budget Testimony people that live and work within the confines of the City of Philadelphia are paying this, so it is our system in the end. We are paying for it.
We are state taxpayers too and so are the people that work in the city. So, therefore, the School District of Philadelphia, whether it is the SRC or the old district Board of Education is our system, correct?
So what I'm asking you is down the road, if none of this materializes, we are going to be in a situation to require additional revenue in order to educate our kids?
The School District will need additional revenue. The state will have a responsibility to --
Right, and they are not living -- hypothetically they are not living up to it. So now we are in a position where the schools potentially cannot open. The state has not lived up to whatever commitment we think they made 687 3/21/02 - Continuing FY '03 School Budget Testimony with you guys because we don't know of any commitment they made from our perspective and we are encumbered with $25 million of debt service over 30 years. We are encumbered with $25 million of debt service for NTI. We are encumbered with or $25 7 million in debt service for new stadiums. What do 8 we do? We have to find new revenue, correct? 9
I don't know how to answer 10 the question you are asking me. 11
I will answer it for 12 you. We have to find new revenue. 13 All the discussions we have been having 14 in the midst of this wage tax discussion and grocery 15 receipts taxes and the recognition that we are 16 probably one of the more unfairly taxed cities in 17 the country, we probably couldn't raise the real 18 estate tax, we probably could not raise the wage 19 tax, we probably could not raise business taxes in 20 the city, so the only options left to keep the schools open in light of the state again failing its responsibilities would be potentially to raise the real estate taxes. Isn't that a possibility?
I will repeat what I said before. Our position at that point would be, and 688 3/21/02 - Continuing FY '03 School Budget Testimony for the reasons that you have just said, that we couldn't afford to put more money in, and that's why the State should have to live up to its responsibility.
The State should live up to its responsibility and hopefully the State will, but this bridge loan that we are asking to make or to allow to be made or to pay for will take us beyond 2004 potentially. In the event the State doesn't live up to its commitment or alleged commitment in solving statewide school funding, we are stuck in 2004 after a municipal election with the opportunity to close the schools or raise additional revenue to keep them open, and I would argue to you that the easiest one to raise, because the other ones are so problematic, would be real estate taxes. So we find ourself in a situation in 2004 after that municipal election without the state's commitment or the state's follow-through with anything that they committed to or allegedly have committed to, I would argue with you that the next move is going to be to raise the real estate taxes in the city. It will pay for the schools. It 689 3/21/02 - Continuing FY '03 School Budget Testimony will be a safe thing to do after 2004 because everybody will be safely reelected.
Councilman, I'm sorry. We are going to have to curtail some of our questions.
We have the monsignor waiting to deliver the invocation and I know the youngsters are back there and I'm sure they are getting a civic lesson.
With all due respect, Council President, I agree with you. The monsignor has been waiting and these young people have been waiting, but we are in this room this morning not through any fault of ours.
The people who are sitting at this table could have been sitting at this table a lot earlier than five minutes to 11:00 on Thursday morning. We could have had this discussion much sooner than we have had it, so anybody who has been inconvenienced, it is not any 690 3/21/02 - Continuing FY '03 School Budget Testimony fault of this council. Thank you.
Thank you. At this time the Chair recognizes Councilman Cohen.
Yes. This is a strange sort of discussion because those of us occupying council seats ask questions and talk about the issue to people representing the administration as if the individuals representing the administration created these policies or even necessarily support them privately. The fact is people sitting at that table have to pursue a certain line of answers to questions because they don't have the same freedom that we have in City Council to discuss our views. Isn't that right? Aren't you portraying the views of the Mayor, the administration? Is that true, Miss Kahn? Let me address the secretary directly as the ranking member sitting at the table.
Of course we are here representing the views of the administration, but I also think we have made known both our personal beliefs as well as the belief of the administration that the issue of having the State live up to its 691 3/21/02 - Continuing FY '03 School Budget Testimony responsibility in funding schools is critically, critically important to both the present and the future of this city.
Of course you believe that the State ought to live up to its responsibilities, but your definition of the State living up to its responsibilities is far different from our definition. We believe the State lives up to its responsibilities when the State takes action in accordance with those responsibilities, not when the State defaults or the State puts caps on the amount of contributions it is going to make to the School District like it did back in the early 1990's.
What I'm saying is there's a difference in how we interpret. You have to interpret everything through the prism of the Mayor's eyes. We are free to interpret the situation through the prism of our own eyes and therefore we even have differences of opinion that we are free to express, maybe not free to vote, but free to express. And I think that distorts this 692 3/21/02 - Continuing FY '03 School Budget Testimony kind of dialogue that takes place. Suddenly we got involved this morning in cash flow. Tell me the relationship between the cash flow problems of the district and the deficit. Is there any relationship between the two items?
Could I ask you to restate the question? I'm a little confused. I have testified what the cash shortfalls would be through the end of the year and starting in July, so I don't understand what the question is.
What would stop the School District from operating would be a lack of cash, right, not a deficit? Because we have a big deficit and the school system is operating with a big deficit, but if you had the same kind of cash flow deficit, if you didn't have the cash, the schools wouldn't be operating, right?
If I didn't have the cash, the schools could not operate, but it will reach a point in time where you cannot incur larger deficits. I think we are at that point in time.
The deficits become 693 3/21/02 - Continuing FY '03 School Budget Testimony problematical when the additional streams of cash to cover the shortfall stop. You are only postponing the day of reckoning.
But as of now we have a very substantial deficit, according to your figures, and we are open and operating, right?
Now I understand your question. Yes, the immediate need is a cash need, not an accounting deficit issue.
Has the School District made an effort to meet the cash flow needs other than through the bond issue that we are talking about with the $45 million contribution by the City? Have you gone to banks asking for them to take you through April 15? Is that the first date of danger?
The actual problematical period historically for the School District is from the July to August period, which is when tax revenue anticipation notes historically are issued by the district, and that's exactly what it is, short-term bank borrowing.
I have difficulty when we flow between historical dates and actual 694 3/21/02 - Continuing FY '03 School Budget Testimony dates. This year what is the date when the schools will cease operating as a result of a cash flow shortage ?
Without any additional funds we anticipate that we will run out of cash on May 15.
Now this is approximately two months before. What is the School District doing to take care of the situation in the event this council acts unfavorably on the administration's request?
With all due respect, sir, I don't think there is a second alternative given that the amount of funds that are necessary the Pennsylvania Department of Education has advised that they are not in a position to advance and the banks have advised that they are skittish to lend given the current deficit of approximately $170 million.
Has there been any effort to go to banks directly, or is this supposition on your part? 695 3/21/02 - Continuing FY '03 School Budget Testimony
No, we have initiated initial discussions with the banks because I have to assume that if for some reason something does not happen I have to start those discussions at this point in time.
Is there any other bank? How about First Union or Wachovia, whichever you choose to call it?
In the past First Union and PNC, because they are Pennsylvania domiciled -- well, I can't say Pennsylvania domiciled -- because they have material operations in Pennsylvania have always been the two banks frankly that would be willing to lend to us in these circumstances. Needless to say, the School District does not -- is not the most favorable credit that a bank would look at. 696 3/21/02 - Continuing FY '03 School Budget Testimony
Because we have insufficient cash flow and we also have a deficit.
Has there ever been a time that the School District has defaulted on a bond issue?
Why would we be a bad credit risk? I think we are an outstanding credit risk. The School District has not only itself but the City and the State to rely on.
We have been a viable credit risk for the bondholders because of the Commonwealth's intercept which provides that if we were not able to pay the bondholders, the amounts of monies due the School District from the Commonwealth will be redirected to the bondholders. It is for that reason that we are a viable credit. Standing without that intercept, we would be a junk credit in the credit markets. It is only because of Pennsylvania law which obligates the Commonwealth to redirect funds for the benefit of the bondholders that makes us a viable credit in the marketplace. 697 3/21/02 - Continuing FY '03 School Budget Testimony
That's a pretty good guaranty to the bondholders, isn't it?
You know, it seems to me we paralyze ourselves and tie ourselves up in knots. It seems to me we have lots of sources. Did you go to the pension fund? We have a pension fund in the city with many billions of dollars? Its returns have not been very good. The beneficiaries of the pension fund are the city employees who have a great stake in the viability of the pension fund. We could pay them an interest rate which is probably higher than the recent returns the pension fund has had in the last year. Has there been an effort made to go to the pension fund?
I'm afraid I'm getting confused. The source of the funds, I don't know understand what the source of the funds, whether it be pension fund or long-term general obligation bonds, how that is material to the School District's current situation and current need for cash.
I'm sorry. I don't get that answer. It seems to me the pension fund, 698 3/21/02 - Continuing FY '03 School Budget Testimony like the bank, would in an excellent position to provide the cash flow money necessary to maintain the school operation during the month of June, the rest of May and the month of June. It seems to me that the School District is derelict in not taking a whole series of steps made to guarantee its continued operation in the event that either Harrisburg or Philadelphia as far as the legislative bodies are concerned will both fail in meeting the needs of the School District.
I will restate my testimony from yesterday. Not only do I have a cash shortfall between now and June 30, there is also a cash shortfall between July 1 and August 15 when we receive the bulk of our annual revenues of approximately $200 million. Getting to June 30 really isn't the answer. If I get to June 30, yet immediately after the July 4 holiday continue not to have funds, I will still not be able to open up the schools in September even though I completed the current school year.
But that is a different problem from finishing this school year.
That is correct. 699 3/21/02 - Continuing FY '03 School Budget Testimony
Thank you. The Chair recognizes Councilman Clarke.
Thank you, Madam President. Madam President, I just wanted to reference earlier testimony with respect to procedure as it related to hearings in council and information submissions. I have only been here two years, and in my brief tenure here I have seen just about every procedure imaginable used as it related to reporting bills out of committee. I have actually seen bills recommitted to committees. I have seen information come before the final passage of a bill, and it is just unclear to me as to if we have individuals saying they essentially want to send a political signal --
I'm sorry. It is just so noisy. Please proceed, councilman.
I said it is clear to me that the request here today is to send a political signal to Harrisburg that the City of 700 3/21/02 - Continuing FY '03 School Budget Testimony Philadelphia is serious and I think we all know that we are serious and I think that Harrisburg to a degree knows we are serious, but simply reporting a bill out of committee, understanding that there is a strong likelihood that we will not move that bill 7 beyond the first reading, that is the request on the table today. We will be hearing a calendar later on at some point in caucus that probably every bill on that particular calendar is going to be held, some of which have been held more than a year. I don't think it is an unreasonable request to ask us to report those bills out of committee, understanding that without the submission of that information that these particular bills would not move beyond the first reading of council. So I would just like to get that out there, that there is another process. It is not just simply us not moving the bill out of committee until we get the appropriate information, and I agree we should get all the information. If it requires that we get some additional briefing from the administration or from the legislature, I think that should happen, but it is clear that the request 701 3/21/02 - Continuing FY '03 School Budget Testimony today centers solely around sending the appropriate signal, and I'm assuming there has been some discussion among members of the SRC, the administration and members of the legislature that sending that particular signal today enhances their ability to move forward the $75 million commitment. So I just wanted to put that out there, that I think that's what we are here to talk about today.
Thank you. The Chair recognizes Councilman Goode.
Thank you, Madam President. I share the same concerns as my colleagues over the testimony of the commission and the administration. I think it is not much different than past practices of the lack of information and respect for council in terms of its process, and council has never really been involved as it should be in school matters by law, just by the way government is structured. But as I share those concerns and as I share the same concerns with a 30-year, $30 million debt issue, we have no bills before us today that 702 3/21/02 - Continuing FY '03 School Budget Testimony obligate us to a 30-year, $30 million debt issue. We should actually end that confusion right now. We are not voting on a 30-year, $30 million debt issue. We are simply making a decision to give the School District $45 million a year, and I'm particularly concerned because we spent a couple hours here in the height of hypocrisy, particularly for certain members who less than six months ago were ready to give the School District $75 million a year with no 11 strings attached. On October 11 Councilman Kenney along with Councilman Nutter and Councilman Ortiz introduced an appropriations bill for $75 million. Take $75 million, give it to the general fund, give it to the School District, no strings attached. In fact, the day that bill was introduced Councilman Kenney made a speech after council, and let me quote from that speech. It says, "Any solution that may be coming from Harrisburg is going to require local increased aid to the district. I think in the end and also I believe the legislature has made it very clear that unless and until Philadelphia steps up to the plate for additional, substantial new monies for the district, they are really not willing to provide 703 3/21/02 - Continuing FY '03 School Budget Testimony any additional funds that will make any difference. In the end it is our responsibility to deal with the district. " He goes on to say, "I can't think of a more important investment we can make in this city other than the education of our kids and I will argue that probably even beyond blanket taxes and auto insurance and other reasons why the citizens of Philadelphia decide to no longer be citizens of Philadelphia, probably the number one reason is condition of the schools and lack of choices they feel they have for their kids. " 704 3/21/02 - Continuing FY '03 School Budget Testimony He goes on to give an interview to the Philadelphia Inquirer in which it says, Councilman James Kenney posed legislation authorizing release of $75 million. He is quoted as saying, "I think it's important that we show a tangible commitment, that we show the students, their parents, and the State that we are willing to come up with a substantial amount of money," Kenney said. The article goes on to say "Under Kenney's bill the City would give $75 million to the district, an amount intended to restore the $65 million appropriation to the schools that Street vetoed at the end of the summer. Street and council members have expressed concern the state law, Act 46, will require any such appropriation to be made annually if the State ceases control of the district, but Kenney said that was not a concern for him now. The city should make school funding a budget priority," he said. So you see the $45 million bill as opposed to the $75 million bill is a better deal. For the $45 million bill, it represents the art of negotiation. The $75 million bill represents the art of grandstanding, and what is happening here in 705 3/21/02 - Continuing FY '03 School Budget Testimony the last few days represents the art of hypocrisy. It is as I have heard in this council before. It is flip-flopping. It is boomeranging. It is wrong. It is time for us to end this disingenuousness that is in this body, decide what we want to do, if we are going to help the kids or not.
In the end, for those people who might be educated in the school district and don't know what disingenuous means, it means full of crap. Thank you. )
Thank you. The Chair recognizes Councilman Kenney.
Thank you for the opportunity to respond to the additional personal attack from Councilman Goode's inane fixation with what I have to say and my positions. But let me say I will take that $75 million deal again today. What the Mayor and what this administration is asking us to do is to basically give $45 million, million of which will 23 be used for debt service. They have already said 24 they are going to borrow $300 million and pay for it 25 over 30 years at the cost of $750 million. I will 706 3/21/02 - Continuing FY '03 School Budget Testimony take that deal for $75 million today and I will take it tomorrow, but I will not mortgage or remortgage the future of this city's taxpayers on what I believe is a pure election ploy to get this administration beyond 2003 without a critical stoppage of school services so that they can then move forward in the next term, not really caring about what happens because now the reelection as already happened. So I will take that $75 million deal again today. I will not remortgage the City's future for $750 million over 30 years. Even legal counsel that has to at some point in time defend their client's positions, I don't think that necessarily was a very strong endorsement of using a 30-year borrowing to pay for a two, two and a half year window of opportunity with no guaranties, with no additional indication from anyone in state government that this problem is going to be solved. So we all have our opinions. I'm glad that Councilman Goode has had the ability to quote me properly. I do not stand beside those words, but I do not stand beside mortgaging the City's future over the next 30 years on a wing, a prayer and a 707 3/21/02 - Continuing FY '03 School Budget Testimony promise. Thank you.
The Chair recognizes Councilman Goode for a point of order.
This $45 million bill 6 can be categorized as people want as obligating us to a 30-year $30 million debt issue. That simply is not the case. It is not true. The truth of the matter is that the $75 million bill, as he says he would accept now, if we were to pass that bill, if we would have another appropriations committee hearing today, pass it out, the School District would actually have $75 million that they could use to float the same debt. The $75 million has more loopholes than the $45 million bill. Thank you.
There is apparently a disagreement here, but I will stand by that position and I will take the $75 million and I will take the $75 million appropriation from the State to match it and I will refuse to participate in any activity that will encumber this city over the next 30 years and $750 million in hard-earned taxpayers' support to do this shell game that the administration insists on pursuing.
Thank you. 708 3/21/02 - Continuing FY '03 School Budget Testimony Councilman Ortiz, you are next.
I would vote for $75 million today. I would vote for $75 million tomorrow; however, we have a couple of bills in front of us. One will allocate $45 million. Bills 0200031 and 020033 will erase the millage that will transfer over to the school and lower the millage in terms of the city. That is the other money that is being transferred that will pay for the floating of the bond over 30 years. In order not to resolve the issue of the structural deficit that we have in the School District of Philadelphia, not to begin even to discuss a final solution, I would put $75 million today that would go to classroom, that would go to instruction, that would be targeted to that rather than mortgage the future for one year, a one-year crossover and a bridge that will not resolve anything. Yes, yes, let's give the school. Let's send a signal that this City Council is willing to put a lot more money, but let us not mortgage our future without any response from Harrisburg as to where are we going to go to resolve the final issue of education not only in Philadelphia but across the 709 3/21/02 - Continuing FY '03 School Budget Testimony Commonwealth. It isn't grandstanding. It isn't hypocrisy. It is the aspect of coming together and for the first time dealing with the issue of finally funding the Philadelphia school system in an adequate manner. We are not discussing that here. All we are saying is let's build a bridge and no one knows where that bridge is going to lead to, but it does not lead to the solution of our funding problem.
Thank you. Councilman Clarke, do you care to be recognized?
Yes, Madam President. I just wanted to speak to the reference of the electoral process as it relates to this particular bill and I agree that in some respects that is a part of this discussion, but I think it has more to do with the electoral process of this particular year. The reality is, as I have said on numerous occasions throughout the process of these last two days, that until we seriously deal with statewide school tax reform, this issue is not going to be resolved. The reality is that I don't think 710 3/21/02 - Continuing FY '03 School Budget Testimony anybody involved in this process thinks that at some point in time we are not going to seriously address this issue given the fact that more than half, more than half of the school districts of the State of Pennsylvania have a similar problem as Philadelphia. After November this is going to be the front burner. This is going to be the topic of discussion, about reforming our school funding, right? That is not going to be discussed now. We need not kid ourselves. I cannot believe that anybody in this room does not have a sense that that is the case. With respect to the 30-year note, in the testimony yesterday there was a question with respect to restructuring the debt on that particular 30-year note. I believe that the response was assuming that we got statewide school tax reform that that would be addressed and that would be addressed immediately. I don't think it is anybody's intention, anybody's intention, to think that we will be dealing with the bill as structured now as it relates to the 30-year note. So I think that we need to seriously consider what we are being asked to do today, which 711 3/21/02 - Continuing FY '03 School Budget Testimony is simply send the appropriate political message that we are serious about this, that we are willing to commit. I understand that we need to get certain information and I think that information will be forthcoming because I think the folks know that we are serious about us getting that information and there is a strong likelihood that if we do not get that information there will not be the votes to move this ahead. So I would just like us to focus on the issue at hand today. Thank you, Madam President.
Thank you. The Chair recognizes Councilwoman Tasco.
Thank you, Madam President. Did I misinterpret, Miss Kahn, your answer when Councilman Nutter asked you about providing the information? I thought your answer was I will provide you the information if you pass these bills out of committee?
No. I'm sorry. What I said 712 3/21/02 - Continuing FY '03 School Budget Testimony was I didn't want my answer to imply that I was willing and that it was our position that the bills not be passed out of committee. I said we are still asking that this committee vote the bills out and certainly we will be providing that information. We would provide it in any case, but I didn't want it to be misinterpreted in saying that we were withdrawing our request to have the bills reported out of committee.
I want to give a point of information for those of us that sat here for a couple of days. To be clear on what we are asked to vote on, as I understand it, there are two bills. One, as Councilman Ortiz said, $45 million for '02, but and 20 that add up to the 45 17 million, while we do not vote on the $300 million 18 bond deal, the moment we pass that 45 million gives 19 the SRC the ability to go to the bond market and to 20 sell those bonds, so in essence we are giving our 21 approval to the expenditure of those bonds. 22 I just want it so people will be clear 23 on what we are doing here today. There are two $45 24 million. Thank you. 25
Thank you. 713 3/21/02 - Continuing FY '03 School Budget Testimony Are there any other questions or comments from the members of the committee? Seeing none -- Miss Kahn, did you want to be recognized?
There is a small clarification on what Councilwoman Tasco said. There are the two bills that reflect the transfer ordinance. I mean one bill for the transfer ordinance for the 45, two bills, one of which increases the millage for the School District and the other that decreases the millage for the City. Those could not precede the protection for the City on that unless we get the protection from Act 46 on those from the double counting from the State. That's on the one hand. And, two, the district and the school reform commission could not proceed with the bonds unless they get the authorization from the State. Thank you.
Thank you. Are there any other questions or comments from members of the committee? Seeing none, this will conclude our public hearing. We will now go into our public meeting, and the Chair recognizes Councilwoman 714 3/21/02 - Continuing FY '03 School Budget Testimony Blackwell regarding Bill No. 020031.
Point of information. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. Can we, not only by way of bill number, but in five words or less, with regard to some of these bills? We know that some are the regular tax reauthorizations. The ones that have been of the most intense discussion, if they can be -- I don't want to say highlighted, but at least pointed out which bills are which bills or what they do?
Bill No. 020031 is the one that reduces -- it is the two-part bill that the secretary kind of talked about. This would reduce the real estate tax on the city side. Then the companion bill --
That's all. We don't have to go into the companion bill. We are just talking about this bill right now.
I understand. 715 3/21/02 - Continuing FY '03 School Budget Testimony
I apologize, Madam President. For clarification, you said "and the companion bill," which I know will come up. The companion bill is 020033; is that correct?
Yes. The Chair recognizes Councilwoman Blackwell.
Thank you, Madam President. I move that Bill 020031 be reported out of committee, no suspension, with a favorable recommendation. (Duly seconded).
It has been moved and seconded that Bill No. 020031 be reported out of committee with a favorable recommendation. All in favor will signify by saying aye. MEMBERS: Roll call.
Aye. 716 3/21/02 - Continuing FY '03 School Budget Testimony
No. 717 3/21/02 - Continuing FY '03 School Budget Testimony
So the motion fails. We will now consider Bill No. 020032. I don't think there has to be any explanation on that one, or do you want an explanation on all of the bills?