COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COMMITTEE OF THE WHOLE - - - Wednesday, 5/15/02 10:27 a.m. Room 696, City Hall Philadelphia, PA - - - BILL 020227 - Dissolving the Schmidts Plaza TIF and creating the Schmidts Plaza II TIF. BILL 020231 - Dissolving the Jump Street TIF and creating the 1600 North Broad TIF. BILL 020309 - Decreasing in stages the rates of the tax imposed upon certain low-income persons. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA, Chair COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DARRELL L. CLARKE COUNCILMAN DAVID COHEN COUNCILMAN FRANK J. DICICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN BRIAN J. O'NEILL COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 WITNESS BILLS 020227, 202231 James Cuorato, Commerce Director.............. Robert C. Fina, Senior Vice President, PIDC 38 J. Robinson, North Phila. Homeowners Assoc. 67 Florence E. Mason, concerned citizen.......... 71 BILL 020309 Charles Pizzi, Phila. Chamber of Commerce..... 76 Councilman David Cohen........................ 90 S. Herzenberg, Keystone Research Center....... 107 Richard Weishaupt, Community Legal Services... 115 Hal Sawyer, Value Through Labor Project....... 120 Sam Katz, Greater Philadelphia First.......... 125 Robert Dubow, Budget Director................. 129 Nancy Kammerdeiner, Revenue Commissioner...... 139 3 5/15/02 WHOLE - BILLS 020227, 020231
Good morning, everyone. This is the public hearing of the Committee of the Whole regarding Bill No.'s 020227 and 020231. I would ask Mr. McPherson to please read the titles of the bills.
Bill No. 020227, an ordinance dissolving the Schmidts Plaza Tax Increment Financing District and creating the Schmidts Plaza II Tax Increment Financing District, being the area generally bounded by Girard Avenue on the north, Germantown Avenue and Second Street on the west, Wildey Street on the south, and Hancock Street on the east, and approving the project plan of the Philadelphia Authority for Industrial Development ("PAID") for the redevelopment of the Schmidts Plaza II Tax Increment Financing District and making certain findings and declarations, all in accordance with the Tax Increment Financing Act, being the act of July 11, 1990, P.L. 465, No. 113, as amended, and authorizing the Director of Finance and other offices of the City to execute documents and do all things necessary to carry out the intent of this 4 5/15/02 WHOLE - BILLS 020227, 020231 ordinance. Bill No. 020231, an ordinance 4 dissolving the Jump Street Tax Increment Financing District and creating the 1600 North Broad Tax Increment Financing District.
Good morning. Please identify yourself for the record and proceed with your testimony.
Good morning, Council President Verna and members of City Council. My name is James Cuorato, and I am the City Representative and Director of Commerce for the City of Philadelphia, and I'm here to provide testimony in support of Bill No. 020227 and Bill 19 No. 020231. Bill No. 020227 will dissolve the former Schmidts Plaza Tax Increment Financing District created by Bill No. 000222 in the year 2000 and will create the Schmidts Plaza II TIF to assist in financing the development of an approximately 240,000 square foot retail center 5 5/15/02 WHOLE - BILLS 020227, 020231 that will likely include a supermarket, a drugstore, and several retail shops and restaurants. The center will be located on approximately nine acres generally bounded by Girard Avenue on the north, Wildey Street on the south, Second Street on the west, and Hancock Street on the east. The City and School District are being requested to approve an $8 million TIF loan for the $34 million project. The TIF note would be repaid from new real estate, City sales, and business- privilege taxes generated from this project. Additional revenues generated by U and O taxes will not be used to repay this TIF note. , an affiliate of Tower Investments Incorporated, purchased the property at sheriff's sale, and I would note that the principal for Tower Investments, Bart Blattstein (ph), is here this morning. Project benefits include approximately 200 construction jobs, 600 permanent jobs, and new tax revenues of $7 million to the School District 6 5/15/02 WHOLE - BILLS 020227, 020231 and $17 million to the City. Another benefit is the removal of the blighted vacant former Schmidts Brewery and the provision of new retail services to the community. A copy of PIDC's financing gap analysis has been submitted with my testimony. This analysis indicates that the gap is approximately $9 million. " The difference in the two districts is Schmidts Plaza II is smaller by two acres, and the effective date, or start date, of Schmidts Plaza II is July 1, 2002. I would note that the School Reform Commission voted unanimously to approve and participate in this TIF, as presented in Exhibit A to Bill No. " The second TIF bill before you today, Bill No. 020231, dissolves the former Jump Street TIF District created by Bill No. 980705 in 1998 and 7 5/15/02 WHOLE - BILLS 020227, 020231 creates the new 1600 North Broad TIF District. The 1600 North Broad TIF District will facilitate a neighborhood-based development on a five-acre parcel on the west side of North Broad Street between Cecil B. Moore Avenue and Oxford Street on the Avenue of the Arts North. The Philadelphia Redevelopment Authority has acquired the parcels comprising this currently-vacant site to convey or lease for the purpose of constructing a mixed-use residential and/or retail and entertainment center with related parking. The Redevelopment Authority is presently in the process of selecting a developer from responses to a request for proposals. Based on the three proposals received, the development costs will range from $42 million to $63 million, of which $24 million to $40 million will be financed by the developer and up to $23 million will be secured by incremental increases in real estate, City sales, business-privilege, and use-and-occupancy taxes pledged as repayment of the TIF note over a 20-year term. PIDC may provide a HUD 108 loan of up to $20 million to fund all or a portion of the TIF 8 5/15/02 WHOLE - BILLS 020227, 020231 note and/or developer's financing for this project. Other public funds may also be provided to the extent that the TIF loan is less than $23 million. A parking structure may also secure public financing beyond any TIF financing. As in the case of the Schmidts Plaza II TIF, the 1600 North Broad TIF is basically an amendment to the former Jump Street TIF.
The major differences between the earlier TIF and the 1600 North Broad TIF are the reduction in term of the TIF District from years to 20 years with an 13 effective date of January 1, 2003, an allowance for 14 a range of developers and development scenarios 15 within which project costs would range from 16 $42 million to $63 million, the amount originally 17 approved in the Jump Street TIF,District. The 1600 18 North Broad TIF would also permit residential and 19 parking structures. 20 The project benefits include 430 to 490 21 construction jobs and 500 to 800 permanent jobs. 22 Projections indicate that approximately $19 million 23 to $27 million will accrue to the City, $4 million 24 to $8 million to the School District, and 25 $32 million to $43 million to repay the TIF note 9 5/15/02 WHOLE - BILLS 020227, 020231 during the term of the district. Included with my testimony is a copy of PIDC's project financing gap analysis. The analysis indicates that the funding gap is between $18 million and $23 million. Once more, I would note that the School Reform Commission voted unanimously to approve and participate in this TIF, as presented in Exhibit A of the 1600 North Broad Project Plan. The City has provided $7 million in economic stimulus funding to acquire and clear the site. To assure that the public is fairly compensated for the acquisition, two creative repayment processes will be implemented. First, the developer will be required to provide an interest in the project for a community-based organization that will also receive a participation in the net cash flow from the project. Second, the developer will be required to repay the public from surplus net cash flow, as determined by an agreement to be negotiated with the selected developer. Project design for both 1600 North 10 5/15/02 WHOLE - BILLS 020227, 020231 Broad and Schmidts Plaza II have not been finalized, and the figures presented here are based on estimates. The total amount and line items may vary as product design for each TIF project is refined and are not intended as limitations. The initial project cost and/or size of the project, excluding provisions presented in each project plan, may increase or decrease by up to percent prior to settlement of the financing, 11 without amendment to the project plan. Additional 12 increases shall not be funded from any public 13 financing source, except as provided in the project 14 plan. After settlement of the financing, no 15 further amendment shall be required. All projections contained in the TIF project plans for tax revenues and jobs to be created are based on reasonable and approximate assumptions and methods of estimation. This information was reviewed by the City Finance Director and her staff as well as by representatives of the Pennsylvania Intergovernmental Cooperation Authority and the City Controller. I understand that this morning, a letter was distributed to members of City Council 11 5/15/02 WHOLE - BILLS 020227, 020231 from the Director of Finance indicating her concurrence with the projections for these two TIF project plans. Typographical errors contained in the Schmidts Plaza II TIF project plan and the North Broad TIF plan have been corrected, and copies were distributed to City Councilmembers. In closing, I would note for the record that today's hearing is required by the Pennsylvania Increment Financing Act and that the act requires Council to wait at least three weeks from this hearing for final consideration. Because of this State-imposed restriction, I would request that Council take final action on these bills at its meeting of June 6, 2002, but in any event, no 17 later than June 13, 2002. I respectfully request your favorable consideration of these two bills acting as Committee of the Whole with a recommendation for approval to the full City Council in accordance with these aforementioned timeframes.
Thank you for your consideration of this testimony, and we would be happy to answer any questions that you may have. 12 5/15/02 WHOLE - BILLS 020227, 020231
Mr. Cuorato, you indicated that there were typographical errors contained in the Schmidts Plaza II TIF, and they were being corrected and copies were being distributed? Have they been distributed?
And there are only typographical errors -- do all Councilmembers have a copy?
Thank you. The testimony I have in front of me is dated May 15th; however, there is a stamped date marked May 2nd. Is this the corrected copy? Oh, I'm sorry, May 14th, I'm sorry. It's kind of blocked out. It's stamp-dated May 14th for testimony 13 5/15/02 WHOLE - BILLS 020227, 020231 that is given today, May 15th. Would this be the corrected copy?
My testimony should have been distributed to City Council yesterday.
So that would make sense. The date on the testimony was just for the date that the public hearing is being held, which is today.
Mr. Cuorato, is this what you're referring to (holding up document)?
Madam President, that is the document. And on the second page that contains the table of contents at the bottom, it should say, "Introduction Spring 2002 - Version 2."
Okay. I believe that's being circulated now, is it not? 14 5/15/02 WHOLE - BILLS 020227, 020231 Mr. Clark, are you circulating this to all Councilmembers? Okay, it's presently being circulated. While that's being circulated, Mr. Cuorato, can you tell us, what are the reasons that the Administration is asking to amend these two TIFs?
Yes, Madam President. These are two projects that have come before this Council recently, and they are two neighborhood projects that the Administration very much supports. The rationale behind seeking approval for new TIF districts remains the same, which is to say that they are neighborhood-based projects which we are supporting, which will create jobs and help to revitalize neighborhoods in which we are seriously interested in making progress. There have been some changes to each of the projects and each of the TIF districts since this Council's initial approval. For that reason, we have decided, rather than an amendment, to come back with new TIF proposals, but the projects are essentially the same. 15 5/15/02 WHOLE - BILLS 020227, 020231 For Schmidts Plaza, the project has been downsized somewhat and concentrates on the commercial portion of the project. The development in Northern Liberties around Schmidts Plaza is a three-phase project that would include residential and commercial. This TIF focuses on the commercial portion of that project, so it's a smaller area. For 1600 North Broad Street, we will be selecting a new developer. That's why the way the project plan is presented, it includes ranges. We have received three proposals. We are close to selecting a developer, but the ranges that are in this TIF project plan will cover us in the event that any of those three proposals are selected.
Can you tell us, are any additional public funds being committed for these projects? (Mr. Cuorato confers with colleague off record.)
Madam President, there is the possibility of additional public assistance. There may be a HUD 108 loan; there also may be separate public financing sought for a parking 16 5/15/02 WHOLE - BILLS 020227, 020231 structure in conjunction with the project. For Schmidts Plaza, we may be seeking state grants for infrastructure improvements. And the Empowerment Zone, the financial institution established by the American Street Empowerment Zone, is also working with the developer on a loan for the project.
In the 1600 North Broad TIF, why isn't there any project costs associated with the land? Is this consistent with the original TIF?
Madam President, I -- I believe you're referring to the project costs that are in the project plan that include a range. Right now, we're not certain of what the cost of the land will be to the developer. So in order to maintain maximum flexibility, we established this range with minimums and maximums for each of the capital costs. The maximum land cost that we've noted is $7.5 million. We're not sure if the land will ultimately be disposed of for an amount somewhat less than that. So we left -- in order to be conservative, we left the land cost at zero for the 17 5/15/02 WHOLE - BILLS 020227, 020231 minimum scenario. That is still to be negotiated with the developer. And I am certainly not here this morning saying that the land will be given away. That's still to be negotiated.
Thank you. Can you tell us, if the two TIFs are approved, are we assured that the projects will be built?
This seems strange because usually when somebody comes requesting a TIF, there's a developer in place, and this time around, you say the developer is still to be chosen in the near future for this. It seems to be putting the cart before the horse or -- I mean, it really makes me a little bit preoccupied about this process and the way we're doing this. Why?
Councilman, this is an extremely important project for the Administration and, again, one that -- 18 5/15/02 WHOLE - BILLS 020227, 020231
But if it's extremely important, why isn't there a developer? And, you know, and....
Okay. The project is a mixed-use project that will include entertainment, retail, and possibly residential --
That takes a whole universe of things. What do you mean by "entertainment"? It could mean a multitude of things.
Well, it could include a movie complex with retail stores, it could include other types of attractions.
See, we have the Eighth Street and Market, and there we have some agreements already, and that didn't developed. Here, we're putting a whole series of things in which we don't have -- you don't sound very sure as to what it is that we have there. I mean, an entertainment center, it could mean anything. A cineplex, you know, is that the Magic Johnson thing 19 5/15/02 WHOLE - BILLS 020227, 020231 that he did in Harlem is coming here? You know, is it going to be competitive. You know, I know that there are a few cineplexes planned around the City. So how are we going to do this? And you're asking us to approve something really without -- again, on an conceptual basis, it seems to me.
Councilman, if I may, I'll bring you up to date on where the process is. Following the termination of discussions with the developer who had been designated previously for this site, the Redevelopment Authority issued a request for proposals for this site. We received three proposals and those proposals are being evaluated -- have been evaluated, and I would say we're near a recommendation. The three proposals were submitted by: Crafco (ph), which is a major retail developer in this area and one in which -- one who has done very good projects; the Goldenberg Group, a development team headed by the Goldenberg Group; and Grid Properties.
So we received three quality proposals. We expect to recommend one of those three for selection. So they --
But why don't you wait until we have some sort of plan? Because we have a plan for Penn's Landing, and that's been in discussion now, and we almost got it there, and then all of a sudden, it sort of, like, got murky there, and my friend says it's going to happen, and I trust his word that it's going to happen.
But the issue is, there is a developer, there's a plan, there was a whole series of financing besides the TIF that was put into place. And here, you're asking us again to really approve something on a very conceptual basis; I mean, you know, with smoke and mirrors.
Councilman, I can tell you with assurance that one of the three developers who have submitted proposals will be designated --
But why don't you wait until you have a real plan in front of you and 21 5/15/02 WHOLE - BILLS 020227, 020231 say, Look, we need this TIF in order to accomplish this, this, this, that?
Well, based on the proposals that we have received, on all three proposals, one of which we will select. There is no question that a TIF district will be necessary in order to have the project move forward.
But I think this Council would like to -- at least at one point would like to know what we're voting on when you bring it here. I mean, we're going to be voting on something that we don't know anything about.
Madam President? I'm asking whether Councilman Ortiz would yield to me for one question.
If we have a developer before us, then questions can be asked of that developer with respect to his plans, and developers have testified before us, and we've brought about changes as a result of that testimony. It certainly doesn't seem to make very much sense for to us yield that right and that 22 5/15/02 WHOLE - BILLS 020227, 020231 power. What is the urgent rush to approve blind in the blind who the developer is? Is it to satisfy all three developers that they don't have to come before City Council, that you've done their work for them? I don't understand this procedure. This is May, Council will recess by June 13th -- and I assume that's for the summer -- until the early part of September, but I don't see any reason for the great rush on this. With that, I yield back to Councilman Ortiz, but I think you're asking us not only to approve somebody in the blind, but you're asking City Council to remove itself from being in a position to raise any questions that it may have with any developer.
And I deeply resent the effort of the City to do the hard work for the developer. A developer coming in asking for the City TIF ought to at least be prepared to face this legislative body; it really isn't such an ogre, and it really isn't such a difficult task. I think we've been reasonable on these 23 5/15/02 WHOLE - BILLS 020227, 020231 TIFs. Many of us who have strong questions about the whole concept of TIFs, nonetheless, have been voting together with all of our colleagues in generally unanimous support after we've had an opportunity to question a developer.
Thank you, Councilman. To a couple of my colleagues, and with the fullest disclosure, since I potentially anticipate being in this same position when we return in the fall, I think a part of what we're trying to accomplish here is, one, we are reaffirming something that the Council has done previously; both of these TIFs in front of us have been approved in the past. A lot of things, as they say, happen along the road to try and get a project done. 24 5/15/02 WHOLE - BILLS 020227, 020231 In my own situation out in West Philadelphia, we've been actively engaged now in a much too long discussion about trying to get a supermarket project done in West Parkside. That is a TIF. That TIF was approved before we had a developer lined up, and the purpose of that was, in the West Parkside industrial park, as we have desperately tried to encourage development out there, we thought it prudent to put every incentive we had available on the table, short of my writing the developer a personal check, to create an environment that would make development possible, the result of which is, we do now have a developer. Unfortunately, it has taken so long, we will have to come back in September, and I might have a bill in another week or two to do essentially what our two colleagues here in the 1st District and in the 5th district are now faced with, which is now the extending of the terms of the TIF because, all Councilmembers know, the TIFs have a 20-year life to them. These projects maybe did not get started as quickly as anybody would like; I don't know the details of either of them. But I would like to at least advocate 25 5/15/02 WHOLE - BILLS 020227, 020231 that we want to have development, and we need to have as many incentives and opportunity as possible. There have been other TIFs where, I think, with every respect to Mr. Cuorato and Mr. Fina and before Mr. Cuorato, I have raised concerns about the need for a particular TIF at a particular location. I am not left with the impression that either of these sites is of any question as to whether the TIF is needed or not, but I did want to disclose to colleagues that these things do happen. They're often not the prettiest, you can't always give all the explanation. I mean, I certainly plan to support them, but I thought that you should know that I'm going to be in this same situation in another couple of months not because of a change in developers but just because time has literally elapsed off the clock. And if we're going to give someone a TIF, they should get it for the full term of the TIF, and these are ones that we've already approved. I think in the 1600 Broad Street, as it's now called, there apparently is a change in the developer; I don't know the details of that. 5/15/02 WHOLE - BILLS 020227, 020231 And for the Schmidts Brewery, the developer is here and a person that we know. So, I mean, I just wanted to add that to the record. These things do happen. I don't necessarily know that Council's giving up any, quote/unquote, right. We have the right to approve these or not approve them. And in the case of the multiple-developer TIF, I guess you're going out for an RFP in trying to figure out who it's going to be. I think I'm left with the impression that these are recognizable names, and what we're doing is creating opportunity. We don't ever get to ultimately directly approve who the developer's going to be unless we turn the TIF down. So I just wanted to add that to the record. I mean, I'm certainly planning to support these, but I understand the difficulty that Commerce and PIDC is faced with and, as I said, we're going to have another one of these probably in September. Thank you, Madam Chair. And thank you, Councilman, for the yield.
You're 27 5/15/02 WHOLE - BILLS 020227, 020231 welcome. The Chair recognizes Councilman Clarke.
Thank you, Madam President. First I'd like to add to Councilman Nutter's reference to his particular TIF. It's my understanding, in doing some research on TIFs that were created not only in the City of Philadelphia but nationally, as an example, in the City of Atlanta, there was actually a TIF district created of some 1100 acres to encourage development both on the commercial and residential side, so this is not something that's abnormal. And, traditionally, my understanding is that TIFs were done for districts, not specific projects, but the City of Philadelphia, in its recent history, has designated TIFs for a particular project. So this is not an abnormal situation where you create an environment, as Councilman Nutter has indicated, to create incentive for development. This particular site has a history. There is a basis this particular process. As you recall, I guess, three years ago -- actually before 28 5/15/02 WHOLE - BILLS 020227, 020231 I was a Councilperson -- you guys came before this body and requested a TIF for the formerly-known-as- Jump Street development. In retrospect, we probably made a mistake in selecting one developer and continuing to negotiate with that developer for approximately four years, and at the end of the day, weren't able to do that development. We changed our strategy and we decided to put out a request for proposals to encourage additional developers to come to the table, but we knew, based on the prior discussions and negotiations with the former developer, that we would, in fact, need to have a TIF in order to develop this location. The basis for us coming back and not simply extending the TIF is because the TIF language in the title indicated that it was a Jump Street TIF. If that developer is not selected, we will not be able to use that name; therefore, we have come with the new legislation creating 1600 North Broad. Subsequently, whomever we select, I'm assuming, will have a name. It is my understanding that that process, in terms of selection, is winding down. I 29 5/15/02 WHOLE - BILLS 020227, 020231 fully anticipate that within the next week, the recommendation that was put forth by a committee of individuals both from PIDC, Commerce, I believe, and the Redevelopment Authority and possibly someone from Legal and the Planning Commission have reviewed all three proposals, have submitted their recommendation. It will be reviewed by the Administration, and I believe that that recommendation will be formalized within the next week -- it definitely will be formalized before the passage of this particular bill. So I can assure you, as the sponsor of the bill, that if I'm not comfortable with it and the developer and the process, you know, then there's a strong likelihood that that bill will not be passed at that time or not be asked to vote on final passage. Thank you, Madam President.
You're welcome. The Chair recognizes Councilman Ortiz.
I don't think the TIF is a controversy; we approved a TIF for this site already. 30 5/15/02 WHOLE - BILLS 020227, 020231 Like you said, this is just an amendment to the TIF. So we're not discussing whether this site needs a TIF to attract development. Obviously, that's why the TIFs were created: To be able to attract development and specifically development to areas where development usually doesn't go. And there is no problem with that. But because of the history that we've had with this site, it's one of the reasons why I think we should be incredibly cautious and have all the things start out, and, you know, I have no 14 problems. I think it's an important site to develop because of what is happening up there, and one needs to happen. But a TIF is already there; we're just amending it. We'd just like to get the information so that we have an understanding of what is going to transpire so we're not here three years from now or four years from now, saying, Well, you know, we did that decision but the plan really could not gel, could not come for this reason or that. And you know that we have -- in that Jump Street, we have some problems and some people 31 5/15/02 WHOLE - BILLS 020227, 020231 misuse money in terms of the development and so on. So we've got to be able to do it and, I think, approve it, and I have no problem with that but. But we'd like to see things in front of us that happen. I mean, like I said, we approved the Penn's Landing project, and we had all the hoopla. We approved the Eighth Street project and we had all the hoopla. And we approved TIFs for that and TIFs for this and that. And we're still waiting, you know. And the issue is, I'd like to see once we pass it, I'd like to see development happen and jobs created. But, you know, and it's all right. We'll vote this out, we'll get it out, but let's see some beef to the bone.
Councilman Ortiz, are you completed with your line of questioning or comments?
Thank you, Madam President. I think the question that I'm raising 32 5/15/02 WHOLE - BILLS 020227, 020231 reflects the concern that Councilmembers-at-large, or at least some of them, have. I think the criticism is not just of the Administration for not making more information available to us, but also it's aimed at our colleagues who occupy District Council positions, and I'm urging that the District Councilmembers be more forthcoming to all members of City Council during the process so we won't be getting our first understanding of these matters at the hearing. In view of the statements made earlier by Councilmember Clarke and Nutter, I'm going to be prepared to withdraw the objections I had, though I think it would be desirable if we could have the developers here if not now, maybe at a later time, because sometimes, certain developers are more prone or more able to grant certain concessions. But if the Councilmembers-at-large are more involved and kept more informed, then we'll be more ready to act when these strange things seem to occur when we learn they're really not so strange because of circumstances. So I'm going to be prepared to withdraw my objection at this point, with the hope that at 33 5/15/02 WHOLE - BILLS 020227, 020231 some point, we'll be able to talk to the developers. Thank you.
You're welcome. The Chair recognizes Councilman Nutter.
Thank you, Madam President. First, the record should note that when Councilman Cohen was mentioning the developers making further concessions, one of the developers who is here, Mr. Blattstein, indicated his willingness, I believe, to give back all benefits that may come from the TIF. He was smiling, so I took that to be his agreement. That is only -- I'm only playing on the record. Seriously, Councilman Cohen is right, and I think any of us could do a better job of sharing more information. I will only share with you, Councilman, that now, just speaking for myself, in some of these development projects, many of us would probably love to share more information, one, if we had it, because at times, these discussions take 34 5/15/02 WHOLE - BILLS 020227, 020231 place even away from us, between the developer and either a community organization or one of our economic-development agencies. The other reluctancy at times in sharing some of this information is it is either so stupid or so embarrassing for some of the stuff that goes on in development, that some of us, to retain any last shreds of dignity in these jobs, are probably reluctant to even talk to anyone about some of the stuff that goes on in development out in neighborhoods. But I'm just speaking for myself in that regard. I do want to put on the record that I'd be glad to share more information as long as -- whenever possible. Thank you, Councilman. Madam Chair, I'm going to yield 'cause I know some other members want to talk about this particular issue. I have some questions of my own with regard to the projects in front of us, and I'll come back on them.
Okay, thank you. At this time, the Chair recognizes Councilman Clarke. 35 5/15/02 WHOLE - BILLS 020227, 020231
Thank you, Madam Chair. First, Councilman, I'd like to apologize. I'm still relatively new around here; only been in office a couple of years, so I will share more information with respects to this particular TIF. But I also ask that if we don't meet our target date of a groundbreaking ceremony next year, I ask that you stand with me as we get criticized by the press inevitably. If we don't meet that target date, I ask that my at-large friends stand with me and take some of that heat that I know that's going to come.
I can recall a particular site about two blocks from this particular location that we continue to get criticized. Frankie, you're not the only one with a hole in the ground. We continually to get criticized. So I only ask that my colleagues at-large stand with me if we don't meet this target 36 5/15/02 WHOLE - BILLS 020227, 020231 date, but I will be forthcoming with the information. As a matter of fact, I would like to ask for Mr. Cuorato and Mr. Fina to prepare a summary of all three development proposals and have them distributed, through the Chair, to the Councilmembers. Thank you, Madam President.
Thank you. The Chair recognizes Councilman Goode.
Thank you, Madam President. Good morning, Mr. Cuorato and Mr. Fina.
First, I'd like to thank you for your support of the new-jobs tax credit bill. I look forward to that being the type of incentive I think that we need to use in Philadelphia. You know I'm not particularly in favor of TIFs or the way TIFs are done here. In our previous conversation the last time the TIF projects were considered by Council, we talked about the job-creation aspects of it and whether 37 5/15/02 WHOLE - BILLS 020227, 020231 those jobs were being monitored. At that point, I asked for a report from PIDC on what they were doing in terms of job-creation-monitoring. But I think the way we get around that is really what the Controller has suggested: Putting in strong claw-back conditions within the legislation and within the agreements. Does that exist within this legislation? And if not, why not?
The claw-back provisions, Councilman, will be in the development agreements with each of the respective developers.
And the claw-back provisions will be what specifically? 'Cause in the new-jobs tax-credit bill, essentially, if the companies do not create the jobs, they could give us our money back. Is that what the claw-back provisions within this agreement will say?
No, no, Councilman. It's -- the claw-back provisions are that if the project revenues exceed projections, that the City would be repaid more quickly than in our -- than in what our estimates show now.
So we're still using 38 5/15/02 WHOLE - BILLS 020227, 020231 a debt model, and essentially, we're claiming that it's creating jobs, but if people don't create the jobs, they just have to pay back the money. (Mr. Cuorato confers with colleagues off the record.)
Councilman, for the record, my name is Robert Fina, and I'm a senior vice president with PIDC. The claw-back provision that the Controller was referring to in his letter to members of City Council talked about the fact that if the City taxes are not generated, he would want dollars repaid. However, if the taxes are not generated, Councilman, it is the developer who is responsible to repay the TIF note, not the City.
There is no claw-back regarding job creation, but if there is no job creation, then --
Are we going to a move to a point where we do claw-backs related to job creation? This is really not just related to these TIF projects; it's related to what our 39 5/15/02 WHOLE - BILLS 020227, 020231 economic development strategy is. And I support the work of the Commerce Director and PIDC in general. This particular strategy in terms of the way you do TIFs, you know I don't agree with, you know I'm voting against it. But beyond that, I wanted to appropriately have this discussion now in talking about, are we doing economic development to simply launch major projects; are we doing this to create business, attract business; or are we actually doing it as we say we are doing it, primarily to create jobs? If we're doing it primarily to create jobs, if that is the number-one priority of economic development, then if the jobs are not created, we should put claw-back provisions in both the legislation and in the agreements. And at what point are we going to do that?
Councilman, you raise a very good point and I know that you're aware that PIDC's mission is to create jobs and taxes in the City; that's our simple mission.
If it is the first priority, as you come to this Council again to authorize spending taxpayers' money supposedly for the creation of jobs, will you include a claw-back provision that says if those businesses do not create the jobs, then essentially, you have to give the money back?
Councilman, as we've discussed before, every PIDC loan program has job creation as a requirement, and there are penalties for that. With these two particular TIFs, both are retail-based TIFs, and retail-based TIFs, to be successful, must create jobs. If those jobs are not created, there is no business done, and that would mean the developer would not be able to pay the TIFs.
Bob, actually, let me say this to you: I respect the work that Mr. Cuorato's doing, but I'm actually tired of the same song and dance here. I'm still waiting for the job-creation monitoring reports that I asked for the last time you came here asking for TIFs, and I'll just ask you to forward the same job- creation monitoring report on all the projects that 41 5/15/02 WHOLE - BILLS 020227, 020231 PIDC has funded particularly through TIFs. Simply show us the jobs that have actually been created. Thank you, Madam Chair.
Thank you. The Chair recognizes Councilwoman Brown.
Good morning. As a follow-up to my colleague's question, help us understand why you decided not to include this in the legislation. You made a tactical decision to include it only in the agreement. What is the rationale for not including it in the legislation, Mr. Fina?
The legislation that we proposed to City Council is legislation that we follow the direction of the State act that creates the TIFs, that we have to have a project plan that is an exhibit to the ordinance that you pass and as an exhibit to the resolution that the School Reform Commission passed. In that project plan, it gives projections and estimates of not only taxes but of jobs created. In both those project plans, there's 42 5/15/02 WHOLE - BILLS 020227, 020231 an enormous amount of jobs created, as was included in Mr. Cuorato's testimony. I have no problem requiring in the TIF agreement that is executed by the City, the developer, and PAID, PIDC and PAID, that there will be a job-creation requirement. All of these economic-development projects create jobs, and particularly retail, which these two jobs are about.
I believe, however, that part of the question is, a projection is made on the front end, but there is no assurance in the language that that projection is met on the back end. So the question becomes, what kind of contingency, what kind of condition is placed in the language that assures us on this side of the table that what you project to be done will be done?
Again, that's a fair question. And this Council, about a year ago, with some legislation introduced by Councilman Nutter, had certain job-reporting requirements. PIDC has been slow in gathering them, but we just recently have submitted them to the City Commerce Department 43 5/15/02 WHOLE - BILLS 020227, 020231 for him to submit through this Council. So we do have monitoring now of construction jobs and permanent jobs for the nine TIFs that have closed.
That's somewhat encouraging. The expectation remains on this side that legislation becomes an assurance for us as public policy-makers. Agreements happen on your side of the table and with your staff and excuses, for lack of a better word, become on why something does not happen.
Councilwoman, I would just say to your point and to Councilman Goode's point, they both are very well taken. We are looking to create neighborhood- based jobs with these projects, and we come here and ask you for approval for economic-development incentives in order to make these projects go forward and create these jobs. If the jobs are not created, we're not accomplishing one of the main objectives that we set out to do. So we will see if there are ways that we can strengthen the requirement that those jobs 44 5/15/02 WHOLE - BILLS 020227, 020231 be created. We have given you what we think are realistic projections for those jobs, which is to say, if the economic-development incentive is in place and the project gets built, we have reasonable expectations that this number of jobs will get created. But I assure you, we will see if we can't strengthen those requirements that that number of jobs be created. And on behalf of the Administration, I want to apologize to Councilman Goode that any information he has asked for on jobs data has not already been provided, and I will personally see to it that it's provided immediately.
Is there any penalty, Mr. Cuorato, if, in fact, there is a commitment that X-amount of jobs will be created and they're not created?
Madam President, for our traditional loan programs, our low-interest financing programs, there are penalties for are -- they are tied to job creation, and if jobs are not created over a certain period of time, we can call the financing or it can be revoked.
Well, this is 45 5/15/02 WHOLE - BILLS 020227, 020231 a TIF, the same thing.
For TIFs, there are no 4 penalties. We provide reasonable projections for what the jobs -- the number of jobs that will created; that's the information that we provide to Council. We stress to the developer that we will be monitoring each year the number of jobs that are there. But you are correct; there are no 11 specific penalties, and it's an issue the worth addressing.
I didn't mean to interrupt you, Councilwoman. Please proceed with your line of questioning.
It's not a problem at all, Madam President. So it begs the question, Mr. Fina, why are TIFs exempt?
That's a fair question again, Councilwoman. TIFs are not exempt, but the way they're structured and such, they are labor-intensive projects, such as, if I may, the Loews Hotel, a labor-intensive project. Without 46 5/15/02 WHOLE - BILLS 020227, 020231 that TIF, the project could not proceed, and in order for the project to stay open, it has 600-some permanent jobs.
For the Marriott Courtyard, the same thing. For the first TIF we did to support PNC Bank's operation center near the airport, the Bartram TIF, that has approximately 900 jobs there, and I'm probably being conservative in that number; I'll have to check the information that we've recently submitted.
So is that track record consistent across the line?
Yes, that's consistent with every TIF that has closed across the line with the jobs. So we're very proud of the jobs and very pleased that were created, and we'll be very pleased to provide that information to Council.
Thank you, Mr. Fina. Thank you, Madam President.
You're welcome. 47 5/15/02 WHOLE - BILLS 020227, 020231 Mr. Cuorato, how do you propose future reductions in the business-privilege tax impact with the TIFs? Base your calculations as well as the projected amount available to cover the project costs.
Madam President, we updated our projections based upon the reductions in the business-privilege tax, and so the projections that we have for repayment of the loans take into account those reductions.
Thank you. What are the MBE/WBE opportunities associated with these projects, and what is their status?
Madam President, for the Schmidts Plaza II TIF District, there is an economic-opportunity plan that has been negotiated with the developer that we believe is acceptable. For the 1600 North Broad district, when a developer is selected, there will be no final agreement with that developer unless, and until, an acceptable economic-opportunity plan is negotiated. For the Schmidts Plaza II TIF, it is the same developer, Tower Investments, and we have 48 5/15/02 WHOLE - BILLS 020227, 020231 negotiated with them an economic opportunity plan that provides MBE and WBE opportunities both for contracting and employment. We do have a negotiated agreement with that developer. On 1600 North Broad Street, because we will be selecting a new developer, we have yet to negotiate the economic-opportunity plan, but we will not complete an agreement with that developer unless, and until, an acceptable economic- opportunity plan is agreed to by all parties.
Thank you. The Chair recognizes Councilman Nutter.
And Mr. Fina. I may have missed something that you were just talking about that I was interested in. Let me go back, though, for a second. We received a letter from the City Controller with regard to both of the TIF projects in front of us. Have you seen this letter dated May 13th from the City Controller to the Council President? 49 5/15/02 WHOLE - BILLS 020227, 020231
Okay. And that came in pretty much simultaneous with the package from Mr. Longstreth, which is dated, I guess, yesterday, the 14th, which mentioned some changes that have been made, many of which sound similar to what the Controller was raising. What I'm trying to understand, or at least reconcile, is: Have all of the issued that have been raised in both of these letters, which are pretty much virtually the same on the projects, have those corrections, most of which are related to wage-tax rates, school millage tax rates, things that have changed here in recent times because of legislation that probably happened subsequent to the advertising of these bills, have those changes that have been raised by the City Controller for both of these been made?
Okay. Are there 50 5/15/02 WHOLE - BILLS 020227, 020231 any changes or concerns that were raised by the Controller that were not addressed?
I'm sorry, Councilman, let me just amend that last statement. All of the changes that the Controller noted have been incorporated into our projections, with three minor exceptions, and I will go through those with you if you would like.
Okay, hold on for one second. Are we looking at the Controller's letter now?
On 1600 North Broad, the only comment that the Controller made that has not been taken into account at this point is the transposition of the City and school benefits from the real-estate tax in the base year.
Which -- are we on 51 5/15/02 WHOLE - BILLS 020227, 020231 ?
I understand that. Are you reading from his letter? Which bullet point are we talking about?
It's Pages 3-A and 3-B of the project plan for 1600 -- Pages 3-A and 3-C for the 1600 North Broad project plan. In the base year, the City and school benefits from the real-estate tax were transposed.
Are you talking about this bullet that says on -A, the City and school distribution of taxes in the base row is incorrect?
The column at the right that says "Use of Tax Revenue in Thousands," the columns that read "City" and "School" were just transposed, so that needs to be corrected.
Okay, I'm assuming we need to take care of that this morning? Are you going to have an amendment for that or --
That's an amendment to the project plan, which is on file with the Clerk's 52 5/15/02 WHOLE - BILLS 020227, 020231 Office, so we'll make sure that amended pages are submitted to the Clerk's Office today.
Do we need to make that amendment in the course of this hearing? Aren't we approving the project plan here?
Okay, so you're going to -- at some point in time during this hearing, you're going to put forward amendments?
And indicate to you that we will submit a corrected page as part of the project plan that makes the proper calculations for city and schools.
Have you had an opportunity to talk to Councilman Clarke about that?
I have not personally talked to Councilman Clarke about that, but --
Let me at least recommend that before we try to make a proposed amendment to a project plan, that you have some 53 5/15/02 WHOLE - BILLS 020227, 020231 opportunity to talk to Councilman Clarke about that somewhere in the course of this hearing, unless he doesn't want to talk about it. (Addressing Councilman Clarke.) Councilman, the issues raised by the City Controller, the Commerce Director is saying that they addressed all of the issues raised by the City Controller having to do with tax rates and some calculations. There was one that they did not address that needs to be amended, and I asked, were they going to make that amendment today? because we're approving this project plan. The Commerce Director gave me the impression that they would just substitute the in the plan that goes to the Chief Clerk's Office. I asked him to be sure to talk to you before proposing any amendment even if it's just correcting literally the transposing of numbers, and that that could be done during the course of this hearing and wouldn't slow us down.
Yes, we'll take 54 5/15/02 WHOLE - BILLS 020227, 020231 care of it.
Okay. And then, Councilman, with respect to Schmidts Plaza II, there were two comments. On the wage tax for 2004, there was a typo which results in the calculation being off by sixteen 100ths of a percent, resulting in an understatement of revenues to the City of $20,000, and a comment by the Controller that we conservatively did not inflate 2004 figures for real estate, U and O, sales, and business-privilege tax, which results in an understatement of $1.6 million. So, in effect, the first one being a very minimal amount, $20,000; the second one being up to $1.6 million. The Controller is saying that we are underestimating revenues. So --
Well, I mean, is this a material issue or is this just a difference of opinion between people making estimates?
It's a difference of opinion between people making estimates, and because the Controller is saying that we are underestimating, we're fine just leaving these 55 5/15/02 WHOLE - BILLS 020227, 020231 figures as they are.
I understand. With every respect to the Controller, I'm more interested in making sure that the right numbers are in the right column and that they actually add up. You guys can debate forever about who does better estimates. We have a letter from Secretary of Financial Oversight and Director of Finance, Miss Davis, called a "Statement of Review of Estimates." We've done -- what have we done, 32 TIFs?
25? I thought we had done an additional group of 5 or so at the tail-end of last year. I could be wrong.
I have not seen this kind of letter before, and this one that I have is specifically with regard to 1600 North Broad. 56 5/15/02 WHOLE - BILLS 020227, 020231 Two questions: One, is there a similar letter for the Schmidts site? Maybe it just didn't get into my package. Secondly, is this letter the result now of Bill 000355-A back from December of 2000?
Okay. One, thank you for following up on that. Now, along with that, there had been discussion at that time and a part of that legislation also talks about goals for youth employment contracting and employment opportunities for young people as well as minority, female, and disabled business enterprises. I wanted to ask -- and this is where I may have missed some of your exchange with either Councilman Goode or Councilwoman Reynolds Brown -- what's the status of those provisions of the bill 21 that I mentioned to you, 355-A, with regard to these two particular proposals?
Those provisions will be included in the economic-opportunity plan for both projects. 57 5/15/02 WHOLE - BILLS 020227, 020231
Okay. And are the economic opportunity plans completed for both at this time, or are you still working on them?
For Schmidts Plaza II, it is completed. For 1600 North Broad Street, it is to be negotiated. And the terms, the basic provisions of the economic-opportunity plan are included in the project plans for each bill before you today.
Okay. So is your testimony that with these two technically new but really old TIFs, that you've decided to go basically the new route. We are disbanding the old ones, creating new ones.
Are both of these projects being put forward with 000355-A and its provisions in mind?
All right, thank you very much. 58 5/15/02 WHOLE - BILLS 020227, 020231 Thank you, Madam Chair.
Thank you, Madam President. During your testimony, you referred, I think it was, to the Schmidts Brewery II TIF. You referred to a community-based organization. I didn't get what it was that you said. Are they participating in the development? and what is the significance of their involvement?
Councilman, I think what I said in response to a question from Councilman Goode is that these --
No, it was not; it was in your regular statement. It had nothing to do with what --
There is a community- based organization that will be participating in the 1600 North Broad Street project, not the Schmidts Plaza II project.
And does that participation aid in the grant of any financial benefits to the development? I'm wondering why you 59 5/15/02 WHOLE - BILLS 020227, 020231 mentioned that point.
It's an effort on our part to further assist the development in the North Broad Street area by providing funding to a community-based organization that can further the development of the area.
Well, how does that work? I'm interested in knowing how the involvement of the community-based organization assists in the funding.
No, they won't be assisting in the funding; they will be a beneficiary of a portion of the proceeds of the project in order to further the development of that area.
Excuse me, Councilman, there's a point of order. 60 5/15/02 WHOLE - BILLS 020227, 020231 The Chair recognizes Councilman Clarke.
Excuse me, Councilman. I think the short answer is that it's the requirement of the District Councilperson that a community-based organization be a participant in this particular development.
There will be funding consequences with respects to the community organization sharing in certain proceeds not yet to be negotiated as a result --
Well, how about in obtaining proceeds for the development? I'm all for the second part.
Well, actually, I think the fact that there was a substantial commitment by the City to acquire the site requires that there be community participation. In my mind, the justification for that government acquisition is based on the community's participation; i.e., the community organization, as far as I'm concerned, that is in some parts their equity into the project, which is why I felt completely 61 5/15/02 WHOLE - BILLS 020227, 020231 justified in insisting that that community organization --
Well, I think it's fine that they're in there, but I thought that also as a result of being in, that there was a special funding stream being made available. Am I wrong as to that?