Well, let me present a slightly different point of view. I hadn't planned to get into this. But if your argument on the one hand is that the rating agencies like a certain 148 OPERATING BUDGET & TAX BILLS - 5/10/04 stability in tax reduction, which in the past we would do tax reduction on an annual basis, as Ms. Wilkerson points out, we then have a Five-Year Plan which did not set rates but laid out what the rates should be, that gave us certain stability to what we anticipated doing. Then a couple of years ago this Council, along with the Mayor, put in place for the first time a guaranteed five-year reduction in both wage and business taxes. Now we have a proposal in front of us to put into effect at least a ten-year guaranteed rate reduction. I do find it interesting, though, that one of the bills in front of us would actually propose to interrupt the five-year guaranteed rate reduction, and for a moment, essentially, proposes a tax hike in the wage tax from the guaranteed cut that is supposed to take place on July 1, 2004, and extend the rate that is presently in place for the current Fiscal Year until January 1, 2005, which, at least by my mathematics, is a tax 149 OPERATING BUDGET & TAX BILLS - 5/10/04 increase. But you are, in fact, interrupting the five-year guaranteed laid out schedule of reductions. And, so, I mean, if one year with the Five-Year Plan was good, and if five years guaranteed was even better as it relates to the rating agencies, then I don't see how you then argue against longer-term guaranteed reductions. And, again, whether it is the Tax Reform Commission or the 21st Century Review Forum, both seem to have arrived at the same conclusion. Which is, yes, we have an obligation to pay our bills, yes, we have an obligation to provide certain services; but both seem to arrive at pretty much the same conclusion, that we also have an imperative to rye dues the onerous tax structure that is killing our ability to provide long-term the needed services that all of us want to provide. So, you know, but that's the challenge of leadership. 150 OPERATING BUDGET & TAX BILLS - 5/10/04
Yes. Ten years of tax reductions at a time, when the city is having difficulty meeting its basic obligations, is not something that the rating agencies would embrace. Ten years in time --
Ten years of cutting taxes, at a time when the city is having difficulty balancing its budget and meeting its basic obligations, would not be something that the rating agencies would embrace. Because it also then puts into question whether or not the city has a willingness to meet the obligations it has to bond holders.
Or maybe it just raises the whole challenge of how we managed not only our finances, but run the government.
There is also the question of, what would you cut? 151 OPERATING BUDGET & TAX BILLS - 5/10/04 The Administration has proposed cutting rec centers, changing deployment at fire companies, cutting funding for arts, for the art communities. But the question is, what would you cut? What expenses can we identify that allow the city to support the kind of reform --
The Chair recognizes Councilman Clarke for a point of order.
I am sorry. I may have missed it. We can conclude. I didn't hear the bell. I am sorry.
I am done. COUNCILMAN DiCICCO: Thank you, Madam President. The rating agencies -- I am going to 152 OPERATING BUDGET & TAX BILLS - 5/10/04 pick up on where Councilman Nutter just left off, and kind of include it in the comments and discussion that took place with Councilman Ramos. You say the bond rating companies would not look favorably on us if we did these tax cuts that would last ten years because of -- what was your statement, Ms. Davis, again?
I said cutting taxes for ten years, in a time where we are having difficulty, it is not the -- it is not the stability of the tax cut that creates the problem. COUNCILMAN DiCICCO: How would the rating agencies look at us if we don't do anything, status quo remains, we continue to lose jobs, and we continue to lose revenues? Would they look any more favorably upon us then?
The rating agencies have in fact looked at the city during a period when it was declining in revenues. As long as it was being fiscally responsible, the city 153 OPERATING BUDGET & TAX BILLS - 5/10/04 has maintained its credit rating. There has been no real negative impact during this period when the city continued to lose population and jobs while the economy was booming. They looked at our ability to pay our bills, and that is where their primary focus is. COUNCILMAN DiCICCO: I guess, then, for me, the concern is, in the simplest of terms, is that, we are a city that has been on life support for a very long time, and I think that we need to do something extremely bold. During the eight years or so that I have been in Council, I recognize that the only times that we ever were able to get something of any significant economic development going is when we came up with some creative idea, whether it was the KOIZ, whether it was the TIF, whether it was an abatement, some sort of a tax relief, if you will. You can call it a lot of different things. But were it in the for those 154 OPERATING BUDGET & TAX BILLS - 5/10/04 incentives, most of those projects, if not all of those projects, would never have occurred or taken place. So when we sit here and we talk about, if we continue to do the tax reductions that we are talking about, obviously there is less revenue coming in, we assume. Because of that, we recognize there would have to be cuts in services, et cetera. But we are still a city that is losing jobs. We are still losing jobs. So either we are going to slowly but surely eventually die, or we are going to do something that is bold to try to stop the bleeding and see if we can't save it. And I think that, for me -- although I still have a problem with one of the recommendations of the Tax Reform Commission, and that's the land tax, because I am still not perfectly clear on that -- but I am speaking overall, overall in general, if we do nothing but continue to do the small incremental cuts that we have done and all the things that have been in place for at least 155 OPERATING BUDGET & TAX BILLS - 5/10/04 the eight years that I have been here, and we are still losing jobs, what is the end result going to be? Additional loss of jobs, which translates into additional loss of revenues, which translates into additional costs, cuts in services, anyway. So my point is, you know, no one can predict the future. We can look at the numbers and say, if you cut X, you will have less coming in. That's a given. But no one is looking at the up side of that. Because if we cut and make it a more business-friendly city, in a dramatic way, will we continue to retain the jobs that we have and, quite possibly, will we increase jobs? I don't have the answer for that. But I think the one thing that we all know is consistent, is that everything we have done to date on a small scale hasn't produced the results that we need to continue to run this city and grow. So I think from a practical 156 OPERATING BUDGET & TAX BILLS - 5/10/04 standpoint, we either bite the bullet now and figure out and try to do something bold, or we just say, we will continue to go on and maybe by the grace of good somewhere down the line the national economy is going to do great and for some reason people are still going to want to come to the City of Philadelphia and do business, even though, even though the taxes are higher to do business here and the incentives aren't here that they may be in New Jersey, as an example. (Applause.)
If we are willing to say we will take cuts in services that could be extreme in order to fund those cuts in taxes, then it is a proposition that works. But, again, as Joyce said, what do we cut that's acceptable? COUNCILMAN DiCICCO: But, Ms. Davis, isn't that really an unknown? We are looking at the number. If you take in less revenue, therefore, you have less money to spend on services. But we are never looking at the 157 OPERATING BUDGET & TAX BILLS - 5/10/04 other side of this, that maybe by doing that we will increase jobs, maybe become a more attractive place to do business. We are always looking at it on the negative side. I mean, just last week -- and I am going to sound like I am patting myself on the back, but it really was the efforts of this City Council, this Mayor, and Mayor Rendell -- the housing project we just did in South Philadelphia. But for the fact we were able to create affordable housing with the ten-year tax break, those homes would never have been sold. 93 homes were sold in four days. And people from outside of Philadelphia bought those homes. So, I mean, that was a bold step that we took. And it cost some money on both the city side, the state side to invest into that, but it was something different that we tried. Just like when the Rendell Administration was in, we tried something different with the wage tax and the business 158 OPERATING BUDGET & TAX BILLS - 5/10/04 tax reductions. It set a tone. It started sending a message. And I think, though, that the message needs to be something more forceful. And I am not criticizing any of the panel people here or the Administration. We are never going to move from where we are. If anything, I think we are going to continue to slide backwards. We need to do something much more dramatic. Thank you. (Applause.)
Thank you. In light of all the proposed cuts, I just have a few questions regarding the noncollection of revenue due the city. We have heard about collection with PGW, the Water Department, but also in other areas. For example, what about real estate agents who live outside the city but sell 159 OPERATING BUDGET & TAX BILLS - 5/10/04 properties and earn their commission in the city? I understand that currently the city collects no tax revenue from these realtors.
Nancy Kammerdeiner, Revenue Commissioner. We are aware of the concern that's been raised about people like real estate agents who are outside the city. We have met with the representatives of the Board of Realtors. We work regularly with them providing seminars for new realtors in terms of their own personal tax obligations, as well as those of the clients they will be working with. And we also seek information through discovery projects in terms of identifying people who are in that situation. I know it is not perfect, we don't find them all. 160 OPERATING BUDGET & TAX BILLS - 5/10/04 To the extent that --
This has been going on for a long, long time. Just pick up the paper, and you can see it. What's it going to take the city to collect all this?
We do use that as a way of identifying discovery projects. We use newspaper listings. We particularly use listings from the Center City area, where we are talking about higher-dollar transactions. Again, we don't get them all. We do our best to identify them. The additional staff that was referenced earlier in terms of revenue enhancement projects for Fiscal '05 will be looking at some projects that will be heading in that direction, among others. To the extent that there are specific cases that you or others are aware of, we always welcome information that will enhance our discovery activities.
Excuse me. The Chair recognizes Councilman 161 OPERATING BUDGET & TAX BILLS - 5/10/04 Kelly for a point of order. COMMISSIONER KELLY: I just want to follow up on Councilwoman Krajewski's question. Do the realtors outside of Philadelphia, do they currently have a business privilege tax enabling them to do business in Philadelphia?
Most of the realtors, the individuals, would need to have a business privilege license and pay business privilege tax, because most of them are not employees. Most of them are independent contractors.
The realtors as individuals in many cases are independent contractors. They don't pay wage tax because they are not a full-time employee.
They don't pay wage tax, nor have a business privilege tax?
They are supposed to. 162 OPERATING BUDGET & TAX BILLS - 5/10/04
Would the Councilman please wait until I am finished my questions. Because I am not through yet, Mr. Kelly.
Thank you. I just wanted to know how many other nonresidents will see this loophole to do the same. Do you have any idea the amount of money that we are losing annually?
Councilwoman Krajewski, the stenographer cannot hear you. Pull the microphone closer, please. Thank you.
You said the city right now is in the process of 163 OPERATING BUDGET & TAX BILLS - 5/10/04 working on this; is that right?
And how long do you think this will take, because of the money we are losing?
We work on this very regularly. We use Internal Revenue Service data, we use newspaper advertisements for homes in terms of the real estate data. We pursue a number of different avenues.
You know, just looking at this -- I am sorry. Just looking at this, each week in the Philadelphia Inquirer I am looking, just looking at this, each week millions of dollars a year, I believe, that we are losing.
We do use that as a source. And I don't have a way of putting a dollar figure on what we don't know about.
I hope the next time when you come here in Council, that you will have that figure. Before we are talking about cuts, lack of collection. I 164 OPERATING BUDGET & TAX BILLS - 5/10/04 think we are very, very remiss in this. Thank you. COMMISSIONER KELLY: I don't have any followup questions. I think, Councilwoman, you asked the right questions.
He wouldn't dare. COMMISSIONER KELLY: I wouldn't dare intrude on your time.
Thank you, Madam President. I promise I will not ask about the nonutilization tax.
Although Mr. Faider from the law department is here, who can answer your question.
I understand the Administration will be called back, I have a request, at some point?
We are telling them to be here on Wednesday. As of now they are being told they should be back on Wednesday. Because we do have, as I said, any 165 OPERATING BUDGET & TAX BILLS - 5/10/04 number of witnesses today.
I did have a question. Actually, in preparation for that -- and I don't know how difficult this may be -- but I would like to, if at all possible, you do as best an analysis as possible -- and I am assuming you are able to get a dollar figure -- on what the proposed recommendations will be on the budget. The difficulty of what I am going to ask you to do would be possibilities of areas where the budget will be impacted; i.e., cuts or reduction in employees. And I know in two days it is difficult to pull that together. But prior to the ultimate passage of these bills, I think personally I would like to know what the potential impact will be on the budget and on service levels. And the reason why I ask that, I want to ask it in this context: Having represented a district that includes Center City, and parts of North Philadelphia over the last years or so, I have seen in the past 166 OPERATING BUDGET & TAX BILLS - 5/10/04 Administration a surplus that was substantial, and a lot of that, I believe, a substantial amount of that, was as a result of the boom in the national economy. But I also know that there was not a focus on certain parts of my district in terms of investments. And some those areas have been allowed to suffer for a long time. My concern, as we talk about supply side, as we talk about additional tax-reduction programs -- and remind you I haven't made up my mind what I am going to vote for yet -- I would like it know what impact of any supply side programs or any reduction in revenue will have on the people in the district that have been allowed to suffer for too long, and finally have some focus put on their neighborhoods. And they are, actually, turning around. And I am a little concerned that that debate, that part of the equation is, not being heard during this discussion. That, you know, people who have been allowed to live in conditions that, frankly speaking, nobody 167 OPERATING BUDGET & TAX BILLS - 5/10/04 should, are finally getting some focus. And when we talk about reducing revenue, and talk about the hope -- and I hope that, you know, some of the speculations are in fact true, the speculative nature of ultimate job creation and subsequent additional revenue that will flow into these neighborhoods, that people shouldn't have to wait for another ten years before we take advantage of what we hope will be a change in the economy. So I am extremely concerned that those neighborhoods who now have maybe three years of focus, now will be again put on the back burner. So I really would like you to give me a sense of where the likely cuts would have to come from across the board, Safe Streets, aggressive neighborhood programs, and things of the like, because I think that should be a part of the discussion.
Thank you, Madam President. 168 OPERATING BUDGET & TAX BILLS - 5/10/04
Thank you, Madam President. Good morning. The Administration opposes Bill 040020, which you acknowledge is a collection issue. When we factor in and consider what budget hearings have revealed with regards to how poorly our city is doing in the area of collections, and though you acknowledge on of your testimony that there is no 15 magic wand, should we not seize the moment to adopt all measures that are going to help the city do better with regards to collections at any level?
The particular bill you are referencing has a negative impact from a cash flow standpoint, in that it resorts to quarterly installment payments. In the initial year of this bill's implementation, the city would use -- would lose roughly 50 percent of its revenue for 169 OPERATING BUDGET & TAX BILLS - 5/10/04 that year and create a cash-flow situation, cash-flow problem, quite frankly. And that's the reason that we are opposed to that bill, because of its negative impact in the year of implementation.
Yes, in that first year, if you did quarterly installments. Only two of the installments would come due in that initial year of implementation.
Can you say what that dollar amount would be? Because my followup question becomes, would that not be offset in the out years by taking some of the pain early on?
You never, from an accounting fund balance standpoint, once you lose it, you never get it back. So you would take that hit. And then that hit, although in subsequent years you would collect a full year of revenue, in the first year of implementation, you would 170 OPERATING BUDGET & TAX BILLS - 5/10/04 only have a half year's revenue. There are -- we would be looking at, I guess, half of the real estate, and real estate is about 300 million. So you are looking at an impact of roughly $150 million.
And that is the principal reason for the lack of support?
You are welcome. The Chair recognizes Councilman DiCicco. Your light is on. Councilwoman Brown.
Quick followup question. Are not 18 and 20 related or tied 171 OPERATING BUDGET & TAX BILLS - 5/10/04 together?
and both call for 4 installments. And, in that sense, they have a 5 similar impact on the city. 6
So we would not 7 save any money? 8 Because it was reported, or maybe I 9 read, there is a potential to save 10 million 10 a year, with the support of 040018? 11
If you saved 10 million, 12 it would be after you took a hit of 150 plus. 13 I mean, I don't think you even save 14 that 10. I am assuming that the savings were 15 attributed to having a reduced borrowing. 16 But because you wouldn't get all of 17 the revenue in one fiscal year, that would be 18 eliminated; that savings benefit would be 19 eliminated. 20
Thank you. The Chair again recognizes Councilman Nutter.
I will be very 172 OPERATING BUDGET & TAX BILLS - 5/10/04 brief, Madam President. I guess either Ms. Wilkerson or Secretary Davis, in your testimony, as well as in the distributed or specific distribution piece, the analysis of the various bills, I noticed that while there was specific mention of the work of the Tax Reform Commission, that there was no mention of the work of the 21st Century Review Forum, which looked at a variety of tax issues based on the work of the Tax Reform Commission and other work that they may have reviewed. Why is that?
I think the request was a request to prepare responses to the specific bills. We will just use the Tax Reform Commission's recommendations as the point of reference. There was nothing.
I understand that. But didn't the 21st Century Review Forum agree with 27 out of the 28 recommendations of the Tax Reform Commission?
I think it was about that. 173 OPERATING BUDGET & TAX BILLS - 5/10/04
Didn't the Administration appoint the 21st Century Review Forum members?
Yes, the Administration appointed the 21st Century Review Forum.
We don't embrace all of the work of the 21st Century Review Forum, either.
From the report, the tax subcommittee was made up of Dr. Jeremy Nowag, Dr. David Crawford, Edward McBride, Joseph Kiniones, and Dr. Edward Schwartz. So it is now your testimony that their findings, or their analysis, is incorrect, as well?
No. I think what the Administration's position is, is this is 174 OPERATING BUDGET & TAX BILLS - 5/10/04 very valuable work that was done. The Administration has tried to integrate as much of the recommendations as we could, while at the same time being what we think is fiscally responsible.
Do you think they were being fiscally irresponsible in their recommendations?
We think that -- we differ with them on some specific recommendations. We don't agree with recognizing supply side effect. We don't agree with -- I mean, that's one of the largest. We think that tax reform is critical to the city. We also think that -- and perhaps place a larger emphasis on the service side of the equation. I think when we look at the magnitude of the cuts that would happen in services to the city were we to extract another several hundred million dollars out of the Five-Year Plan, we would find that the results were unacceptable. 175 OPERATING BUDGET & TAX BILLS - 5/10/04 You know, when we read through the Tax Reform Commission recommendations and some of the supporting information, when we look at some of the polling that was done, tax reform was not, in many instances, the most critical component. They talked about security in neighborhoods, people talked about the need to have high-quality code enforcement. Those are the kinds of things that people see as being critical to staying in the city and growing the city. And those are specifically the kinds of services that we would not be able to preserve at any kind of acceptable level. I think the Administration also has an obligation to try to project forward. We are currently in arbitration with the FOP. We know that there will be some cost associated with that. We have the AFSCME contracts expiring at the end of June. And there are going to be costs associated with those, as well. 176 OPERATING BUDGET & TAX BILLS - 5/10/04 And, so, when we tried to put together a Five-Year Plan, we did our best to anticipate some of the risks down the line. We didn't do a perfect job, and that's why we have had to -- we will have to recommend changes in the Five-Year Plan to take into account the loss of PGW revenue, the $18 million a year, and also moving back the timing of the $45 million repayment. So it is all those factors that underpin the city's decision not to embrace more comprehensively the changes recommended.
So what comes out of this -- and I will just kind of conclude with this -- is, I mean, two things become clear: That the Administration's position is that the Administration is right, the Tax Reform Commission is wrong, the 21st Century Review Forum is wrong, that's one. And, second, there is a statement here in the document that says, "Philadelphia has a fundamental choice to make. We can try to manage continued economic decline or we can seize the moment of opportunity to create 177 OPERATING BUDGET & TAX BILLS - 5/10/04 significant economic growth." That's from the 21st Century Review Forum. And I think what we have heard today, in essence, is that the city is, basically, going to try to manage continued economic decline; is that the position?
Okay. But there is no other proposal to deal with the second part of it, which is, seize the moment of opportunity to create significant economic growth?
Well, it is from the document that was from the committee appointed by the Mayor. I mean, it is, really, kind of one or the other at this point, isn't it?
I think that the Administration has put forward a proposal that 178 OPERATING BUDGET & TAX BILLS - 5/10/04 in fact puts adopts and embraces a number of the recommendations of the Tax Reform Commission. They are not recommendations that the Administration came up with. We respect the work that was done and have adopted some of the recommendations. For example, the land value tax is something that the Administration did not initiate; it is something that we have embraced from the Tax Reform Commission. We have embraced the single-factor apportionment. We have embraced the need for change at the BRT, the hundred percent assessment. So there are any number of changes. The Administration views this as not just an issue, though, about tax reform. That in order to grow this city's economy, we have to proceed along a number of fronts. And, so, we proposed strategic investments in order to develop assets, we propose continuing in investments in neighborhoods, in addition to tax reform.
Okay. All 179 OPERATING BUDGET & TAX BILLS - 5/10/04 right. I appreciate your response. Thank you. Thank you, Madam Chair.
Thank you. Are there any other questions from members of the committee? Seeing none, thank you. And we will see you on Wednesday. Our next witness? MR. McPHERSON: Jonathan Saidel.
Good afternoon. Identify yourself for the record and proceed with your testimony.
Jonathan Saidel, City Controller of the greatest city in the world, the City of Philadelphia. I am not going to read my statement because you can read it at your leisure. I am concerned that a number of the individuals that have taken off a day from work have already left, while listening to city employees ask other city employees questions. And I am a city employee. So rather 180 OPERATING BUDGET & TAX BILLS - 5/10/04 than me answering questions from respective Council people, I am more than happy to come back Friday, tonight, Tuesday morning, Thursday, whenever you need me to. But let me make a couple of statements for the record. I support Bill 040313. It was introduced March 25, 2004, signed by Council Members Goode, Miller, Ramos, and Blondell Reynolds Brown, which concerns the pilot program of the jobs credit and making it part of a permanent ordinance. It was originally prescribed by the tax analysis that my office did in 2001, in working with Councilman Goode and others. I think it is a step in the right direction. The other bill which I know is before you that I would like to make mention is, I am not in favor of increasing the parking taxes in the City of Philadelphia. And the reason is that I have lived my life in Northeast Philadelphia, and all four of my children think that the Willow Grove Mall is actually an extension of 181 OPERATING BUDGET & TAX BILLS - 5/10/04 Northeast Philadelphia. And the people where I live go to those malls because a dress at that mall that costs $70, they will pay $70 for in the suburban areas. But if they drive into Philadelphia, that dress ends up costing $95 because of the additional taxes and additional parking fees that are involved in coming into Center City. So I think there is a disadvantage and will effectively reduce the amount of transportation that is done from people living in the farther areas of the inner-city to Philadelphia to shop in our areas. We should look at San Francisco, which has a forgiveness program, and has worked with their parking lot owners to create an atmosphere upon which urban malls have an opportunity to compete with suburban malls. So it is not something I think that would help us beneficially. I know that there was a question, an analysis, that the parking tax in the City of Pittsburgh is 31 percent. Certainly using a 182 OPERATING BUDGET & TAX BILLS - 5/10/04 city as an analogy that's going down the toilet is not an analogy that I think would benefit the people of Philadelphia. Let me, before I make a general statement about the bills that have been introduced, let me try to answer some of the questions of the two Council people that are still here, three, four -- four Council people that are still here. When I start talking --
Oh, yes, I am sure they are. I am sure they are. Councilman O'Neill had asked about the rating agencies. As the only one testifying today who has been involved with rating agencies, I was asked, Councilman, in the latter part of the Goode Administration and the beginning of the Rendell Administration to go with the respective Mayors to talk with ratings agents about the budgets that were submitted. In the last two years of Mayor Goode and the beginning of, as you remember, the 183 OPERATING BUDGET & TAX BILLS - 5/10/04 PICA and a variety of other things that went on during the Rendell, they do look at expenses. How could they not look at expenses? You know, if your revenue doubles, but your expenses quadruple, you have no money to pay debt service. It is not a good thing, and it is something that they look at. And though they don't micro-manage any government's budget, they do look for trend lines and they do like to see are we meeting our obligations, are we showing that we have the leadership to move our city forward. So they do look at the expenses. And I didn't really understand the answer to the question that you asked three hours ago, but that's exactly how they asked me. In fact, they sit there with blue books. And as you speak, they actually write down a variety of information, not only written testimony, but oral testimony, as you speak on behalf of the people of Philadelphia. So I wanted you to know about that. My 184 OPERATING BUDGET & TAX BILLS - 5/10/04 pleasure. There was a question that was asked about the estimated payment schedules, which to me are revenue neutral. And the Administration mentioned twice that it has an impact upon the cash position of the City of Philadelphia. To me, the most, the biggest impact to our cash in the City of Philadelphia is that people that are leaving the City of Philadelphia, that people are not working in the City of Philadelphia, they are not buying homes in the City of Philadelphia and raising a family. So the major impact in the last number of years that I have been the controller of Philadelphia to our cash in bank has been the lack of taxpayers. So when the question came up, and I think the Finance Director mentioned, that there is an impact on estimated. We are the only major city in the country that, when you pay your current tax, you pay a hundred percent of your estimated. The state doesn't 185 OPERATING BUDGET & TAX BILLS - 5/10/04 do that, the federal government doesn't do that. So I think those recommendations are to lessen the impact of the tax schedule. And that is only if there is a cash problem at any given time. That only happens for the first year, because everything catches up for the year after that. A couple of things that the Mayor has put into his budget, which I have been in favor of. In 2001, as you remember, I came in with a tax analysis which included the single apportionment; that businesses that did a hundred percent of their sales outside the City of Philadelphia, those types of businesses, we would like to see stay in Philadelphia because they have portability and can move from city to city and even from nation to nation. That bill that was asked by Councilwoman Blondell Reynolds Brown is that bill, and it is incorporated into the Mayor's 2005. He still needs to resubmit a Five-Year 186 OPERATING BUDGET & TAX BILLS - 5/10/04 Plan. The other thing that was mentioned was the land tax. I have been a proponent of the land tax for a number of years. Every time someone fixes their home, why should we increase their real estate taxes, when the ability to pay is not a nexus with those people that are fixing their homes. Every time somebody fixes their home in the City of Philadelphia, it is less money we have to spend on NTI. And with the lack of uniformity in the real estate tax system, the lack of understanding as to the broad base for real estate tax system, I think that the land tax is something that everyone in this Council should look at. )
Anyone that has been involved in government and the City of Philadelphia for the last 50 years knows that our taxes are too high. They know that our real estate taxes are too high, that our business taxes are an impediment to bringing 187 OPERATING BUDGET & TAX BILLS - 5/10/04 businesses here, and the real estate taxes, which are not our primary way of funding government, the government function here in the City of Philadelphia, is in many respects inequitable in its application. Everyone knows that. Now, the choice, to me, is the choice between -- the Mayor says he is going to close a couple of pools today. Well, if we don't stop tinkering around the edges, we are going to have to close all the pools for the foreseeable future. I think the tax bills that are presented through Councilman Nutter and from the Tax Reform Commission -- which are not the first time they have ever been spoken about, nor will they be the last -- is a group of bills that have been addressed to over a long period of time by a divergent representative of our society at large, and was voted on overwhelmingly, 14 to 1, by the Tax Reform Commission. They deserve a lot of credit for that. But we also have a responsibility 188 OPERATING BUDGET & TAX BILLS - 5/10/04 not to tinker around the edges, but make the fundamental differences to move our city forward. The impact on our budget is almost minimal, as was the question asked by Councilman Goode in relationship to the $18 million a year that the Mayor says he is not going to take from PGW. It was miniscule in relationship to the total responsibilities of the City of Philadelphia. And budgets are not the Holy Grail, they are not the Bible. And taxes, once they are approved and become an Ordinance, can be changed if problems arise in the next few years. But I believe that we have to make the necessary steps so that this city can survive and be profitable and move forward. I don't want to be part of the last generation of Philadelphians that left the city to the next generation of Philadelphians in less shape than they were me growing up in the 1950s and the 1960s. And we all have our work cut out for 189 OPERATING BUDGET & TAX BILLS - 5/10/04 us. There isn't anyone here who doesn't know that we have a responsibility to the people of Philadelphia. A lot of the questions that have been asked this morning from the Administration officials have been asked and answered, and asked and answered, 700 times. And I have been asked the same number of questions over and over and over again for the last three years. I think it is important that we open up the process, that we see exactly what we can do, that we constrict the size of our government based upon the revenue that's collected in relation to the taxes that we have. For anyone to believe, and for the government to say, that it is voodoo economics to say that not even one job or one business will be created by changing our tax structure I think is irresponsible by the Administration. There will be an increase of employment. There will be an increase of 190 OPERATING BUDGET & TAX BILLS - 5/10/04 productivity in the City of Philadelphia. It is about jobs. You know, the president is looking for weapons of mass destruction in Iraq. We have a weapon of mass destruction in Philadelphia, and it is called poverty. And if we allow it to continue and allow the decay to continue in the City of Philadelphia, it will overcome us and overcome the state and overcome the United States of America. I think we have a responsibility to do what is necessary today. I thank you for this opportunity to be here for the last six hours. I am not going to take any questions. Let these people that have been waiting all day. I will come back Wednesday, Thursday morning. Whenever you want me, I am here for you. God bless. Thank you. (Applause.)
Thank you very much. MR. McPHERSON: Thomas O'Drain. Bill DiMascio. 191 OPERATING BUDGET & TAX BILLS - 5/10/04
I believe that witness was for Bill 313. He had to leave, but he did leave written testimony.
Do you have the written testimony? Do you know who he left it with?
Because we don't have it. MR. McPHERSON: Mr. Malik Aziz.
Good afternoon. Please identify yourself for the record and proceed with your testimony.
Good afternoon, President Verna, Council Members. My name is Malik Aziz, and I am the Program Manager for the Philadelphia Ex-Offenders Task Force, and also the program director for the Safe School Safer Communities Program and the Mayor's Office of Community Service.
Please proceed 192 OPERATING BUDGET & TAX BILLS - 5/10/04 with your testimony, sir.
I am trying to focus. I am here for bill -- Council Wilson Goode's bill and Ramos and Councilwoman Brown, bill on tax rates for employers that hire ex-offenders. I would like to start to say that employment means freedom. Our mission is to enable ex-offenders to effectively re-enter society with the reasonable expectation of securing employment, housing, social services, job training, and minimal support. We need to assist and re-integrate offenders who have rekindled their sense of civic responsibility and want to be active, productive members of society. Employment in new businesses provide that incentive to be successful and responsible in society. There is a lot of people out of work. There is also a lot of people in Pennsylvania prisons. Most of those incarcerated in Pennsylvania prisons are from Philadelphia, in the state prisons. 193 OPERATING BUDGET & TAX BILLS - 5/10/04 As a matter of fact, out of the 42,000 currently residing in the Pennsylvania Department of Corrections prisons, 42 percent are from Philadelphia, or 16,800. In regards to re-entry or reintegration, the majority of those incarcerated in Pennsylvania prisons will return to society. In Pennsylvania, Philadelphia is the home address for more of them. Most important, if we do not address the needs of those returning citizens, many will return to the cycle of crime, most within 90 days after their release. A chance for an opportunity to have employment making a livable wage will enhance the odds that they will not return to the cycle of crime and return back to prison. Of 300 ex-offenders that were interviewed after their release from prison, 90 percent said that if they had a full-time job opportunity, they would not return back to prison. Having people gainfully employed 194 OPERATING BUDGET & TAX BILLS - 5/10/04 decreases crime in our neighborhoods and brings an influx of new stability to the tax base. Simply, Economics 101. The formula is simple. People released from prison works and earns a livable wage equals a stronger economy, safer community, and a more stable family, equals successful reintegration. Existing businesses and new start-up businesses need to be made aware that tax breaks and takes incentives will be made available to them if they hire an ex-offender. Most ex-offenders, having completed their sentence, may be on probation or parole, if given that chance to work a livable wage, prove to be a valuable and trustworthy employee. Many also hope to start small businesses and need start-up capital and technical assistance. Mostly all will continue to reside in Philadelphia, and work here. Bill No. 040313 will amend Chapter 25 19-2600 of the Philadelphia Code entitled 195 OPERATING BUDGET & TAX BILLS - 5/10/04 "Business Privilege Taxes," by making permanent and clarifying the pilot program under which a job creation tax credit will be given to certain businesses that create new jobs within the City of Philadelphia. We humbly ask that Philadelphia City Council will pass this ordinance as an investment in the quality of life and public safety of each and every citizen in the City of Philadelphia. Thank you.
Thank you very much. The Chair recognizes Councilman Goode.
Thank you, Madam President. I just wanted to thank Mr. Aziz for his testimony, for the work he has done in this area. He has often challenged me to look for ways to do some of my economic development work to benefit ex-offenders. I hope this will be a useful tool for him if this Council 196 OPERATING BUDGET & TAX BILLS - 5/10/04 passes it. But I want to thank him again for his work and for his testimony. I also want to say that the written testimony from the Prison Society has been submitted for the record.
A copy has been given to the stenographer and it will be transcribed in full. Thank you.
Thank you, Madam President. MR. McPHERSON: The next witness is Pete Matthews.
All right, Mr. Matthews, let's go. Please move forward, identify yourself for the record, and proceed with your testimony.
Pete Matthews, President District Council 33. Council President Verna, members of City Council, I want to thank you for the opportunity to offer comments and testimony on the proposed budget for the City of Philadelphia. My name is Pete Matthews, President 197 OPERATING BUDGET & TAX BILLS - 5/10/04 of District Council 33. The members and retirees of District Council 33 are the backbone of this city. And all of you know that this city works because the members of District Council 33 make it work. There is not a single function of city government that is not dependent in some way on the services provided by union members. Our diverse and dedicated memberships do their job so well, with little disruption of service, that we are almost invisible to the taxpayers and citizens of this city, and yet we are all taxpayers and citizens, too. We are invisible, that is, until there is a budget crisis. Then the members of District Council 33 are the first place the city Administration looks when they are attempting to make up for deficits by cutting costs. I realize that you are conducting hearings today on the packet of bills that have been introduced to reform the city's tax structure. Our District Council has no 198 OPERATING BUDGET & TAX BILLS - 5/10/04 problem with any reasonable forms of the city's tax structure. With that in mind, I am here today to set the record straight on the valuable and necessary services that are performed by the members of local unions that make up District Council 33 and to remind you, the members of Council, that the city Administration and the City Council both need to pay close attention to make sure that the basic services our members provide are recognized and adequately funded. As I already mentioned, our District Council 33 members are all residents of the city, and all of them are also taxpayers. Our members make their living serving the citizens of the city, and they recycle the money they make many times over in our local economy because they are residents of the city. Therefore, the members of District Council 33 recognize that they have a dual interest in seeing that our city survives and prospers. With that in mind, I have a simple 199 OPERATING BUDGET & TAX BILLS - 5/10/04 question to ask each of you as you consider the Mayor's proposed budget. How can you consider passing a budget that doesn't have any sufficient funding to cover the costs of contracts that covers the members of District Council 33 who deliver the city basic services? The Mayor's budget address before Philadelphia City Council on March appears 11 to our union to be an attempt to put our 12 District Council Members back to the wall and 13 make our members once again bear the costs of 14 balancing the city's budget. 15 We believe that it is unconscionable 16 to propose a budget for the City of 17 Philadelphia that has no money for any of the 18 four city unions. It is not good for our members and it is not good public policy for the city. By boldly stating that this budget contains no provisions for wage increases or health benefits, the Mayor has told the members of AFSCME District Council 33 that they do not matter, just when we are entering 200 OPERATING BUDGET & TAX BILLS - 5/10/04 into contract negotiations. In spite of the fact that health benefits costs are increasing at a rate of 5 to 20 percent per year, the Mayor has 6 expressed his feelings for city workers 7 seeking a fair contract by insisting any wage 8 improvements have to be financed by the 9 savings produced by health benefit cuts. 10 Now the Mayor is once again trying 11 to turn the clock back to 1992, with his 12 assertions that the fiscal crisis is due to 13 the financial burden of having to pay fair 14 wages and decent health and pension benefits 15 to city workers.
It is the position of AFSCME District Council 33 that the Mayor should have set aside sufficient funds for city workers' contract, as well as investing tax dollars in blight, safe streets, and building new sports stadiums. We contend that this Administration should have been making sure the basic city services are preserved and adequately funded, along with the city workers who deliver them. 201 OPERATING BUDGET & TAX BILLS - 5/10/04 When the Mayor talks about change in the structure of the city pension fund from a defined benefit plan to a defined contribution plan that would put the pensions of thousands of tax-paying city workers at risk in the stock market, he is showing us and every taxpayer in the city that he doesn't care about the long-term fiscal security of the city's work force. This kind of underhanded attempt to shred the safety net of a decent pension for District Council 33 members is something that we would expect from a President Bush, who is dedicated to destroying public sector unions, not from a Mayor that refers to himself as the labor Mayor. Instead of closing recreation centers, fire houses, and playgrounds, all of which will only serve to make living in the city more unsafe and unattractive, maybe this Administration, City Council should consider ways to fund programs and services that city residents and taxpayers can use to increase their quality of life. 202 OPERATING BUDGET & TAX BILLS - 5/10/04 Instead of continuing to cut business taxes and promote tax shelters for big companies and developers without studying the long-term consequences, the Administration and this City Council would be better served to use this budget to make sure that basic infrastructure of the city is able to support the increased demands for public services that large commercial developments will produce. )
By forcing the Mayor to change his priorities to reflect the real needs of the city residents and taxpayers, this City Council will easily improve the quality of life for all city residents, including city workers. As District Council 33 starts negotiations with this Administration for a new contract, I want City Council and all the citizens and taxpayers of Philadelphia to understand that this Administration wants to balance the budget on the backs of city workers, just like in 1992, and as the Mayor, 203 OPERATING BUDGET & TAX BILLS - 5/10/04 who should be held accountable for any disruption of services that could result from what could end up to be very contentious talks. The members of District Council 33 have sacrificed time and time again in the past and have shouldered the burden of the city's financial woes. District Council 33 members have been forced to give back holidays, sick days, management rights, work rules, and subject to the start of a two-tier pension system, to say nothing of millions of dollars -- hundreds of millions of dollars in healthcare benefits concessions in past contracts. These sacrifices were made in the past as our members' contributions to the overall financial health of the city, when forces beyond our control put the city into a city crisis. That time has passed. We have lived through wave after wave of job freezes and attrition and poorly planned attempts to contract out jobs that are vital to the city's operations. 204 OPERATING BUDGET & TAX BILLS - 5/10/04 We have fought as a union to protect the wages, benefits, and working conditions of our members because we believe that this city benefits from having a resident work force that is stable and fairly compensated. We have also done our part as a union to help keep healthcare costs in check by closing and selling JFK Hospital, for which years was a huge burden on our union's health and welfare, and by restructuring our health benefits plan and changing our health benefits provider, saving the city $6 million in healthcare costs this year alone. In addition, virtually every union in our District Council has proposed ways in which the city can save money by listening to the suggestions of the workers on the front line of service delivery. I have here today Charles Gaskin, the President, and Business Agent Sam Shelton of Local 403, as well as Fred Cummings and Ann Cohen, the President and Business Agent respectively, of Local 1637, who can detail for you in their own words what they have done 205 OPERATING BUDGET & TAX BILLS - 5/10/04 in their local unions to make the delivery of city services more efficient and, in the process, saved the city's millions of tax dollars. For example, Ann Cohen will present testimony among the longstanding problem of using police officers for civilian duties that can be performed more efficiently and less expensively by members of Local 1637. In face, Ann's research has detailed changes in civilization that could save the city close to $2 million, and at the same time put more cops on the street to make our neighborhoods safer. Charles Gaskin can detail for you the ways in which the members of Local 403 can perform the same city services better and cheaper than are currently being done by private contractors. These local union officers, along with other officers of local unions within District Council 33, who can and will be offering testimony before this body, represent city workers who are very experienced in doing 206 OPERATING BUDGET & TAX BILLS - 5/10/04 their jobs for the taxpayers and citizens of Philadelphia. The members of local unions and District Council 33 have been finding ways to do the job more efficiently and at a cheaper cost to taxpayers for many years, but their experience is always discounted or ignored.
The fact of the matter is that whenever the members of the local unions, District Council 33 come up with suggestions to improve city services or save tax dollars in delivering basic city services, our suggestions seem to fall on deaf ears. By taking the concessions in past contracts, which we have spent most of the 12 years recovering from, and by making suggestions to improve city services and save taxpayers millions of dollars, the members of District Council 33 have provided enough relief for the city. Our members are not responsible for the current budget situation, and we firmly believe that we should not be required to bear the brunt of solving any budget shortfalls. 207 OPERATING BUDGET & TAX BILLS - 5/10/04 The members of District Council 33 have earned the right to a fair contract, and we will not agree to a contract that calls for concessions in wages, health and pension benefits. It is the Mayor's responsibility to negotiate with this union and settle a fair contract. And we believe that it is the City Council's duty to make sure that the Mayor fulfills that responsibility. That is why AFSCME District Council 33 is asking you, the members of City Council, to postpone passing any budget for the City of Philadelphia until we have concluded negotiation for a contract covering city workers.
Thank you very much. We certainly appreciate, I know I do, for one -- (Applause.)
And we know the vital role that you play in our city and your commitment to making sure that we move forward in a positive direction. 208 OPERATING BUDGET & TAX BILLS - 5/10/04 And I am hopeful that, out of all of this, that you and -- I mean, this is a union city -- that all will be satisfied that you get a fair contract, and many of us are committed to that. Councilman Clarke. (Applause.)
As they say, District Council 33 is in the house for sure. Councilman Clarke.
First I would like to commend your workers for the wonderful work they do in the City of Philadelphia, and particularly in my district, as I see the trucks moving around the city and the work that's being done. One of the questions, and I understand it to some way this is your opening salvo to your negotiations for your contract, 209 OPERATING BUDGET & TAX BILLS - 5/10/04 I would like to ask you a question about the matter before us today, on tax reform. Have you had any conversations or any substantive conversations with members of the Tax Reform Commission?
Have they reached out to you during their deliberations --
-- about the potential impact on tax reform on the municipal workers?
All right. Has your union taken a position? I see you reference in your testimony to some --
Our reference is, we understand it, as far as some citizens of the tax reform, that taxes will be reduced. But our reference is, how do we get these services done without taxes? And, you know, I would be 210 OPERATING BUDGET & TAX BILLS - 5/10/04 open to that. But, quite frankly, as I was talking about, health costs go up, our members want raises. So, I mean -- and we pay taxes, also. So it is not a point of when we come here, or come to City Council, we come to negotiations with our hand out. All of our 10,000 members represent a part of the city and pay taxes, as well. And how are you going to --
You pay the resident tax, because I live in the city. It is a little higher than nonresident.
That's right. And how are you going to keep these services going without taxes?
Thank you. Good afternoon, everyone, and welcome to City Council. And I, too, would like to offer my appreciation for the hard 211 OPERATING BUDGET & TAX BILLS - 5/10/04 work of the employees of District Council 33, and all city employees who service the public in my district. (Applause.)
I get a lot of flak for that street cleaning program in Olney, but it works.
You said that Ann Cohen is going to testify about the efficiencies that you all have come up with. I know some time ago, when we were negotiating the trash collection contracts some time ago -- let me get this right in my head. Let me pull that back. Let me hear her first, because I have to go too far back and I can't remember.
I just wanted to know some of the efficiencies that you are talking about.
She is on our way, 212 OPERATING BUDGET & TAX BILLS - 5/10/04 but Charlie Gaskins, he can talk about the highway department.
Hello. My name is Charles Gaskins. I am the President of Local 403, that's the Highway Division of the City of Philadelphia Streets Department. We also represent the Traffic Engineering Division, the Survey Division, and we also represent employees who work for the Parking Authority who do your meter repairs and installing your meters. I am a 33-year city employee. And one of the things that I would like to say is, first of all, I am a taxpayer, city resident who must live here. I take great pride in the work our people do. The local that I represents, we represent a lot of trades people, carpenters, bridge painters, bridge workers, cement finishers, the whole nine yards. One of the sad things that I have to say here is that, a lot of times over the years we have come up with solutions that we think would help the city. 213 OPERATING BUDGET & TAX BILLS - 5/10/04 We change the specs, along with the city managers that we have worked with, changed the specs of some of our employees to help the city along. We have gotten different types of equipment that would help save money. And some of these programs that we had to save money are not in existence anymore. And I also represent workers who pave our streets. And let me just say that some years ago our employees were predominantly black. Years ago we weren't allowed to pave streets in certain neighborhoods in the City of Philadelphia. And that used to disturb me. It was almost like nobody thought our people could do a good enough job. Today I am very proud to say we pave all over the city and we get commended for that. We had a program out not too long ago called HIP, Hot In Place. And that was a program where you recycled the asphalt that was already there. That saved the City of Philadelphia 214 OPERATING BUDGET & TAX BILLS - 5/10/04 money from having to buy asphalt, from having to mill the streets, because it was all done right there and used right there. That program ended a couple of years ago primarily because of a certain contractor that cried the blues. He cried because he wasn't getting paid for milling the streets, he cried because he wasn't getting paid for selling the city asphalt. That's not my concern. Myself as the president of this local, I am here to represent our people, keep our people working. And I am also a taxpayer who thinks about how my tax dollars are spent, as well. I have worked with some Council people in this room. I don't want to put anybody on the spot, but Councilman Kenney some years ago came to the aid of our street lighting division, where he told the then Commissioner Larry Moy, who I have love and great respect for, that if our workers could do the work, let us do it. And it worked. Now that same department over the 215 OPERATING BUDGET & TAX BILLS - 5/10/04 years has been allowed to go down to nobody. And I don't understand that, when you go out and hire a contractor.
No, the work hasn't been contracted out. But the unit is so small that it is ridiculous. It was so small years ago that you had to get a contractor to put alley lights up. How do people maintain them? How do you continue to maintain them, when you don't continue to maintain the work force? We haven't been able to hire in over three and a half years. There are no layoffs there, you are just cutting people out. That's not right. The work is getting done, and there is a lot more work that our people can do that would save the city more money. But it seems like a lot of times that our people get caught in the middle because of the political ball. You have a lot of managers who, if 216 OPERATING BUDGET & TAX BILLS - 5/10/04 they weren't afraid of losing jobs, they would speak out. But they can't because they feel like they would be politically incorrect. You have commissioners that are appointed by the Mayor. They don't want to say anything. You have the Gas Works that's supposed to be in financial trouble. Well, our people do ditch repairs, we do plumber's ditches. I don't know why we can't do gas ditches. The Gas Works hire contractors to do that work at the cost of two and three times more. But nobody is listening to the union. And it is about time that somebody listens to our side of this thing. And I wish we would have a bigger format. Like you have all these hearings for everyone to speak on the budget, and you get all the department heads to come in. You should listen to every one of these union leaders. We have something to say. Our people come up with all kind of ideas. And sometimes nobody wants to listen 217 OPERATING BUDGET & TAX BILLS - 5/10/04 because, quite frankly, contractors donate funds to campaign coffers. Our employees cannot kick out $10,000 at a time for campaign coffers. But we are trying to protect our workers' jobs. You think that trickle-down effect doesn't affect our workers, it does. And when our guys are paving those streets, and the temperature is 95 degrees, and that truck backs up and dumps, and it pulls out, and another one backs right up, and you are working shorthanded, but you are still asked to do the same amount of work, it is not right. It is not right. You create an unsafe -- you create an unsafe environment. And all we are asking for is for fairness. We need some employees, and we need not to be used as a political ping-pong ball. And that's what I feel like we are being used as. (Applause.)
But the thing is -- you have, you know, when you reduce the wage taxes, for whatever reasons, it hurts us. And 218 OPERATING BUDGET & TAX BILLS - 5/10/04 then you say we have to raise taxes to pay our people, that hurts the public, or the public perceives that as being hurt. We know that our workers can do the work for cheaper, a lot of this work. I mean, there is enough work in this city to go around for everybody, building trades and everybody else. But the fact of the matter is, we seen, in my opinion, to be the ping-pong ball, the yo-yo, or whatever. And it is not fair. Because our people come to work every day, and then some of they don't want to come because that's all they hear about, what's going on wrong with us. Our departments constantly being cut back, cut back, cut back, and then you turn around and look at others flourishing, it doesn't make an employee feel good. And then the first thing that's said is, well, the attendance is low. Well, you have to ask why sometimes. It is not because everybody doesn't want to come to work. It is a lot of things that goes on. 219 OPERATING BUDGET & TAX BILLS - 5/10/04 And as we are here when storms happen, and you can't get ahold of those contractors who live across the bridge -- such as a few years ago, when we had that ice storm, and you couldn't even get nobody to cross the bridge. The city workers that live in this city were here to respond to that challenge. And that's the way it has been for years. I lost $4 dollars an hour when I first came to work for the city. I was working on the outside building trades as a carpenter apprentice. I came here because of the racism that went on then. Took the pay cut because I knew I would have a steady paycheck. There is no job security here like it used to be. Now it depends on what the political whims are. And I think as a person who has represented a local who two years ago won the Governor's Award for labor management cooperation, that had never been done before, the Streets Department won that award, we won 220 OPERATING BUDGET & TAX BILLS - 5/10/04 it with great pride, and now we are facing two years later the same old thing that, you know, we are looked upon as nothing. Just a political ball. And I think it is time for it to stop. Thank you. (Applause.)
Ann Cohen, President of Local 1637, she is here, and she is going to testify.
Thank you, Vice-Chairman Blackwell, distinguished members of City Council. Good afternoon. My name is Ann Cohen, and I am President of AFSCME Local 1637. Local 1637 represents civilian employees of the Police and Fire Departments, the Department of Public Property, the District Attorney's Office, the Philadelphia Parking Authority, and the Capital Program Office. We are here to comment on the Mayor's proposed budget and Five-Year Plan. 221 OPERATING BUDGET & TAX BILLS - 5/10/04 Today, however, the word "proposed" seems a little inadequate to us. Six weeks ago, when I first asked to testify about the Mayor's budget proposal, I planned to speak in defense of the mounted police unit and about the cost savings that could accrue to the city in a comprehensive civilianization plan. Unfortunately, today there is not a single horse left in the mounted police unit. After more than 30 years, no horses patrol the country's fifth-largest city. The world's largest park system is without mounted officers. The demise of the mounted unit is remarkable for the damage it has done to the quality of life for city residents and the speed with which the unit was disbanded. Every year Mayors propose new programs and initiatives in their budgets. In hard times, the city's leaders call for cuts in programs and services. The programs, initiatives, and cuts are debated by City Council. And, of course, the city's taxpayers get the opportunity to be heard in public 222 OPERATING BUDGET & TAX BILLS - 5/10/04 hearings like the one today. That's what the Democratic process is all about. In defense of the mounted unit, concerned citizens gathered thousands of signatures. District Council 33 members generated hundreds and hundreds of letters. But, it was a done deal before we started. The fact that the city will save less than $110,000 a year by shutting down the mounted unit will not be debated in these chambers. That the lives of the men and women who cared for the horses for decades have been thrown into turmoil won't even be a footnote in the budget process. Nor will the diminished police presence in the parks, on South Street, at the Greek Picnic, and every other place we come to expect mounted police officers. But I'm not here only to cry foul. The proposal to eliminate the mounted patrol unit appeared as a part of a paragraph in the Mayor's Five-Year Plan that touted savings of $50 million that could be gained by 223 OPERATING BUDGET & TAX BILLS - 5/10/04 transferring uniformed officers from administrative to street duty. This process is known as civilianization. Its premise is that it makes economic sense to have officers perform the law enforcement functions for which they are trained. It makes no sense economically or operationally to pay an officer to perform functions that could be more efficiently performed by civilian employees. AFSCME local 1637 and District Council 33 have long fought the civilianization battles. More than years 16 ago we first came before this body to make our 17 cost-savings proposals. 18 We won civilianization gains in 19 collective bargaining in 1982 and 1986. The 20 city last implemented comprehensive 21 civilianization initiatives 12 years ago. 22 And when the city violated our 23 contract by assigning uniformed officers to 24 perform civilian functions, we have gone to 25 arbitration and won. 224 OPERATING BUDGET & TAX BILLS - 5/10/04 Not surprisingly, the city was found to be in the wrong when it assigned police officers to mop floors, make building repairs, operate duplicating machines, and perform secretarial duties. We do not believe that it is coincidental that the union's most recent arbitration victory came in the mounted police unit. In that case, which the city has now appealed to Commonwealth Court, the arbitrator ruled that the city was wrong to assign a veteran police officer, whose salary is in excess of $47,000 a year, to a clerk/typist position.
We have seen the speed with which the city can act as it completely demolished a beloved institution in less than 45 days. The question now is, will the city act with similar decisiveness to save the real money, by actually civilianizing hundreds of police department jobs. We believe that civilian employees are an integral part of the police department 225 OPERATING BUDGET & TAX BILLS - 5/10/04 dedicated to the mission of that department. After all, we are all citizens of the city. We raise our children here. We need safe streets, secure schools, and the quality of life that is part of the ideal 21st Century city. We are proud of our role in law enforcement and stand in great appreciation and admiration of the work performed by the men and women represented by the FOP. But when the work can be better and more cost-effectively performed by civilians, that must be our goal. Our union long fought for cost-saving reforms in the mounted unit, as we have across the department. We have attached a chart of just a few of the additional cost savings civilianization suggestions. But our suggestions have largely gone unheeded. The city's failure to act costs taxpayers millions of dollars a year. This is not new news. In the 1980s Kevin Tucker's blue ribbon panel identified the problem. In the 1990s, City Controller 226 OPERATING BUDGET & TAX BILLS - 5/10/04 Jonathan Saidel pinpointed abuses and suggested solutions. Our chart is just a tip of the iceberg. We know that there are opportunities in virtually every unit and office in the police department for further civilianization. In the meantime, we want to highlight just a few of the suggestions contained in our chart. The last meaningful civilianization efforts occurred between 1992 and 1994. One of the department's successful initiatives at that time was the civilianization of the police detention unit. Police officers were transferred to street duty and were replaced by over 60 civilian correctional officers. This is the same Civil Service title and Civil Service job list used to staff the city's prisons. It is now time to take the next step and civilianize the supervision of that operation. We propose the use of correctional sergeants to replace both police corporals and police sergeants. 227 OPERATING BUDGET & TAX BILLS - 5/10/04 These civilian supervisors would still report to a uniformed police lieutenant and captain, but this change alone could save the city over $266,000 a year. Similarly, civilianizing the supervision of police radio and the DPR unit could save another $245,000 a year. Again, the Civil Service job title, police communications dispatcher supervisor, exists to make this replacement easy. More savings could come in other areas using existing city job titles. For example, when an attorney or legal services clerk in the District Attorney's Office has a problem with their PC, they call a help desk and a computer user support specialist responds. In the police department, however, an officer, a detective, or a sergeant answer the PC problems. We don't think that is the most effective way to ensure safe streets. Other examples like this abound, but we do not have the time today to focus on them all. We would like to point to one more huge 228 OPERATING BUDGET & TAX BILLS - 5/10/04 opportunity for cost savings. This opportunity exists on every shift, in every operations room, of every police district in the city. The operations rooms are staffed by both civilians and uniformed personnel working side by side and performing identical functions. Each uniformed officer receives between 10,000 and 20,000 dollars a year more than the civilians to answer the phone, complete paperwork, and maintain computer records. If the city is serious in its commitment to efficiently delivering services, it will move quickly to further civilianize operations rooms, easily saving the city more than a million dollars a year. Totally civilianizing the operations rooms would save even more.
We regret we could not be part of the public process on which we have relied in the discussion about mounted police, but we appreciate the opportunity to appear before 229 OPERATING BUDGET & TAX BILLS - 5/10/04 you today to further the dialogue on the Mayor's proposed budget. Thank you very much. )
Were these suggestions made part of any dialogue with regard to the budget before the mounted police was done away with?
Yes. We certainly made proposals in the 1990s. We made proposals throughout our arbitration and settlement process of the mounted police, of the mounted police arbitration. We have written repeatedly to the Police Commissioner. We have raised it in every arbitration that we have won. No later than April the 12th we wrote again to the Police Commissioner asking that he convene a meeting to talk about the cost savings that could accrue from further civilianization, to talk about the payments that are owed to the union for past violations.
So even 230 OPERATING BUDGET & TAX BILLS - 5/10/04 though you had these other recommendations that were also cost saving, and in fact which means that getting rid of the mounted police costs less than all of these things combined, and were all of these suggestions on the table?
I don't think that they were -- they certainly weren't in the form that you see them now. But we certainly raised them throughout Safe Streets, for example. We talked about further civilianization of the operations rooms. They have been -- the police department has been found guilty of violating the collective bargaining agreement many times by assigning police officers to make repairs at the Police Academy, but making repairs in the 14th District, by having officers mop floors. It is not new.
Yes. We regret to lose the mounted police, as well. Councilman DiCicco. COUNCILMAN DiCICCO: Point of order. 231 OPERATING BUDGET & TAX BILLS - 5/10/04 Good afternoon. Ms. Cohen, you mentioned that you have written to the Police Commissioner about some of these issues on proposing savings, proposed savings? I didn't hear what the response was to that.
We last wrote on April the 12th, and we have received no response. COUNCILMAN DiCICCO: No response. Thank you.
Thank you. Are there any other questions for these witnesses? Councilman Nutter.
Thank you, Madam Chair. I will be very brief. I just want to say to Mr. Matthews, Mr. Gaskins, and Ms. Cohen, that I deeply appreciate your testimony, your service and commitment to the city. Many of the union members are with us. Most of the others, the thousands of them, are at work, and so couldn't be with us. And we are the beneficiaries of that. I have received tremendous service 232 OPERATING BUDGET & TAX BILLS - 5/10/04 from all three of you and a number of others who are not at the table. And I wanted to thank you publicly for that and for the service that you provide. (Applause.)
I think any opportunity we have, those of us who have maybe a little more access to microphones and newspapers and the like, should always take the opportunity to recognize public employees. We are public servants. We have a certain job. But, you know, I try to remind my constituents when they call our offices in City Council that it is highly unlikely that whatever service it is that you are calling about, I mean, other than something that can be done over the phone, it is highly unlikely at, you know, midnight or, you know, 6 o'clock in the evening, or 2 o'clock in the afternoon, more than likely even myself or my staff are not the person who is going to go out and fix that particular problem. Not because we don't want to. But for many of the things people call for, you 233 OPERATING BUDGET & TAX BILLS - 5/10/04 probably would not want me to go out and do that. And, so, this notion that, you know, public employees, you know, do anything less than in 99.9 out to infinity percent of the time their best in their work and their effort, you are what make our offices go, you enable us to do the things that we do, and the partnership is critically important. I think that it is good for you to share with us not only the concerns, but also what you do. I do have some amount of regret, although I did not create this environment, I did introduce the bills, and they are the subject of testimony today. I think we have to reach a point in this city where we seek our best to stop trying to pit groups or sides against each other in an irrational dialogue about, if this group gets X, then the other group doesn't get Y. And I don't mean -- I am not being naive or Pollyanna-ish about it. We do have 234 OPERATING BUDGET & TAX BILLS - 5/10/04 some tough decisions to make. But I do think that the first course of business should not be trying to pit groups against each other. We are all public servants together. We are all trying to serve people in the ways we know best. (Applause.) (President Verna resumes the Chair.)
You have a unique situation because in many instances what we do does have a direct impact on you. But nonpublic servants are in the same situation. We are all Philadelphians first and foremost, whether you are on the public payroll or not. And you do deserve a fair contract because of the hard work. And the citizens of this city also deserve a government that can provide leadership, solve problems, generate jobs, new people to work here, to pay our taxes, hopefully in a reduced fashion, and so that we are not in a constant fight about an every-shrinking pot or pool of dollars; but 235 OPERATING BUDGET & TAX BILLS - 5/10/04 that we are actually moving in a direction where we have the luxury one day of talking about how to spend some additional dollars generated by making tough decisions and making investments in the future, and actually providing people with at least as good, if not better, quality of life in this city. And, so, I think that partnership is very important. I am glad that you are here today participating in this discussion and dialogue. I do, again, regret that it is being posed as one side against the other. We are all Philadelphians, and we care about this city, and we are all just trying to do our jobs. So I thank you very much. (Applause.)
Thank you, Councilman Nutter. And I have worked closely with you in the past and will work closely with in the future. But I think what we need to 236 OPERATING BUDGET & TAX BILLS - 5/10/04 understand, what we are really trying to say, is -- and you are right, we should be partners. But we should be real partners, and our input should not be taken for granted and should not fall on deaf ears. And I always refer back to 1992, when it was devastating for the union. From that point, if we worked closely together, we could have alleviated a lot of those problems in the past. But, that just doesn't happen. And that's what we are trying to do now, before we get to the point June 30. It seems like you don't think about contract negotiations until two or three months before the contract is about to end. So, I mean, it just repeatedly happens over and over again. And now what we are facing is 1992 all over again. So, you know, I appreciate your help. I appreciate all the Council person's help. But, I mean, we are in a dilemma. And I don't pit this as one group against another. I am willing to sit down and work with any group. 237 OPERATING BUDGET & TAX BILLS - 5/10/04
I know that. You have always been that way. Thank you. Thank you, Madam Chair.
Yes. Ms. Cohen, I have a question here. Did you ever have any discussions with the leadership of the FOP in regard to your recommendations of replacing police officers with civilians? I was just interested in that.
We have had discussions with the FOP over a number of years. Clearly their position is to defend the jobs of their officers at their staffing levels. And I am sure there are areas in which they would have fought us on some of its recommendations
I noticed that we have had, over years, I think we have been 25 discussing this. And I agree with you. 238 OPERATING BUDGET & TAX BILLS - 5/10/04 Another interesting thing in your testimony, on , you mention that the city will save less than $110,000 a year by shutting down the mounted unit. According to the Mayor's budget, it was over 400,000. Is there any reason for the discrepancy?
Yes. According to the Mayor's budget, it was $400,000. According to testimony given by Police Commissioner Johnson, it was 750,000. I can only assume that those higher figures represented personnel costs. Because the actual cost, the costs for feeding, housing, shoeing, and vetting the horses is less than $110,000 a year. And the reason that there will be no 20 savings is that the officers who have been assigned to -- any greater savings, is, the officers who were assigned to the mounted police unit will be assigned to other units, or to other districts. The civilians will be placed in other jobs. So the only real 239 OPERATING BUDGET & TAX BILLS - 5/10/04 savings are the savings of the actual cost to feed and house those horses.
Thank you. I just want to thank you for your testimony, all of you. I think there are some interesting things in here. And what we are trying to do is save as much money as we possibly can. And I thank you for your recommendations and your time.
Thank you. Are there any other questions from members of the committee? Thank you all so very much. (Applause.) MR. McPHERSON: Our next witness is Gabriel Bevilacqua.
Is Gabriel Bevilacqua here? Good afternoon. Welcome. Nice seeing you. We are going to ask that all of the witnesses be given five minutes for their testimony. I believe we have approximately 69 240 OPERATING BUDGET & TAX BILLS - 5/10/04 witnesses, and we would like to hear everybody by the end of the day. Please identify yourself for the record and proceed with your testimony.
My name is Gabriel Bevilacqua. I am Chancellor of the Philadelphia Bar Association. Good afternoon, Council President Verna and members of City Council.
Just a minute, please. The noise level is much too high. If you are having conversation, please do so in the corridor. Thank you.
On behalf of the 13,000 members of the Philadelphia Bar Association, I offer my thanks and appreciation for this opportunity to once again testify on tax reform. As you know, our Association is committed to this effort. And it is not just this one Chancellor that has spoken about this, but it is in fact the entire 241 OPERATING BUDGET & TAX BILLS - 5/10/04 Association, 13,000 members strong. They have joined me so that we may demonstrate the sustained commitment of our Association and its members to tax reform. Indeed, several Chancellors of the Bar Association have appeared before you in the past few years to speak on this topic. Our concern is real and it is ongoing. We understand that tax reform is a huge issue for this Council and this city government to confront. And, indeed, that is reflected by the fact that there are 13 pieces of legislation that you are considering. But I want to call your attention today to one particular inequity which we believe can and should be promptly addressed, especially if we are really serious about tax fairness and a pro-growth, pro-jobs economic policy in our city. Specifically, we urge the city to address the disproportionally high tax burden imposed by the business privilege tax and the net profits tax on service firms that are organized as partnerships. 5 percent for residents. 5 percent on their net income. In addition, the partnership would pay a net profits tax, but would be able to claim a credit of 60 percent of the net profits portion of the BPT. The effective rate of tax on partnership net income could in some cases exceed 7 percent. As you may know, the BPT applies to businesses conducted within the city regardless of form of organization; for example, corporation, partnerships, sole proprietorship, or LLC. The BPT consists of two tax bases, a tax on gross receipts and a tax on net income. 5 percent on income attributable to business 243 OPERATING BUDGET & TAX BILLS - 5/10/04 done within the city. By regulation, the city's Department of Revenue has directed that businesses conducted in partnership form may not deduct payments made to partners, even where partners perform a significant level of service on behalf of the partnership. Businesses formed as corporations, however, may deduct payments of compensation made to shareholders who provide services. As a result, service firms organized as corporations have little or no net income and pay little or no city taxes on their net income; instead, their shareholders pay city wage taxes at substantially lower rates. No apparent policy supports the discrimination against service firms organized as partnerships. For the reasons, we encourage the Council to consider the inequity presented in this situation. We are not asking for special treatment; we are only asking for a level playing field. Specifically we ask that the BPT be 244 OPERATING BUDGET & TAX BILLS - 5/10/04 amended to permit partnerships to deduct distributions made to partners who provide services to their partnerships. The effective this amendment is that service partnerships would pay tax on their net income at the rates imposed by NPT which are the same rates that are imposed under the city wage tax. We believe that the inequities which I have just enumerated are among the major factors in the relocation of professional firms from the city into the suburbs, that's why we care so deeply about this. Due in large part to the city's tax structure as it applies to partnerships, many firms have left the city either entirely or in part. Many professional service firms operate in partnership form for various reasons. Significant tax and nontax restrictions exist to limit their ability to convert to nonpartnership or corporate form. And, in many ways, this is really a small business issue.
Bear in mind that many small and mid-sized firms are organized as 245 OPERATING BUDGET & TAX BILLS - 5/10/04 partnerships and, consequently, suffer under this provision In fact, nearly two-thirds of the membership of the Bar Association is composed of small and mid-sized law firms, so this is a serious issue for us. A study released in January 2003 by the Center of Philadelphia Development Corporation explains that Pennsylvania suburbs have enjoyed a robust 34 percent rise in professional service jobs between 1990 and 2000. The study goes --
Thank you, Madam Chair. Chancellor Bevilacqua, tell us a little bit about your firm and its economic 246 OPERATING BUDGET & TAX BILLS - 5/10/04 impact on the city, and what your firm has been experiencing in terms of its own economic and needs of economic well-being in the City of Philadelphia.
I would be happy to do that. Our firm is located in five states. Our signature office is our office in Centre Square, right at 15th and Market Street. And our firm, like other large, multi-state firms, has really shrunk in terms of its presence here in Philadelphia, but has grown in terms of its presence in our other offices. And I can point to specific sections within the firm that have really moved to different offices in order to avoid this inequitable tax.
Tell us how the proposed legislation would amend the tax and equity that you say exists.
I think it would equalize it to require both corporations and unincorporated associations to pay tax at the same rate. 247 OPERATING BUDGET & TAX BILLS - 5/10/04
Do you have any other suggestions or any plans that you could offer to be helpful with what we are here to discuss today?
Councilman, we have strongly supported the recommendations of the Tax Reform Commission in the past, and continue to support those recommendations. But we wanted to single out this one, what we considered an inequity which impacts severely the unincorporated associations.
Thank you. Are there any other questions from members of the committee? The Chair recognizes Councilman Goode.
Thank you, Madam President. Good afternoon. I understand the issue of fairness should be one that is paramount, particularly if it makes us less 248 OPERATING BUDGET & TAX BILLS - 5/10/04 competitive. But I am wondering if you are familiar with any revenue implications with regard to next year over the Five-Year Plan? I just don't have those figures broken out from the other business tax figures.
We don't have a bottom-line figure. And we would like to -- we really don't know what the impact would be of equalizing this for corporations and unincorporated associations.
Thank you. Anyone else want to be recognized? Thank you very much.
Council President Verna, we have complete remarks, which I would like to hand up to be made part of the record.
We will give them to the stenographer, and they will be transcribed in whole. Our next witness, Thomas O'Drain. Mr. O'Drain, please identify yourself for the record and proceed with your testimony. 249 OPERATING BUDGET & TAX BILLS - 5/10/04
Good afternoon. My name is Tom O'Drain. I am the President of the Philadelphia Firefighters Union. I represent 2400 active firefighters and paramedics. I am a 19-year veteran of the Fire Department. I am also a lieutenant currently on leave of absence to serve as the President of Local 22. In March, just before the Street Administration released their budget for this year, the 21st Century Review Forum issued a report that suggested that city services in the Fire and Recreation Departments may need to be redistributed to match changes in the city's population. But the 21st Century Review Forum did not recommend any immediate cuts to the Fire Department be implemented. S. Navy when considering base closures. This process would attempt to 250 OPERATING BUDGET & TAX BILLS - 5/10/04 eliminate the politics from the closure or cut decisions. And while I disagree with some of the conclusions reached by the Forum, I agree that any review of public safety services must be conducted in a thorough, deliberate, and open manner. As president of Local and a 10 life-long citizen of this great city, I was 11 extremely disappointed the following week, 12 when the Street Administration released a 13 proposed budget that called for several cuts 14 discussed, but not recommended, by the Forum, 15 without the thorough, unbiased, detailed, and 16 open review that the Mayor's own Forum deemed 17 absolutely necessary. 18 In light of the severity of the cuts 19 proposed, this course of conduct is a recipe 20 for disaster. 21 Council Members, you have heard Fire 22 Commissioner Hairston attempt to sugar-coat the drastic and unnecessary cuts that the Street Administration plans to impose upon the Philadelphia Fire Department. But make no 251 OPERATING BUDGET & TAX BILLS - 5/10/04 mistake about it, the Mayor's plan will gut the Fire Department. It will result in 200 fewer firefighters on the streets of this city, a whopping percent cut. And all of this in a 7 year where fires and injuries are up and at a 8 time when public safety remains the number one 9 issue on our public discourse. 10 Despite Commissioner Hairston's charts, the city-proposed cuts will have a dire impact on public safety. There is no 13 doubt about it. It is just common sense. Fewer engine companies and fewer ladder companies means that the existing companies will have to cover greater distances. Increased distance means increased response time. In other words, under the Mayor's proposal, it will take longer for the Fire Department to respond to calls for emergency service. Every citizen can understand how critical response time is when you call 911 and you have a loved one in distress. Seconds 252 OPERATING BUDGET & TAX BILLS - 5/10/04 count, seconds are meaningful. But when it comes to fire, the average citizen may not know how important response time is. Simply put, fire grows exponentially. Each minute of uncontrolled fire growth results in a geometric increase in temperature and damage. This results in greater damage to the initial structure, to the adjoining structures, and to risk faced by occupants and by firefighters. So when it comes to fires, seconds are not merely important, they are absolutely critical. And no meaningful discussion of company closings can ignore the impact of those closings on response time. Unfortunately, Commissioner Hairston's testimony did not address the impact that the proposed Fire Department cuts will have on response time. This is troubling for several years. Two months ago when the news first broke of the Mayor's plan to close fire companies, our union asked the Fire Department 253 OPERATING BUDGET & TAX BILLS - 5/10/04 for information related to what we hoped was the detailed study of the issues that the department had performed seeking to close fire companies. To date we have received no 6 response.