COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE ON TRANSPORTATION AND PUBLIC UTILITIES - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, July 14, 2005, 2:15 p.m. - - - 040298 - Resolution authorizing City Council's Committee on Transportation and Public Utilities to hold public hearings to investigate the proposed nearly 43% water and sewer cost rate increase to be effective July 1, 2004, requested by the Philadelphia Water Department, and in furtherance of such investigation authorizing issuance of subpoenas to compel the attendance of witnesses and the production of documents to the full extent authorized under Section 17 2-401 of the Home Rule Charter. PRESENT: COUNCILMAN MICHAEL NUTTER COUNCILMAN FRANK RIZZO V A R A L L O Incorporated Litigation Support Specialists 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2 P R O C E E D I N G S - - -
Good afternoon, ladies and gentlemen. This is the City Council Committee on Transportation and Public Utilities, the hearing on Resolution No. 040298. I am Councilman Michael Nutter, chair of the committee, and as appointed by the Council President, Councilman Rizzo is serving today on this committee. This is a resolution authorizing City Council Committee on Transportation and Public Utilities to hold public hearings to investigate the proposed nearly 43 percent water and sewer cost rate increase to be effective July 1, 2004, requested by the Philadelphia Water Department, and in furtherance of such investigation authorizing issuance of subpoenas to compel the attendance of witnesses and the production of documents to the full extent authorized under Section 2-401 of the Home Rule Charter. 3 Transportation & Public Utilities Before we start with our witnesses, Councilman Rizzo has a statement. Councilman.
Thank you, Mr. Chairman. Good afternoon. My name is Councilman Frank Rizzo. Thank you for coming today. I also want to thank Water Commissioner Bernard Brunwasser and Hearing Examiner Henri Marcial and Public Advocate Lance Haver. I also thank you, Chairman Michael Nutter of the Transportation and Public Utilities Committee. This is the third hearing on this issue. We had two hearings in May and June of 2004 to investigate the water and sewer rate increase which the Philadelphia Water Department proposed as being nearly 43 percent to raise $311 million. Since then the Hearing Examiner for the water rate increase has been appointed and has made his 4 Transportation & Public Utilities recommendation. The Water Commissioner is expected to make his final decision before the end of the week. The increase is expected to be in the 31 percent range over three years to account for an estimated 220 million requested. $50,000 has been spent to advertise five public hearings at five locations throughout the City. For whatever reason, the participation was low, people. Since 12 then, I have heard from those who have 13 not been heard. The common theme among 14 those who wanted to be heard was we 15 didn't know. The purpose of this hearing 16 is to give you, the public, an 17 opportunity to be heard. Thank you. 18
Thank you, 19 Councilman. 20 The first witness is the Water 21 Commissioner, Bernard Brunwasser. Please 22 come to the witness table, identify 23 yourself.
Good afternoon, Councilman Nutter, Councilman 5 Transportation & Public Utilities Rizzo. I am Bernard Brunwasser, Water Commissioner for the City of Philadelphia. I was hoping I could read an opening statement.
That would be fine. Commissioner, do you have any written testimony for us?
No, since this is a continuation of a prior series of hearings. I'm here today at the committee's request and I'm appearing for the fourth time on the issue of water rates. As you probably know, the legally enacted water rate process has been ongoing since last December. Both formal and informal hearings open to the public have been held under the direction of an independent hearing officer, Mr. Henri P. Marcial. Residential customers have been represented in the formal process by the Public Advocate, Community Legal Services. Commercial industrial customer interests have been represented by the Commercial Customer Consortium. Expert 6 Transportation & Public Utilities witnesses have testified and have been cross-examined. Legal briefs and reply briefs have been rendered. The transcript of the formal and informal hearings has been issued. Most recently, the Hearing Officer has issued his recommended decision for fiscal years 2006 through 2008. In other words, an extensive public record in this matter has been compiled. It is this public record that I'm currently in the process of reviewing so I may be able to render a just and reasonable rate determination. This public record is now closed. My rate determination must be based on the extensive record that has already been compiled. Otherwise, the last eight months of hard work by the Hearing Officer, Public Advocate, the Commercial Customer Consortium, and the Water Department staff and legal team may have been in vain. Therefore, I may not be at liberty to answer some of the questions 7 Transportation & Public Utilities that the committee or the public has for me today. As you have witnessed in the prior three hearings on this matter and in my testimony on operating budget, I have always strived to be responsive to each question I am asked. Today I must be careful not to comment upon those issues that have been aired in the formal rate process. The City and I wish to protect the legal hearing process that has been in place for the past 13 years. Finally, I wish to state that my final rate determination must balance the concerns of all of our customers, our owners, the City of Philadelphia, our bondholders, the Environmental Protection Agency, the Pennsylvania Department of Environmental Protection, and the Delaware River Basin Commission. The department strives to bring its customers the purest drinking water and the cleanest river environment at the lowest cost in the region. Since all of our 8 Transportation & Public Utilities employees, their families, friends, and neighbors live in Philadelphia, it should go without saying that there is a strong focus on keeping our rates affordable. Nationally and internationally, the Philadelphia Water Department is considered one of the finest utilities of its kind. The department has dozens of nationally recognized experts in the many varied fields of water and wastewater treatment, water distribution, wastewater conveyance, biosolids disposition, laboratory sciences, and more. Each year our utility continues to win numerous awards in the industry. I am proud to represent the more than 2,000 hard-working water department employees who have made this utility what it is today. Mr. Chairman, thank you for allowing me to make this opening statement. I should say to my right is Mr. J. Barry Davis of the law department, 9 Transportation & Public Utilities who serves as my legal counsel.
I assume it's Mr. Davis' responsibility to make sure that you don't get in trouble.
Commissioner, thank you for your opening statement, but I would like for the record to just make -- I just want to make sure I understand. You know the decision because I believe the decision will be tomorrow, your decision?
The decision, there is no time constraint on us per se to make the decision, but in no event I would not expect it until at least a week from today. That would be July 21. We 10 Transportation & Public Utilities are still working on it.
You're still working on it, so that's good. Maybe this hearing will have some influence over your decision then.
I have to say that it should not because of the record in the hearing, the formal hearing, the legally enacted hearing is closed. If there is something that is said here today, it should not have an effect on the final rate determination. Under what I've been told by the law department, the legal department, that record is closed and whatever has been said -- and it's voluminous. It's a voluminous record. Most of these issues that may still be out here and people have interest in were discussed most likely in the hearing process and aired --
Is it true that only 23 people responded to the citywide --
That sounds 11 Transportation & Public Utilities about right to me. I don't have the exact number.
Twenty-three people and you spent $50,000 to advertise that.
But you are the Commissioner. You make the decision. Do you not have -- you're not locked to adopt what the Hearing Examiner's report says. You can deviate from that from what I understand.
I have to give the Hearing Officer -- his report has to be given substantial weight. That is the way the process --
So we could 12 Transportation & Public Utilities influence --
If it's on the record, as long as it's in the record. I cannot point to something outside of the record to change my decision.
But we could make a point that you possibly -- that's in the record, in the report, that you could go back and look at a second or third time; correct?
I believe that might be possible. What I should say is the Water Department and all of our employees are always listening to constituents' concerns. We never stop doing that.
When we had previous hearings, we talked about some issues with the suburban communities, wholesale water. Could you elaborate on some of the things that as a result of those hearings that have transpired that are in that record that could influence the decision on the rate increase? 13 Transportation & Public Utilities
There has been some recent good news and it will -- it's in the record and will affect to some degree the final rate determination. And that I actually have to -- before Councilman Nutter leaves, I just want to tip my hat to him --
-- and to you, Councilman Rizzo, for putting me in touch some months back with some of the political leadership in the Bucks County area. And it gave me an opportunity to give the Water Department's side of the story in a dispute with Bucks County Water and Sewer. That quickly led to serious discussions with Bucks County Water and Sewer and they have opted to buy more capacity, more sewage capacity in Philadelphia as part of our northeast wastewater treatment plant and have -- 14 Transportation & Public Utilities are in the process -- have already made one payment of about $9 million and we're expecting another payment of a similar amount, a little bit higher, in August for this additional capacity that we will be accepting from Bucks County. Now, much of that money is capital in nature and that money may well be used in doing some expansion work at the northeast plant to accept the greater flow.
Commissioner, thank you for the information. And I appreciate the compliment. At the same time, you did all the work. I just tried to make the connections between yourself and the political leaders in Bucks County. Let's go back to the issue about the five hearings. Do you recall when they were?
We can provide that information for you. I don't have 15 Transportation & Public Utilities it with me currently.
Only to say that they were in different -- they were in different neighborhoods in the city. Yes, we have that information actually with us and we'll just have you look at that.
I used to be part of the hearing process in my former jobs.
So it looks like the first one was Wednesday, March 30, 6:00 to 8:00 at Hunter School.
I think that one became a problem which I think it may have been moved to a different location. So I would say that probably four out of 16 Transportation & Public Utilities those five locations are accurate and one may have been moved.
And as the Councilman pointed out and you seemed to at least generally agree, are you saying that at the total of all five hearings there were people? 9
Again, I'm not 10 certain but I will accept that. That 11 sounds within reason of what I had heard. 12 Now, it's not that much different than 13 the prior set of hearings back in 2001. 14 There was relatively little -- you know, 15 seemed to be very little interest. Those 16 were very small rate increases we were 17 dealing with. Now, back in the early 18 '90s it was a different story when we 19 used to come in with some very large rate 20 hikes, the end of the plant expansion 21 period. 22
Well, would 23 you consider this relatively small, relatively large, or somewhere in between, 42 percent over three years? 17 Transportation & Public Utilities Would you consider that to be relatively small, relatively large, or somewhere in between?
That is I would guess relatively large. But across the country it's probably somewhat in the middle at this point in time. That number has come down, though.
But, as you can imagine, notwithstanding newspapers, Internet, and the like, most Philadelphians actually live in Philadelphia so possibly are not paying that much attention to water rates across the country. So to what would you attribute such a small number of people coming out to hearings about what you've at least characterized as a relatively large increase? Why do you think that is?
That would be speculation on my part. I really can't speculate.
And did I 18 Transportation & Public Utilities take down correctly you said the decision you anticipate being made somewhere on or about July 21?
We hope that will be ready by about that point in time, yes.
And, lastly, with regard to the Bucks County situation, getting a resolution to that and you've articulated what sounds like some fairly hefty payments, does that play into or how would that impact the overall water rate increase?
Well, yeah. Okay. We can agree on that. Councilman Rizzo, any other questions?
Commissioner, thank you very much. Are you going to be able to stay for a little bit in case anything comes up?
Great. Thank you. Henri Marcial, did I come close to saying that correctly?
Well, I just wanted you to know that as a part of the process here, but I actually didn't do that well in that particular subject matter. So why don't you identify yourself for the record and tell us what's on your mind.
My name is Henri Marcial. I am an attorney here in the City of Philadelphia and I was contracted to be the Hearing Examiner in this 20 Transportation & Public Utilities particular matter. As a general rule of thumb, I followed the Council's regulations, which are published, as to how these proceedings were to be conducted. And we spent approximately seven to eight months now on these proceedings. I initially came on board in December. We bifucated the proceedings due to the delay. And we just completed and, as you probably already know, I've issued my recommended decision.
Okay. And I did receive your report this morning. Could you just for the record -- is this your first time appearing before us?
Could you just give us a little bit of background information in terms of the nature of your work? Have you been a Hearing Examiner before for the City? Just a little bit of that.
This is my first 21 Transportation & Public Utilities time as a Hearing Examiner for the City. I was prior to this an employee of PECO Energy company in their rates and regulatory division in their legal department. I spent the last year working as a real estate developer for Norris Square Civic Association in North Philadelphia. And that was what I did prior to taking on this matter, at which time I ceased that and started focusing solely on this matter and the development of my own solo legal practice.
You've issued your report. I believe it's the same we have here. It's dated June 17, 2005; is that correct?
The recommended decision is self-explanatory. In short, I have directed the Water Department to make some recalculations to adjust for the Bucks County settlement and to adjust 22 Transportation & Public Utilities for the final issuance and interest rate figures related to the 2005 bond issuances, of which there were two. And those are in addition to the negotiated decreases in rates between the Public Advocate, the Water Department, and the Commercial Consumer Consortium.
And I guess my last question would be the originally announced or proposed increase was 43 percent over a three-year period. Do you have a specific recommendation with regard to that or a position?
It's very difficult to in my position to based on the recalculations that I've ordered come up with a percentage. I can give you some gross figures. The original request from the Water Department was approximately $311 million. In Phase of these proceedings for 2005, that was reduced. Since 2005 was handled separately, the remainder was approximately in the 260 million number. 23 Transportation & Public Utilities That again was reduced once adjustments were made for a complete removal of the lateral program to approximately 200 and I want to say 30 million, which was further reduced to 217 million by the time I received the remainder of the record.
Hold on for a second. You've made the statement a couple of times. When you say it was reduced, what was reduced and by whom?
The overall dollar figure for the rates requested by the Water Department were reduced via several I'll call them rounds of negotiations between the parties.
The Public Advocate, the Commercial Consortium, and the Water Department.
And by the time I 24 Transportation & Public Utilities received the final record from the hearings and the briefs, that amount had been reduced to approximately 217 million. My decision further -- should further reduce that figure.
Close. It's a little over $90 million, $94 million, I believe.
Could you just go back and tell us about the relationship with water and sewage in Bucks County? What developed to -- what 25 Transportation & Public Utilities exactly occurred there to bring some numbers in? Would you explain what happened in this commercial relationship with Bucks County?
As a broad overview, because these proceedings were bifucated, the first phase of these proceedings allowed for rates to be set for 2005. That decision also held that at the end of the fiscal year, a true-up or adjustment would be made to accurately reflect the business up to that point in time, the business of the Water Department, revenues and expenses, since that was an emergency proceeding and there were some extenuating circumstances. And during the course of that time, there was the Bucks County settlement, which is basically a business transaction between the Water Department and Bucks County's water and sewer authorities.
Excuse me. What was the argument? You're using the Transportation & Public Utilities word "settlement." What was the dispute?
It's not a settlement in terms of a dispute. It's a settlement in terms of a business negotiation as far as I understand it. I did not have any function in that other than to indicate to the Water Department that those dollar figures --
We're not interrupting you, but we're getting a signal that someone wants to have some input here. You complete your statement and then they can add whatever.
It is my understanding that it is more of a business arrangement. Those dollar figures fall into the economic stream of funds for 2005 fiscal year. They impact the dollars and the rates for 2005. As part of the decision that there be an adjustment to reflect the actual expenses and revenues for 2005, those dollar figures need to be appropriately -- it's not just a blanket wholesale 27 Transportation & Public Utilities implementation, but based on the understanding of the parties need to be reflected. As part of that, those dollar values will go into the overall financial health of the department.
All right. Well, why don't you hold that point right there. Does the Water Department wish to add to the record or provide some clarification? This is on the Bucks County matter. Please identify yourself for the record.
My name is Barry Davis. I am a divisional deputy city solicitor in the law department. Councilman Rizzo, I wanted to respond to you with regard to the nature of the Bucks County matter. The contract between the City of Philadelphia and Bucks County Water and Sewer Authority has provisions for the maximum quantity of wastewater that can be discharged into the City's sewer system. Under that 28 Transportation & Public Utilities contract, if Bucks County exceeds the limits for certain periods of time, there are penalties that are charged against the customer. In addition to that, there is under state law a requirement that the City must assure that there is capacity for development in Bucks County. So if someone wants to build a new housing development in Bucks County, they have to make sure that there's actually capacity in the sewer system for that. And in Bucks County, they would have to go to both the Bucks County Water and Sewer Authority and to the City of Philadelphia to assure that there is capacity. Because they have been exceeding their contract limits, there was not any additional capacity. And, therefore, the City in effect created a moratorium on issuing approvals for additional development in the Bucks County Water and Sewer Authority area. So there were two provisions 29 Transportation & Public Utilities that were in effect that were encouraging Bucks County to do something about these excessive flows. We had met with them several times and were not making much progress with our negotiations. Eventually, Bucks County Water and Sewer Authority elected to file for arbitration. There's an arbitration provision in the contract and they asked for arbitration. Once that arbitration commenced, this became a law department matter and I was very much involved in negotiations with Bucks County and with Bucks County's counsel in trying to both move forward with the arbitration and also to try to come to terms in some sort of resolution. We were ultimately successful I think as the Commissioner pointed out in part because other political leaders in Bucks County were able to more fully understand the situation that the Authority had gotten itself into, and the resulting settlement was an acknowledgment on the part of 30 Transportation & Public Utilities Bucks County Water and Sewer Authority that the City needed additional capacity in its wastewater treatment system in order to handle these excessive flows. And so what we came to was an agreement about a contribution from Bucks County Water and Sewer Authority that would help the City increase capacity both for the City and for Bucks County. So we achieved an advantage for the City in that settlement. I think some of the concern that the Commissioner has in terms of how this particular settlement is reflected in the rates has to do with the nature of that payment. The payment was specifically made with the idea that the majority of it -- I think the total settlement is close to $19 million, of which about 18 million has to do with this capital contribution to increasing the capacity of the system. And so the monies that were provided by Bucks County will ultimately be used in that capital 31 Transportation & Public Utilities function rather than as a general revenue function.
Thank you. Just for my own knowledge, I remember that part of the capacity issue in Bucks County was not necessarily raw sewage. It was when they had issues with storms and they had thunderstorms that came in that unfortunately got into the wrong system instead of into the storm water system. It got into the wastewater system, and they were really spending and giving us water that was relatively clean but still affected their contractual relationship with us; is that correct?
That's correct. And any additional flows that they would send us would mean we would have less capacity in our system to handle the storm water that we collect in our combined sewer system. I think it's important to note also as part of that settlement agreement we were able to have Bucks County take other actions with 32 Transportation & Public Utilities regard to addressing these revenue flows and we were able to put some additional provisions in the existing contract by amendment that would limit daily flows. Up until this point, the contract did not have a limit on a 24-hour flow and it simply said you can't exceed a certain amount. Well, the issue is really more complicated than that engineeringwise.
And the other issue, and I don't want to belabor this, was the fact that they needed to do something about part of the problem why this storm water was getting into that system. And I know I after conversation with the Commissioner made some contacts out there and they did not honestly understand the problems that they were having with their Authority and they were terribly concerned that they needed to fix the reason that we were getting this excess flow. And I hope as part of our agreement with them that they have fixed it and not just sending us water we 33 Transportation & Public Utilities really shouldn't be getting or sewage we really shouldn't be getting. I hope that was part of the process.
It is. And one of the difficulties with storm flow getting into sewer systems is that they are very difficult sometimes to find and to remediate. And it takes a very long period of time for that to happen. The agreement that we have addresses that issue by allowing them to have more additional capacity for a while and then reducing that capacity as time goes on in recognition of what should be their ability to identify and remediate their additional flows.
Thank you, Councilman. The only other question I have 34 Transportation & Public Utilities is there are some issues that have been raised -- and he will be up himself actually next. The City's Public Advocate has raised a couple issues regarding your report. One is about the issue of affordability.
I'm talking about the City's Public Advocate, Lance Haver, who will actually be coming up next. But I wanted to get your views on the issue of rate affordability as a concern as well as -- this is either a public policy issue or a philosophical issue having to do with possible suggestions in your report that it's possibly somehow okay if the Water Department might have been overcharged because ultimately there would be a refund back to customers. Can you comment on both of those issues?
I'll give you a couple of general comments. As far as my 35 Transportation & Public Utilities decision, it stands and it's self-explanatory, but in a general context, water rates are -- the bottom line, it's the cost it is to provide service divided by the number of ratepayers you have. Now, that doesn't mean that the Water Department should be complicit. It doesn't mean it should be inefficient. And it doesn't mean it has free reign to do what it wants. Part of this process is to make sure that it is operating in as efficient a manner as possible and for all intents and purposes at modern industry standards. With regard to the overall decisions that are made within that context, affordability, although it is a concern as a general rule of thumb and you do try to from a public policy point of view balance the affordability issue, especially in a city such as this, you are limited as far as to what extent you can go because you have to maintain the system. There is a cost. And once 36 Transportation & Public Utilities you've determined that everything is operating efficiently, that's your cost. You have several hundred square miles worth of a city and that infrastructure of several hundred square miles will service probably two to three times the number of ratepayers you currently have in it and at one time probably did.
Good afternoon. With your permission, I'd like to read my statement and be happy to answer any questions.
Just please identify yourself for the record and then proceed.
My name is Lance Haver. I'm director of the Mayor's Office of Consumer Affairs. Thank you 37 Transportation & Public Utilities very much for this opportunity. Let me start out by saying the obvious. No one wants to pay a higher water bill. Many families whose budgets are stretched tight have trouble keeping up now. It will be even harder for them after any rate increase. Raising the cost on the basic necessity of life for anything, including water, is a difficult burden for many. The hearing today can and should be more than a vocalization of the difficulties low-income families face making ends meet. While it's important to listen to those who are struggling, it is equally important to find ways to craft solutions. It would be great if all one had to say is the rates are too high and they would come down automatically. Unfortunately, that isn't so. I would urge Council to use the proposed rate increases not as a soapbox from which to give speeches but as a starting block to examine what can be 38 Transportation & Public Utilities done to eliminate the need for rate hikes now and in the future. I would hope that Council would join me in saying the premise used by the Hearing Examiner in reaching his decision was faulty. And I recognize the Hearing Examiner has said something different than he wrote, but in of the report in explaining how rates are to be set, it states, and I quote: Ultimately the test is whether the underlying revenue requirement reasonably reflects costs and most importantly that the end result is a reasonable one. Notably missing from his written word and written decision is the concept of affordability. Rates must reflect cost, be reasonable and affordable. Further, the suggestions on Pages 17 and 34 that an overcollection is acceptable because the Water Department is municipally owned is in my opinion also misguided. 39 Transportation & Public Utilities Also notably missing from the report is how to regulate and keep track of the rate stabilization fund and what should be done if the rate stabilization fund continues to grow. I would urge Council to reject both premises. Affordability does matter and rates should not be higher than needed even if the excess is refunded at some time in the future and the rate stabilization fund is depleted at sometime in the future. No one should have to pay more now with the hope of a refund later. In addition, it appears that the Hearing Examiner's report does not properly lower the proposed rate increase based on the recommendation it makes. 5 percent to 87 percent. This means that the Hearing Examiner expects the Water Revenue Bureau to bring 40 Transportation & Public Utilities in millions more than what was originally proposed. Typically, such a change in collection rates would lead to a reduction in the size of the proposed increase, but the report is silent as to how much the rate increase proposal should be reduced to match the increased collections. 5 million settlement that the Water Department reached with the Bucks County Water and Sewer Authority. And I recognize today you've been given different numbers of what the size of that settlement is. Again, I can only go on what the Hearing Examiner's report said and I do apologize. And just as importantly, the report states that actual costs of the last bond sale are unclear and gives the Water Department three months to recalculate the savings and reduce the 41 Transportation & Public Utilities proposed rates, but the report never states in what years the rates should be reduced nor does the report address the issue of rate stabilization fund and what should be done if rates are collected at a higher than accepted level. I believe the Water Commissioner is well aware of the difficulties that I have outlined and the shortcomings of the report. It is my hope that the Commissioner will lower the proposed rate hike based on an accurate accounting of the value of the decisions outlined in the report.
But what is most disappointing in the report is its failure to even discuss what can be done to lower rates. As I stated earlier, because the Hearing Examiner used incorrect criteria in examining the facts before him, the report fails to make necessary recommendations of what can be done to keep rates down. Council should work with the Public Advocate, the Water Department, 42 Transportation & Public Utilities community groups, and water consumers to develop such plans that would make water more affordable. Our goal must be continual improvement and efficiency. If, for example, I was given an opportunity to testify at such a proceeding, I would suggest that it is time to combine water revenue and PGW's meter reading, billing and collection, that the sheriff's office should be forced to release the funds that were collected through sheriff's sales for the Water Department. Council should not allow the sheriff to hold millions of dollars in tax, gas, and water revenue year after year after year that appropriately belongs to the taxpayer and utility consumers. Council should provide the Water Department with the resources it needs to attempt to market the technological advances it has made in processing water and the resources needed to see if it makes sense to sell more 43 Transportation & Public Utilities water or water processing to surrounding water utilities. Council should work with councils in other cities to build buying cooperatives for municipally owned utilities to keep costs down. An examination of such suggestions and others raised by consumers, workers, and technical experts would be in everyone's best interest. If these hearings lead to such discussions of how we keep rates down in the future, they will serve a worthwhile function. If they end today in a blame game, it will fail to help consumers. The problems we face are very real and they demand realistic solutions. Thank you for your time.
Thank you for your testimony, Mr. Haver. You heard the Commissioner indicate that the record basically is closed. You pointed out that there may be some I don't want to 44 Transportation & Public Utilities use the word "flaws," but I guess they're flaws in the report. What could the Commissioner do to reopen that record and take into consideration some of the points that you're making here today? I mean, just because the record is according to the Commissioner closed, I'm sure that that could be reopened or delayed until accurate information is utilized to make a decision.
While I'm sure it doesn't feel like it to the Water Commissioner, I believe in his abilities. And as I said in my testimony, I really believe he saw these mistakes. There is a true-up mechanism that's recommended in the hearing process where there's not a dollar figure. The Water Commissioner is a capable man. I believe that when all is said and done, he will make the correct decisions on the numbers. It is awkward for me to say otherwise.
Well, I'll ask the Commissioner eventually to come 45 Transportation & Public Utilities back with his counsel to answer that particular question. The record's closed, but if there's obviously issues that you've pointed out -- or do I understand you're saying that when the decision is made it will -- he will take into consideration the points that you made today?
I really believe that. I believe we do him a disservice if we don't acknowledge he is an expert. The Hearing Examiner's report is a guideline. There are exceptions that have been filed to it. He weighs the Hearing Examiner's report and the exceptions. It is not a secret that the numbers don't add up. He is much better at it than I am. He will see that and know that. As he talked about earlier, how you actually account for the 18 million versus the 14.3 million are issues that he's well aware of. And he will be giving a decision. I don't for a second believe that the rate increase 46 Transportation & Public Utilities will be at the level that it's now at.
Mr. Haver, I read your testimony and I understand the issues that you've raised with regard to affordability and some of the other suggestions. I mean, is there for the matter that's in front of us or more importantly for the matter that's in front of the Water Commissioner in his rate-setting capacity, I mean, is there kind of a bit of bottom line to this? What's your position?
I cannot give you one unfortunately, Councilman. I don't think it would be realistic. I did not enter as a formal party because I am part now of the government and the government had hired an independent advocate, Community Legal Services. I don't think I would be a fair interpreter of those numbers. I am left looking at the process. For instance, I think we err when we don't write to every community group before the rate increase is filed 47 Transportation & Public Utilities and say, look, we have a very significant problem. We have a post 9/11 environment where we have to spend millions more on security. We have a problem where the state has cut back on the funding that it's given us. We have a requirement that we improve the quality of the discharged water. These are -- and we have a sheriff's department that refuses to give us the money that we're owed. In my opinion, what the process should have been to start was to write to every community group, tell them what's going on, invite them to the hearings, not take out an ad in the legal section 17 of the Daily News and Inquirer where we know most people don't read them but to work with the community to try to develop these solutions. That's the best I can get. I do think we have an opportunity here to recognize that there are very real pressures on the Water Department. And there are excellent men 48 Transportation & Public Utilities and women working there. But if we don't give them the tools they need, if we don't help them get around the fact they don't control the Water Revenue Bureau, we're really being misleading. As the Hearing Examiner points out, they don't control their own budget. The majority is controlled by Water Revenue Bureau, which is not under the control of the Commissioner. I don't know how we hold him responsible for somebody else's decision. It doesn't seem fair to me. So I think we have to look at the structural issues and say as well, you know, the Home Rule Charter has served us greatly but there are times when it has to be changed.
I think it's refreshing to hear you say that. Anything else? Thank you.
What I'd like to do if there's no objection is 49 Transportation & Public Utilities to -- we have a number of community representatives and I'd like to have them up at the table at the same time just for consistency, Pedro Rodriguez from Action Alliance, Devon Shaw from ACORN. Is there a representative from the Urban League of Philadelphia? And Naomi Zaslow from Hapco. Are you Devon?
I know you have some other folks here, but they're not all testifying, are they?
They're just here to provide support. Okay. Before you get started, again, is there a representative from the Urban League of 50 Transportation & Public Utilities Philadelphia? (No response.)
And Naomi Zaslow from Hapco; Meg Greenfield, East Falls Community Council; Jim Foster, community advocate. Okay. Okay, Mr. Rodriguez, why don't you get started. Identify yourself for the record.
Good afternoon, Councilman Nutter. My name is Pedro Rodriguez. I'm the director of the Action Alliance of Senior Citizens. And I'd also like to say good afternoon to Councilman Rizzo. I'm happy to testify about the rate increase for the Water Department. Action Alliance was a party to the discussions and negotiations through our legal representation with the Community Legal Services, which is the Public Advocate on utility matters for the City. We were also involved in trying to steer some interest in participation from residents in the 51 Transportation & Public Utilities public hearing process. I have a written statement which I'd like to give you copies of, but I would like to concentrate on speaking about two specific things. One has to do with the affordability and how that impacts the well-being of the senior citizens and retirees on fixed incomes. And the second one has to do with what are we doing in trying to help people who are the least able to absorb a rate increase, what do we do to help and maintain a standard of living, make sure they are able to pay their water bills and don't go into delinquencies. Of the question of participation in the public hearings, you have to understand the particular situation that we were in when the rates were announced in this city and in this region. And I'm only speaking from the people that I work with, retirees and senior citizens. We were facing increases in gas rates at the time, 52 Transportation & Public Utilities seniors and retirees being the recipient of a constant assault from drug companies increasing the price of medications, you had changes in the suppliers of electricity, some of them having higher rates and people not paying attention to the changes being made for them and being assigned to companies that have higher rates, and within this environment here comes a Water Department rate increase of a whopping 43 percent. And most people that we work with just threw their hands up in the air and said what's next, what's going to happen to us? It's a constant demoralizing situation for many people. We managed to bring some individuals who are Water Department customers to testify about potential impact on their budgets of a rate increase. And even if you look at the average consumption for a residential individual, for a senior citizen, that will add approximately $7 to their billing cycle. And you're talking about 53 Transportation & Public Utilities anywhere between 87 to 90 dollars a year. For someone and for people in Philadelphia who are in fixed income and facing a number of other priorities in their lives, talking about $90 a year increase in their budget is really a difficult situation. We see individuals who have just no room and no ability to stretch their income for anything else. So this is going to have a really negative impact on their standards of living and ability for them to function. In addition to that, Philadelphia has a program to assist seniors who are low income to pay for their water bills. It's a discount of percent. However, this is one of the 19 best kept secrets in Philadelphia because 20 the Water Department does not do an 21 efficient job of promoting the 22 availability of the program to people who 23 qualify. And I think we believe that the 24 Water Department can do a lot better on 25 promoting the program and assisting 54 Transportation & Public Utilities people to enroll in the program.
Mr. Rodriguez, sorry to cut across you. Do you have any estimate as to how many people may be eligible who are not actually participating?
Based on the Philadelphia Corporation for the Aging just finished releasing a demographic study of the elderly in Philadelphia, we perhaps have 111,000 seniors in Philadelphia who fall within the guidelines of the Water Department program. We don't have an accurate number of how many people are involved in the program now. We usually get those numbers easily from the Philadelphia Gas Works, not from water revenue. We asked for the numbers a couple of times. We don't have some reliable figures at this point. The Philadelphia Corporation for the Aging demographic study just released earlier this spring also 55 Transportation & Public Utilities projects the increase of people who are 65 and over who are residents of Philadelphia for the next ten years. There's going to be an increase of people eligible for the program and a decrease of the people who are 65 to 75 and an increase for those 85 and up, which is the fastest growing population in the city right now. So there will be a larger pool of people who are homeowners who have accounts with the Water Department who will be eligible for the program. It is difficult unless they hear from us or from some of the other network agencies or offices of City Council members that this program exists for people to know they might be eligible to do that. In addition to that, Councilman, I'd like to add that the income guidelines for the program have not changed. Council just went through a revision to increase the income guidelines for the property tax, and I 56 Transportation & Public Utilities think it's about time that we revisit that particular issue. Thank you.
Yes, my name is Devon Shaw. I'm a member of ACORN, also a leader in the Philadelphia, PA, Neighborhood Chapter 1. My main concern is that a high increase of the water bill 11 that's going up that's going to affect a lot of people -- a lot of ACORN members in our community. By the bill going up affects that. If we're working on a low income, then we have to use -- we have to use our money to pay one bill like electric bill or maybe the gas bill or some other bill when we really can't even afford to pay the electric bill and the gas bill because their rates are also going up higher. And it's kind of inconvenient for us, especially for a person like me who is raising seven kids and have a real low income and have to buy -- I have to buy clothes and other 57 Transportation & Public Utilities stuff for my children and stuff like that. And ACORN understands that the water utility also significantly -- the state of funding support in the city. They reduced the support in the city that they used to have. The funding went down. And in the other states, they also modified the ability in 2001 that the water would either be shut off quicker and more faster outside of our community, which would affect where we're living at. If it started out there, then it's going to eventually come into our community. And I feel as though this is the wrong time for the water company to raise their rates because people is living under a certain income, a set income I should say, a set income. And if you're living on a set income that you know that you can't afford already that the bills are real high, the gas bills are high, electric bills are high, then you have your telephone bills that's a necessity, 58 Transportation & Public Utilities then you have the elderlies who need their medication and stuff like that, with a high water bill is not going to help us at all.
I understand. So you're opposed to the size of the rate hike?
Mr. Jim Foster, community advocate, please identify yourself for the record.
Chairman Nutter, Councilman Rizzo, my name is Jim Foster, lifetime Philadelphia resident, vice president of the Pomona Cherokee Civic Council, a Germantown organization, business owner in northwest Philadelphia, and part-time journalist. I write a column for the Chestnut Hill Local. In any event, my purpose here today -- and I'm late to this issue. And 59 Transportation & Public Utilities the fact that I am late is I will cover in my purpose. I'm here to talk about process and procedure. Only recently becoming aware of this increase, the size of it, and the fact that it was purported to have been ongoing in community awareness, the statistics that were spelled out earlier that there had been three or four hearings with only folks 11 showing up I think illustrates a much 12 larger problem that should be addressed. 13 I can't talk about the technical aspects 14 because I haven't learned about them yet, 15 but it doesn't matter whether you spend 16 $50,000 putting newspaper ads in two 17 Philadelphia newspapers if we know, and 18 we doe know, that ads in newspapers no 19 longer reach the majority of the 20 Philadelphia residents. I have 21 statistics in front of me. Even with the 22 present circulation of the Inquirer and 23 Daily News, the proportion of that that is sold to Philadelphia residents even if every single person read the newspaper 60 Transportation & Public Utilities and read those rather condensed announcements, it could only reach percent of the total Philadelphia 5 citizens at best. This is the 21st 6 century. We know that people do not get 7 their news from the newspaper like they 8 did 25 years ago. I'm old enough to 9 remember the quote "Nearly everybody 10 reads the Bulletin." Well, we don't have 11 a Bulletin -- well, I guess we do. We 12 have a Bulletin again and that's probably 13 a good sign. The problem is that that 14 method of announcing a significant change 15 in the cost of a public utility is absolutely irresponsible. If you want to reach the majority of the folks with this information, there should be a filler in the bill, not something that's so small that a senior citizen would need a magnifying glass to read it but something that falls out the way a past due notice does in bright pink with big letters that says public hearings soon on significant rate increase. The percentage of this 61 Transportation & Public Utilities rate increase has been described depending on who you talk to as somewhere between 32 percent and 43 percent. And that might be something you have to decide on whether you're talking commercial or residential or some combination. The point is the vast majority of Philadelphians did not know about this. I do not think the water bureau can hide behind the fact that they used obsolete methods to inform folks. If I wanted to get to people, I'd put it in the SEPTA Metro. I'd bet more ratepayers read that in a week than read the major newspapers. In any event, I think that considering the fact that this is a significant increase, considering procedures followed are inconsistent with the way we live and learn about things today that it's time to take another look at this.
I think you've made a very good point. I think 62 Transportation & Public Utilities that should be something even though the charter requires a certain type of advertising that it would not have been a bad idea for them to put a stuffer along with the bill to let the customer base know that there were going to be hearings. I think that they did what they had to do to conform legally. And you're right, it may be at this point an obsolete way to do business, but even with that said, the additional step, I don't know and the Commissioner -- I'll ask the Commissioner when he comes back up to the table was that done. Are you suggesting that there was nothing included in any of the normal communication with the customers?
I have not been able to find any evidence of that kind, which would have been a very rudimentary way of alerting folks, has taken place. I agree with Mr. Haver being part of a community group that is fairly active and there are quite a number of them 63 Transportation & Public Utilities contacting community organizations with some degree of spelled out detail. Now, nobody's going to digest a 52rundown.
I'm not suggesting that they didn't want the customer base to know, but conforming --
-- conforming with just the letter of the law to advertise to satisfy the law and not going the extra steps could be a management decision. You know, they don't want people rocking the boat for their organizations. So I think that maybe where we need to go from here is that the City's consumer Public Advocate is going to have to communicate with the Water Department in the future and any other department that can affect rates, that they need to communicate with them above what the law requires. The natural way would be to put that bill stuffer. They even have a system now where they 64 Transportation & Public Utilities can call people on the telephone and make announcements, the city can, in snow storms, et cetera. So it's not that they can't do it. It's do they want to.
I agree with you, Councilman. Meeting minimal requirements I think in this case falls way short of obligation. You know, there's a triumph here of obsolete procedure over prudent responsibility. And as far as I'm concerned, if this is going to be automatically granted in a few days, maybe injunctive relief is necessary.
That's what we need to find out when the Commissioner comes back. What Mr. Haver said is important. The Commissioner is an expert, one of the best at this. And whether or not the record needs to be reopened, that may need to be the case. And there probably is a procedure to do exactly that.
Thank you for the opportunity. 65 Transportation & Public Utilities
Pedro Rodriguez again. I had I didn't give you an exact number in terms of the number of residents that we believe will qualify for the rate. According to our calculation and based on the Philadelphia Corporation for Aging report, it should be between 79,000 to 83,000.
Would be eligible, okay. Hopefully, in a few minutes we'll find out how many are actually participating. Yes, sir?
I have to quote on something I forgot to quote on. I took my 2-year-old daughter -- she's not really 2 yet. She's almost 2. I took her to the doctor. The doctor diagnosed her with low lead in her blood. They said it was coming -- you can get lead. 66 Transportation & Public Utilities Lead is in the air. It's like little thin dust is in the air so it can get into the water. So drinking the water is really not safe for you. You have to let cold water run two to three minutes in order to decrease your lead count that's in your body. So right now me and my family, we try as much as possible not to drink the water from the spigot. He says the hot water is even worse. You have to let that run even longer because of the lead that's inside of the water.
Well, I am neither an engineer or a doctor, but I think the lead issue in the water in your house may be more related to the pipes in your house quite possibly than what's in the air.
So you may want to conduct a home lead test. You can get those kits from the like hardware store or one of those kinds of stores. But I would tend to think it's less about 67 Transportation & Public Utilities what's in the air than what's right in the pipes in your house. You might want to check that out.
Switch over to copper. Thank you. Thank you all very much. Commissioner, normally I would not do this, but for consistency with regard to the record and some of the issues that have been raised, why don't we have you back up to talk about a couple issues that just came up. I'm not going to hurt him, Barry. Come on.
Good afternoon, again. I'm Bernard Brunwasser, Water Commissioner.
First, Commissioner, let me just advise you as you continue to receive tremendous praise from a variety of people about your expertise, in these kinds of proceedings that may potentially be damning with 68 Transportation & Public Utilities faint praise. It will only come back to haunt you to be considered an expert under these circumstances. Having said that, a variety of issues have been raised with regard to, for instance, the advertising of these required proposed rate increase hearings. Can you tell us what steps the Water Department took to provide maximum advertising exposure with regard to these hearings?
Yes, be glad to. I can read what -- you know, where the ads appeared. And they were in ten publications.
Why don't we start with this: What's required, do you know?
Here comes somebody from the back. Don't worry about it. Reinforcements coming.
It's a charter requirement and it's that the publication 69 Transportation & Public Utilities be in two papers of general circulation. That would mean that they are paid --
Is this a code requirement or Home Rule Charter requirement?
Ten days, okay. And did these ads end up as they often do on like back where there are employment notices and City Council hearing notices and, you know, you can buy a car, buy a dog, and do a whole host of other things? Is that where they probably ended up?
Just take a 70 Transportation & Public Utilities seat. Be comfortable.
I don't know how much control we have on exactly where they're placed.
However, they are relatively large. And we've certainly gotten away from the little legal notices that you may be familiar with. And so we do make an effort. We wanted the public to be aware of these hearings.
As far as you're concerned, you met the statutory requirement for advertising?
Now, tell me anything else that you may have done beyond the charter requirement with regard to public notice or information.
We put the hearings and the locations on our web site. 71 Transportation & Public Utilities
Yes. Also, we published in ten publications and not just the two that are required. And I can quickly read that off to you.
The Philadelphia Inquirer March and 21, 11 the Philadelphia Daily News March 17 and 12 21, the Philadelphia Tribune March 18 and 13 25, the Public Record March 24 and 29, 14 the Germantown Courier March 23 and 30, 15 Mount Airy Times Express March 23 and 30, 16 the Roxborough Review March 23 and 28, 17 University City Review on March 23, Al Dia in Spanish March 27 and El Sol also in Spanish on March 30. There were some newspaper deadlines which did not allow us to have two ads in those last three papers, but we did get one ad in.
-- or the Chestnut Hill Local? Commissioner, what is the issue here?