COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COUNCIL COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, 10/24/00 10:15 a.m. - - - Bill 000355 - Tax Increment Financing District Certification. BILL 000546 - Establishing the Philadelphia Community Reinvestment Corporation. BILL 000180 - Increase Safe Harbor Goals in Neighborhood Benefits Strategy. BILL 000181 - Employment of Low- and Moderate-Income Persons by City Contractors. PRESENT: COUNCILMAN MICHAEL A. NUTTER, Chairman COUNCILMAN FRANK DICICCO, Vice Chair COUNCILMAN DARRELL L. CLARKE COUNCILMAN W. WILSON GOODE, JR. COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILWOMAN MARIAN B. TASCO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 2 I N D E X Page Bill 000355 Jonathan Saidel, City Controller. . . . . . . James Curato, Commerce Director . . . . . . . 82 5 Robert Fina, V.P., PIDC . . . . . . . . . . . 104 Bill 000546 Folasade Olanpekun, City Treasurer. . . . . . 56 Ray Desiderio, Senior V.P., PNC Bank. . . . . 58 Christina Weinmann, Senior Policy Associate 67 National Community Capital Association Mary Frances Davis, Division Director . . . . 70 Greater Philadelphia Urban Affairs Coalition Rick Sauer, Executive Director, PACDC . . . . 73 Robert Sanders, Manager, Sustainable. . . . . 76 Fund, The Reinvestment Fund Bill 000180, 000181 Jahad Ali, Union Carpenter. . . . . . . . . . 169 John Thomas, Businessman. . . . . . . . . . . 170 John Simon, President, UMEA . . . . . . . . . 171 3 COMMERCE, ECONOMIC DEV. - BILL 000355 P R O C E E D I N G S
Good morning. The Committee on Commerce and Economic Development will be starting in a couple minutes. There is a Councilmember on his way, which will give us a quorum, and we will get underway in a couple minutes. Thank you. - - -
Good morning. This is the Council Committee on Commerce and Economic Development. We now have a quorum and we will start today's hearings. I'm Councilman Nutter, chairman of the committee, and to my far right, we have breaking -- breaking new ground today is Councilman DiCicco, leading a sartorial effort to have a relaxed dress code at Council hearings; Councilman Goode; Councilman Ortiz is in agreement with Councilman DiCicco's new look; as well as Councilwoman Tasco; and Councilwoman Reynolds Brown. There are four bills before us this morning. We have a couple logistical hoops that we're going to try to jump through and accommodate 4 COMMERCE, ECONOMIC DEV. - BILL 000355 a couple of people. At the end of the day, we will get all of the business done, and I've worked out with Councilman Goode that we will initially hear testimony from our City Controller, Jonathon Saidel, on Bill No. 000355. After that testimony, we will then go to Bill 000546 so we can hear from all of the witnesses on Councilman Goode's bill, and then the other bills will be called up after Bill 546. Is that in accord with the understanding of the rest of the committee? Okay. The clerk of the committee will read the title of Bill No. 000355.
Bill No. 000355, an ordinance amending Chapter 21-1400 of the Philadelphia Code, entitled "Tax Increment Financing Districts," by providing for certain additional requirements for Tax Increment Financing District project plans relating to a certification statement, good-faith efforts to provide employment opportunities for youth, and to provide contracting and employment opportunities for minority, female, and disabled business enterprises and individuals and the filing of 5 COMMERCE, ECONOMIC DEV. - BILL 000355 certain documents, all under certain terms and conditions.
Good morning, can we have the Controller at the table for Bill No. 6 0003556789. (Witness comes forward.)
I have just a quick statement, and then I'll certainly be available for any questions that you may have, Mr. Chairman, or the other Council people. I come before you today to offer testimony on Bill No. 000355, which would provide additional requirements for Tax Incremental Financing Districts. I applaud Councilman Nutter and City Council for focusing on this important subject. As you know, Tax increment financing allows the City to finance projects by issuing bonds or notes that are repaid by the increased revenues resulting from improved property values and business activity. Ideally, tax Increment financing encourages a project to move forward 6 COMMERCE, ECONOMIC DEV. - BILL 000355 where it would otherwise not and then help with funds of projects for future tax revenues that would not have come to the City but for the tax increment financing. City Council's considered and approved more than twenty Tax Increment Financing Districts in the past five years, from recently completed development of the landmark PSFS building into a premier hotel to the soon-to-be-completed conversion of the Schmidt's Brewery site from a blighted eyesore to a neighborhood shopping center. But I know this legislative body has been frustrated when considering requests for TIFs. Each time a new TIF request comes before this Council, you are told that but for the TIF, the project would not move forward, and that each prospective TIF deal will, in the long run, be a winner for the City. I know you wonder if projects could move forward without the TIF, I know you question whether the City uses TIFs to encourage projects based on a grand economic development plan, or whether TIFs have simply become entitlement that any developer seeks before 7 COMMERCE, ECONOMIC DEV. - BILL 000355 moving forward with any deal. Government is often asked to subsidize private enterprise through direct governmental grants, tax abatements, infrastructure improvements, and other expenditures. In theory, government benefits if its investments produce a positive, sustained, and widespread private market reaction. The test for whether public investment should be used to encourage private investment must then compare the costs asked of the public to the benefit of the public can expect to derive from that particular project. Among other provisions, Bill 000355 would require the Mayor to submit to Council a statement signed by the Controller, Finance Director, and Executive Director of PICA endorsing the revenue and job projections involved with a given Tax Increment Financing District. I think this could be a part of the strategy to help ensure the economic development efforts of this city -- and specifically TIF projects -- move forward based on sound assumptions. But I fear that such an endorsement alone would do little toward helping the Council 8 COMMERCE, ECONOMIC DEV. - BILL 000355 achieve its goal of guaranteeing that it is acting in the public's best interests in these matters. First, unless we find a way to actually look into a developer's heart, we will have no way to truly determine if a given project would move forward without a TIF. If a developer tells us that a deal would not move forward but for the TIF, we will still be left to take the developer at his or her word. Even if I suggest that the City no longer needs to TIF hotels, only the individual developer truly knows whether or not he or she could build a new hotel without a TIF. Second, I can certainly examine the specifics of a given TIF deal to determine if the revenue and job projections will result in a deal that benefits the City over a long term, but I would never be able to look into the future to determine whether the revenue and job growth will occur, as projected. Even if I endorse the revenue and job projections, I could only predict economic downturns or industry conditions that may be cause those revenues or jobs to wane.
I do believe that with a few changes, this legislation can achieve its goal of helping 9 COMMERCE, ECONOMIC DEV. - BILL 000355 to assure this Council that it is acting in public's best interests when considering tax increment financing legislation specific. I suggest four specific changes: 1. The City should adopt an overall economic development plan designed to support businesses and growing industries and businesses that create a significant impact on local economy. With such a plan, the Administration and this City Council could then develop criteria to help guide which industries the City is willing to subsidize, how much the City is willing to contribute for each new and retained job, and where to target subsidy assistance within the City's neighborhoods. Similarly, a plan would include an overall reevaluation of our tax structure to encourage economic development that would naturally eliminate some of the need for targeted assistance. 2. Philadelphia should follow the lead of cities like Minneapolis, which is considering proposing application fees of $5,000 to $50,000 for developers who propose TIFs to help fund economic-risk studies for the TIF project. Such a 10 COMMERCE, ECONOMIC DEV. - BILL 000355 measure would help ensure that only serious developers apply for TIF assistance, while providing necessary funding for the City's due diligence. 3. The City only support a TIF if it is accompanied by an agreement between the City and the subsidized developer that indicates the conditions upon which the City shall terminate a tax abatement or request repayment of all or a portion of tax savings received if the developer fails to meet agreed-upon job or tax revenue growth. Indianapolis employs such an agreement, which is called a "claw-back agreement," to make sure that the city protects its investments. 4. Finally, as we consider the ailing financial situation of the School District of Philadelphia, we must look to hold the District harmless when considering new TIF projects. While it is true that we are not taking away from the District to do a TIF deal, the District customarily gives up more than half of its future taxes, but must be repaid at a much slower rate that the City because of the different mix of taxes collected by each entry. In the future, we 11 COMMERCE, ECONOMIC DEV. - BILL 000355 should consider only using the City portion of the real estate tax for TIFs or, at the very least, make sure that the District's return on the TIF is paid back at the same rate as the City's return. I will be pleased in the future to work with Council to help ensure that tax increment financing is used in the most responsible manner to encourage economic development in Philadelphia. I thank you for your attention to this matter and, again, applaud you on your efforts to focus concern on such an important issue.
Thank you, Mr. Controller. Are there any questions for the Controller? (No questions from the committee members.)
Mr. Saidel, I would only ask if you could provide any additional information on -- you made mention in your testimony about process and procedures they use in Minneapolis as well as -- what are some of the traditional methodologies that are used to evaluate the projections that are often laid out 12 COMMERCE, ECONOMIC DEV. - BILL 000355 in these project plans, or how would you get to the essence of, you know, do the numbers make sense on this particular deal, will the jobs actually materialize. Again, I'm not asking anyone to make a guarantee that things are going to work out. We know people going into business have great ideas, have the best of intentions, but often things, for not even bad reasons, don't always work out. So how do we, I guess, ensure that the project plan is in fact viable?
Indianapolis is a -- I use in many cases as a good starting point when you look at an analysis. They have an overall economic plan not only for housing, but for economic development in the City of Indianapolis. And what they have done, and what we have suggested over a period of time, is you evaluate the type of industry that can grow and prosper in a place like Philadelphia, and then when you look at the different TIFs, you then begin to look at what types of industries that you think not only accelerate that production in those particular fields, but increase the job growth in those 13 COMMERCE, ECONOMIC DEV. - BILL 000355 areas. And in Philadelphia, fortunately, I haven't seen an overall economic plan in this city for a number of years upon which to then incorporate where we should give TIFs, the type of TIFs to the different types of industries we'd like to attract. If you can begin to attract businesses in Philadelphia, say, in the health care and related industry fields that we are well known for, and then look at how that domino effect of having that industry in Philadelphia, coupled with the industries that are already here, it is much easier to project the job growth in that particular field and the basis upon our return of investment by continuing that segment of our population of our economic development to be healthy and move forward. In many cases, when you look at the series of TIFs in Philadelphia that have been accepted in Philadelphia, they are a hodgepodge of different types of development schemes, without any overall sense of the impact or the overall ability to get a return of investment as to what would be good for the City in total. 14 COMMERCE, ECONOMIC DEV. - BILL 000355
Yes. To the Controller. The thing that bothers me about the TIFs is that there's a sense of entitlement among the developers, it seems, and it seems that cities posture. The Administration, both the previous one and this one, have taken it that if you don't approve a TIF, then you are really anti-business, anti-job development. And so the individual developers and this Council have really been put into -- this Council have been put into a posture of really defensive and not really asking the questions as to what benefits, what payback, what does the City taxpayers get for its abatement of taxes for such a period of time. And like you said before, we don't have a targeted strategy to see what are the specific economic development needs that we have and who we should be using TIFs to attract to get to the City of Philadelphia. If you have a garage that you need, before, you built the garage, but now you ask for a TIF. Why not? You know, it's given almost automatically. So why not ask for it, even 15 COMMERCE, ECONOMIC DEV. - BILL 000355 if it's right in the center of the City, where you know that it's going to do business. What -- you know, we are put into this situation and we don't have the mechanisms really to go into the study of each and every one of them that comes before the City of Philadelphia, you know. And I wonder what process does the Controller's office could offer us along those lines.
I think you're absolutely right, Councilman Ortiz. I have never seen a development scheme sent to me by a developer in Philadelphia that did not have a TIF mentioned, did have any type of tax abatement mentioned. It has not become -- it was supposed to be a way for us to compete with other major cities for multinational corporations, it was supposed to be a way for us to compete, to reduce the tax burdens of Philadelphia, in competition with the suburban counties and South Jersey, but it has become almost a fait accomplis that within their presentation, all I find is that they already are getting -- they're already considering in their numbers all types of tax breaks that we should use 16 COMMERCE, ECONOMIC DEV. - BILL 000355 as leverage to bring businesses into the City of Philadelphia. And I think that's a problem, and eventually you have to say no to some TIF to show that you won't be taken for granted. And you mentioned a garage in Center City, which is a TIF that I am not in favor of, and I think it's a perfect example. I am sure someone else will open up a garage in Center City without a TIF. But you always get, as you know, in government, something minutes before you have 14 to vote on it and you say -- you're told that if 15 you don't give the TIF --
And the wrong message will be sent, we'll be known throughout the world, the universe.
But I think the primary emphasis and what I can certainly help with, as is mentioned in your bill, is to look at the job 17 COMMERCE, ECONOMIC DEV. - BILL 000355 estimates, to look at the cost estimates. But what's really necessary to even get to that point is to have an overall economic strategy as to what type of businesses you're going to try to attract. Because if you have an overall strategy, then you can say, I'm going to attract X types because that dollar investment in a TIF 6 is almost a public subsidy and has a multiplier effect because that's the type of businesses we want to try to foster in Philadelphia because we already have a basis for that. So I have never seen, in my years of being the controller, some overall economic plan that can benefit South Philadelphia, North Philadelphia, West Philadelphia, Northeast Philly, and the River wards by having a total look at the economic scheme that we need to have in Philadelphia.
It is much more a blueprint for, Well, we'll put a parking lot in Center City, we'll put this over here, we'll put this over there, but there's no real tie-in of economic benefit to the people of Philadelphia for 18 COMMERCE, ECONOMIC DEV. - BILL 000355 the TIF.
I guess I have more of a statement than a question. When you talk about overall strategy, I certainly agree that we need to have something. I mean, I'm five years on the job here and most of the TIFs that have been awarded are in the 1st Councilmatic District, which I represent. And I am of the opinion that on the large scale, they are necessary. And I'm not a developer, I'm not into the fine-tuning of developing the TIF and where the financial gap may be that requires a TIF; I basically rely on the information that comes to me through the good folks over at PIDC or the Administration. But I think the strategy should be, maybe, and maybe it's the role of this committee, is, I always believe that the Planning Commission 19 COMMERCE, ECONOMIC DEV. - BILL 000355 should have a greater role in this city in determining the strategy for economic development, and incorporate what the Planning Commission's vision is, along with the Commerce Department and PIDC, to develop this -- such a strategy. To put a parking garage at Eighth and Market for the purpose of what we were hoping to be the DisneyQuest development, in my opinion, made a lot of sense. I still think it makes sense to do a garage there. Now, whether the Parking Authority or a private development should do that, that remains to be seen, because I do see the need for parking in that section of Center City because it's a growing community. But I think that we have, as a government, really not utilized the Planning Commission or put them to the task of not just developing grandiose plan of what the City will look like in twenty years, but actually be a working partner in attracting investors and developers and working in conjunction with them and the Commerce Department and PIDC to develop not only the structural plan for that -- for those communities, but also the financial and economic 20 COMMERCE, ECONOMIC DEV. - BILL 000355 plan. Because I think one goes with the other. I look at some of these books that the Planning Commission has put out over the years, and it's really spectacular what their vision of the City was, but are they doable, can we bring in the right people to make these things become a reality? So I think that, again, this may be the role of this committee to, in the feature, when we look at TIFs, but also to incorporate the Planning Commission in that discussion as to what they foresee the City's growth and how we may want to develop certain neighborhoods, even outside of Center City. Because, you know, you have to do it block by block by block, and I think Center City is, for the most part, in great shape. But where do we go beyond Center City and how do we attract private developers to put money into those communities. Maybe TIFs are worth exploring but, again, I think it's something we may want to challenge this made by this committee to play a greater role in the future.
I think, Councilman 21 COMMERCE, ECONOMIC DEV. - BILL 000355 DiCicco, that it is always been the history of Philadelphia that we have a thousand boards and commissions but they never talk to each other. We have a series of initialed organizations that never talk to each other. And I think that one of the things in the responsibility of the Council, then, is to draw all of these individuals so there's a coordinated plan, not only of economic development but how that economic development impacts on the re-creation of neighborhoods and blighted areas that I think are indispensable to the future of Philadelphia. If you coordinate the Housing Authority with the Parking Authority with the Planning Commission with OHCD with all of these thousand different organizations, which seem to drift on their own, and many do a nice job in their own particular venue, but there's no coordinated effort between the RDA and a variety of other things, then I think you have a patchwork of economic development and a patchwork of housing. But if you can put them together and have an overall strategy, an overall plan, then not only 22 COMMERCE, ECONOMIC DEV. - BILL 000355 does that TIF benefit that particular developer, but it benefits the entire scheme of where we want Philadelphia to go. And then you can argue whether a parking garage on Market Street should have been built by a private developer or whether the Parking Authority, which was originally created to create parking in areas where no parking developer would ever build a parking lot, should go back to that original purpose. But until you bring everyone together to have a common goal, you'll never really know the impact of a TIF or the variety of different ways that we can try to attract businesses in a healthy environment.
And that's the point I was making, was that the communication between the various agencies just doesn't exist. I mean, everyone is off in their own direction -- with all good intentions, but it just doesn't come together, and that is major task. It's breaking old habits, it's traditional that the Streets Department believes that they have a certain jurisdiction and they don't talk to the Planning Commission or they don't talk to the Department of 23 COMMERCE, ECONOMIC DEV. - BILL 000355 L&I until something happens. And, again, I think that's our role, either as this committee or as the full Council, to make some of those changes, because I don't think we'll ever really reach the potential that we -- I think we should be able to reach, or could reach, unless we start really pulling together. And thank you for being here.
And it was a pleasure driving you around for four years when I worked for you. (Laughter.)
If you want to become councilman, drive the Controller around for three years, and the next step up is Councilman.
That might actually be a step down. Councilwoman Reynolds Brown is next and then Councilman Clarke after her. I have one piece of information that I need to share in the realm of full disclosure. In 24 COMMERCE, ECONOMIC DEV. - BILL 000355 addition to our session, as is always, they're not only held in public but they're normally taped by stenographic services, I am participating in a project. A gentleman over to my left, your right, Charles Seymour, Jr., who's the proprietor of Claushdor (ph.) Productions, is going to be following me around for a couple days. And so I am, in addition to these microphones, I have a wireless mike on my tie or lapel, which will have no impact on my behavior whatsoever. But for those of you who may dare to talk to me for the next couple of days, just understand that there is a gentleman following me around. We won't, naturally, engage in anything inappropriate, but full disclosure is always best. Having said that, Councilwoman Reynolds Brown.
I would like to flip to another argument that's often given on why it's valuable to support TIFs, and that is, at some juncture, the School District of Philadelphia benefits. And I have reluctantly been persuaded 25 COMMERCE, ECONOMIC DEV. - BILL 000355 to support TIFs, but I move to vote for them because, at some juncture, the School District of Philadelphia benefits. You make a very specific recommendation in number 3, last sentence: "In the future, we should consider using only the City portion of the real estate tax for TIFs; or, at the very least, making sure that the District's return on TIFs is paid back at the same rate as the City's return." Whom would you suggest would be charged with assuring that? Where would that packaging or those numbers-crunching happen?
Yeah, the argument has always been that if it's a vacant land, then the School District wasn't getting any money -- meaningful money to begin with; therefore, if you give a TIF, the School District wasn't getting its portion of real estate tax that could eventually be, after a five-year period of an abatement. As an example and that in the future, the School District would get this money. And that's on the -- that's based on the assumption that the TIF is a good deal. That's based the on the assumption that nothing COMMERCE, ECONOMIC DEV. - BILL 000355 would be done on that property but for giving a TIF.
The other reality that we face is that the City of Philadelphia gives a break on real estate taxes, but in many cases, we get back the money in gross receipts tax, we get back the money in net profits tax, we get back the money in City wage tax if there's additional employment. None of those taxes that we get money back by fostering a TIF goes to the School District of Philadelphia; it needs the real estate taxes or it gets nothing. So it has always been my assumption that you cannot guarantee that a TIF is going to work. And it may be that in three or four years, you find out that that TIF -- that the TIF was not necessary. Therefore, if we would have had someone who built on that property without the benefit of a TIF, the School District would have gotten their portion of the real estate taxes. So in many ways, what I'm stating to Council is, maybe we ought to give them some funding out of the General Fund, because we are 27 COMMERCE, ECONOMIC DEV. - BILL 000355 getting benefits by additional employment, additional business taxes, and a variety of other taxes that come to Philadelphia that come into the General Fund but never see the light of day in the School District's fund, because they either get real estate taxes or they get money from the State or the federal government. They don't have an income tax to speak of and they don't have a City wage tax to speak of, and they're not an independent taxing authority, as they are in other school districts throughout Pennsylvania.
And so then would PIDC be the agency charged with that scenario?
It could be the direction of the bill that however the functioning unit that you prescribed under the new legislation would be, that pooling of funds for the TIFs, that it could come out of PIDC, it could come out of our General Fund as a -- as after the end of the fiscal period, you estimate how much money the School District might have gotten and then give them a certain portion of that every year, just to keep them going. You know, theoretically, if we TIFed 28 COMMERCE, ECONOMIC DEV. - BILL 000355 every property in the City of Philadelphia, the School District would have no money except for the money get they from the State. So it may work in five years, but they would not have any funding base, because their primary funding base is the real estate taxes.
Mr. Saidel, first I have one quick question and, I don't know, maybe -- I see Mr. Fina here, and I don't know, he may be the best person to answer this, but I'll ask you this: What's the benefits associated with the TIF ordinance versus a 108 loan?
Well, 108 loans are limited, and usually they're done in combination. Usually, it -- I've never seen somebody get a TIF 29 COMMERCE, ECONOMIC DEV. - BILL 000355 who didn't get the 108 money. You know, one is not directly through the City of Philadelphia, and the TIF is -- directly affects our taxing power by effectively forgiving taxes for a period of time, and then that money is used along usually with 108 money. And that whole mixture that usually comes in to a developer when -- when some of these deals are approved by Council. And I've never seen one without the TIF and 108 money. But they're just different categories, but the TIF is a taxing provision that directly affects our revenue stream as -- you know, HUD 108 money is federal.
I just recall instances where we decided not to do a TIF, and the Administration felt that it may be appropriate to provide a 108 loan.
Well, it depends on the availability of the 108 money. We use different -- there's supposed to be different criteria for both of them, but anytime I've ever seen a TIF, they have 108 money, but you can find areas, even in your district, where 108 money has been available, but a TIF was not something that was 30 COMMERCE, ECONOMIC DEV. - BILL 000355 pursued.
With respects of the legislation that we speak of today, it talks about opportunities for low-income individuals low- and moderate-income individuals in neighborhoods throughout the City of Philadelphia. In reality, I would say probably 99.9 percent of these TIFs will ultimately pay prevailing wages. Do you think -- do you agree with that assumption?
I have not seen any ones that don't have prevailing wage. I --
So when you're talking about prevailing wages in this particular city, you're normally talking about unions.
Realistically, as it relates to the goals of this particular legislation and, actually, one of the bills that we speak of a little later on in this testimony today, is it realistic to assume that we would be able to meet these goals given the number of MBE, WBE individuals or low-income and moderate-income individuals in the various neighborhood throughout 31 COMMERCE, ECONOMIC DEV. - BILL 000355 the City that are members of the union across the board?
I think that has to be the case. I think that we have to make every effort to make sure that we meet the goals. I think that if you look at where we've been given TIFs for the last number of years, I have always believed that TIFs and 108 money should be used in areas that partly you represent and you've been, you know, you've been pushing TIFs in the Cecil B. Moore area, which I applaud. I think that if you can utilize economic development schemes that truly are areas where someone may not want to build a development or build a business opportunity within an area that they wouldn't go unless they were given viable entitlements by the City if Philadelphia, I think that that is a perfect example of where those opportunities should occur. And prevailing wage and union benefits, to me, is not something that is ever arguable. That has to be the case in any development or housing scheme the City of Philadelphia.
Well, if those 32 COMMERCE, ECONOMIC DEV. - BILL 000355 individuals -- I guess I'm more to the workforce. In reality, the majority of the trades have a very low number of minority participants among its rank and file. And if we're requiring a certain number under this legislation, how realistically are we going to be able to achieve that goal if people just are not in those particular trades?
I remember, you know, when I had the pleasure of being associated with the Housing Authority a number of years ago that we set up an agreement with the building trades that they would actively recruit tenants and children of tenants within the housing developments to become journeymen, eventually journeymen within the trades, and I know that that's been expanded. I think one of the areas for this type of a bill is that for the building trades and for anyone's that involved in the construction industry, that they have to actively recruit minorities and women to be involved in the trades and give them an opportunity to receive the benefit of union pay in the City of Philadelphia; and, therefore, move forward and look at that also as an investment opportunity to bring people up 33 COMMERCE, ECONOMIC DEV. - BILL 000355 from being working poor to middle class and making them stakeholders in the community and giving them an opportunity to have the same respect and opportunities that you and I have had, and lucky to have, in the City of Philadelphia. But that has to be -- I think that has to be something that's worked out and actively recruited. If somebody wants our benefits and our forgiveness for taxes, then they're going to have to make every effort available and show us every effort available to -- so that people get a prevailing wage and, I think, be a part of the trade and workforce.
Should the developer be responsible or the trades? I mean, in a number of these particular trades or -- well, all of them, actually, there are certain requirements above and beyond what some individuals may have in some of these communities. And a number of business agents that I've met with over the years have indicated a willingness to do that, but people aren't qualified for the various apprenticeship programs. And I don't see any mechanism that gets 34 COMMERCE, ECONOMIC DEV. - BILL 000355 them into the system that will allow them to pass the apprenticeship test and ultimately become a journeyman. And I'm wondering who's -- at some point, who's going to take the bull by the horns and say we need to provide these particular opportunities on the front side so that people will benefit on the back side. The Housing Authority, because Mr. Green has been very aggressive in that, I agree with you, incorporated a relatively decent program, but that's a small percentage of the population. And at some point I'm wondering, should the City of Philadelphia step forward, or should we require that the developer step forward, should we require that the various building and trades step forward and provide some sort of training mechanism that allows these people to get the appropriate educational skills to go into the apprenticeship program and ultimately placement. And that's my --
I think, Councilman, it's probably a combination of both. I would always hold the developer responsible. Anybody who's 35 COMMERCE, ECONOMIC DEV. - BILL 000355 getting a tax break from the City of Philadelphia should be responsible to meet the levels that we impose as a condition upon receiving that tax benefit. Though, again, I've seen the IBW, I've seen a number of the building trades that are now, much more than they were 10, years ago, 9 actively beginning to recruit the minorities of 10 all persuasions. And if need be, there should be 11 ongoing classes, preschool classes, before they 12 take the apprenticeship test so that people can 13 have an opportunity in the long run to get the 14 good-paying jobs that we're giving tax breaks for. 15 But I think a developer, anybody who's getting a break from us should be held accountable if they want that break, and that should be a condition.
Yeah. 36 COMMERCE, ECONOMIC DEV. - BILL 000355 Thank you, Mr. Chairman.
Mr. Controller, all of the data I've seen in terms of -- in the direction that Councilman Clarke was talking about, in terms of projects that have been done in the City of Philadelphia, Center City, the hotels, the other construction that has taken place through the use of either TIFs or Office of Housing and Community Development grants and so on down the line, they have shown they have shown -- the data has shown that most, the overwhelming majority of individuals that come in and work in those projects are from outside of the City of Philadelphia. And I don't mean 60/40; I mean 70, 80 percent of the individuals outside of the City of Philadelphia. And that says to me that most of the monies that are being taken in by the developer and the workers are -- is just going outside of the City of Philadelphia, obviously. And I'd like to see that change. I'd like to see the figures really correspond in which we have the overwhelming majority of citizens of Philadelphia get those jobs in those projects and a small 37 COMMERCE, ECONOMIC DEV. - BILL 000355 minority from outside. And I think we have to strive and I think we are going to have to legislate that developers really adhere to that. And I -- and this is not talking about minorities; this is talking about citizens of Philadelphia working of all of the different racial and ethnic groups in the City.
Well, I think you have to watch the legality of that type of legislation. In many cases, the unions have open shops and they'll come in and a developer will say, I need laborers, 20 electricians, and they'll grab 14 from a pool. So they may not necessarily be 15 living in Philadelphia, but I'm more than happy to 16 take their wage taxes while they're working in 17 Philadelphia. Though I've always believed -- 18
Well, I'd like to 19 get the wage taxes, but also I'd like for the 20 aggressive -- (Unintelligible, parties talking over each other.)
Yeah, and the investment is placed back in to pay your mortgage and living in a vibrant community within Philadelphia. 38 COMMERCE, ECONOMIC DEV. - BILL 000355 I would -- if I had my druthers, I would just hire Philadelphia folk, but I don't know -- I don't know if that could meet any type of legal muster, and I think that's something that should be looked at. And when you place a paragraph like that in a piece of legislation, you have to make sure that it can, you know, pass the constitutional muster and legalities that may exist in the Commonwealth. That I don't know. But I think we are all in agreement that we'd like to hire Philadelphians first for everything, but the object is -- I believe that. But how you do that in a legal matter, I think, would have to be looked at very closely.
Well, the reality is that the huge overwhelming majority of the individuals that are being hired on these project are not Philadelphians.
No, I -- years ago, I was in favor, Councilman, where, you know, you have a contractor that's competing in an RFP that's located in Philadelphia with a contractor that's located in New Jersey and we never gave that contractor in Philadelphia credit for paying wage 39 COMMERCE, ECONOMIC DEV. - BILL 000355 taxes to his employees or business taxes. And I was told years ago that we could not favor contractors located in Philadelphia in comparison to an RFP.
I think as long as it's not done race-specific, I think constitutional muster can probably be passed.
Councilman Clarke has a follow-up and then Councilman DiCicco.
Thank you, Mr. Chairman. Mr. Saidel, in your response to both Councilman Ortiz and myself, you talked about the developer being responsible to some degree for the workforce. Isn't it true that the developer traditionally hires a general contractor, that general contractor hires the subs, and they are ultimately responsible for the workforce. And isn't it realistic to say that the developer couldn't, frankly speaking, care where that 40 COMMERCE, ECONOMIC DEV. - BILL 000355 individual who's working on that project lives, what zip code that person is, what color that person is, as long as they can come on time and under budget?
I think that's the case, but if you make a condition upon the developer getting a tax benefit, the power of funds will flow down to an enforcement provision that you necessarily want within that law. I mean, if you give a developer a $5 million tax break and you condition it upon X, Y and Z, if you're that developer, you're going to make sure that whoever your subs are, that they live within that compliance. And then what we should do as a city is to go and examine their books and records to make sure that they're within the compliance and we have a claw-back provision.
So you're saying that the contractor shouldn't have any responsibility for --
Oh, no. I think that -- you know, you follow the dollar. If you're giving a tax break to the developer and that development would not occur but for the TIF or the 108 money, 41 COMMERCE, ECONOMIC DEV. - BILL 000355 then the contract, the GC would not be working but for the TIF and but for the 108 money. So if you're giving a tax break to the developer, then it's the developer's responsibility to make sure the GC follows those rules and regulations that are conditioned upon that tax break. If they do not and you take away the abatement or take away the 108 money, then the GC loses his employment too. So the economic benefit is what creates the enforcement of rules and regulations. And I think, you know, people's profit motive actually makes them better people.
Thank you, Mr. Chairman. Just to follow up on the question raised by Councilman Ortiz, or the comments raised by Councilmember Ortiz. A year or two ago -- Mr. Applebaum's in the room, I see him -- I thought we had a conversation that when we discussed -- when we make purchases or do contracting we were able to -- or I thought we 42 COMMERCE, ECONOMIC DEV. - BILL 000355 were looking at the possibly of giving a point preference, more or less, for those companies that were Philadelphia-based, all things being equal.
I'm not sure if we ever got to that, but I thought we were working towards that goal and if there's a way in which we can legally attain that --
Well, all things being equal, that's -- we could that, because then we the choice between someone giving us -- both giving us the lowest bid, I would always pick the Philadelphia person. But the reality is, as you know, Councilman, that it costs more money to do business in Philadelphia than it does to do business out in Perry County. So if you're going to buy goods and services in Perry County, nine times out of ten, that bid request will be lower. And that's -- I've always had a problem with that, but the legal department has always had a problem with that type of issue.
Not to take off on a different subject, but when we're talking about 43 COMMERCE, ECONOMIC DEV. - BILL 000355 contracts, and I think we got into the discussion a year or two ago when we were speaking about buying cars for our fleet. I think we were purchasing the cars from a dealer in New Jersey, and if I'm not mistaken, I think the cost of the cars was maybe $10 less per car at the New Jersey dealership than it was with the Philadelphia dealer. But by law, because it was the lowest bid, we still had to go there, and I was wondering if there's a way, you being an attorney, maybe you can help us, if we could do some sort of a point preference because of the reasons you stated. We are getting the wage taxes out of that dealership, the sales taxes are staying in the City and in the Commonwealth. Shouldn't those two factors alone weigh into the cost of buying the car versus buying it in New Jersey or in another state? You know $10 a car, I see Mr. Applebaum shaking his head.
I think they should, but the -- and I'm sure you can ask the Commissioner, but the manner in which RFPs are presented, they have never been Philadelphia-first RFPs. You know, based on the lowest, we're supposed to get 44 COMMERCE, ECONOMIC DEV. - BILL 000355 the best bid for the most -- the lowest bid for the best qualified within the terms and conditions of what we're looking for. But I would much rather deal with Philly folk than -- because -- and I do the same thing with New York. When New York comes down and wants to take our money and invest it, I asked them the last time some company in Philadelphia got business out of New York. But in the end, I've got to look at the competition, regardless of geography. And that's unfortunate.
And maybe we should get the Pennsylvania Society to have their --
I always wondered about that, you know, all the law-makers going to New York to spend their hard-earned money. Whatever. And the other comment I wanted to make about -- with working with developers and trying to encourage them to hire Philadelphia contractors 45 COMMERCE, ECONOMIC DEV. - BILL 000355 is, in my experience, dealing with many of the developers in my district, and particularly those developers that were requesting a TIF, I was able to develop a relationship with those developers over a period of time, and, more or less, was able to encourage them, again, all things being equal, that it would be in not only their best interests but in our best interests if they would look to Philadelphia contractors and subcontractors first. And I'm happy to say that in the majority of those cases, even with the entertainment center, which is probably one of the biggest projects we're undertaking, the Simon folks have entertained those referrals, or at least the request to look at Philadelphians first. And in most cases, they did hire Philadelphia-based companies to do the architectural work, subcontracting, engineering work; they did that first. All things, again, being equal, I wouldn't want them to accept an inferior contract in terms of what they needed for their project just because that contractor was a Philadelphia company. But there are so many of 46 COMMERCE, ECONOMIC DEV. - BILL 000355 them here, I'm sure in the scheme of things, they could find someone or a few of them to pick from. So that's the kind of thing that, as a District Councilperson, I'm able to -- when we're talking about the TIF and they're seeking my support on a TIF, I'm able to work that into the dialogue of why I would be willing to support, you know, when I'm willing to support the TIF. And thank you again, Mr. Controller.
Let me mention quickly that Councilwoman Tasco has a question. Given the discussion and the direction that it's going, I should mention that many of the ideas and concepts that are being discussed are actually very pertinent to another bill that will be heard today, which is Bill No. 000181, which lays out certain additional requirements on contractors for City -- to get City work, one of which is provision that deals with the issue of a certain percentage of workers on the job who would be low- and moderate-income people. We'll have an extensive discussion, I'm sure, on that particular bill and also on the percentages that are laid 47 COMMERCE, ECONOMIC DEV. - BILL 000355 out. I know Commissioner Applebaum is here to discuss that particular bill, but that bill may get at some of the -- many of the issues that my colleagues have just been discussing with regard to contracting opportunities for workers and businesses. Councilwoman Tasco. Councilwoman, hold on for one second. Councilman Ortiz, we actually had a couple of yields while you were in your questioning a while ago, which went on extensively. Were you finished, or do you want to come back?
All right, I'm just trying to keep track of everything.
It's on his yield too. I think it's the same question.
In terms of developing the specifications which we would require of the developer to meet -- for instance, the lowest responsible bidder -- how do you -- couldn't we define what "responsible" would mean 48 COMMERCE, ECONOMIC DEV. - BILL 000355 in terms of, saying, Well, if it's a Philadelphia company, it has a benefit added to Philadelphia for getting the Philadelphia company. Don't we establish our own criteria? Or are we subjected to State laws or something like that?
Yeah. Councilwoman, you know, as I mentioned years ago, I've always believed we should hire and buy Philadelphia first, because not only is there a benefit that we get goods and produce and product and development out of a company that's located in Philadelphia, but we then reinvest our payment for that product back into our community to keep our businesses open. I mean, we spend, you know, 6, $7 billion a year on a variety of different projects. I can't imagine why we would need to buy anything outside of Philadelphia businesses. And then we benefit greatly by increasing the employment pool because of the reinvestment of those tax dollars back into those communities by utilizing those businesses. But I have never found a mechanism to stay within the parameters of the law, as to the State law, in relationship to those type of bidding procedures. Now, I would be more than happy to 49 COMMERCE, ECONOMIC DEV. - BILL 000355 approve, as the controller in the pre-audit function, anything that would pass legal muster to give Philadelphia first people an opportunity -- to compete, actively compete for their goods and services that we need, as well as the variety of other things that we purchase almost on a daily basis. It would be great if we could just plow that money that we take out of their pockets back into a business located in Philadelphia so that they can continue to prosper and hire more people. And that domino effect, you know, then increases our tax flow in the long run, because as they hire more people, the less people that need government assistance, more people that are paying wage taxes, they're paying their mortgages, their gas bill, their water bill, and a variety of other things. And I think we benefit from that in a multiplier effect. How you do that within the legal framework is another story is, another story.
Any other questions 50 COMMERCE, ECONOMIC DEV. - BILL 000355 for the Controller on Bill No. 000355? (No further questions.)
I hate to do this to you. Actually do have one last question for you myself.
Almost. A question has been raised with regard to the first section of the bill on the -- that talks about TIFs should not be approved by Council unless there are essentially three signoffs. One of the questions that's been raised is whether or not that can potentially result in a virtual veto or -- and I'm not saying you would do this, but talking more about anyone in the office, that there would be an unnecessarily withheld approval, which could potentially collapse a project or would be in direct conflict with the sponsor of the TIF or the Administration. And I guess I needed to at least ask you for the record, if there was, I guess, a 51 COMMERCE, ECONOMIC DEV. - BILL 000355 different mechanism that at least required some statement, something short of a signoff, but more than nothing.
But something in the middle that essentially says the package at least goes to you, that the City should get or would be required to -- I want to choose my language carefully. That the City should at least get some response from the Controller or from the PICA Board that they've at least looked at this and opine whatever they opine, but that that opinion does not necessarily block the TIF or prevent it from going forward; you always again naturally have the opportunity to come and testify at any public hearing on a TIF project, and certainly, the weight of your argument would weigh heavy on our hearts and minds. What's your reaction to that?
I never really thought about it being a blocking mechanism; I actually thought of this bill as being an ability for me to help Councilpeople to better understand what the implications are of the projections, but I would 52 COMMERCE, ECONOMIC DEV. - BILL 000355 never send a document back to Council that said I disapprove, without any statement as to the reason -- a comprehensive statement as to the reasons why. And I -- and if Council decides that if -- that PICA, myself, or the Finance Director are wrong, then I think there should be a mechanism of two-thirds vote, or however you want to do it, where there can be an override, if it's the concern of the majority of Council that that is something that is necessary. But I never thought about the fact that I would have carte blanche to do that 'cause that never really entered into my thought about the bill.
Okay. So if an arrangement was made whereby you are, you know, clearly and obviously a part of the process that we are going to get some kind of response or reaction, anything from, you know, yes, no, to, you know, a short novel, you're not -- I don't get the impression that you're particularly rigid in what the mechanism is versus that there be a process, that you have an opportunity to comment, for instance, on what's going on and, again, 53 COMMERCE, ECONOMIC DEV. - BILL 000355 naturally, taking advantage of your right to come and publicly testify, and we'd have to take all of that into consideration in the course of the evaluation of that particular TIF project.
No, I think that if it was anything more than that, it would be an infringement upon your responsibilities and powers as a city council for me to unilaterally be able to say no to something like that. I think that -- I think when I looked at the bill, I thought that my job would be, because I was asked by Council to be involved and look at the process, and if I thought it was not an adequate return on our investment, that I would say so. And then the ultimate decision, I've always believed, is in your branch of government, and I respect that.
Okay, thank you. I appreciate that. Any questions for the Controller? (No further questions.)
It's my pleasure, Mr. Chairman. 54 COMMERCE, ECONOMIC DEV. - BILL 000546
Thank you. Okay. I know he's here and I know we also need to move on to Councilman Goode's bill. Mr. Fina, would you wish to be grilled now or would you rather sit with the Commerce Director, Mr. Curato later? (Mr. Fina responds off mic.)
You choose later, yes. Very smart move on your part. (Laughter.)
We will now ask the clerk to read the title of Bill 000546 so we can take all of the testimony on that bill.
Bill No. 000546, an ordinance amending Chapter 21-800 of the Philadelphia Code, entitled "Advancement of Economic Opportunities," by adding Section 21-802 on the Philadelphia Community Reinvestment Commission.
Councilman, do you wish to make any opening statement? I thought I saw about a 10-page speech that you had prepared over there and I'd like to give you an opportunity to give it. 55 COMMERCE, ECONOMIC DEV. - BILL 000546
Let me first thank the Chair for the timely hearing of this bill. This bill is based on legislative findings from the Community Reinvestment Report released by my office a couple months ago, which was made available to this committee and the full Council and the public at large. I would also like to thank those who testify on behalf of this bill, including the Administration. I think that all of the things on the agenda actively move forward in the whole issue of neighborhood transformation and creating opportunities for disadvantaged persons, businesses, and neighborhood. I look forward to hearing the testimony. Thank you very much.
Thank you, Councilman. We'll first have the City Treasurer. 56 COMMERCE, ECONOMIC DEV. - BILL 000546 (Witness comes forward.)
My name is Folasade Olanipekun, and I am the City Treasurer. I am here to testify on behalf of proposed Bill No. 8 000546, introduced on September 14, 2000. Bill 9 No. 546 would amend Section 21-800 of the Philadelphia Code, entitled "Advancement of Economic Opportunities," by adding a subsection, 21-802, to create the Philadelphia Community Reinvestment Commission. The Administration is fully supportive of the CDFI Program's mandate of using limited financial resources to invest in and build the capacity of private, for-property, and nonprofit financial institutions to provide capital and services under-served people and distressed communities. It is a very important tool to be used for neighborhood in desperate need of economic stimulus. The Administration also supports the creation of a Philadelphia Community Reinvestment Commission as a strategy for helping to realize 57 COMMERCE, ECONOMIC DEV. - BILL 000546 the full potential for the CDFI Program. However, as you know, the Home Rule Charter, as a general rule gives the Mayor sole authority to create boards and commissions, except in special circumstances that do not apply here. Since Council is legally unable to act upon Bill 8 No. 546, it is the intent of this administration to create by executive order a commission that is comparable to and embraces the spirit and intent to proposed Bill 546. This concludes my testimony, and I'll be happy to answer any questions you may have.
Are there any questions for the Treasurer? (No questions.)
Madam Treasurer, you have stunned the community. (Laughter.)
We have no ability to respond to your testimony. And for that, you are free to go.
Unless other questions come up. 58 COMMERCE, ECONOMIC DEV. - BILL 000546 Mr. Ray Desiderio. (Witness comes forward.)
Thank you. I'm Ray Desiderio. I'm a senior vice president at PNC Bank of Philadelphia here. And I'm happy to lend our support to this bill. My job at the bank, I'm a senior community development officer of PNC Bank, and I'm responsible for managing the bank's community development activities. I've been in banking for 38 years and have worked on community development issues for the past 30 years. PNC Bank strongly supports this bill, which will provide much needed capital for community development financial institutions through the institution of Philadelphia Community Reinvestment Commission and the operation of local CDFI Fund for the primary purpose of lending support to Philadelphia-based intermediaries and CDFIs. The Greater Philadelphia Coalition, of which I am a co-chair, has seen fit to create a task force under the offices of the Committee for Community Economic Development to support this 59 COMMERCE, ECONOMIC DEV. - BILL 000546 issue. We feel that the ultimate result will be the fostering of proactive, cooperative initiative around small-business lending and economic development in the City of Philadelphia. PNC considers CDFIs and intermediaries to be much needed conduits between the bank and the community which the bank serves. These intermediaries play a vital role in supporting the bank's community development lending, investment, and service activities. There are a welcome and important complement to the overall community development business strategies. Strong CDFIs possess day-to-day intelligence on the community development community due to their active involvement. Strong CDFIs understand the community strengths and weaknesses of borrowers, the availability of quality funding, the details of public and private-sector financing required to get the deals done, and the political culture within the business which is transacted. The best CDFIs use this market information to create efficiency in the way projects or businesses are financed. We at PNC have had the good pleasure of 60 COMMERCE, ECONOMIC DEV. - BILL 000546 working with an excellent, well-managed CDFI here in Philadelphia, the Reinvestment Fund, and for all of the reasons stated here, are an active supporter and we are an investor in the fund. The Reinvestment Fund takes a three-pronged approach to economic development: First, it is an active small-business lender in Philadelphia, providing debt for scores of urban-based businesses. More than 50 percent of its borrowers are minority owners. TRF is a licensed SBA lender. Secondly, TRF provides equity financing for growth businesses through a venture capital affiliated called DVCRF Ventures, in which PNC is an active investor. The venture financing supports companies that are profitably expanding and provide quality jobs for entry-level workers. Thirdly, TRF is an active source of grant support for a small group of quality workforce programs that are training inner city workers and linking them to urban and suburban community. And PNC supports the International Community Association, a trade group which 61 COMMERCE, ECONOMIC DEV. - BILL 000546 supports CDFIs. In fact, PNC is the corporate sponsor for NCCA's national conference here in Philadelphia in November. PNC has a major commitment to the Pennsylvania Community Development Bank. The goal of this bank is ultimately one of empowerment, specifically financial empowerment, through CDFIs. Without an influx of investment capital opportunities for low-income Philadelphians in the communities in which they live, these resources will continue to shrink. The importance of new financial tools and resources in the revitalization of the Commonwealth's disadvantaged communities cannot be overstated. The bank and PNC's investment are designed to provide these resources by supporting CDFIs. We expect that our support of this issue will impact the CDFI movement in Philadelphia. Funding provided by this legislation will leverage the support provided by this program.
While not officially designated CDFIs, PNC Bank has worked very closely with two other important intermediaries in the City of Philadelphia. These are the Local Initiative 62 COMMERCE, ECONOMIC DEV. - BILL 000546 Support Corporation and the Philadelphia Neighborhood Development Collaborative. Both of these organizations provide much needed, technical, and systems-building capacity to community development corporations engaged in economic activities in Philadelphia. If these organizations elect to become CDFIs, this legislation would also enhance their capability. We at PNC hope that the information provided in this testimony will be helpful in the final determination of passage of City Council Bill 546. We applaud the efforts of the sponsors, and especially Councilman Goode, in this initiative. Public-private partnerships are important in this city, and we're happy to join in this effort. Thank you.
First I'd like to thank you for your support for Greater Exodus. 63 COMMERCE, ECONOMIC DEV. - BILL 000546
I wanted to ask you a question about a particular business corridor, or it could be anywhere in the City of Philadelphia. As you know, I represent most of North Philadelphia, on the lower side, and we have several commercial corridors, some of them thriving, some not doing so well. We get questions from business owners and people who are interested in opening businesses on those corridors, particularly on Cecil B. Moore here of late about financial assistance, access to capital, lending practices that are somewhat beyond the traditional lending practices, and I see here in Councilman Goode's document that he speaks to that. But what happens on a number of occasions is that we make the capital available but we don't necessarily give the technical assistance to businesses, and two, three years down the line, they end up folding. And I'm wondering, what is your suggestion or recommendation as it relate to the technical side of it, developing an appropriate 64 COMMERCE, ECONOMIC DEV. - BILL 000546 business plan, making sure that that business plan is carried out, and other things related to operating the business long-term. Can you spoke to that for a minute, please?
Yeah. I know well the corridors you're speaking about, and I know that there's a dire need for a continued or even start-up economic activities in those corridors. There's no question that a number of those businesses are unsophisticated businesses; in many cases, start-up businesses; and in many cases, businesses that need capital, capital infusion. To invest in those businesses and not provide the technical and educational assistance is just a problem that will just become more complicated. In the many cases, because those businesses are start-ups, because there are capital requirements and for -- and because there is a lack of capital that is available to that, many of those businesses have a tendency to fail. So it would not be in the best interest of the banks or the CDFIs or the intermediaries to make investments in those businesses unless there 65 COMMERCE, ECONOMIC DEV. - BILL 000546 was a very definite commitment to technical assistance and education of those business owners. And technical assistance and education before, during and, most importantly, after. We have elected, and in my testimony, I remark about the close association we have with the CDFIs in the City and the fact that this bill 9 will just strengthen the CDFI movement. We've worked very closely with those organizations because we find that they have the best intelligence on those communities, they have the wherewithal to interact in those communities, they have the ability to be the conduit between the banks and the communities, and most importantly, they do have programs that provide that technical and educational assistance. So it makes much sense, a lot of sense, for us as banks to provide the CDFIs with the grant support that they need to continue those activities, and many of us in the banking industry in Philadelphia do provide that support, as well as our investment support to the CDFIs. So there's no question that there's a need for technical assistance before, during, and 66 COMMERCE, ECONOMIC DEV. - BILL 000546 especially after the loan is made.
Thank you very much. Mary Frances Davis. (Witness comes forward.)
I'm sorry, you can please -- I made a mistake. Christina Weinmann. You can stay, please. I'm sorry, I apologize, my mistake. But Miss Weinmann can come up as well. (Witness comes forward.)
I have a witness list that I'd like to stay in compliance with the witness list, and I apologize to Miss Davis.
It was my oversight. Miss Weinmann? 67 COMMERCE, ECONOMIC DEV. - BILL 000546
Good morning. I'm pleased to testify before the committee on behalf of this bill to establish the Philadelphia Community Reinvestment Commission and to provide oversight for community reinvestment strategies for the City. In the interest of brevity, I'd like to submit my testimony for the record and instead just tell a little bit about National Community Capital here in Philadelphia and summarize my testimony in three key points. First of all, my name is Christina Weinmann. I'm the senior policy associate with National Community Capital Association, a national community development and financial intermediary headquartered here in Philadelphia. We were founded in 1986, and we represent more than 400 CDFIs nationwide. One of our primary purposes is to build a strong national CDFI industry through our financing, training, consulting advocacy, and information services to CDFIs. And as Mr. Desiderio mentioned, we are having our 16th annual conference here in Philadelphia in November, where we've got 500 -- over 500 CDFI practitioners coming from across the 68 COMMERCE, ECONOMIC DEV. - BILL 000546 country to come learn more about trends in industry and to receive some of the more premier training for CDFIs in the country. One of my first points is that CDFIs are experts in developing partnerships and leveraging private capital with public funds. They work with mainstream financial institutions, community groups, governments, and neighborhoods to channel private investments into low-income, low-wealth and under-served communities. And as Mr. Desiderio said, banks use CDFIs as strategic partners to cultivate new markets. The second point that I wanted to make is that mature, high-performing CDFIs are increasingly concerned with value recapture. And I think that the proposed Philadelphia Community Reinvestment Commission could provide overall perspective and, as Councilman DiCicco suggested, a coordinated effort amongst agencies, financial institutions, and non-private and public community development organizations to provide overall perspective and a check to ensure that targeted impact and that investment (unintelligible) sustainability in these communities. 69 COMMERCE, ECONOMIC DEV. - BILL 000546 Finally, as a model for the Philadelphia Community Reinvestment Fund -- the model for the Philadelphia CDFI Fund, in 1994, Congress established the CDFI Fund within the U.S. Department of Treasure to support a national comprehensive community economic strategy by investing in CDFIs, like what this bill is proposed to do. The funds bolsters economic development by investing in CDFIs. And by investing institutions, not projects, the fund helps CDFIs respond to their markets by increasing their ability to manager risk, to enhance capacity, and to be flexible in their financing. The CDFI Fund makes the most effective use it use of limited federal resources. It uses relatively small amounts of federal money to leverage significant amounts of and private non-federal dollars, promotes private entrepreneurship, and encourages self-help and self-sufficiency. National Community Capital is -- strongly supports Bill 546. We applaud Councilmembers Goode and Blackwell for introducing this important legislation. On behalf of National 70 COMMERCE, ECONOMIC DEV. - BILL 000546 Community Capital, I thank you for this opportunity to share my views and would be pleased to answer any questions you may have.
My name is Mary Frances Davis. I'm a division director with the Greater Philadelphia Urban Affairs Coalition. I have 30 years experience in addressing issues related to community and economic development. Thank you for the opportunity to testify today in favor of this bill establishing a community reinvestment commission, the Philadelphia Community Reinvestment Commission. The Greater Philadelphia Urban Affairs Coalition, as you may know, is a large nonprofit civic organization in Philadelphia, which brings together community leaders from low-income and minority neighborhoods with corporate executives and other stakeholders to solve urban problems. 71 COMMERCE, ECONOMIC DEV. - BILL 000546 In that context, our board, the GPUAC Board, has created a committee for community and economic development, and I am the staff person for that committee. The purpose of the committee is to create and partner with efforts to promote community economic development in Greater Philadelphia. To that end, we involve all stakeholders in finding permanent solutions of great magnitude. In the context of that, we create task forces which address specific issues of importance to our low- and moderate-income and minority neighborhoods. Just such an issue is the need for neighborhood small-business investment capital. Among the members of our group are nine banks: Beneficial Savings Bank, Commerce Bank, Commonwealth Bank, First Union Bank, Keystone Financial, Mellon Bank, PNC Bank, Sovereign Bank, and Summit Bank. These banks particularly are concerned that the $700 million that these lenders have invested in home ownership in Philadelphia's low- and moderate-income neighborhoods over the past couple decades will be ill-spent unless 72 COMMERCE, ECONOMIC DEV. - BILL 000546 economic development funds are targeted to neighborhoods which have made such progress in housing and community development that small business capital investment will bolster those markets to the point that they are self-sustaining. Our committee agrees -- I'm sorry. Our committee includes, in addition to lenders, neighborhood representatives, the CDC association, the major CDFIs that are already on the scene -- that is LISC, (Local Initiative Support Corporation to) in the reinvestment fund, and hope to include others emerging CDFIs as they come forward and the Philadelphia Neighborhood Development Collaborative. We have formed a small business capital team to create the type of strategy that will, we believe, feed very well into the strategic approach of the Philadelphia Community Reinvestment Commission. And we look forward to using our small business team to delve into issues raised and proposed by the Commission and to working closely with the Commission to advance its goals. 73 COMMERCE, ECONOMIC DEV. - BILL 000546 Thank you.
No? Okay, thank you. Rick Sauer and Robert Sanders. Mr. Sauer is first and then followed by Mr. Sanders. (Witnesses come forward.)
Members of the committee, my name is Rick Sauer. I'm the Executive Director of the Philadelphia Association of Community Development Corporations. It's a citywide association of 60 CDCs and other community groups working to revitalize our neighborhoods and rebuild communities. And I'm here today on behalf of our members to voice our support for the creation of the Philadelphia Community Reinvestment Commission to help plan and implement community investment strategies for the City of Philadelphia. As you know, sponsors of housing and 74 COMMERCE, ECONOMIC DEV. - BILL 000546 community development projects have the daunting task of assembling a jigsaw puzzle of financing to support their projects, ranging from approaching public sources, various City, State, and federal agencies to private lending institutions foundations, and other investors. With the active support of these players, the local CDCs, during the 1990s, were able to demonstrate their capacity to serve as a vehicle for neighborhood reinvestment in the neighborhoods, developing over 3 and a half thousand housing units, over a million square feet of commercial and retail space, as well as a number of other facilities and other community development activities. A key to the success of these projects has been their ability to utilize public-sector resources to attract and leverage private-sector involvement in the neighborhoods. And we really need to build on what we've done there, both continuing the efforts of housing and commercial redevelopment in general, but also in supporting the expansion of small businesses in our neighborhoods. We all know that the City does not have 75 COMMERCE, ECONOMIC DEV. - BILL 000546 enough resources at its disposal to address the myriad of issues in our neighborhoods, and especially it's a timely band important issue right now is, we're about to embark on the neighborhood transformation initiative. I think it's critical that we take a closer look at how we are using our current funds to make sure that we're using them in the most efficient and strategic manner to advance our neighborhood revitalization goals. I think the proposed Philadelphia Community Reinvestment Commission can may an important role in this process. It can look at how public funds can be used to better leverage resources from the private sector, we can give thought to how we can allocate new City funds to leverage more resources from the State of Pennsylvania, and, most importantly, we can better coordinate the delivery of both public and private-sector resources so that we can restore the local real estate markets in our neighborhoods and achieve our neighborhood revitalization goals. Thank you for the opportunity to comment. We certainly are glad that Councilman 76 COMMERCE, ECONOMIC DEV. - BILL 000546 Goode has introduced this legislation, along with Councilwoman Blackwell, and we strongly support its passage. Thank you.
Good morning. My name is Rob Sanders. I am a manager of the Sustainable Development Fund, a designated fund within the -- reinvestment fund, and I'm speaking as a representative of the Reinvestment Fund this morning, in support of Bill 000546. The Reinvestment Fund is a CDFI based in Philadelphia that was founded in 1985. Over the last 15 years, the Reinvestment Fund has invested over $200 million in community revitalization projects, community service organizations, and small business enterprises. The vast majority of these investments were made in Philadelphia. The RF's mission is to use capital and 77 COMMERCE, ECONOMIC DEV. - BILL 000546 technical expertise to build wealth and create economic opportunity for low-wealth communities and low- and moderate-income individuals. The fund accomplishes its mission through its financial support of affordable housing developments, community facilities, small businesses, and workforce programs. In years, the Reinvestment Fund has 10 grown to where we now manage more than $80 million 11 in a assets. These funds have been entrusted to 12 us by more than 700 investors. S. Treasury Department. How are we organized? The Reinvestment Fund is a nonprofit organization with two nonprofit subsidiary corporations and one wholly-owned, for-profit subsidiary. TRF has a core loan fund that attracts investments from individuals and investors. Each year, TRF files a registration statement with the Pennsylvania State Securities Commission. 78 COMMERCE, ECONOMIC DEV. - BILL 000546 In addition to TRF's core loan fund, we've established three entities that I mentioned -- two nonprofit, one for-profit. The Collaborative Lending Initiative is one of these. It was founded in 1994, which is a bank loan consortium comprised of member financial 8 institutions. , which was founded 10 in 1997, is the nonprofit general partner of DVCRF 11 Ventures LP, a limited partnership formed to 12 provide venture capital to growth companies with 13 strong job creation potential for entry-level 14 employees. 15 And then the Enterprise Investment Corporation is a for-profit company that was formed to house TRF's SBA loans. S. Small Business Administration and regulated by the Pennsylvania Department of Banking. So what has all of this accomplished? We believe that over the past 15 years, TRF has demonstrated it is possible to create an organization that combines a strong public purpose with sound business discipline in its lending and 79 COMMERCE, ECONOMIC DEV. - BILL 000546 investment programs. Our $200 million in cumulative loans and investments have leveraged $1 billion in public and private capital. The result of this invested capital has been to create over 6,000 new affordable housing units, 5,000 child care slots, 5,500 charter school seats, and 1,800 jobs in small businesses, as well as retaining 16,000 jobs overall. In the past year alone, TRF has made more than $38 million in new loans and investments. Charge-offs have remained less than 1 percent of outstanding loans. And the Reinvestment Fund's capital-to-asset ratio, which is equity capital to total assets, how much equity we have, that ratio stands at above percent. 17 Now, I would conclude that essential to 18 this growth in our assets and financial capacity 19 was the support of the federal and State CDFI 20 Funds. S. Treasury over the years and $2 million from Harrisburg. This public-sector support has been very important in attracting ongoing private investments. Indeed, one of the great values of 80 COMMERCE, ECONOMIC DEV. - BILL 000546 CDFIs is their demonstrated capacity to bring private investment to the settlement table, to build wealth, and create economic opportunity for low-wealth communities and low- and moderate-income individuals. The Reinvestment Fund strongly supports the creation of the Philadelphia Community Reinvestment Commission as well as the creation of a Philadelphia CDFI Fund. Thank you. I'll take questions if there are any.
Thank you for your testimony. Any questions? Councilman Goode.
Thank you. Mr. Sanders, I don't know if you are prepared today to respond to this, but could you speak a little bit to demographics of some of the end-users of your finances?
The great majority of the end-users that will benefit from our financing has been low -- and I mean low, not moderate, but low-income families. Primarily at this stage in the Reinvestment Fund's development, it's still 81 COMMERCE, ECONOMIC DEV. - BILL 000546 true that the majority of our financing has been to affordable housing projects and to community service facilities. These would be health care centers, day care centers, charter schools, or to developers of affordable housing. And the overwhelming beneficiaries of that financing has been low- and moderate-income constituents -- again, within the City of Philadelphia.
Thank you very much. Is there anyone else who I did not call on or was not on the list for Bill 000546 who wishes to testify at this time? (No response.)
Okay, seeing none. . . Again, I hate to keep going back and forth, but I believe our commerce director is here now, and he wants to get his testimony in on Bill 24 000355, so we're going to go back to that bill, complete that, and then take care of Bills 180 and 82 COMMERCE, ECONOMIC DEV. - BILL 000355 181. That would be Mr. Curato, the Commerce Director and Mr. Robert Fina, Vice President of PIDC. (Witnesses come forward.)
Good morning, Mr. Chairman and members of the committee. My name is James Curato, and I am the City Representative and Director of Commerce for the City of Philadelphia. I would first like to thank you for accommodating my schedule this morning and hearing my testimony today on Bill No. 000355, which would amend Chapter 21-1400 of the Philadelphia Code, entitled "Tax Incremental Financing Districts." As the City Commerce Director, I fully support the spirit and intent of Bill 355, and I fully support the idea of requiring developers to undertake good-faith efforts both to provide employment opportunities for youth and to provide contracting and employment opportunities for minority, female, and disabled business enterprises and individuals. Notably, many of the provisions proposed by the legislation are already being 83 COMMERCE, ECONOMIC DEV. - BILL 000355 accomplished through the TIF program, administered by PIDC in cooperating with the City, and will continue with or without this legislation. However, certain provisions of the proposed legislation would significantly and detrimentally alter the autonomy that now vests with the Mayor and City Council in approving each district. Therefore, I cannot support Bill 355 as currently drafted. I do have some amended language that addresses the several sections of the bill that I would respectfully submit to the committee for its review. I understand that prior to my arrival here this morning, the Controller testified, and I have also indicated to the chairman that we do not object to a basis for our projections being evaluated. However, we do believe that the legislation as drafted, that gives the Controller and PICA what would amount to almost a right to preempt any TIF legislation should be changed.
Mr. Curato, can I at least mention to you -- I know you didn't have the benefit to being here earlier, and that was by agreement. You had, I believe, a ground-breaking 84 COMMERCE, ECONOMIC DEV. - BILL 000355 to attend. I did raise that issue earlier with the City Controller and at least we should place on the record again, one, the Controller's view, and it was just his view, that he would not, I guess, unnecessarily withhold such a statement. But secondly, I think we began a discussion that led to a conclusion that stepping back from a strict requirement that would not allow the Council to make an approval without having such certification a statement. I think that there is a way to at least ensure a comment or a review of such a project, again, without either infringing on the prerogatives of the executive branch or even of the City Council. And so along those lines, I think we'll be able to work something out on that. I'd like not to, I guess, have you so deep in the hole on the record with regard to where you would not like to be, and I'd rather like to, if possible, steer you in the direction of where you would like to be and some of your ideas and some of your thoughts. I think we kind of got it on what your concerns and -- what your concerns might be.
I'll just, if it's all right with the chairman, just complete the rest of my testimony. Under Section 21-1403(1) as drafted, the bill would require that no TIF district be approved by City Council, unless the ordinance 9 creating the TIF district is accompanied by a statement signed by the Finance Director, Controller. And the Executive Director of PICA. That's the issue that we just discussed. And, again, if there's a mechanism for comment, as you pointed out, Mr. Chairman, that would be acceptable to us. The bill further requires that any TIF district plan include a statement that there will be an economic opportunity plan submitted for the TIF district. The economic opportunity plan would contain a statement that the developer shall use good-faith effort to ensure that the project shall provide for the maximum feasible number of year-round part-time and full-time employment opportunities for low- and moderate-income youth and a preliminary implementation plan for such 86 COMMERCE, ECONOMIC DEV. - BILL 000355 employment goals. The bill as drafted also goes on with similar language for minority, female, and disabled enterprises and individuals and the preliminary implementation plan. The provision that the developer shall use good-faith efforts to provide for these employment opportunities would also be applied to any TIF district approved after January 1, 1998. I do have some amended proposed amended language that was provided to me by the Law Department regarding these sections. I have reviewed the amendments and would submit them to you. I don't believe that they would in any way alter the intent of what was trying to be accomplished with the bill. It's, I think, more along the lines of just the Law Department providing language that they felt more comfortable with, and I'd be glad to submit those.
If we're talking about the same language, although I have not seen what you plan to provide 'cause I have not seen any of the amendments that you wish to talk about, I know the Law Department did express concern, and 87 COMMERCE, ECONOMIC DEV. - BILL 000355 I'm already prepared to make at least one amendment that had to do with a legal issue involving, I believe, the language maximum feasible number.
There are at least three sections where that language is used, and I agree with that that needs to be deleted.
Yes, Mr. Chairman, that is correct. And I will leave what I have here with you.
Can we -- Mr. Curato, you may recall in your previous tenure with us, you and I had an exchange on the floor -- it was a very nice one -- and I believe I asked you about a particular project and whether you were carrying the secret documents in your briefcase. You at least stated for the record at that time that you did not have the secret documents in your briefcase. You did not say that you didn't have the secret documents, just that 88 COMMERCE, ECONOMIC DEV. - BILL 000355 they weren't in your briefcase. But please don't keep the amendments so secret.
Mr. Chairman, I remember that exchange well. I believe it had to do with the Civic Center and whether or not I had a secret plan involving the Civic Center. I do remember that very well.
I would also note that do not have my briefcase today either.
The amendments, again, that were submitted, I think, reflect the fact that we do support the intent of this legislation. And you referenced the fact that it really was just the language related to the phrasing "maximum feasible number." With those changes, we can be supportive. I would just conclude my testimony by saying that we are, and continue to be, eager to work with City Council in developing TIF districts 89 COMMERCE, ECONOMIC DEV. - BILL 000355 that foster economic growth throughout the City and to provide City Councilmembers and their staff with any relevant data that is required to achieve that goal. With respect to the job and tax projections, both the Finance Director and I are willing to sign off on any plans that are submitted to Council. I believe that we can find a way to solicit the additional comments that you had talked about. And with the minor changes that were suggested this morning, we're prepared to support this legislation.
Thank you very much for your testimony. I do have a couple of questions and some things I'd like to walk through. I've looked at the amendments very quickly. I again understand exactly what you're trying to accomplish, and number one, by essentially deleting the Controller and the Executive Director of PICA. Again, I would only say back to you that I think somewhere in that section, we need to make some reference to receiving comments or a review by those entities, 90 COMMERCE, ECONOMIC DEV. - BILL 000355 but take them out of the area where essentially there would be a locked revision on approval or disapproval. We can bat about some language on that. What I'd like to get to, though, is your amendment on -- or your number 2 amendment seems to take a significant amount of that section 9 out and replaces it with new language, which, again, which we've just seen for the first time. My thought on this was to just remove the language where it says "contain a statement for the developer, that the developer shall use good-faith efforts to ensure that the project shall provide," and then just delete "for the maximum feasible number of" and then let the sentence continue. Your testimony seemed to talk about -- I thought that it was difficult for you for some reason to provide this, I believe what's called, a preliminary economic opportunity plan up front. Is that the sum and substance of what you're trying to communicate to us?
Your testimony is not numbered, but on one of the pages, it says, 91 COMMERCE, ECONOMIC DEV. - BILL 000355 "An economic opportunity plan is required for all TIF districts and becomes one of the closing documents. Currently PIDC does not attach its economic opportunity plan to the initial preliminary TIF project plan. The documents required to be submitted under the preliminary TIF project plan are specifically enumerated by State law and, therefore, it has been PIDC's custom to conform to the requirements of that State law." I understand your need to comply with State law, but we are allowed to establish our own provisions in terms of our own approval-making process. And while I understand that the entire plan may not be complete, and as I understand, these provisions -- I mean, kind of the way it works in the real world is that the final components of an economic opportunity plan are often negotiated subsequent to the transaction being completed, or at least until the legislation has been voted upon. I don't necessarily see where it is an unreasonable burden that you would be able to at least give the framework or the outline of what that economic opportunity plan would be or what your goals might be, as you 92 COMMERCE, ECONOMIC DEV. - BILL 000355 proceed down the path to conclusion. Would you agree or disagrees with that?
So it's not impossible to give us at least a framework of what you're trying to do or what you would be trying to accomplish, understanding that that is not the final plan, that is merely the framework or the outline of what you're going to try to do, but we could see it, we'd have an opportunity to have some discussion about it in the public hearing. And I think we all understand that it is really subsequent to the developer understanding that I've got my TIF approved, I have my financing lined up, that you're really legitimately in a position to even have those final negotiations and come up with the final economic opportunity plan. I mean, is that kind of the scenario of how it all works out?
Could I add 93 COMMERCE, ECONOMIC DEV. - BILL 000355 something to your statement, Mr. Chair?
Mr. Director, if we could -- if you can, within that structure that the Chair just delineated for you, I think the key question for me has become that a developer has to answer one question, and we have to decide upon that one question. But for the TIF, but for the TIF, this project would not be done. And I think, given the current economic conditions in the country, the State, the City, given the current situation, I think that question, prior to everything else, has to be presented fully answered to this Council. But for. I mean, if we are talking about a project up in North Philly, where there is empty land and there is probably no prospective of getting and somebody comes in and says, I need a TIF in order to develop over here. But for us being able to do that, if he is able to present the project and says yes. But it is for a Center City project that could be done, and the developers have come to see it almost as an entitlement, I think that question has to be fully 94 COMMERCE, ECONOMIC DEV. - BILL 000355 answered. And I don't think they're answering that question right now. And that's in addition to what. . .
Thank you, Mr. Chairman. As a follow-up to Councilman Ortiz, isn't it also a question as to not necessarily the area of the City where potential development may be looked upon, as it is more related to what the components of the deal for the development is all about. I think in the minds of some of my colleagues and a lot of other folks, when we speak about development in Center City, most people feel that because it's Center City and it's the vibrant commercial hub of the City, every deal that is put on the deal will automatically become a reality and it will automatically work and can get done. Again, you weren't here earlier, Mr. Curator, but through some of my communications with developers in the last five years, even in Center City, the deal sometimes will not work unless there is some financial incentive or some 95 COMMERCE, ECONOMIC DEV. - BILL 000355 monies that the public sector needs to put up to fill the gap. Eighth and Market is a perfect example. A TIF was created and approved, the Parking Authority put their money on the table to develop a garage, and still today, two years, maybe a little bit longer, since all of those financial packages were approved, we still don't see development because it is not as easy to do as all of us would like for it to be. I mean, I don't know that we can just say TIFs -- I mean, I don't think anyone is suggesting that we throw all TIFs out the window, but I just don't think that we could sit here today and make any really determination as to what we should structure into the TIF, because I think each TIF, each development brings a different set of circumstances to the table that need to be dealt with at the time of their application. And if you care to comment on that, either one of you, I'd appreciate that .
If I may add to you. But that's why I said the but-for question. But for this TIF. And then rationalize it and 96 COMMERCE, ECONOMIC DEV. - BILL 000355 then explain it and then substantiate it. But for this TIF, this project cannot be done. And put that forward -- be it in Center City or anywhere else. But you have to be able -- we have to be able to have that question answered. And I'm -- you know, I'm resolute that we need to do it, because I think the developers have taken this as an entitlement without having to answer that question --