And I think you're probably right in many cases, or in some cases. I think what you have to rely on is the due diligence of the Commerce Department and PIDC who do this as a normal course of business. They're familiar with what the projects would cost, they are familiar with what the application or the developer is presenting and the jobs that it will create. They know the financial market and what kinds of money are available to the project. 97 COMMERCE, ECONOMIC DEV. - BILL 000355 So, in most cases, even though I deal with the two agencies and I talk to the developers, I'm really at everyone else's mercy to tell me what they feel is necessary to make the project a reality. I recall Mayor Rendell calling me two or three years ago about the high-rise development at Eighth and Walnut, and the name of the development I forget at the moment 'cause it still hasn't happened. But the developer was seeking a 20-year TIF. Somewhere around $15 million, and I'm not sure if that's the correct number. And we discussed it and I thought that years was 15 entirely too long, I thought we'd be setting a 16 precedent for future developers who might be 17 looking for the same kind of terms in their TIF. 18 And we went back and forth with that developer and 19 I think it has since changed to reduce not only 20 the length of the TIF but also the amount of the TIF. And the developer walked from the job. However, a different developer came to the table and said, I can do it for 10 to 15 years and I can do it for $10 million as opposed to 15. So I think that there are those kinds 98 COMMERCE, ECONOMIC DEV. - BILL 000355 of discussions about the but-if that are ongoing. And what we get for the most part is the final result of all of those questions and issues that are looked at and scrutinized by the Commerce Department and PIDC. And if you'd care to comment, I'd appreciate it.
Well, I actually -- and I'm not just saying this to be diplomatic, but I actually agree with both of you. Councilman Ortiz, I can assure you that I will be a tough sell when it comes to City assistance, and that's the way that I approach the way we use our City resources to help projects. If we are needed to step in and help to get a project going, and if the project is good for the City and will create jobs and is helpful in either generating additional development or in revitalizing a neighborhood or will help a certain sector of our economy, and it is clear to me that without our assistance, that project would not go forward, then I will be inclined to favorably consider it. But I can assure you, I do not approach 99 COMMERCE, ECONOMIC DEV. - BILL 000355 TIF projects or any other City assistance as though they are entitlements. I look upon City funding for projects as not a right but something that we are to use very judicially and only when necessary. And then to Councilman DiCicco's point that we have -- the TIF program has been used very successfully for a number of Center City projects. And the Councilman is right: there are a number of those projects that, I think, have really done wonders in bolstering Center City development. And I just have not been on the job very long, but in my review of the projects that were done, the TIF program was necessary. The one I have the most direct experience with was down at Penn's Landing for the family entertainment center. That project will completely revitalize the waterfront, it will give us, if not the best waterfront in the country, then certainly one of the best. And I think that the TIF program was very effective in that regard. So I can assure you I will review every proposal very carefully and judiciously and not -- and that program will not be abused. 100 COMMERCE, ECONOMIC DEV. - BILL 000355
Thank you, Mr. Chair. With all due respect to my former colleagues from the Commerce Department and PIDC, I would not suggest that we are strictly at the mercy of the due diligence, nor could we be at the mercy of due diligence. My question is really geared toward not so much whether due diligence has been done with respect to the developer and a specific project, but we talk about Tax Incremental Financing Districts. Yet I have yet to see a proposal, while I've sat here on Council or even before coming to Council, that's actually established a district where tax increment financing was available to more than one developer. My problem has been twofold. I will not completely rehash my problems with past TIF projects where I feel that there was not a financial need demonstrated or at least not submitted to individual members of Council, but certainly, there has not been a TIF district approach to try to change the actual market 101 COMMERCE, ECONOMIC DEV. - BILL 000355 conditions within a district for more than, quote/unquote, the client of PIDC or a specific client of PIDC. My question is more, since this bill 6 really addresses how to create some public benefit beyond that benefit that goes to the specific developer, what is in the future of TIF? Is there going to be any strategic planning in terms of doing TIFs, as the City Controller talks about, to actually create TIF districts where unknown developers come in to really spur revitalization, particularly in view of the fact that not only do we have -- tax increment financing has been concentrated in specific areas of the City and in specific Councilmatic districts, but beyond that, in very specific areas, we've done TIF districts in exactly the same area, which means that we establish a TIF district and the intent of it was to change the market there for private investment, then why didn't that impact that market? And why do we continue to reestablish TIF districts that essentially overlap? I mean, when are we going to do it correctly, actually carve out areas of the City where we're trying to spur private investment 102 COMMERCE, ECONOMIC DEV. - BILL 000355 and allow it to be an open process to all developers that may want to develop there?
Councilman, I'll just give you my brief answer, and then maybe ask Mr. Fina to respond since he has more of a history with the program than I do directly. The TIF is really one tool that can be used. The other one that comes to mind, when you talk about setting up areas or districts to encourage development without a specific developer in hand is the Keystone Opportunity Zone legislation, which, I think we've had a good bit of success with and is about to expanded. Pending final approval legislation in Harrisburg, we will be able to add more acreage to the Keystone Opportunity Program, and I think that's one tool that can used very effectively. My own experience with TIFs and how they're used is that we do tend to be more reactive. When a developer comes to us with a project, if there is a gap or shortfall, as Councilman Ortiz pointed out, that but-for argument, that we've tended to step in at that point, and it has been, at least in my experience, 103 COMMERCE, ECONOMIC DEV. - BILL 000355 the case that the TIF district directly overlaps the boundaries of a certain project that we want to do. And I think what you're alluding to this morning is the possibility of creating TIF districts perhaps in certain neighborhoods that encompass a larger area and that can be used as an incentive in more of an open competitive process, if I hear you correctly. I think that's certainly something we can explore. I know that we do need to have a TIF strategy in place, certain guidelines and criteria as to what constitutes a proposal that the Administration would be willing to support. I have started to work on that. My initial reaction was to not make it purely location-based; in other words, to not say, we're only going to support TIF proposals in certain areas of the City. My initial thoughts were to gear it more towards direct economic benefits to the City, primarily jobs, and areas where supporting a TIF could revitalize a neighborhood and spur additional development. But I have not completed those 104 COMMERCE, ECONOMIC DEV. - BILL 000355 guidelines yet. I would be glad to share those with you and with other members of Council when they're completed. Maybe if it's acceptable, if I could just ask Mr. Fina to comment just for more of a historical perspective.
Good morning. My name is Robert Fina. I am Senior Vice President at Philadelphia Industrial Development Corporation, PIDC, and I've had the pleasure of speaking before members of City Council on TIFs many times in the past. The program is about seven years old, not five; we've been doing them for seven. And there's been a number of success stories, both in Center City and out of it. We have proposed -- more specifically to your question, Councilman Goode, we have had more than just, say, project TIFs. The Philadelphia Naval Business Center encompasses more than just the Kvaerner project as a TIF, as well as 13th Street Passages, which is in Center City, which is more than just a project. 105 COMMERCE, ECONOMIC DEV. - BILL 000355 We've avoided doing those larger geographical areas for many of the concerns that Council has raised in the past, that you won't basically know that there is a but-for argument if you create a TIF district and then during the term of that TIF district, years usually, projects 8 come in and out of that process. In fact, what 9 you've done on the Philadelphia Naval Business 10 Center is require us to come back annually every 11 time we use TIF revenue, in effect, asking us to 12 give you the right, as you require, the right to 13 approve each TIF district within that -- or each 14 TIF project within that TIF District. 15 So we'll certainly explore with the 16 Commerce Department both methods of applying 17 TIFs. There isn't a right way or a wrong way. We 18 are in compliance with the law. Other parts of 19 country use the larger geographical TIF districts, 20 as well as other parts of the country use a per-project basis. There are advantages and disadvantages to both. When you create a TIF district, there's some disadvantages. If you're a property owner and you make improvements in that TIF district, 106 COMMERCE, ECONOMIC DEV. - BILL 000355 you do not have a tax abatement by right, as you do now. So you lose certain aspects of it. So we were very careful in presenting that to you, that you would be able to at all times wrap your arms around what we're proposing. And I just wanted to add one more comment. We do, at your request, at this Council's request, and Councilman Goode, you were one who championed that about a year ago, that we do a financial gap analysis and we provide that to Council and your staff. And we've been doing that for the last TIFs that have been presented to you, that we do a gap analysis to show but for the TIF, that particular project, that project could not proceed based upon the assumptions and numbers that we put in that analysis that we share with you. I'll be happy to answer more questions if there are any.
As a follow-up to that, it's a interesting argument in terms of the whole but-what-if scenario. I'm assuming, or was assuming under the context of my comments, that we were providing TIFs because there was not a market 107 COMMERCE, ECONOMIC DEV. - BILL 000355 there for private investment, but you're saying that they are very deal-specific and have always been very deal-specific.
Councilman, I'm not sure. Not always. We have -- that's been --
Other than the Navy Yard and other than a couple of examples, they have generally been deal-specific.
And you're suggesting that they should be deal-specific.
I'm suggesting that it depends on the nature of what's being proposed and the economic goals and objectives of the Administration and of City Council. So far, we've only closed 8 TIFs. Of the 24 that you've approved, only 8 have closed. It's a very -- it's -- it's -- is not a giveaway and is not -- even with a TIF, a project doesn't necessarily move forward.
One last follow-up. In light of Councilman DiCicco's very aggressive tax incentive legislation agenda, have you begun to revisit the whole issue of TIFs, the fact that 108 COMMERCE, ECONOMIC DEV. - BILL 000355 we are extending abatements to ten years?
We will be doing that. I think Councilman DiCicco's efforts have been terrific as far as giving us additional incentives to attract development. So to the extent that it helps our cause and impacts whether or not additional TIFs are needed, we'll certainly be looking at that.
You're welcome. Mr. Chairman, if I could just, if I may just one other point that was in my written testimony that I did not mention when I gave the testimony here this morning. The provision in Bill 355 that made the provisions on the hiring the youth and minority, female, disabled business enterprises retroactive to January 1, 1998 I think would be somewhat problematic. This is another example of where I think we support your intent and we can certainly make efforts to --
Well, I saw that in your testimony, and I had put an asterisk next to it to ask you the question. When I looked at the TIF schedule, the 109 COMMERCE, ECONOMIC DEV. - BILL 000355 number -- I believe the number's now at -- we're now at number 24, have done 24, right? My recollection was that we picked that particular date so as to not interfere with any project that was already underway, but there are some that have been approved since that time, which, to the best of my knowledge, at least at the time of introduction, were not underway. And so I guess I need to get from you what projects have gone into play since January 1, 1998 that you think will be affected by this bill. And rather than painfully dragging you through that, now that I have reoriented myself to the document, since '98, we have, I believe: Cecil B. Moore Avenue. That was on 6/18/98; Penn's Landing 6/18/98. How is that project going? St. James Court, December 10, '98; Brewery Park, December 10, '98; Convention Center Garage, 1/14/99; Jump Street, 1/14/99; West Philadelphia Retail, 1/26/99; Pavilion Market East, 1/14/99; 110 COMMERCE, ECONOMIC DEV. - BILL 000355 Whitaker (I don't remember that one), 6/17/99; Ashton (I remember this), 6/24/99; New Market (I think that's the Hotel W), 12/9/99; 13th Street Passage, 12/9/99;l. Gateway, 12/9/99; Schmidts Plaza, 4/13/2000; Networks, 4/13/2000; West Chestnut Retail, 4/13/200; And Ninth Street Retail 4/13/2000; And we did -- Councilman DiCicco, didn't we do Silver City right before we left? Was that June?
So estimate of June of 2000. Now, I mean, some things could have changed since May 18, 2000, but have most of these projects started?
Or are they anywhere near started at the moment? I mean, some are probably are a little further along than some others.
There are some further along than others, and rather than go through each one, project by project, I mean, my reaction is that some of these are further along than others, some of them -- there are a lot of agreements that have already been signed. I think in most cases, we can go back to the developers and ask that they incorporate the provisions of this bill.
I mean, I think in this particular section, all we're asking is when -- and we say that they are along, I mean, they may have started digging in the ground, but I don't necessarily know from any of these, especially on the retail commercial stuff, that they've determined who their employees are going to be, selling clothes, or whatever they're going to be selling, and all we're saying is, if there's an opportunity, to make sure that some young people here in Philadelphia get a chance to work at a project for which we've provided a tax 112 COMMERCE, ECONOMIC DEV. - BILL 000355 incentive for. Rather than having them take three pieces of transportation to go work at the King of Prussia Mall, it would be nice if they could work right here in the City. Maybe they could go there after school.
I mean, look, I'm not trying to jam anybody up, but if you haven't even started down the path of putting up a sign saying "Jobs Available," then I don't think that we're causing you that much of a problem to try to figure out how to make sure that some Philadelphia young people get some employment, whether in the summer or during the school year. So, I mean, no, I don't necessarily want to go project by project and, you know, if it, you know, becomes such a violation of something, you know, I'm a pretty open-minded person, but, I mean, I looked at the dates before we picked one, and based on an evaluation of where things were at the time, it didn't seem that anybody was in any particular jeopardy. Most haven't even put a shovel in the ground yet. Mr. Curato? 113 COMMERCE, ECONOMIC DEV. - BILL 000355
Mr. Chairman, if I could maybe follow up on your question.
I think maybe what we need to discuss here, without getting into all of the fine details is, even though there might not have been any ground -- shovel in the ground or any construction that has begun, a lot of this stuff, at least on the retail side, the developers are negotiating with potential tenants. So while you may have not seen any -- Penn's Landing a perfect example. There are a number of tenants that are in place and there are a number that they're trying to sign an agreement to do that, to locate to that site. So, in all fairness to them, some of these things we're asking for may actually interfere with what they're doing. I mean, in the case of Silver City my experience --
Right. But, Councilman, if I can, I mean, Penn's Landing is a great example. I mean, it's billed as a family entertainment place. I have to assume that a fair number of young people will probably work at 114 COMMERCE, ECONOMIC DEV. - BILL 000355 Penn's Landing. I would be stunned, based on the continued extensions -- I mean, with every respect to -- I mean, it's a complicated project. But even in the negotiation with these respective tenants, if they have not made determinations on their youth workforce yet, then how is our saying to them, At the time that you're in that phase, to the greatest extent possible, we'd like to make sure that young people in Philadelphia versus somewhere else. I mean, you know, young people being equal --
And I agree, and I think you know my position on residents.
People working in the City and for the City should all be required to live here.
But what I'm suggesting is that in some cases that -- I'm using Penn's Landing as one of the examples -- there are 115 COMMERCE, ECONOMIC DEV. - BILL 000355 a number of tenants who have already entered into a contractual agreement with the Simon Group. And I'm certain, from my conversations, that many things that you're suggesting or requesting have already been implemented. But for those -- "but for," that's becoming a key word today, a buzzword.
But for those tenants that have not yet signed the agreement, I don't know how far along they are in their negotiations, and would this interfere with their --
Well, Mr. Curato may actually know the answer to that particular question. What was your last employment?
Mr. Chairman, my concern is that -- as I said to you earlier in my 116 COMMERCE, ECONOMIC DEV. - BILL 000355 testimony, we support this concept, I think it's worthy, I totally support Philadelphia youth being a part of these projects. We have no problems or issues in carrying this forward. I'm just a little bit concerned that we're going back with developers who have been through the process and imposing new after-the-fact regulations on them. And I say that with the understanding that I think virtually all of these developers would also agree that these are worthy goals to be achieved and would work with us on that. I'm only concerned that I'd rather do this with the prior approved TIFs on more of a sense of just conveying that this is important to us, rather than putting them into the process and having them to have to agree to regulations that we're imposing on them retroactively.
With all due respect, Mr. Curato, I have been hearing that same phrase about our inability to do what Councilman Nutter is talking about and requiring of 117 COMMERCE, ECONOMIC DEV. - BILL 000355 developers, and that we will begin doing this good-faith effort, you know, in the next ones. Since I've been here, and I've been here since 1984, and a lot of development has taken place since then, and the issue has been that we've always heard that, and not just you, you're just brand new, but from every commerce director that has come before us. And the reality of it has been that none of these things have ever been met so that throughout all of the development that we have seen, we have seen that he citizens of Philadelphia and the young folks and so on really are not being employed. And it's really disheartening to see the data that we get from RDA in terms of projects that are being built right now. And most of that data is totally depressing because most of those individuals do not reside in the City of Philadelphia. And then, as Councilman Nutter says, can we just begin putting forward some sort of a requirement? I don't think it's that difficult that in the year 2000 and on forward, we expect developers who get all of these things from us to be responsive. We ask teachers to live in the 118 COMMERCE, ECONOMIC DEV. - BILL 000355 City of Philadelphia. I mean, if they don't live here, they can't be hired. We have policemen, firemen and so on. I think it's really a thing that maybe shouldn't even have to be legislated. It should just be taken for granted almost, and it is not. And that's the pity of it.
Mr. Curato, could I -- I mean, maybe there is some solution to this. The language reads that the developer shall use good-faith efforts to ensure these things. Now, I mean, I can only speak for myself, but I mean, it would be pretty much the sense of the committee. I mean, if they've already made agreements, signed documents, you know, laid out what their workforce is going to be and kind of signed, sealed, and delivered, we have no right to try to undo that, and it is not our intention -- certainly not mine -- to try to do that. But in a purely we haven't even dealt with that situation because we're still trying to figure out how we can put the roof on, I think we can go to someone and say, This is important to the City, it is a part of the project plan. You 119 COMMERCE, ECONOMIC DEV. - BILL 000355 haven't even started down that particular road, this is what we'd like you to take a look at and use your good-faith efforts to do it. If you've already done it, my view is that there's nothing we can do about it. So, I mean, I'd only ask you to give that some thought and maybe it will give you some additional comfort level. Go ahead.
Just, again, I'm just somewhat concerned about imposing new provisions on a developer who's been through the process after the fact. I would go -- I will go to every developer who has gotten a TIF approved and convey the sentiments of this ordinance and the goals that we're trying to achieve. I would expect that --
Wasn't it a part of our sentiment, or someone's sentiment, in the first place?
When they were done, when the negotiations took place, did anyone sit in the room say, Now, you're going to have a whole lot of jobs, whether adults, kids, seniors, babies. To the extent that you can, you know, by the way, since we're helping to provide this economic incentive, I mean, you are going to try to hire people from the City or the region. I mean, someone did say that, didn't they?
We can re-express them. My concern is -- and just again to 121 COMMERCE, ECONOMIC DEV. - BILL 000355 reiterate -- imposing new provisions on a developer after the fact. We're looking at developments that have been approved under one set of guidelines, that have been made it through Council, TIF bills that have been approved signed by the Mayor, we're going down the path, and then all of a sudden, we're coming back and saying, We are now going to impose new regulations on you, even though it's after the fact. What I'm saying is, we can go back and say to them --
Mr. Curato, I don't necessarily look at it as imposing something new. I have to assume and believe -- or maybe I want to delude myself into believing -- that it was already a part of the program and the package when all of this was discussed. I mean, there had to have been some discussion like that. Mr. Fina, I mean, what happens in these discussions? Don't we talk about these kinds of things?
And I think those sentiments were expressed in the beginning, at Council. 122 COMMERCE, ECONOMIC DEV. - BILL 000355
Because Mr. Curato is now the newly-appointed commerce director, he hasn't been a part of the negotiations on TIFs. And I've been before this Council, as I mentioned, many times. We do require every TIF developer, every recipient of a TIF, to do an economic opportunity plan.
In that plan, it talks about hiring -- well, I'll use the word "goals." I don't know if that's the legal term, but --
But with this group, I'd just like to speak very openly. Those goals have included employment of various levels of income and race and gender and location. We've also been very successful in doing things at such -- well, I'll give you one example, the Loews Hotel, of bringing people from welfare to work into employment.
That was not a part of the economic opportunity plan at the time, but we and 123 COMMERCE, ECONOMIC DEV. - BILL 000355 the developer, in --
And the intent of City Council have asked them to do those things and we've done that.
We're trying to anticipate your wisdom, Councilman. And, seriously, you know, that was the goal that the Administration at the time, this current administration, wants to see occur -- welfare-to-work employment. That was a major focus; at the same time, still adhering to the goals of the economic opportunities plan. They exist. Adding a provision that says, you will, to the maximum extent possible, or some language that --
That language is being -- (Unintelligible, parties talking over each other.)
-- and under 21, I think that would, providing it doesn't conflict with 124 COMMERCE, ECONOMIC DEV. - BILL 000355 other agreements. I mean, most of these economic opportunities plans,, as you require, have been submitted and completed already. So by this language, we'd have to go back and amend them. I think Mr. Curato's right in asking -- that he ask the redeveloper to do that.
Let me add to this discussion. And I understand what Councilman Nutter's talking about. As an example, we talked about the Networks TIF, a component of the Networks TIF, particularly in the discussion phase, was incorporating a program with Community College. And we actually met with the head of Community College and had the developers of the network go meet with them, and they were talking about Community College being a feeder system into the e-commerce development opportunities in that facility. Would you feel more comfortable if we talked about the School District of Philadelphia, who, by and large, would deal with individuals 125 COMMERCE, ECONOMIC DEV. - BILL 000355 under -- hopefully not 21, 'cause we hope we still don't have kids in the School District at 21 -- providing some sort of a feeder system into these types of job opportunities. I understand we have a school of business. One of the magnet schools, I think, is Bartram. It's a School of Business. And we have a School of Communications, which is William Penn to possibly be participating in some of these TIFs. Would you feel more comfortable with us having some sort of language or provision that requires that these developers work with the school system in the City of Philadelphia or the Catholic school system or some other type of entities that provide educational opportunities? I mean, would that make you feel more comfortable? 'Cause we have done something similar to that in the past.
Councilman, what you're 21 asking for is actually being done to some degree. We've used previously the Private Industry Council, and now I think it's called "The Workforce 2000," as an entity, as an agency to help bring about employment of Philadelphians. 126 COMMERCE, ECONOMIC DEV. - BILL 000355 And that's where these jurisdictions are. They -- the Worforce 2000 doesn't have jurisdiction outside of the City. The welfare-to-work programs that exist in Philadelphia, they may be funded by the feds and the State, but they have jurisdictions within the County and the City of Philadelphia. So that's where their focus is. So that is all being done. I don't think that there's a -- I'd be willing to stake a risk in saying that the TIFs that have been completed, those projects funded with TIFs, you would be very pleased at the employment in those TIFs being in Philadelphia.
And I agree with that. And in speaking to the TIFs in my district, you know, as Councilman DiCicco indicated, we talked about that process early on with the developer and get some assurance that they would work with us. But I guess what we're trying to get is some language that specifies the process. I personally, I think that this is rather vague, to talk about individuals under 21. I'd rather see something a little more detailed and a little more 127 COMMERCE, ECONOMIC DEV. - BILL 000355 specific, which is why I talked about maybe the school system, both Catholic and public school systems, I'd like to see a program actually set up to be a feeder system into these programs, and not just the Private Industry Council and workforce development agencies. So if that's something that we can incorporate, I'd like to see that, you know. Yeah, Councilman DiCicco referenced the -- one of the schools, I think, works with the hospitality -- it's a hospitality feeder system. So I think that, you know, we want to get -- I personally would like to see something a little more specific if we agree on the goals associated with what we're talking about today.
Councilman Clarke is correct. What we need is specificity. And what -- and my staff has been working on an amendment as the discussion goes on. And I believe that the lowest responsible bidder is the one that usually gets the contract, is that correct, when we put it up for bid? The lowest responsible bidder?
Right? And maybe we should add a new section to 180 here that actually construes and then puts to the legislation something that goes along those same lines, where two or more sponsors, developers, bidders have submitted substantially equivalent bids in a future OHCD and DOC-covered project, the sponsor -- or builder -- a developer or builder which has demonstrated the superior ability to meet or exceed the numerical goals set forth in subsection 2 a. above shall be deemed the lowest responsible bidder. And I think that gives you a greater enhancement of the criteria in which to select who the builder or the developer is going to be. Do you agree with that?
But I would -- I would think that the City Law Department should review that language. I'm not sure if that's something that we can do.
I think you can do it. 129 COMMERCE, ECONOMIC DEV. - BILL 000355
Thank you, Mr. Chairman. I was glad to know that after spending or approving hundred of millions of dollars in tax and probably implementing projects for tens of millions of dollars in tax financing, that we are able to report that there are some jobs going to Philadelphia residents, that there are some welfare-to-work opportunities, there are some opportunities for minority and women and disabled businesses. But I think what we're trying to get to today is what specifically in negotiating TIFs with developers do you require as it relates to this legislation? And it's interesting that you said that we would be pleased with the statistics in terms of employment. But have you actually submitted job-monitoring reports based on those TIF projects that are already in effect? I'm not willing to necessarily take your word for it.
Councilman, PIDC does general monitoring for all of our programs. Normally what we require is that one year after 130 COMMERCE, ECONOMIC DEV. - BILL 000355 opening, permanent employment must be documented. And then we do that for three years. We're collecting that data now for the TIFs as it relates to this. So I think --
The data is available. It's probably in a format that has to be collated and presented, you know, in a much more intelligent way. But, yes, that data does come in. As a project is completed in all of PIDC's programs, City Council has received this information in the past for all PIDC's programs, employment, where that employment comes from. And then we track that for three years from the date the project's is completed.
Well, let me ask you a question regarding TIF contracts or general PIDC lending contracts. If those employment numbers 131 COMMERCE, ECONOMIC DEV. - BILL 000355 are not met in any case, would you sort of rescind the tax increment financing, or would you call the loan?
It depends on the program. We have not built that into the TIF program employment, except in certain special cases. You may recall the Cardone TIF that we did for that project. We had that the TIF would go away if employment were at -- were not met at -- for both those TIFs that Cardone only received approval for two of those projects have not closed. But that was the spirit that City Council wanted to approve those projects, that's what we included. We did have in effect claw-back of the TIF for that. We've proposed claw-backs in almost every TIF of late for different circumstances. One has to deal with, again, the discussion of the but-for's, is the TIF really needed, and others do have employment requirements.
But as of this date, there are no requirements regarding employment goals or minority contracting that would cause you to call that loan or rescind financing or a tax incentive based upon not meeting those goals. In 132 COMMERCE, ECONOMIC DEV. - BILL 000355 other words, there is no penalty.
You asked for it at the table, they do meet some goals, but in terms of the goals you asked at the table, they are not requirements. And if they are not met, they still get the money; is that correct?
Okay. What I just said, for two particular TIFs, there was a grave concern of this Council that --
You're talking about proposed projects that are not going into effect yet; I'm talking about past PIDC lending practices and I'm also talking about TIFs that are already in effect. I'm not talking, you know, the claw-backs that you proposed this spring; I'm talking about the up to 20 projects you did before 133 COMMERCE, ECONOMIC DEV. - BILL 000355 that and the tens of millions of dollars, the hundreds of millions of dollars of financing that PIDC has done. I'm saying, when you talk about a track record in terms of employment and in terms of minority contracting, have you ever had requirements that caused you to call the loan or rescind the financing or bring back the tax incentive?
The answer your question succinctly, our past practice is, yes, we do have requirements on the number of --
Do you have requirements in place that caused you to rescind the tax incentive or call the loan? I mean, are the requirements that stiff that if someone does not meet an employment or minority contracting goals, that you take back the financing or tax incentive?.
The employment goals on most of our programs, that is the case, Councilman. We do have default mechanisms. That's the mechanism for the -- if we find a project in default --
And have you ever 134 COMMERCE, ECONOMIC DEV. - BILL 000355 taken any money or tax incentives back?
Could you please submit any documentation to that effect the Chair.
Councilwoman Reynolds Brown on the point and then Councilman Clarke..
Thank you. Following up on Councilman Goode's point, define "claw-back." And is that synonymous with "penalty"?
Oh, I would absolutely say yes. What we offer, what you've approved in just the TIF program alone are an inexpensive way to finance a portion of a project, understanding 135 COMMERCE, ECONOMIC DEV. - BILL 000355 the TIF never finances all of the project, but a portion of the project. We have built in lately a claw-back in which that TIF if -- would be accelerated and paid (unintelligible) by the developer if they do not meet certain -- if they make certain income levels or if they don't do certain employment. It varies with the project, depending on the negotiations that we enter in with the TIF developer. That does happen.
Define "lately." The testimony says that there are 24, and 8 have closed?
I'm curious to know, at what juncture in the has the penalties 17 that you've talked about and/or claw-back been 18 instituted? 19
I think that's been an 20 (unintelligible) process coming before you, 21 Council. That is, you require more, and we 22 basically responded to your request. 23
So now claw-backs, 24 or penalties, as you have defined them, are a standard operating procedure with all future 136 COMMERCE, ECONOMIC DEV. - BILL 000355 TIFs?
We propose that on all TIFs so far of late, all TIFs have a form of claw-back in them, yes.
"Of late," meaning of the last Council round and the ones proposed before Council now.
Thank you, Mr. Chairman. That was actually going to be one of my questions, Mr. Fina, to explain the claw-back provision, but I'll go on now to the other parts of my questions. In line with Councilman Goode's other questioning about the creation of these TIF districts, my recollection, when this was originally explained to me, I in fact thought they were actually going to be districts where multiple 137 COMMERCE, ECONOMIC DEV. - BILL 000355 developers would possibly have opportunities, but if you're saying that wasn't the original intent, so be it. What I'm trying to get at, the question I'm trying to get at is with respects to the Mayor's blight initiative. I know one of the reasons why some of these developments would be more feasible than others is that you have developable parcels, there are certain things associated with the site that makes it a feasible project for certain developers. Is PIDC involved in the discussion as it relates to the Mayor's blight removal initiative? Because a large part of that, from my understanding, is supposed to create light industrial, other type of retail and commercial development opportunities. Are you all involved in that process at all, in any level of detail?
Well, can you explain to me what level and how. I mean, what part of the discussion? 'Cause I, you know -- I mean, I'm just trying to get a sense as you talk about your reformulating your TIF policy in 138 COMMERCE, ECONOMIC DEV. - BILL 000355 response to Councilman Goode's question, and what exactly are you looking at?
I've provided a substantial amount of information and met with various people from the Mayor's neighborhood transformation program. I wanted to make sure I used the right phrase here so I'm clearly understood. So I've, other members of PIDC have met with that group, I've met with specific people from the Mayor's Office to talk about how a TIF or a TIF program could be implemented into the -- used in conjunction with that program, with that initiative.
So if, as we talked about earlier, these TIF districts, say, for instance, if some parts of City -- unfortunately it may be in my district -- we were to be in a position to clear two square blocks of land, we can look at possibly creating a TIF district if the financing associated with that was more favorable than any potential abatements as it related to Councilman DiCicco's prior bill. I mean, is that a part of the discussion? I'm just trying to get a sense as we 139 COMMERCE, ECONOMIC DEV. - BILL 000355 talk about strategies and planning for our neighborhoods.
The answer would be yes, again, in a broad way. I mean, considering that, again, the program, the TIF program, you really don't finance anything until you really develop it, because it's the incremental taxes, it's the new taxes.
So everyone would have to be comfortable that there will be incremental taxes to provide a TIF loan.
To fund a piece of development. Normally that does not occur until permanent financing. Occasionally there is construction financing that's associated, but it's much riskier because you never know whether a TIF will be created. Going back into the history of the program, just quickly, in California, when they created huge TIF districts and they paid for infrastructure improvements in those TIF districts -- roads, highways, itself -- with bond issues 140 COMMERCE, ECONOMIC DEV. - BILL 000355 that were going to be supported by the incremental taxes in those districts when development occurred, the development never occurred, the bonds defaulted. So that's one issue that you have to be very cautious on that. The development will likely occur before you start funding the improvements within that district, whether the infrastructural or building that anticipates the revenue will be there. We have to be very careful here in the City not to do that.
Can we give an effective date of the TIF, say a year out, when we will feel comfortable that possibly we were able to lease up, we were able to get enough tenants and developers to develop that parcel, and at that time, we can move ahead with the TIF?
Certainly, Councilman. That's what we basically do with the TIF program now. We create an effective date that goes forward from this date to get the -- to gain the benefit.
I believe Councilman Goode wanted to add to that? 141 COMMERCE, ECONOMIC DEV. - BILL 000355
In a previous testimony question on a separate TIF project, I probably mentioned before that I did have in my opening discussion with the City's Finance Director, when she first came to town, she talked about TIF districts in Texas and how they're working effectively. But then following what you were saying, if a particular proposal for a TIF district or proposal within a TIF district do not provide but for a certain amount of revenue, it's assuming that that's the amount of financing that it would yield. But in terms of floating bonds for infrastructure and so forth, wouldn't that be the call of the Finance Director anyway, rather than PIDC?
The State program has an authority -- not a city -- has a redevelopment authority or an industrial authority proposing to do the TIF. Under that legislation, an authority can issue bonds. We have not issued bonds for that very reason, because one is that the City said they will not guarantee those bonds; and secondly, we wanted to be certain that the TIF 142 COMMERCE, ECONOMIC DEV. - BILL 000355 project would proceed. There's nothing -- there is no right or wrong to implementing a TIF. You could do it with bonds, you could do it in a large district, you can do it as the Finance Director proposed. We haven't seen the advantages beyond what we're doing presently in Philadelphia to move off the mechanism we propose. We're certainly open to it and we will talk and negotiate and develop a strategy for TIFs here in Philadelphia going forward, as the Commerce Director has indicated.
Somewhat unrelated, but you did bring it up, the Keystone Opportunity Zones. Mr. Curato, you weren't here at the time as the commerce director, but when they did the selection of the various zones, I wasn't a councilperson at the time, but I was kind of like a deputy councilperson, so I had a little 143 COMMERCE, ECONOMIC DEV. - BILL 000355 authority in terms of working within the district. That process did not lend itself to input of Councilmembers or staff, and I was a little upset because there were several areas within the district that I thought, had we had the opportunity of having a KOZ, we would have been able to develop some types of businesses, institutional, industrial, retail, light commercial. Can you tell me in the future how you will work, you know, as the Commerce Director as it relates to your interaction with Council offices when you make these decisions and policies associated with commercial development and designation of areas? 'Cause we kind of like got caught in on the tail-end, and I had to connect to the American Street Corridor and got a little small part next to Temple University, but it didn't really make a lot of sense, but I felt that I needed to have something in there, to be honest with you. Can you tell me how you will deal with that in the future.
Councilman, I think if I 144 COMMERCE, ECONOMIC DEV. - BILL 000355 understand the legislation pending in Harrisburg, there is going to be a relatively short time frame for submitting the expansion zones. Our department has already started doing some research based upon the prior work that was done, which areas were included, what our priorities are. I believe that we're only going to have probably a couple months to do this. I can tell you, we will reach out to members of Council to get their input as we put together the final plan. There are going to have to be some tough decisions made, because it's a popular program, the incentives are real and substantive, and there's a lot of demand for those areas. So there will have to be some tough decisions made. But we will -- I mean, I will ensure that my staff is working on this, does reach out to members of Council, and makes sure that their priorities are included in our decision-making.
Just one quick 145 COMMERCE, ECONOMIC DEV. - BILL 000355 statement for the record, and then I'm shortly going to have a logistical problem in terms of Councilman DiCicco's time. We may have to move into a public meeting, then come back to a public hearing. Mr. Fina, you, in one of your responses as one of my colleagues, made reference to reporting various pieces of information, and I was reminded that City Council passed Bill No. 990181, which was signed by the Mayor on 6/1/99, that required various reporting requirements for, at the time, existing TIFs and other TIFs going forward. That reporting date was December 31th of every year. I do not recall either at December 31, 1999 or at any time during the course of the year 2000 receiving any reports regarding TIFs. The items to be included were not limited to all data on: the number of construction and permanent jobs and demographic data on those jobs; the implementation of a plan for utilization of minority, female and disadvantaged businesses for contracting opportunities created by the establishment of the district; and any other data that is pertinent to 146 COMMERCE, ECONOMIC DEV. - BILL 000355 the financial, contracting, and employment operations of the district. Can you tell me what's going on with that reporting requirement?
Yes. PIDC is at best attempting to obtain that information. There's a number of agencies that you might have noted in Mr. Curato's testimony who monitor the employment in TIFs. And PIDC has been in communication with them, have set up meetings because that data has been slow in being brought to us so we could provide it to the Mayor's Office, that the Mayor can comply with the ordinance and provide it to City Council.
Well, I mean, about a month and a half -- you're about two months short of a year and a half, since the bill passed. It's taking you almost a year and a half to get this data together?
We'll probably be about a year behind. 147 COMMERCE, ECONOMIC DEV. - BILL 000355
So we should get a report by December 31, 2000, and that's going to tell us about --
Well, the data should be more than just for one year. We hopefully will have data up to the date of receiving it. So it could take on almost two years of information.
Okay. But you expect to meet the reporting deadline for this year?
Okay. I think Councilman Cohen and Councilwoman Blondell Reynolds Brown were next.
I just want to make one more comment, if I may. When Councilman Goode asked me on data concerning have we defaulted anyone for 148 COMMERCE, ECONOMIC DEV. - BILL 000355 not creating jobs, I think my more appropriate response, Councilman, should be: If they have not created the jobs under our loan programs, they will have been defaulted. Most times, developers have met the job requirements that have been imposed on us by City Council, by HUD, and by the State. So we may not have any defaults in the past half a dozen years because every developer has met the job requirements as imposed by those programs. So I want to be very careful.
You're saying that because you don't have any defaults based on job monitoring, you're assuming that they all met the goals? Is that what you're saying? 'Cause that's what it sounds like you were saying.
What I'm clearly saying is that we have very, very stringent job creation requirements in our loan program.
But do you have strict job-monitoring requirements? That's what I'm asking.
Do you have strict 149 COMMERCE, ECONOMIC DEV. - BILL 000355 job-monitoring requirements?
Based upon job-monitoring, have you called any loans? And your response just now was that you may not have any defaults based upon job monitoring because you're assuming there's no --
That's not what I'm saying. What I'm saying is that, if a developer --
Yes. I'm saying that of late, as far as the data that PIDC has, if the developer or borrower has not met the job requirements they would be defaulted.
If no one has defaulted, therefore, they have met the --
We look forward to receiving that information, not so much people who have defaulted based on job-monitoring; we look forward to the job-monitor reports in general. 150 COMMERCE, ECONOMIC DEV. - BILL 000355
Councilman, we do provide that data to City Council on a regular basis, on an annual basis. That data has come from PIDC on job creations within Councilmatic districts.
What I specifically just responded to. It has job creation within Councilmatic District for dollars loaned. We have the per-loan, we have the --
Mr. Fina, you're saying that we've received that every year.
I'm sorry. My question is not if you made a loan for $1 million, that loan's supposed to create 50 jobs, whether you submit a report that says, For this $1 million loan, it's supposed to create 50 jobs. I'm asking, do you support -- do you 151 COMMERCE, ECONOMIC DEV. - BILL 000355 send documentation to Council that actually monitors whether those 50 jobs were created? Not whether you put on a piece of paper that for that $1 million, we were supposed to get 50 jobs. I'm asking, is there actually a monitoring report that shows that we know that those 50 jobs exist?
Councilman, we don't provide you with all of the data in our files, if that's what's you're asking for. You're welcome to come to PIDC and look through that data anytime. We can arrange that so --
We provide you job-monitoring reports; don't give you or any Councilmember all the data that supports that information. It would be voluminous, that amount of data. PIDC has done thousands of transactions in our 41-year history.