Oh, the $5 million for a line of credit? Over what period of time?
But essentially the $5 million, if the loans go right, is never used. So it's --
Right. So it revolves. Exactly. Yeah. Okay. We'll 133 2/26/08 - WHOLE - RES. 080173 look into it. I don't know why it was dropped.
Thank you. The Chair recognizes Councilman Jones.
Thank you, Madam Chairman. In reference to the Mann Music Center and the Dell, how much revenue does the Mann Music Center generate annually versus the Dell? COMMISSIONER CARAPUCCI: Bill 17 Carapucci, the Recreation Department. I can't answer what the Mann generated, but last year for the eight shows, the cost was approximately 650,000 and the revenue was around 200,000.
Do we subcontract out the operations of the Mann and the Dell? COMMISSIONER CARAPUCCI: Again, 134 2/26/08 - WHOLE - RES. 080173 I can't answer for the Mann, but I know with the Recreation Department we handle 99 percent of it, the Recreation Department. We handle the maintenance, we handle all the skilled trades operations there, and we do all the bookings, most of the bookings and things like that.
I am very concerned about that operation. When I look at the Mann and when I look at the Dell, the Mann Music Center, which is a fine recreational activity -- I love Bach, I love Brahms, little Beethoven, Chopin every now and then, but I also like the Delfonics, the Temptations and the Stylistics. You can throw a little Jill Scott in there, if you'd like. My point is, the vast majority of people who go to the Mann Music Center come from outside of the City of Philadelphia to enjoy Philadelphia, spend money, and that's a worthwhile activity. The vast majority of people that attend 135 2/26/08 - WHOLE - RES. 080173 the Mann Music Center are Philadelphians, and for them, that's their big night out during the summer. I don't want to lose that in the process. And even though it looks like it's in the 5th District, it is actually in the 4th Councilmanic District in the park. So I would be concerned about any plans to privatize it. I would be concerned about how revenue will be generated, whether there will be opportunities for local promoters, local acts, local talent in the City of Philadelphia to participate in it, and I want to be kept abreast of how we proceed on the study of how -- and I want to know, have we met with the Friends of the Dell? COMMISSIONER CARAPUCCI: Yes, I did, January 21st.
And what is their position on this? COMMISSIONER CARAPUCCI: They are very concerned about, over the past number of years, how the ticket sales 136 2/26/08 - WHOLE - RES. 080173 have dropped tremendously, and most of the family of the Dell, they themselves were ticket holders for years and they would like to see something changed to where we could bring this back to where it was.
I like change, and it's a new day, but all progress ain't forward for everybody, so I want to monitor how we move with that, please. My next question is on the previous concern about the commercial corridors in the City of Philadelphia. That's a long walk up there, before my five minutes is up. (Witness approached witness table.)
And I know we're anxiously anticipating the arrival of the new Commerce Director, but some things and food for thought. The relationship between the Philadelphia 137 2/26/08 - WHOLE - RES. 080173 Commercial Development Corporation, the Philadelphia Industrial Development Corporation and the Minority Business Enterprise needs to be examined. I believe there is an opportunity for synergy. And similar to what the 8(a) programs do for federal-assisted DBE, minority and female companies, I think we have a unique opportunity, the resources of those three agencies, to replicate that in some small way for the City of Philadelphia. It is my understanding that we do an annual contracting out of services such as grass cutting in the City of Philadelphia, and that currently goes to a firm up in King of Prussia. We have a 17-day rotation for grass cutting. Is that right, Commissioner, roughly? COMMISSIONER CARAPUCCI: The Recreation Department is 14 days.
Okay, 14 days. Well, that's a 14-day 138 2/26/08 - WHOLE - RES. 080173 opportunity for a homegrown company if we choose to use that as a development opportunity within Fairmount Park and other places. I'd also like to see, having the unique experience of having run MBEC and having run PCDC, a synergy between contracting opportunities and actual capital resources to small businesses in a graduated manner that a company in PCDC's portfolio might graduate to PIDC. So a small tabloid that started a newspaper might actually become a daily newspaper. Thank you very much. (Bell rung.)
Thank you, 139 2/26/08 - WHOLE - RES. 080173 Madam President. I'll pick up where I left off. The video surveillance program, what are you budgeting over the Five-Year Plan for the continuation of the program, particularly as it relates to capital costs and then operations?
They're going to get me the figures. I believe we put in enough money for another 200 -- I think it was about 200 cameras, I believe, but I'll have the number shortly. It was 250 cameras.
While you guys are looking for the number, and I understand we had a change in the Administration, but this was something that all members of Council supported in a very aggressive way. Councilwoman Miller and I actually sponsored a series of ordinances. We had projected in the initial Plan of ultimately getting to a thousand cameras citywide, and I believe 140 2/26/08 - WHOLE - RES. 080173 the Police Department utilizing Comstats had done an analysis on projected phases in the out years, and I want to know, first of all, as it relates to the first 250 -- and I think we have actually allocated enough funding in this current fiscal year to, at a minimum, deal with the current contract that we have with Unisys, but my understanding of the roll-out, if we were to go to a thousand cameras, I think it's like the first three years there's a substantial cost as it relates to the installation and the roll-out of those cameras, and then in the fourth year and subsequent years, the cost goes down dramatically, because you're essentially talking about personnel costs down at the PAD for monitoring purposes and some maintenance fees associated with the cameras. And I want to know, is there a drastic change in the last Administration/last Council's initiative as it relates to cameras, and if so, what the dollars are reflected, 141 2/26/08 - WHOLE - RES. 080173 and is it reflected in the budget to ultimately get to a thousand cameras or at least be on the path to get to a thousand cameras?
Yes, it is. We left the funding that had previously been in the Plan in there and added $2 million more in '09.
And is it the belief that the $2 million will get us to -- I guess my question is -- because I haven't really been involved, and actually I have a meeting tomorrow with Mr. Gillison to talk about some phases of this, because we were intimately involved in the process early on and I'm a little concerned particularly as it relates to the management of the program. Upon some discussion with some of the members of the Administration, I just found out that some of the discussions had terminated relating to other agencies. As an example, the Philadelphia Housing 142 2/26/08 - WHOLE - RES. 080173 Authority apparently had cameras that they were prepared to put online. They wanted to have an arrangement with the City to do some monitoring of some of those systems. There are a number of -- I know that Councilwoman Miller actually pulled together a meeting with Councilmembers and some of the state stakeholders, elected officials and they had tentatively committed the funding for cameras from the state, so, therefore, we wouldn't have to have the full tilt. So I just want to make sure that we're going to have some continuation of the flow. (Witnesses approached witness table.)
And if 20 there are any copyright infringements, 21 please discuss that also. 22
Good afternoon. 23 Everett Gillison, Deputy Mayor for Public 24 Safety, along with Commissioner -- 25
I'm 143 2/26/08 - WHOLE - RES. 080173 sorry. Pull the microphone closer.
And actually as a veteran, I want to sneak this in real quick. I'm on my five minutes. And I would also like a little more clarification of the rethinking of the commercial corridor. The prior Administration committed a number of dollars to the commercial corridors, both in, I guess, capital costs with streetscape and some other activities as it related to management, and I'd like to know, is that being rethought where there might possibly be some reallocation of those funds, a recommitment of those funds to other either areas or strategies? DEPUTY COMMISSIONER GAITTENS: Good afternoon. I'm Deputy Commissioner Jack Gaittens, Police Department. As far as the cameras go, we are still hoping to get 250 cameras installed by the end of this year. We 144 2/26/08 - WHOLE - RES. 080173 are running into some issues out in the area of 52nd and Market. By this time, we should have had 70 cameras installed. We currently only have nine up, and we've only accepted five of those cameras. So there are issues with the vendor at this point in time. We are trying to work through them. There are engineering issues. There are agreement issues as far as where the cameras can be hung, whether it's on PECO poles or on SEPTA infrastructure. (Bell rung.) DEPUTY COMMISSIONER GAITTENS: The Law Department, the vendor and the Police Department, we are all working together to try and iron those issues out. And in the out years, at least in the next year, we were anticipating adding another 250 cameras. We are trying to get the cameras into all areas of the City. So, yes, we are still moving forward with that. As far as Housing, we are 145 2/26/08 - WHOLE - RES. 080173 talking to Housing again about the possibility of putting cameras up in the Housing areas. However, it only makes sense to try and get our system up and running and stable first before we go adding anybody else onto it. It's not a question of not wanting to. It's just the proper way of going about it.
Right. One of the things that I didn't want to do, have us not have an opportunity to take advantage of a commitment, particularly as it relates to capital costs, from any other agency or any other elected official because we're not in the position to bring them online yet. I would like for us to have at least a policy where we can lock that commitment down in terms of funding, because this is, as you all know, a very costly endeavor, but I think it's a worthwhile endeavor as we move ahead.
Deputy Mayor Everett Gillison. 146 2/26/08 - WHOLE - RES. 080173 We're exploring all of those relationships now. We're trying to put all of those things together now so that as these things and we work out the technology, we will be able to deal with that, but a lot of those issues are technology, having problems basically meeting up with one another, and if we can get that ironed out now, then when we go forward, it will be a lot simpler. So thank you.
Thank you. 147 2/26/08 - WHOLE - RES. 080173 The Chair recognizes Councilman Kenney.
Thank you, Madam President. Probably the most remarkable part of this budget and probably the most remarkable thing I've seen in budgets 9 is the pension bond issue and -- 10
Jack, you 13 are fast. I wouldn't want you chasing 14 me, Jack. 15 (Laughter.) 16
-- 17 (continued) is probably the most remarkable thing that I've seen since I've been here, primarily because we put off dealing with this for so long. And I know we've been briefed privately about the issue and we've talked about the benefits of it, but I think for the record and for the public's understanding of it, if you could just go through the 148 2/26/08 - WHOLE - RES. 080173 benefits of undertaking this 95 percent funding issue, borrowing the amount of money we're borrowing, what it does for us in a positive way, and then talk about a couple of the potential pitfalls that we need to pay attention to.
Councilman Kenney, I'm going to turn it over to Steve Agostini to describe the elements of it, but I just want to say on behalf of the Administration that we wrestled with some significant challenges to putting the Five-Year Plan together, one of the most significant of which are the burgeoning pension costs, burgeoning healthcare costs, and the idea of doing a pension obligation bond was put forward to address at least one of those issues, which is the fact that we have a significantly underfunded pension liability in the billions of dollars. Steve, working together with the Finance team, have proposed this. It is not something that's going to be 149 2/26/08 - WHOLE - RES. 080173 easily done, and we would hope that if we could successfully complete it, that the Pension Fund will be one of those things in which we've made a significant investment for the long-term benefit of the citizens of Philadelphia. That's really what we were trying to do. It is very forward-thinking in that regard. So with that brief introduction, I'll let Steve tell you about the elements for the record.
Councilmember, Steve Agostini, Budget Director. What we were trying to do is find a way to address the 52 percent funded and getting that up higher, and what seemed to make sense, given what was going on with the markets, was actually borrowing in the marketplace for an interest rate that was significantly lower than what we are currently paying on a borrowing or indebtedness, if you will, to the pension system to get us to that full-funded level. The current 150 2/26/08 - WHOLE - RES. 080173 level of interest that we are paying is approximately eight and three-quarters percent. Market rates are in the five and a half to six percent range. So the difference of almost two and a half percent to us seemed to make a very sizable impact on our budget. So what we are proposing is a borrowing that would fund the system to 95 percent. It would also enable us to defease the existing pension obligation bond from the 1999 period, a billion dollars to defease that, three and a half billion dollars for purposes of funding the system. We believe the benefits are funding the system at 95 percent, getting ourselves to defease the POBs in the '99 series in advance of when they're scheduled to be defeased, which is about 2028. We believe it will tell a good story to the rating agencies, because we're addressing a very sizable liability that, as you described, hasn't been dealt 151 2/26/08 - WHOLE - RES. 080173 with before. We think it tells a good story in terms of our overall debt and lowering that level of the percentage of our expenditures dedicated for debt from about percent to about 13.8 percent. 8 And we believe it's going to generate 9 some sizable General Fund savings, 10 primarily because we're borrowing it at 11 lower costs. 12 With respect to pitfalls and 13 some of the things to consider as we put 14 this together, it's a sizable issuance. 15 Four and a half billion dollars is a big number. We're encouraged, but also mindful that other communities are out there in this period of time trying to issue sizable debt. The largest we've heard is that Illinois may potentially do a $20 billion pension obligation bond issuance in the coming months. We're funding at less than the hundred percent. We're getting to the 95 percent. That's going to be a little 152 2/26/08 - WHOLE - RES. 080173 tricky in terms of how we move forward to be sure that we're not consuming General Fund savings. The turmoil in the municipal bond insurance industry is something we're going to have to pay attention to as well. Normally we would try to get insurance for this, but that may be a little tricky. And it's a lot -- it's just a lot of paper to be out there for the City, and that's going to be tricky. We have a team that we have to put in place, a lot of assumptions we have to test, actuarial assumptions, as well as what happens in the market. So we still have a lot of work ahead of us.
I think it's analogous to a person who has not gone to the doctors for years and 21 finally goes and gets their blood work 22 done and, wow, we got to do something 23 before the patient dies, and I admire the 24 fact that you're willing to take this on. 25 (Bell rung.) 153 2/26/08 - WHOLE - RES. 080173
And I think it's going to be tough and understanding to sell it, plus -- and people understanding what it's doing, but I think in the long run it's going to take a lot of the burden away from us going forward and getting the things done we need to get done. So I just wanted an explanation for the record.
Okay. To follow up on that for some clarification, on Appendix 5, , you break down the fringe benefit allocation for the Five-Year Plan. Can you explain why there isn't a pension obligation payment in 2009?
Madam President, what we have set aside in that -- I don't have the table in front of me, but if I call, the number for pension related is about $417 million. Embedded in that is not only our normal contribution costs, but also a portion of about -- in that 417 is the normal cost, plus what we 154 2/26/08 - WHOLE - RES. 080173 would have made available to make our first deposit into a reserve fund. We anticipate that we would be able or at least our target is to borrow before the end of the calendar year, this calendar year. If indeed that's the case, what we have planned is that the first pension obligation debt service payment would occur in the subsequent fiscal year, in 2010. That would be the first year. And we would sort of, as you would with a mortgage payment, you would not have to make that first payment. If for some reason that does not occur, we have sufficient funds available to make that payment in the first year for the debt service. But we thought we were being prudent in terms of planning, we had money set aside, and whatever doesn't get deposited in that first year, we would argue, would go into the reserve fund as the buffer for our pension obligation borrowing.
In effect, 155 2/26/08 - WHOLE - RES. 080173 we've capitalized next year's payment, in effect, in that we will borrow the money and utilize the actual proceeds of the bonds to make the payment, thus freeing up the payment. But as Mr. Agostini mentioned, if we don't have the bond issue completed by that year, we will have sufficient monies in reserve to do it.
So what you're saying is to the extent that for whatever reason the Administration cannot market the new bonds before the payment is due on the existing bonds, that you will still have the money?
Madam President, in that $417 million is approximately $350 million that would be available for either the first debt service payment or a deposit into the reserve fund. So if we do not end up making a debt service payment until 2010, what we would recommend and part of the structure of this is that that 350 million 156 2/26/08 - WHOLE - RES. 080173 approximately would be set aside and put into a reserve fund. Those would be General Fund dollars. However, if we do end up, for whatever reason, moving much more quickly in terms of structuring this and we have a debt service payment that would have to be made in Fiscal Year '09, there are sufficient funds in that amount to make that debt service payment.
Madam President, what we had assumed was approximately $300 million based on a 25-year issuance with a 5.83 percent interest rate -- that was based on market conditions about three, four weeks ago -- with a four and a half billion dollar total issuance, but about 14 percent of that would be other funds and about 86 percent of that would be the General Fund.
I think our schedule indicated that we would be taking a lunch break at 12:30. 157 2/26/08 - WHOLE - RES. 080173 It is now ten of 1:00. I would like to recess until ten of 2:00 so we could all go back to our offices and return a call or two and check whatever else. (Short recess.)
We are now resuming our public hearing of the Committee of the Whole and I believe the next Councilman to be recognized is Councilman Green.
Thank you, Madam President. Thank you for coming back after lunch. I have a few questions more on revenue assumptions. Steve, if I could go back to you. I'm just wondering how historically the wage tax, BPT, et cetera, growth compares to the national number that you were talking about earlier.
Madam President, Councilmember, what I have done is, I went back about 25, 30 years and looked at what was being produced by the 158 2/26/08 - WHOLE - RES. 080173 economy, and then tried to compare that -- Philadelphia economy to sort of county boundaries, and compared that to what was happening nationally, and what I was finding, that on average we perform at about inflation; that is, we grow at inflation. Some years we grow a little higher than inflation, some years not. In the last five years, since 2003, we've been growing at slightly more than inflation, about a half a percent to a percent, depending on the year, which suggests that we've got significant wage growth, we have maybe some job growth in those areas where wages are higher, and the economy is still sort of steaming along, which sort of proves its resilience. There is a relationship there and I would say there is that kind of difference where when we're growing, we're probably growing slightly slower than the national economy, not as strongly as the national economy, but 159 2/26/08 - WHOLE - RES. 080173 when we dip, it isn't clear that we dip as severely as the national economy either. Now, what I tried to say earlier is that we're in a sort of new world right now and we haven't had a very severe recession in a while, so all kind of bets are off until we actually see what goes on. Because of that, what we assumed in most of the revenue areas, with the exception of the wage tax, is that we thought we'd be conservative and look at somewhere between two and a half to three percent growth for those revenues that we didn't really have a very strong sense of how they would perform. So for sales taxes, for example, you'll see retail sales taxes growing at about two and a half percent per year over the Plan. For the real estate transfer tax, you'll see a drop in 2009. That reflects what we had anticipated -- 2008 and then a slight growth in 2009, which 160 2/26/08 - WHOLE - RES. 080173 reflects what we've been experiencing in receipts to date. On the wage tax growth, because we've been seeing this kind of very strong growth, we were at three and a half percent and then four percent in subsequent years.
And is there a correlation between wage tax -- in other words, you were comparing the growth of the local economy to the growth of the national economy. Have you compared growth in wage tax receipts to growth in the national economy, which is really the comparison that you're making?
Councilmember, yes, we have. It's sort of preliminary. We've actually done some modeling. I've had some students from Fels at Penn helping me with this. We're in a preliminary state, but I think we're at a place now where we actually do some really rough testing about that relationship from the national economy to 161 2/26/08 - WHOLE - RES. 080173 the local economy to the wage tax, and there are some relationships there.
Yeah. So you used national figures, not Philly Fed figures on --
Actually, Councilmember, I'm using a range of national figures. I'm also looking at the indicators that the Philly Fed produces. I'm trying to pull, for example, the reports in the Beige Book that are done for the Philadelphia economy that go to the Federal Reserve as they contemplate what's happening in the economy. I'm trying to pull as much information from a number of sources as possible.
Given the recent sort of analysis by the Controller of activity expected through December down, I can't remember, 1.87 percent or something and Fed forecasts through the end of next year, Philly Fed forecasts, do you think that three and a half 162 2/26/08 - WHOLE - RES. 080173 percent in the current year and four percent in the out years, would you characterize that growth as aggressive?
Councilmember, no, I don't think it's aggressive. I mean, I'm looking at the Congressional Budget Office forecast right in front of me right now, and for 2008, there's an assumption that there's going to be a slowing in the economy. For 2009, they're anticipating nominal growth of about 4.8 percent. So that's almost a full percent above what we had built into the wage tax growth.
So I think we're being somewhat conservative. But, again, I can't caution enough, if we're in the beginnings of a recession, all of these numbers before us are going to change.
I would love to see the results of the sensitivity analysis or studies that you're doing comparing wage tax growth to growth in 163 2/26/08 - WHOLE - RES. 080173 the local economy and growth in the national economy, same thing with BPT, same thing with -- just for my own information.
I'm curious about how that actually works out. Also, have you built a recession case? I mean, have you done any kind of sensitivity or aggression analysis, standard deviations to --
We talked about it, Councilmember, Madam President. We talked about it a lot, and because it's really early, we didn't know sort of where to go with that. I mean, there's some economists who think it's going to be severe. There are some at the federal level who don't think it's going to be as severe. So trying to build a band around that proved to be a little tricky, and we went with kind of a point estimate, if you will, but we've been thinking what 164 2/26/08 - WHOLE - RES. 080173 happens, and I think the place where we're going to be watching very carefully is on the real estate transfer tax, because that seems to be the early bellwether. Having said that, our sales taxes are still coming in pretty strongly. Our wage taxes are still coming in pretty strongly for the year. So we haven't seen the weaknesses in other areas just yet.
I do think that the Controller estimates actually lower economic activity this year than last year, doesn't he?
I haven't seen the report that you're referencing. I'll go and take a look at it. I just don't have it in front of me.
Even with that activity -- and there's definitely been, all reports, there's been some slow-down in the rate of growth -- we have not seen 165 2/26/08 - WHOLE - RES. 080173 that hit our wage tax yet. And the sales tax after a period of relative weakness has actually come back stronger. So what we're seeing in our taxes is that they are -- they've been resilient during this slow-down in the economy.
Okay. So I'd like to move on to the pension obligation bond. Have you hired an FA, financial advisor?
We have not. We are putting together an RFP right now for that. So we plan to have one hired relatively quickly.
Well, I mean, there's more to it than just the lowest bid. I mean, we want to make sure that we have someone who has expertise in 166 2/26/08 - WHOLE - RES. 080173 handling pension obligation bonds and someone who will be able to give us the best advice. So price will be important, but what will be most important is experience and expertise in the appropriate area.
I think I took down a note, Clay mentioned and other people mentioned -- Chief of Staff, sorry, mentioned and other people mentioned that if we could complete it, I think was the quote from a number of people about the pension obligation bond. What is the likelihood of being able to, in the Administration's opinion, of being able to issue a four and a half billion dollar bond at a rate that is acceptable to the City?
We've spent a decent amount of time talking to bankers to get their view of whether this was sellable, and they have consistently said that it is, that the size is manageable. We actually had one that said, Well, if 167 2/26/08 - WHOLE - RES. 080173 it were twice as big, then I'd be worried, but I think at the size you're talking about, it's something that you should be able to do, if you got the right team in place, which is what every banker would say.
Exactly. But they were all -- they all seemed pretty positive about our ability to do it.
We told them the rates that we had in our model, which is about five and three-quarters, and they said that that seemed reasonable.
Okay. I have concern, and I don't know who can answer this. The last time we did a pension obligation bond, we had, I guess you'd call it, negative arbitrage -- (Bell rung.)
Would you like me to continue? 168 2/26/08 - WHOLE - RES. 080173
We had a negative arbitrage. In other words, we put money in the market, we immediately lost a significant portion of that money. We've just now earned that money back and many people have recovered their drop from the 2000-2001 drop three, four, five years ago. What happens to the budget assumptions if we borrow four and a half billion dollars, we put the money in the market, it becomes three billion dollars over a three-year recession?
One of the things that we have in our models that's different from other structures we've seen is, we take a portion of what we project the savings to be and instead of bringing it into the General Fund, we put 169 2/26/08 - WHOLE - RES. 080173 it into a reserve fund, and that reserve fund would be used as a hedge against downturns in the market. And on that reserve fund, we assume only a three and a quarter percent return, which would allow us to probably invest in something longer term and kind of lock that in and guarantee it so we wouldn't be as subject to the vagaries of the market on that reserve fund, and that would help be a buffer against the market on the remainder of the fund.
Although if there's a sudden drop or a drop in the up-front years, you're not going to have -- which is what we're talking about going into recession now -- you're not going to have enough in the reserve fund for us not to be eating into the $50 million of savings every year.
I mean, one of the things that's a little different this time is, the market has already kind of cratered. Last time, we did it right 170 2/26/08 - WHOLE - RES. 080173 before, right before you started to see returns fall off the cliff.
I mean, the market, the Dow, I think, had a high of just under around 14,000, something. 7 It's now at 12 something. I hope you're 8 not suggesting that Philadelphia thinks 9 it's a market timer and can take $4 10 billion because we're picking the bottom 11 of the -- 12
No. No, but what 13 I'm saying is, last time when we issued the bonds, we were issuing at equivalent of when it was 14,000 now, before any correction had taken place. And there clearly has been a correction in the market, so I think the timing is a little different. I'm not saying the market -- obviously if I knew how to time the market that way --
We should not be in the business of timing the market with this investment; is that correct? 171 2/26/08 - WHOLE - RES. 080173
So we shouldn't look at what the market is in terms of making this decision. We should look at the risk of doing the transaction as a whole, no matter where the market is.
Right. I was just responding to your question of what if the same thing happens as happened last time. So I was explaining why I thought that we were in a slightly different part of the market from when we hit last time. I wasn't trying to say that we should time our issue based on that. The savings and the issue are really based not on what we think earnings will be going forward, but on the difference in what we pay now, which is about eight and three-quarters, and what we pay afterwards, which is the five and 172 2/26/08 - WHOLE - RES. 080173 three-quarters or so.
No. The eight and three-quarters -- I mean, in essence, what we're doing now is borrowing from the pension fund by having this unfunded liability and we repay the pension fund at eight and three-quarters. After we issue our bonds, we would be paying at five and three-quarters, which is the market rate. I mean, it's kind of like refunding a mortgage and getting a lower rate. That's really where the savings are. The savings aren't from making any kind of guess about what investment return we'll have.
The problem is, if the market goes down, we're still going to need to contribute to the pension fund to make payments. 173 2/26/08 - WHOLE - RES. 080173
Right. If the market goes down, we'll have a problem regardless of whether we do this. The market will go down and hurt us whether we have pension obligation bonds or not.
Instead of starting with that damage at 54 percent funded, we would be starting at 95 percent funded. So we'd have a healthier pension fund, but we'd still have -- you're right. I mean, there's always a risk, but we'd be taking a risk with a healthier fund.
I have additional questions, Madam President, but I'll wait until my turn comes back around.
The Chair recognizes Councilwoman Tasco. 174 2/26/08 - WHOLE - RES. 080173
Thank you very much. I just have a couple of questions. It's for the Business Action Team. You say that you will reorganize the Mayor's Business Action Team. What coordination and outreach will we see from the Commerce Department to the communities, individual communities? What process will you use?
I won't speak for the incoming Deputy Mayor, but one of his highest priorities is to secure the resources in the Commerce Department and bring them together to give focus to making sure that when businesses have issues before the City, that they are given a holistic approach to getting them solved. So one of the items that he has at the top of his list is trying to get this Business Action Team -- I think you almost answered the question for me. But to get the Business Action Team reconstituted and focused on making sure 175 2/26/08 - WHOLE - RES. 080173 that as businesses come in to the City to do business with the City, that they are given a holistic approach with respect to solving their problem. So he is going to have a focus on that when he gets here.
Thank you, Madam President. I apologize. This question may have been asked this morning. I was out for just a little bit. Along the same lines that Councilman Green was asking as far as money coming in, on real estate taxes, how much are you projecting that there will be an increase coming in from that over the past year in the coming years, whatever?
I think over the 176 2/26/08 - WHOLE - RES. 080173 life of the Plan, there is kind of consistent increases of -- the real estate tax, right?
Well, it's a little higher. The Board of Revision of Taxes had not really been doing aggressive -- I don't want to say aggressive assessment. They had kind of --
It might depend which neighborhood you're talking to on that one.
Yeah. But while the market was going up, they had not been doing assessments in anticipation of the full value project. They had been doing kind of small-scale assessments. We're anticipating that they'll get back to a normal assessment activity and 177 2/26/08 - WHOLE - RES. 080173 capture some of the growth that they hadn't captured. I mean, even with the downturn, we think that the values are still higher than they were back then.
That's scaring me a little bit, Rob. Does that mean we'll be running over there to the Board of Revision of Taxes with people to file their appeals?
Just to repeat, we're not assuming that full valuation has any additional revenue.
Right. And I guess along sort of that same line, as far as more aggressive collection, enforcement of all taxes, how much do you see that increasing and helping over the next few years? Have you seen it already? I know the last Administration 178 2/26/08 - WHOLE - RES. 080173 talked a lot about that. I don't know if we've really seen a lot of results out of that yet. It might be too early. I don't know.
It's interesting, what we saw when the delinquent collection program started up was not a big uptick in delinquent taxes, but an increase in current collections, which made us think that maybe people decided, Oh, I have to really start paying on time.
Because they'll come after it. But, I mean, that's all that we saw.
So as far as past taxes, whatever, real estate, wage, whatever --
You haven't seen any real uptick yet? 179 2/26/08 - WHOLE - RES. 080173
I'm sorry. Maybe you just said this. I wasn't sure. Do you foresee an uptick in it? Do you foresee increases? Are you factoring that in in any way?
No. We have a very small -- we have a couple of million dollars, but not anything really of substance in here.
Okay. All right. Thank you. Thank you, Madam President.
Rob, I just want to follow through on Councilman Greenlee's question, because I guess maybe last week I received a number of calls from business people who apparently the City is now catching up with, who owe maybe $60,000 in back taxes, another owed 35,000. I think somebody in the Law Department must be doing their job. 180 2/26/08 - WHOLE - RES. 080173
Well, that's good. No, no, and I wasn't trying to say that they weren't doing their job. I was just saying when we looked at total collection amounts and compared it to the earlier year, what we were seeing was an uptick in current collections and not an uptick in delinquent. I wasn't trying to apply that they weren't going after people.
So we should see a big increase if they are going after people --
No. We built in, I think, about $2 million a year in the Plan for that.
Okay. Let me just get to a question or two that 181 2/26/08 - WHOLE - RES. 080173 I have. On of the Plan, you discuss the School District deficit. Is there any new City funding to the School District included in the Plan, and if so, when and how much?
No, Madam President, there's no new additional funding in the Plan for the School District.
All right. In the current fiscal year, the Administration transferred $8 million to DHS to fund some School District programs. Is this funding continued in the 2009 Budget and Five-Year Plan? If not, I assume that the Administration is not prepared to give the School District additional funding for their upcoming budget; is this correct?
Two parts to that answer, Madam President. With respect to the $8 million, we have been working with the School District to try 182 2/26/08 - WHOLE - RES. 080173 to identify contracts or obligations that we could take over for them without creating what we call an Act 46 obligation, which, as the Council is aware, requires continuous funding of those obligations. To date, we have not been able to identify fully the $8 million of obligations that the City could assume. We've been going between $4 to $6 million that we've been trying to identify in terms of obligations. So that's for the current year. In terms of future years, my understanding is that the condition under which that agreement was made was that that $8 million would not be recurring, and the difficulty we've had with trying to identify obligations is that we've tried to identify obligations that would not trigger the Act 46 provision that would make them recurring. So we have not included any additional funds for future years and we are struggling to meet the $8 million commitment that the 183 2/26/08 - WHOLE - RES. 080173 City had made to date.
On Pages 39 through 42 you deal with the City's Capital Program. Can you explain how you determine that the Recreation Department's needs can be addressed for only $900,000 per Council district? Can you tell us how do you propose that the City's recreation facilities be maintained in a prudent fashion?
I think that we do not have enough money anywhere in the Capital Budget and that we're constrained by our ability to borrow. This is one of the reasons that we are trying to start with some pay-as-you-go financing for the Streets. But I don't really think there's any way any of us can sit here and tell you that the amount that's there for Recreation or the amount that's there for the Park or for other parts of the Capital Budget is sufficient.
Thank you. 184 2/26/08 - WHOLE - RES. 080173 The Chair recognizes Councilwoman Brown.
Thank you, Madam President. I had follow-up questions for the Department of Recreation. So could your leadership for that department please come back to the witness table. (Witness approached witness table.)
Councilman Curtis Jones, who represents the location of the Dell, I think more than adequately painted the picture of what is -- the aesthetic of the Mann is one way, the aesthetic of the Dell is another way. What are the allocations, City of Philadelphia allocations, for the Mann? COMMISSIONER CARAPUCCI: Bill 21 Carapucci. I don't have the allocation for the Mann.
What are the allocations for the Dell? 185 2/26/08 - WHOLE - RES. 080173
Just on the Mann, my understanding, Councilwoman, is that the Mann is subject to a lease arrangement. The facility is actually leased out to a private operator who operates that facility.
That may indeed be so, but that doesn't get to the answer to the question, which is what is the City of Philadelphia allocation to the Mann.
We'll have to get back to you. I think the answer may be nothing, but I'm not sure.
Because I was often, as all City department or quasi-City department heads like and need to do, and, that is, approach on numerous occasions for the City to do more for the Mann. So we need to know what those numbers are. 186 2/26/08 - WHOLE - RES. 080173 And let me just underscore the questions raised by Curtis Jones. They really need to be put in bold type, capital letters when it comes to the future of the Dell. So tell us, who did you talk to at the Dell when? COMMISSIONER CARAPUCCI: January 22nd I spoke to the family of the Dell. Maya Burnett is the President, and she had her group there.
And the content, agenda for those discussions was? COMMISSIONER CARAPUCCI: They wanted to know -- they were not generally happy. They sent us a letter with the operation of the Dell over the past number of years and the fact that the ticket base has dropped dramatically. They used to have a larger, much larger, season ticket base.
And the expectation or request they had of the City for those meetings was? 187 2/26/08 - WHOLE - RES. 080173 COMMISSIONER CARAPUCCI: We went over the fact that there's $3 million for the redevelopment of the Dell. We saw the plans and the request that they had, and we went over all that, and the only thing I said to the group was that we would like to have a better management system in place down the road.
So the next steps after you offered that recommendation, the next steps are what? COMMISSIONER CARAPUCCI: There was no next step. The next step was, I brought the concerns about the safety of the site and the redevelopment that has to be done to the Administration.
Was that in writing or by way of discussions during the executive meetings that you all hold? The findings or recommendations that you pulled from your meeting with the Friends of the Dell, did you submit that in writing to the Administration or was that done 188 2/26/08 - WHOLE - RES. 080173 non-verbally through meetings?
Councilwoman Brown, what I'd like to do is tell you what we're going to do with respect to the Dell. I think these -- I don't know exactly what the medium of communication was from the Commissioner to the Administration, but we do have a plan, and if you'd like, I'd like to describe --
-- that to you, what we're going to try to do. As Mr. Carapucci mentioned, we've determined that the Dell has had for years a serious drainage problem that we've identified, and because the sewer lines are inadequate, the water runoff apparently has undermined the seating in the north tier of the facility, and working with the family of the Dell East, the Capital Program Office has determined that there are significant renovations 189 2/26/08 - WHOLE - RES. 080173 that are actually needed to the facility. And so the work plan includes the following improvements: We have drainage corrections; we have restoration of the undermined seating; improvements to the sound stage, lighting and video; parking lot lighting; concrete repairs; seating replacements. The project will be funded with a million and a half dollars from the Cultural Corridors Bond and $500,000 from the General Fund and $500 allocation from the state, and, unfortunately, it will necessitate the closing of the facility for the upcoming season.
It will necessitate the closing of the facility for the 2008 season in order to get this work done.
And it will also necessitate probably a partial 190 2/26/08 - WHOLE - RES. 080173 closure for 2009 as well. But we should be opened up in the middle of the 2009 summer season. That's my understanding. Is that correct?
The Chair recognizes Councilman Jones for a point of information.
Is there an alternate site where Philadelphians can go? Are we going to use an alternate site somewhere to have these shows?
We have not come to a conclusion about that operationally, Councilman.
We'll certainly take that under consideration. 191 2/26/08 - WHOLE - RES. 080173
I mean, this is a major means of recreation for a lot of Philadelphians, and we use that as our Atlantic City without having to leave the City to go to a quality show. Yes, it needs work. Yes, but we need to also have that venue for Philadelphians at a modest price. Where can you go for $2 and sit on a lawn and enjoy an outdoor concert? I mean, it's the kind of venue that the City needs to keep. And it's going to be a hot summer and we want to have plenty of places where people can afford to take their families.
Yes. The Chair recognizes Councilwoman Tasco for a point of information. 192 2/26/08 - WHOLE - RES. 080173
Would you please fix the air conditioner in the ladies' bathroom? Because I am a frequent attendee at the Dell summer program.
I don't know what I'm going to do. But it blows hot air. It's heat in the summertime. And I've never gotten an answer on why it couldn't be repaired. Maybe this Administration can get it repaired.
So as we get ready to hear from the departments further down this road, there will be a lot of additional questions and inquiries around the present and the future of the Dell.
Thank you 193 2/26/08 - WHOLE - RES. 080173 for your testimony.