COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING BEFORE THE COMMITTEE ON PUBLIC PROPERTY AND PUBLIC WORKS - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, January 28, 1998 9:30 a.m. - - - BILL 970747 - Authorizing the Executive Director of Fairmount Park and the Commissioner of Public Property to enter into an agreement with Beasley FM Acquisition Corp. BILL 970831 - Authorizing the Commissioner of Public Property to execute an amended lease agreement for additional air rights over 11th Street and; Cuthbert Street. BILL 970752 - Authorizing the Commissioner of Public Property, Director of the Free Library of Philadelphia, and Budget Director to execute a term sheet with the Crime Prevention Association of Philadelphia. - - - PRESENT: COUNCILWOMAN AUGUSTA A. CLARK, Chair COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN FRANK RIZZO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center Plaza, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 I N D E X BILL 970747 Joseph James, Commissioner, Department of Public Property----------------------------- Joanne Phillips, Esq., Counsel, Beasley Broadcasting-------------------------------- 6 BILL 970752 (Held)----------------------------- 14 7 BILL 970831 Kenneth Sipos, Real Estate Specialist II, Department of Public Property--------------- 15 Noel Eisenstat, Executive Director, Redevelopment Authority--------------------- 17 Deborah Butler, Divisional Deputy City Solicitor, Real Estate Unit, Law Department---------------------------------- 49 - - - PUBLIC MEETING--------------------------------- 52 - - - 3 RESOLUTION 970747 CHAIRWOMAN CLARK: Ladies and gentlemen, the Committee on Public Property and Public Works is now in session. Thank you for your patience. Let the record reflect that a quorum is present. At the table is Councilman Frank Rizzo, Councilwoman Joan Krajewski, Councilman Michael Nutter, and the Chair, Augusta Clark. Would the clerk please read the bill 11 before us.
Bill No. 970747, an Ordinance authorizing the Executive Director of Fairmount Park and the Commissioner of Public Property, on behalf of the City of Philadelphia, to enter into an agreement with Beasley FM Acquisition Corporation, a corporation organized and existing under the laws of the State of Delaware, pursuant to which Beasley shall be licensed to install and maintain radial wires in, on, and about that certain property in Fairmount Park situated generally at Belmont Avenue and Edgely Drive, under and subject to certain terms and conditions. CHAIRWOMAN CLARK: Thank you. Are there persons in the room who 4 RESOLUTION 970747 wish to be heard with respect to Bill No. 970747? If so, please assume the table, introduce yourself to the record, spell your name for the benefit of the stenographer, and proceed with your testimony. Thank you and good morning.
Good morning. My name is Joseph James, Commissioner for the Department of Public Property.
Good morning. My name is Joanne Phillips. I am an attorney from Ballard, Spahr, Andrews & Ingersoll, and representing Beasley Broadcasting. CHAIRWOMAN CLARK: Thank you. Please proceed with your testimony.
Thank you, and good morning again, members of Council. I am here today to testify in support of Bill No. 970747, authorizing a License Agreement with a 25-year term between the City and Beasley FM Acquisition Corporation, and recommend its passage by City Council. In 1952, the Fairmount Park Commission granted permission to the owners of WDAS 5 RESOLUTION 970747 radio station to maintain radial wires on park property located near the intersection of Belmont Avenue and Edgely Drive. The radial wires were connected to WDAS broadcast antenna towers, which are located on adjacent property. The wires run from the towers into the ground, and fan out in several directions about a foot to inches under the surface. 11 Some of the wires are buried beneath 12 the surface of the Park's ground. If the towers are 13 struck by lightning, the wires help diffuse the 14 electrical current into the ground. 15 Since the Park granted its 16 permission, the radio station wires have occupied an 17 area of park land approximately one-eighth of an 18 acre. The Park's permission was granted without any requirement for compensation to the city. The city and current radio station owner Beasley FM Acquisition Corporation recently executed a License Agreement with the term of just one year. Bill No. 970747 will permit the License Agreement to have a term of 25 years 6 RESOLUTION 970747 starting retroactively from the original commencement date. More importantly, as a long-term agreement, the licensing agreement will obligate the licensee to make monthly payments to the City of $1,050. Those payments will be increased every five years by a percentage equal to the percentage increase in the Consumer Price Index. Therefore, a total compensation to the city under the License Agreement will exceed $315,000. Other important terms of the License Agreement that will be authorized by Bill No. 970747 include, the licensee is required to indemnify the city and to maintain specified amounts of insurance, the licensee must maintain the premises. The licensee recently executing an agreement to sell WDAS to Evergreen Media Corporation of the Liberty City, accordingly, the licensee agreement permits the licensee to assign the License Agreements to Evergreen. The assignment will probably take place shortly. In accordance with the Home Rule Charter, the License Agreement can be terminated at 7 RESOLUTION 970747 any time after the fourth year. I respectfully ask that City Council approve Bill No. 970747, and I am happy to answer any questions that you may have. CHAIRWOMAN CLARK: Thank you. Are there members of the committee who wish to be heard?
Just one quick question. Mr. James, thank you for your testimony. Going to , very quickly, your testimony is that presently Beasley still owns WDAS, but that they are in some negotiations with Evergreen Media Corporation of Liberty City?
And you expect Evergreen Media Corporation to shortly purchase WDAS from --
We believe that to be correct. Miss Phillips can answer that question.
Maybe I can answer that. In fact, the transfer has occurred 8 RESOLUTION 970747 already, and Evergreen has acquired the stations. However, this is an important matter, sort of a post-closing matter, to be taken care of.
So as we are here in the hearing today, Evergreen actually owns WDAS?
Evergreen actually owns the station. However, the Beasley FM Acquisition has still been making the license payments under this License Agreement, but they do not own the station anymore.
This may be more of a legal question, but I will ask Mr. James nonetheless. Notwithstanding this transfer, it is 9 RESOLUTION 970747 your testimony that even though the title of this Ordinance specifically talks about Beasley FM Acquisition Corporation, is it your testimony or understanding that the license with the city allows for assignment to, I guess, successors?
Just as a clarification as well, there was a full-blown Assumption Agreement that Evergreen had to affirmatively assume all the obligations under that agreement.
And so everything in your testimony, such as Item No. 2 on , the licensee must maintain the premises, it is both of your testimonies that Evergreen picks up that obligation once this bill is passed?
It is my understanding that the way the Lease is drafted, that they will, in fact, do that.
Okay. All right. Thank you. Thank you, Madam Chair. CHAIRWOMAN CLARK: Okay. Just to follow up on Mr. Nutter's questions, you have solved 10 RESOLUTION 970747 the riddle of "shortly." It has already been transferred; is that correct?
That's correct. CHAIRWOMAN CLARK: And this is all in writing, and the terms could have been submitted to us to look over if we had been interested in it? This is not an oral handshake agreement; this is a written?
This is a written agreement. CHAIRWOMAN CLARK: Okay. Are there any other buildings or structures located on the property? And, if so, how are they dealt with in the Lease Agreement?
This lease is only for ground; there are no buildings or structures on top of the ground. CHAIRWOMAN CLARK: Okay. Are there any actual potential environmental or other liability exposures associated with the property where the radio wires are maintained? And let me give you a second on that. 11 RESOLUTION 970747 Will the city be held harmless and and indemnified for all liability accrued in connection with any such exposure, and is that language specifically included in the Lease Agreement?
Well, first of all, let me answer the question regarding the environmental issues. There was a Phase One Environmental Study done prior to completion of the negotiations that affirmed that there were no environmental hazards or environmental health hazards of any kind with the radial wires in the ground. Also included in the lease is the indemnification against the city if there are any kind of health or environmental issues. CHAIRWOMAN CLARK: And you will hold us harmless?
That's correct. CHAIRWOMAN CLARK: Okay. Are there any other questions?
I just have a followup on something you asked. CHAIRWOMAN CLARK: Mr. Nutter. 12 RESOLUTION 970747
The Councilwoman asked about any other buildings close to the structure. My recollection of the old WDAS on Edgely Road is that there is, clearly, the tower. I have seen the tower. I have seen you call them radical --
-- radial lines -- could be radical in nature -- but there is the old WDAS building. Can you just very quickly give us any information on the status of that building? Where does it stand as a result of any of these other transactions between Beasley and Evergreen?
The rest of the WDAS AM station is on property owned by the radio station, and not the city. The only part of the whole station that encroaches off their property are the wires on this one-eighth of an acre. So there is a building there, and the rest of the station, but it is off city property.
My question, 13 RESOLUTION 970747 though, is, do you know if in either of the two transactions, the original sale to Beasley or now the Beasley to Evergreen, do you know if that building on their own property was a part of the sale transaction?
It is my understanding that that building and that property were sold as part of that transaction.
I understand. Okay. Thank you. CHAIRWOMAN CLARK: Are there questions or comments by other members of the committee? Thank you. Are there persons in the room who wish to be heard to speak in favor of or against Bill No. 970747? Thank you.
May I just request, on behalf of Beasley, if you would be so kind as to suspend the rules so that City Council can consider 14 RESOLUTION 970831 this ordinance? And, also, we would like to thank you for your time, and for Councilman Nutter introducing this bill. CHAIRWOMAN CLARK: Thank you very much. We would be happy to do so. The next bill I am going to call up is, I am going to call for the purpose of holding it, Bill No. 970752, which is being held at the request of the sponsor. Before us next is Bill No. 970831. Would the clerk please read the bill, and would the persons who are interested in this bill please assume a seat at the witness table. CHAIRWOMAN CLARK: Bill No. 970831, an Ordinance authorizing the Commissioner of the Department of Public Property, on behalf of the City of Philadelphia, to execute an amended Lease Agreement by and between the City of Philadelphia and the Redevelopment Authority of the City of Philadelphia for additional air rights over 11th Street and Cuthbert Street, between Filbert Street and Arch Street, east of 11th Street, and such amended Lease Agreement to allow the construction by 15 RESOLUTION 970831 the Redevelopment Authority or its approved sublessee of certain structures over the parking garage at 11th Street and Arch Street, under certain terms and conditions. CHAIRWOMAN CLARK: Thank you. Good morning.
Good morning. CHAIRWOMAN CLARK: Please introduce yourself to the record, spell your name for the benefit of the stenographer, and proceed with your testimony.
My name is Ken Sipos. I am the Real Estate Specialist with the Department of Public Property. Now, with me is Noel Eisenstat of the Redevelopment Authority. CHAIRWOMAN CLARK: Noel is trying to get you to do the second part of the instruction, and that is to spell your name for the stenographer.
Noel Eisenstat, E-I-S-E-N-S-T-A-T. CHAIRWOMAN CLARK: All right.
Good morning. My name is Ken Sipos. I am a Real Estate Specialist with the 16 RESOLUTION 970831 Department of Public Property. I am here today to testify in support of Bill No. 970831, introduced November 20, 1997, authorizing the Commissioner of Public Property, on behalf of the City of Philadelphia, to execute an amended Lease Agreement by and between the City of Philadelphia and the Redevelopment Authority of the City of Philadelphia for additional air rights over 11th Street and Cuthbert Street, between Filbert Street and Arch Street, east of 11th Street. CHAIRWOMAN CLARK: Mr. Sipos, we really are listening, but I can't hear you.
Section -- CHAIRWOMAN CLARK: You don't have to repeat it. Start from where you are, where your finger is on the text.
Okay. Such amended Lease Agreement to allow construction by the Redevelopment Authority, or its approved sublessee, of certain structures over the parking garage at 11th Street and Arch Street, under certain terms and conditions. I respectly ask that City Council approve Bill No. 970831. 17 RESOLUTION 970831 I also ask that the Rules be suspended so that it could be reported out of committee. I would be happy to answer any questions you may have. CHAIRWOMAN CLARK: Thank you. Thank you. Are there questions by members of the committee?
Yes. That was kind of riveting testimony there, but could you tell us what it is about? What is this? Is this a hotel?
There are some air rights over, and the Redevelopment Authority is eminently more qualified than I and in describing the development of this parcel. CHAIRWOMAN CLARK: Noel.
Good morning. My name is Noel Eisenstat. I am the Executive Director of the City's Redevelopment Agency. I am here to provide testimony on the specific bills, and I am also here today to provide 18 RESOLUTION 970831 a little background on this bill and other bills that will be going through other various committees this month, as well as the Redevelopment Agreement that was approved by Council on December 11, 1997. For those who may or may not be aware, let me first take a moment or two and show you a few schematics. What you have here is --
Let me start with a number of schematics. Most notably, let me start with the schematic of, where is this. There are a number of parking decks behind the Gallery. Let me just try to provide you -- City Hall, Market Street, Marriott Hotel, Reading Terminal Market, the Filbert Street Arcade. Right next to the Arcade is the existing parking deck. The parking deck was built in the early 1980s, and it was actually built as part of Gallery II, with a joint venture of the Reading Company and Strouse Greenberg. That facility has been operated for a 19 RESOLUTION 970831 number of years. And although it abuts the Reading Terminal Market, it is not connected. The building was built with certain overbuild, or connections and possibilities. Although I think at the time the vision was, there would be more parking. This was built long before the Convention Center was sighted. What we have, basically, is a proposal today to build a Hilton Garden, which is a limited service Hilton product of about 287 rooms, above the parking deck. This is a schematic. Let me try to give you a sense of how dramatic, in some respects, this is. Because right now we have a traditional parking deck which looks like a parking deck, acts like a parking deck. And what we have in the alternative is a redefined streetscape, whereby panelization --
Is the parking area what looks like the three- or four-story decking?
Yes. You may know this. This is a wall on the Arch Street side. There is a Wawa. And down the street is the Bike One, for those who know it 20 RESOLUTION 970831 from its retail capacities. Inside there is currently a bus stop, Trailways. There are a couple of these on Market Street.
And then you have five floors of parking, effectively. Let me show you a brief schematic, for a second, of how the building transforms itself. Again, let me show you this next schematic. The schematic, again, showing an unimproved facade. Part of what is happening is that, in addition to the ordinances that you will be considering, which are really for the air rights -- and I do have one schematic here which will actually show you what are the air rights in question. We have all these discussions. We thought for once we would show you a picture. 21 RESOLUTION 970831 The point is that there are three packages of legislation: Those that concern Public Property, which are air rights; there are a series of Streets bills which concern curb cuts, actually the additional encroachment by the facade into the right-of-way, that quarter of an inch to eighth of an inch that we need to have lots of discussion about later; as well as, certain financial arrangements between PAID, the PAID lease on this garage, which will run through the Finance Committee once that meeting is scheduled.
On the picture you are taking down, it is obviously the Convention Center on the right.
Then you have got the -- I know where 12th Street is, running right under the Convention Center. Show me now where 11th Street is. Is that 11th Street right there? Okay. Then the first three or four stories is still the existing garage.
But it will have the 22 RESOLUTION 970831 panelization that will allow it to blend, so it will -- CHAIRWOMAN CLARK: So it won't look so much like a parking garage; it will look like a building.
And then the red verticals, are those panels also to try to give this thing like a front?
Correct. A presence. I mean, tourists want to know that they are staying in a hotel, and they are not staying in a garage.
In a garage. All right. And then you are going to build something on --
You know, it does not cover the entire floor. It doesn't cover the entire garage. It is kind of like an eye-shaped building. 23 RESOLUTION 970831 The overbuild doesn't cover the garage.
When this garage was first built in the early 1980s, these air rights were granted by the city. What we're basically talking about today in the bills before you are -- is that additional dearth of space that goes up. Actually, the original ordinance from the 1980s gave the first hundred feet to the partnership. We are taking that hundred feet back from the partnership, and then going from the 100 to 120 foot line. The first 10 feet above the 90, then we are going to 120.
No; they are going to lease it back to us, concurrent with the term of this which is, I think, 87 years.
Is the 24 RESOLUTION 970831 partnership also now the developer of the Hilton?
Two different partnerships, although there is an identity of interest of -- one of the two general partners of the partnership is a general partner in the new partnership.
I wasn't here for the original piece of this. All of these folks have names. I mean, who are these people?
Okay. Originally, the original partnership that was formed was a formation -- was a joint venture of Strouse Greenberg and the Reading Company. Strouse Greenberg --
With overbuild, anticipating the possibility of more parking at a future point in time?
And they bought 25 RESOLUTION 970831 air rights from the city to build a garage?
Correct. Correct. One of the successors as an individual of Strouse Greenberg is Sam Switzenbaum. Mr. Switzenbaum will serve as one of the two joint ventures in a group known as Pace Switzenbaum. They are an experienced hotel owner and operator. They are the major shareholders of the largest Hilton franchisee known as CapStar, Incorporated, a Washington-based hotel operator.
So Pace will operate this Hilton, not the Hilton Corporation?
This will be a franchise. The partners in the franchise happen to be the largest franchise owners of the Hilton brand in the country.
And when all is said and done -- and I may be jumping to the end of the story; I am sure there are some interesting parts to it --
You can do whatever you want to do with that. What do we get out of this? When we lease the feet of air rights, they build the 6 hotel, Pace and Switzenbaum do their deal, what does 7 it mean to us? 8
What it means to us 9 is that we have a parking deck that, for a number of 10 years, until very recently, was running very large deficits, not unlike the Gallery I garage, which is owned by the city. Both those facilities have been less than money-makers for the city.
No. 18 This is one of those unique situations where the garage was owned by a partnership, but there was a Deficiency Agreement. In this arrangement, what we are doing here, which is a little different, is, in consideration for a number of these -- allowing this project to go forward, all future cash flow beyond debt service requirements will be at the control of 27 RESOLUTION 970831 the city.
And what do you estimate those numbers to be? And have you done like a 20-year projection, and those kinds of things?
I didn't bring that material with me today, because that was really the topic of our Finance hearing. I would be happy to share that with you. But I can tell you that just alone, there is additional parking that will just be derived not from the improvement of the area due to the Convention Center, but just from the hotel itself, which is substantial. That's number one. Number two, what's unique about this project is that the project itself will be financed privately. Because of the air rights -- this is a limited-service facility. The rooms are not as expensive to build and the services are not as expensive to serve because it is not as much meeting room. These facilities on hotel rooms will cost between 105 and 115 thousand dollars per unit to build. 28 RESOLUTION 970831 The Redevelopment Authority has seen a financial commitment from a national lending institution to finance about 90 percent of the development. The differential will come from owners' equity. And that's a big difference.
And when you said the garage has been running a deficit, a deficit to the partnership? Does this garage cost the City of Philadelphia any money?
Yes, this garage has, in the past, cost the City of Philadelphia a lot of money.
Because the facility, until only recently, had substantial operating deficits. The facility just did not pro forma from as proposed in the 1980s.
I am trying to 29 RESOLUTION 970831 understand, what is our connection to it? I mean, how are we paying for --
The facility was financed through paid bonds with an obligation to the city to make it through a Deficiency Agreement.
This is the second time you used the term. Are you saying Efficiency Agreement?
Deficiency. I apologize. CHAIRWOMAN CLARK: What does it mean? What does a Deficiency Agreement mean?
Twice a year the owners of the partnership were to take all proceeds, minus certain limited expenses, and deliver them to the bond trustee. It was a paid bond issue. And to the extent that those numbers did not meet the required service payments on the debt, the trustee had the rights to call on the city's Sinking Fund.
To make up the deficiency. CHAIRWOMAN CLARK: Another way to make up the deficiency would have been to increase the revenue by increasing the charging of the price of parking?
Well, I believe that the parking operator, from what we have reviewed, has basically attempted to price the parking there at market. I mean, if they were to price more than others, there is still, other than at times when there are flower shows and auto shows, there is still substantial parking in that facility. I can also tell you that the other parking deck that the city has supported, the Gallery I parking deck closer to Strawbridge's, has also, over the years, had similar issues in terms of its cost of capital, compared to its operating expenses and debt service. They have run parallel in terms of their red ink.
To the extent the Parking Authority had to take revenues from other sources to pay the debt service beyond the revenues of that facility.
In the course of this transaction, will these bonds be retired, and will we get out of this Deficiency Agreement at that point?
No, not effectively, because we are dealing with a new partnership.
No. The bonds will stay -- the bonds were refinanced once in, I believe, 1992 or 1993. And those bonds are not refinancable at this time, I believe, and should be fully retired by the Year 2013. What I am prepared to --
Why are they not refinancable? You can refinance anything, at a price.
Let me double-check. There may be some tax issues. But I can tell you that in our 32 RESOLUTION 970831 discussion, my discussions with others in the Finance Department and the Treasurer's Office, there was no economic advantage of refinancing the bonds at this time, when we originally looked at the transaction.
No. 10 As I said, I believe -- and I am happy to share this with you -- the deficiencies have been erased. The deficiencies were consistent until about months ago. 15
So your testimony 16 now is, you may not retire the bonds, but we also 17 may not have the deficiencies going forward. 18 And, in fact, you seem to be saying, or said earlier, that there may, in fact, even be positive cash flow proceeds out of the future operation of the garage, which the City of Philadelphia will participate in. Is that what you are saying?
Let me state it slightly differently. 33 RESOLUTION 970831 There had been for many numbers of years substantial deficiencies on these bonds.
Recently over the last year, months, I think there was about two 7 years ago they made a full payment, and then one 8 semi-annual payment they missed, and I think they 9 have now made the last two or three payments. 10
It appears, based on 12 those projections, that the deficiencies should not 13 happen any longer, they have hit break-even, before 14 the hotel. 15 There is then further analysis that 16 if you just take a conservative estimate of 40 17 percent of the folks who go to the hotel use the 18 parking deck, there is an additional -- CHAIRWOMAN CLARK: Stream of revenue.
-- stream of revenue. The third is, just generally, parking, costs for parking in terms of what patrons will pay, really is beginning to increase around 34 RESOLUTION 970831 that part of town due to all the development that is already underway, particularly the use of the Convention Center.
I mean, where I am trying to get to, I guess, is, you have an opportunity to do a transaction, people have an opportunity to build the hotel, make some money, you get your garage better situated, get a nice facade, walk-up, all that kind of stuff. I am just trying to figure out how we get out of what has been a loser for us. And why would we continue it going forward if we have a new partnership and an opportunity to get out from under something that we apparently don't do that well?
Well, I think it is fair to say that the new partnership, while it is willing to take the risk of financing a hotel and provide guarantees and provide the facade and whatnot, is not willing to take on the liability of another partnership's arrangement in its full capacity. I mean, they are just not.
But I assume their project doesn't work if they are not building it on top of the already existing garage which we 35 RESOLUTION 970831 authorized some years ago. I mean, there is no 3 benefit without risk here.
That's correct. But there is also a point in time, beyond the economics of building this garage, that the economics of taking on that full liability is not what -- I mean, a lender -- I mean, this isn't just a partnership; it is also inducing -- what substantially is different about this transaction is that a lender, a national commercial lender, is coming to finance a hotel at 90 percent of development cost.
Okay. I have an appreciation for that. We don't need to, certainly, continue to burden the record. Because we are going to have all this same discussion when you come back to Finance. So when do you anticipate coming back? And now that you know all the questions, you can come back with the answers. When will you be back? 36 RESOLUTION 970831
As soon as the hearing is scheduled. There is a Streets hearing tomorrow dealing with the Streets ordinances. I would assume that the remaining of the hearing, I would hope that the Finance hearing could take place in the next few weeks.
Okay. All right. I would like to see the various, the numbers and the relationships between what's going on now, what has gone on, what's going on now, and what do you think is going on in the future, what do you project to happen in the future, and where this deficit activity is going.
I would be happy to. In fact, what we will do is, we will circulate something a little bit beforehand. The other thing I would just point to your direction is that, in addition to the testimony, most of what I have given you is also in this 8-and-a-half-by-11 handouts, this attachment. CHAIRWOMAN CLARK: Mr. Eisenstat, does the developer have to comply with the city's 37 RESOLUTION 970831 equal access policy in connection with selecting architects, engineers, subcontractors, other professional service providers, and vendors?
Through the Redevelopment Authority's Redevelopment Agreement, which is the contractual relationship that this development will take form to, the partnership has to submit a compliance plan, a full compliance plan, on a number of elements, including what you have spoken to, as well as Section 3 requirements. We have received a draft plan. We believe it is adequate. I would be happy to share that with you. CHAIRWOMAN CLARK: You answered my second question. That is, who is going to monitor it? Is it going to be the Redevelopment Authority that's going to monitor it?
Yes. CHAIRWOMAN CLARK: Then I do want to talk to you about what we think ought to happen in this instance, because it is an opportunity which we don't want to miss.
Both in terms of 38 RESOLUTION 970831 construction and long-term employment. CHAIRWOMAN CLARK: Right.
Understood. CHAIRWOMAN CLARK: Starting as early as those soft costs.
Correct. CHAIRWOMAN CLARK: Will the city be held harmless and indemnified for all liabilities that accrue because of the construction and operation of the hotel? And is such indemnification in the air rights Lease Agreement?
I don't know if the actual Lease has been completely drafted. But I can assure you between the Redevelopment Authority, the Commerce Department, and the city's Law Department, those indemnifications will be in place before execution. CHAIRWOMAN CLARK: Fine. Are there any questions by other members of the committee? Mr. Kenney.
Thank you, Madam Chairwoman. Mr. Eisenstat, if you know, relative 39 RESOLUTION 970831 to the design of the building, its peculiar eye-shape design seems to eliminate the possibility for additional rooms, which, of course, is always something that the lender and developers would like to maximize. Is there some structural reason or engineering reason why the entire deck can't be utilized?
Well, I believe that the layout is also a function of just the economy of how to do a double corridor. You want to be able to provide windows and space on both sides. So making the building wider would make it larger and more expensive to operate and build. Codes and compliance requirements which were in place in the early 1980s are not the same as they are today. It is my understanding -- and I would be happy to check and bring it back to Streets tomorrow, when I see you next -- is that without more substantial improvements to the structure, while there will be certain reinforcements under this scenario, that the facility is fundamentally at 40 RESOLUTION 970831 its optimal room count now.
And is it your testimony that the developers will also be the operators of the hotel?
The developers will hire an operator, which may have an identity of interest with one of the partners.
And what is the, I guess, the franchise, the length of the franchise with Hilton?
I would like to double-check. I believe it is a minimum of 10, it may be 15 years.
Are there any other requirements that the city would have relative to the flag, that there --
Not unlike the requirements that are within the Marriott Convention Center Agreement, we will, as part of the Redeveloper's Agreement, require a series of operating covenants, standards, so that the quality 41 RESOLUTION 970831 of -- so if in case the chain changes or partners or managers for some reason bump in and bump out, there are a series of operating covenants to maintain a quality level similar to that.
Obviously, recognizing names like Hilton, are something that we seek. And some others, without mentioning them specifically, down the road may be some that we wouldn't want from a tourism standpoint.
What we had planned to insert within the Redevelopment Agreement are operating standards. And there are some relatively clear operating standards that can be inserted here.
Isn't this, from your experience, I guess, nationally, not uncommon today, for a hotel like this to be financed privately at the level it is being financed?
This is really unusual in an urban context. The Hilton Garden often is built in suburban markets off of highways and on underdeveloped properties. 42 RESOLUTION 970831 There is a trade-off here, there is a certain additional -- so it is usually a wood-frame building with somewhat less construction cost. The developer is now talking about delivering steel shortly, ordering steel for delivery later this spring. And that although there are fewer land costs associated with building air rights, there are also overbuild costs that could be calculated at million to million dollars more per building on top of an existing building. The lender, I would be happy to talk to you about the lending arrangement in more detail later. There is some level of confidentiality because the lender and the developer are still negotiating.
My question is general. It is not common in the not too distant past that --
While the city will be making certain capital improvements in this area as part of the Convention District, you have not heard the words 108 Loan, economic stimulus --
Thank you. CHAIRWOMAN CLARK: Mr. Eisenstat, is it unusual for us to be passing on an agreement that's not yet written? Are you going to bring this final written agreement to us?
Both of the agreements have been drafted. The Redevelopment Authority Agreement is in place, the substance of the leases are in place, the drafting of the deficiency -- the drafting of the PIDC Lease is in place. The matter I spoke about with Councilman Kenney, really goes to the issue that in all respects to the developer, who is negotiating with one lender, but at the same time may want to maintain a second lender as a backup. CHAIRWOMAN CLARK: My question didn't have to do with whether the funding was public or private. I am really asking the question that goes back to my original question about agreements 44 RESOLUTION 970831 and access. This is not yet in writing?
No. I mentioned earlier we received a participation plan over a month ago, and I would be happy to share that with you. CHAIRWOMAN CLARK: And it is going to be incorporated in the Lease Agreement?
It will be incorporated within the Redeveloper's Agreement as an attachment, yes. CHAIRWOMAN CLARK: And at some point are we going to see that whole package?
You may have seen -- Council has already approved the Redeveloper's Agreement. I would be happy to forward you another copy, and I will denote the economic -- CHAIRWOMAN CLARK: Yes, mark it up.
I would be happy to mark it up. CHAIRWOMAN CLARK: All right. So that the questions that I ask are highlighted, and I don't have to read all that tiny legal print to answer the questions that I am asking. 45 RESOLUTION 970831
Be happy to. CHAIRWOMAN CLARK: I thank you. Are there other questions? Councilwoman Miller.
I got here a little late. Did you state how many jobs this project would create, both construction and permanent jobs?
No, I did not. I believe that -- I don't recall the construction count with me right now. That's always a back-of-the-envelope analysis. And I believe that the permanent job count was somewhere between 60 and 80. I will confirm that. I will get back to you on that.
I think that was a number that gives you an equivalent of full-time, 46 RESOLUTION 970831 FTE, full-time employment.
All right. I would be interested in knowing that. And, also, what is the estimated completion date?
The estimated completion date is approximately months from the 9 commencement of construction. So we are talking 10 about a completion some time in the calendar year of 11 1999. 12 The developer would like to proceed 13 with construction this spring, upon final 14 approvals.
Do you know if they have also thought about some type of employment plan, where, how, whether they are going to advertise, recruit, go through PIC, or whatnot?
We believe that the model that was used for the Marriott has been a very good model. And much of the plan that we have received back from the developer, as I promised Councilwoman Clark, has a lot of similarities to the Marriott. 47 RESOLUTION 970831 Now, this is not nearly as job intensive. This is a limited-service hotel; it is not a Convention Center hotel. But the model that's worked with the Marriott has worked well.
Well, you know, I wasn't here when you discussed the Marriott, so I don't have that much knowledge about that plan. Do you have any information, just condensed?
All right. Thank you. CHAIRWOMAN CLARK: Are there any other questions? Thank you. Are there any other persons in the room who wish to be heard with respect to Bill No. 21 970831? Thank you, gentlemen.
Thank you. CHAIRWOMAN CLARK: Wait a minute. Just so I am clear, the air rights 48 RESOLUTION 970831 Lease Agreement that's before this committee had been drafted, and you will provide me with?
That, and the Redeveloper's Agreement. CHAIRWOMAN CLARK: And it has already been drafted?
It is in draft form, yes. CHAIRWOMAN CLARK: It is something you could bring over now; it is not something you have to go home and write? It is done?
It is done. CHAIRWOMAN CLARK: Let's you and me have a private discussion, with that document in hand, to be sure that I am satisfied and clear. All right?
Fine. CHAIRWOMAN CLARK: Yes, ma'am. How are you today? Please introduce yourself to the record, and spell your name for the stenographer.
Good morning. My name is Deborah Butler, D-E-B-O-R-A-H, 49 RESOLUTION 970831 B-U-T-L-E-R, Divisional Deputy City Solicitor for the Law Department. I am the manager of the city's Real Estate Unit, and we assisted in the drafting of the Ordinance and the amendment to the city RDA Lease Agreement. I just wanted to answer Councilwoman Clark's question about the city indemnification. It is provided for in the original Lease Agreement between the city and the RDA, which was authorized by Ordinance No. 1129. So that provision will continue in this amendment of the Lease Agreement. Additionally, the amendment will provide for the city to be named as an additional insured in the garage project and the hotel project. So those issues have been covered. CHAIRWOMAN CLARK: Great. I thank you very much. Yes.
Will the parking facility be inoperable during this construction?
No, it will not be inoperable. That's one of the overbuild constraints. And, in fact, the facility, due to its tax-exempt finance arrangement, will be open to the general public. And the hotel patrons will use the facility, just as any other public member of the public does. Last thing I would ask, again, as was mentioned by Mr. Sipos, the suspension of the Rules. CHAIRWOMAN CLARK: One other question. Is this going to be a moderate-priced hotel?
The pro formas that we have seen in 1998, we would now define as moderate price, which is at about 110 to 115 dollars a night RAC rate, which is, actually, substantially less than what we now see in our Convention Center hotels and hotels in the area. CHAIRWOMAN CLARK: All right. Thank 51 RESOLUTION 970831 you. I would like to have the record show that we were joined at the table by Councilmembers Kenney and Miller. And I state that the public part of the Public Hearing is now closed. (Public Hearing adjourned.) - - - 52 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING of the COMMITTEE ON PUBLIC SAFETY AND PUBLIC WORKS - - - Wednesday, January 28, 1998 - - - Public Meeting conducted by the Committee on Public Property and Public Works, held in Room 11 400, City Hall, Philadelphia, Pennsylvania, on the above date, to consider action on the following: BILLS 970747, 970752, 970831 - - - PRESENT: COUNCILWOMAN AUGUSTA A. CLARK, Chair COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN FRANK RIZZO - - - 53 PUBLIC MEETING CHAIRWOMAN CLARK: And we are now in Public session. And I will entertain a motion. Mr. Rizzo, I believe you wanted to make a statement with respect to Bill No. --
To go on record abstaining on voting on that bill, since I have a relationship with Beasley. CHAIRWOMAN CLARK: Thank you, sir. The record will so note.
Madam Chair, I moved that Bill No. 970747 be reported out of the committee with a favorable recommendation, and a further recommendation that the Rules of Council be suspended so as to permit first reading at our next session. (Duly seconded.) CHAIRWOMAN CLARK: It has been properly moved and seconded that Bill No. 970747 be reported out with a favorable recommendation, and 54 PUBLIC MEETING that the Rules of Council be suspended so as to permit first reading at our next Stated session. All in favor say aye. Those opposed say nay. Abstentions?
One. Me. CHAIRWOMAN CLARK: Abstention noted. Thank you. Before us next for a motion is Bill 11 No. 970831. Ms. Krajewski.
Madam Chairman, I move that Bill No. 970831 be reported out of this committee with a favorable recommendation. (Duly seconded.) CHAIRWOMAN CLARK: Did we get a suspension?
With a suspension of Rules so as to permit first reading at our next session of Council. (Duly seconded.) CHAIRWOMAN CLARK: All in favor. Opposed? 55 PUBLIC MEETING Bill No. 970831 has been reported out with a favorable recommendation, and with a suspension of the Rules so as to permit first reading at our next session of Council. Bill is passed. Bill No. 970752 has been withheld at the request of the sponsor. (Public Meeting adjourned at 10:15 a.m.) - - - 56 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Wednesday, January 28, 1998, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COMMITTEE ON PUBLIC PROPERTY AND PUBLIC WORKS _____________________________________ DEBRA A. WHITEHEAD, RPR