COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON FINANCE - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, December 5, 2007, 3:15 p.m. - - - Bill No. 071081 - An ordinance amending Chapter 19-3200, entitled "Keystone Opportunity Zone and Economic Development District," by renaming said chapter "Keystone Opportunity Zone, Economic Development District, and Strategic Development Area"... (Full text of bill contained herein.) COUNCILMEMBERS PRESENT: Jannie L. Blackwell, Chair Frank DiCicco William K. Greenlee Brian J. O'Neill Blondell Reynolds-Brown Marian B. Tasco - - - V A R A L L O Incorporated Litigation Support Specialists 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 I N D E X WITNESS Stephanie Naidoff......................... Director of Commerce Dan Cantu-Hertzler........................ 6 Chair, Corporate and Tax Group City Solicitor's Office 7 8 * * * 9 10 11 3 12/5/07 - FINANCE COMMITTEE - BILL 071081
Good afternoon. We will now convene the Finance Committee, and today, we will consider Ordinance 0701081, and we will ask the clerk to please read the title of the first bill.
Bill No. 071081, an ordinance amending Chapter 19-3200, entitled "Keystone Opportunity Zone and Economic Development District," by renaming said chapter "Keystone Opportunity Zone, Economic Development District, and Strategic Development Area," to provide for the contingent exemption, abatement, or credit of certain taxes within a specified geographic area, under certain terms and conditions.
Thank you very much. We will now ask our Commerce and Economic Development to come forward, Miss Stephanie Naidoff. And the Chair notes that a 4 12/5/07 - FINANCE COMMITTEE - BILL 071081 quorum is present. We have Councilwoman Blondell Reynolds-Brown, Councilwoman Tasco, Councilman O'Neill, and, to my right, Councilman Greenlee, and Councilman DiCicco is here. Thank you very much. (Witness comes forward.)
Good afternoon, Councilwoman Blackwell and members of the committee. My name is Stephanie Naidoff, and I'm the City representative and Director of Commerce for the City of Philadelphia. I'm here today on behalf of the Administration to testify in support of Bill No. 071081. This bill amends Chapter 22 19-3200 of the Philadelphia Code by creating a Strategic Development Area and designating certain properties within the City as a part of the 5 12/5/07 - FINANCE COMMITTEE - BILL 071081 Strategic Development Area. If I may, I will like to give this committee a little background on the enabling State legislation that created the strategy area designation. In the fall of 2006, the State legislature passed, and Governor Rendell signed, Senate Bill 854, a bill amending the Keystone Opportunity Zone program to create a new designation: Strategic Development Areas (SDAs) and to authorize the Governor to establish, by executive order, up to four SDAs statewide. Effectively, SDAs are the latest round of the Keystone Opportunity Zones. 2-acre located at site 5501 Whitaker Avenue in the City of Philadelphia as a Strategic Development Area. For the Strategic Development Area to become effective, both City Council and the School 6 12/5/07 - FINANCE COMMITTEE - BILL 071081 District agree to the waiver of certain local, taxes as required by the SDA legislation. Under the state-enabling legislation, local approval is required by the end of this current calendar year. The designated property at 5501 Whitaker serves as the worldwide headquarters of Cardone Industries, the largest manufacturing employer in the City, with over 4,000 well-paying jobs. In addition to this headquarters facility, Cardone operates facilities in the Lawncrest and Juniata neighborhoods of the City. Cardone Industries is a true Philadelphia success story. , Cardone Industries has steadily grown over the last 35 years to become one of the largest remanufacturers of auto parts in the world. As you are all aware, the 7 12/5/07 - FINANCE COMMITTEE - BILL 071081 City's manufacturing sector has struggled with many challenges, including foreign competition. Cardone has been particularly hard-hit as it competes in the global marketplace. Presently, China can manufacture many new auto parts less expensively than Cardone can rebuild old parts. Cardone is at a crossroads. The company has gone to extraordinary lengths to reduce operating costs over the last fives years in an effort to remain competitive with foreign manufacturers. Even with those efforts, the company has significant challenges to remain competitive. As our largest manufacturing employer, Cardone's health is critically important to the City and the State. Cardone contributes over $6 million in direct tax revenue to the City. In addition, the company purchases over $42 million per year 8 12/5/07 - FINANCE COMMITTEE - BILL 071081 from other Philadelphia companies. In an effort to assist Cardone in keeping its headquarters in Philadelphia, the Governor issued an executive other designating a portion of Cardone's Philadelphia holdings as SDA, thereby allowing Cardone to realize significant tax relief as part of its larger effort to remain competitive in a global economy. While Bill No. 071081 would exempt many business and real-estate taxes, Cardone has always been an exemplary corporate citizen, and, as such, would not want to harm the financial positions of the School District or the City. The company has negotiated in good faith with the Law Department to enter into an agreement with the City under which Cardone would make annual payments sufficient to provide the City's General Fund and the School District with revenue neutrality. 9 12/5/07 - FINANCE COMMITTEE - BILL 071081 Under this payment in lieu of taxes, or pilot agreement, the School District will receive comparable funding to the amount they would otherwise have been provided directly in the form of tax receipts from Cardone.
Likewise, the City's General Fund will receive funding and public benefit under the pilot agreement that are comparable to the taxes being waived under the SDA legislation. Given the value of retaining Cardone Industries in the City and the revenue-neutral effect on the City and the School Districts respective budgets, I would request the committee give positive consideration to this bill. I'd further request that the rules of Council be suspended to allow first reading of the bill at the next City Council session. This concludes my prepared testimony, and I'd be happy to address any questions you may have. 10 12/5/07 - FINANCE COMMITTEE - BILL 071081
Thank you very much. Could you expand on the -- how they're using the pilot program and what services we may get?
With your permission, I'd like to ask Daniel Cantu-Hertzler, from the Law Department, who has negotiated the agreement with Cardone, to join me here and explain that to you.
Before you speak, the Chair calls on Councilman DiCicco.
Thank you, Madam Chair. I have a meeting to go to with the Mayor and some other folks. I'd like to leave this meeting and have my vote recorded as aye for any bills and/or amendments to it. 11 12/5/07 - FINANCE COMMITTEE - BILL 071081
I'm Dan Cantu-Hertzler, Chair of the Corporate and Tax Group for the City Solicitor's Office. Okay. Could you repeat the question, please.
Yes. Could you expand on what pilot services we'll receive as a result of this transaction?
Yes. Cardone will be paying mostly in cash and has the ability, should it so dire, to pay a portion of these 12 12/5/07 - FINANCE COMMITTEE - BILL 071081 taxes in services rendering public benefit to the City and citizens outside of its own property.
Can you let us know what those services are, the (indiscernible) as well. We're just trying to see what we're -- I'm sure it's a great opportunity, but we just want a little more information on what services they'll be providing to us.
Cardone has indicated that it will be providing neighborhood security patrolling, some voluntary snow-clearing in the area, and some lawn and grounds maintenance and landscaping of public property.
-- that the agreement provides that no services 13 12/5/07 - FINANCE COMMITTEE - BILL 071081 will be accepted in lieu of the cash until they are verified and certified by the City. We need to make sure that we can verify that those services are provided and that they are, indeed, for public benefit.
That's great. Will they be within that area or could they be anyplace in the City?
Well, presumably, they could be anyplace, but the services that we are looking at are services that they provide in the general area but not confined to their property; rather, in the neighborhood surrounding their plant.
Thank you, Madam Chair. I certainly support this bill, and keeping Cardone in the City. I 14 12/5/07 - FINANCE COMMITTEE - BILL 071081 certainly agree with the City rep's testimony. I just -- is this something -- has similar things been done before? Or is this kind of a -- I mean, to steal the phrase there, "pilot program" on this kind of thing?
Pilots have been done before. The SDA, the Strategic Development Area, is brand-new.
Okay, gotcha, okay. That sounds like a good idea to me. Okay, thank you.
Are there any further comments or questions? Councilman O'Neill?
Are any of the four in Philadelphia besides this one?
Okay. Is 15 12/5/07 - FINANCE COMMITTEE - BILL 071081 this the first one of the four to make it this far?
Thank you. Can you tell us exactly what the pilot is?
Thank you very much. Are there any other questions or comments? Councilwoman Tasco? 16 12/5/07 - FINANCE COMMITTEE - BILL 071081
Thank you very much. I'd just like to say that Cardone is in the 9th Councilmatic District, and we have been working with them since I became Councilperson for that district. They employ a large number of people. It's family-oriented business, not only with the ownership, but with the employees. And so we certainly want to do and be supportive of any efforts to help them to stay in Philadelphia and to thrive in Philadelphia and to provide the employment to those employees who, the majority probably, live in the 9th Councilmatic District. So the -- I just wish we had had a little more time to discuss and negotiate, but we thank you for the effort that you all put forth to make this happen, and I certainly have to thank Cardone for their cooperation in 17 12/5/07 - FINANCE COMMITTEE - BILL 071081 this effort to get where we are today. And, certainly, you're not supposed to thank staff people, but I have to thank Derek Green. (Laughter.)
Absolutely. And, Councilwoman, you have been very supportive of Cardone for many years, and we thank you for that.
Any further questions or comments? (No further questions.)
That will conclude our public hearing. * * * 18 12/5/07 - FINANCE COMMITTEE - BILL 071081
We will now enter our meeting, and the Chair recognizes Councilman Greenlee for a motion on behalf of Bill No. 6 071081.
Thank you, Madam Chair. I move that Bill No. 071081 be reported out of this committee with a favorable recommendation, and further, that the rules of Council be suspended to allow for first reading at our next session of Council. (Motion seconded.)
It has been moved and seconded that Bill 18 No. 071081 be reported out of committee with a favorable recommendation; and, furthermore, that the rules of Council of Council be suspended so as to permit first reading at our next session of Council. All those in favor will say 19 12/5/07 - FINANCE COMMITTEE - BILL 071081 aye. Opposed? The ayes have it, and so the bill passes, as was just stated. Thank you all very much. That concludes the business of the Finance Committee. Thank you. (Proceedings end at 3:34 p.m.) * * * 20 C E R T I F I C A T E I HEREBY CERTIFY that the proceedings of the City of Philadelphia Council Committee on Finance are contained fully and accurately in the stenographic notes taken by me on Wednesday, December 5, 2007, and that this is a true and correct statement of same. __________________________________ JOSEPHINE CARDILLO Registered Professional Reporter (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)