COUNCIL OF THE CITY OF PHILADELPHIA2 COMMITTEE ON FINANCE3 Room 400, City Hall6 Philadelphia, Pennsylvania Monday, June 6, 20117 1:30 p.m. PRESENT: COUNCILWOMAN MARIAN B. TASCO, CHAIR10 COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL CLARKE11 COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN BILL GREEN12 COUNCILMAN WILLIAM K. GREENLEE COUNCILWOMAN BLONDELL REYNOLDS BROWN13 BILLS 110297, 110229, 110363, 110371, 110373, 110375, 110376, 110444, 110445, 110446 and15 110447 - - -17 2
Good2 afternoon. The Council Committee on3 Finance will come to order.4 Let me note that there is a5 quorum in the presses of Councilwoman6 Blackwell, Councilmen Green, Greenlee,7 Goode and myself.8 We'll now ask the Clerk to read9 the title of the bills that will be heard10 today.11
Bill No. A. 18 Bill No. 1 Bill No. 12 Bill No. 22 Bill No. 6 Bill No. 6 Bill No. 7 Bill No. 10 Bill No. 6 Bill No. 13 Bill No. 13
Okay.14 Thank you very much.15 We will now hear testimony on16 Bill No. 110297.17 (Witness approached witness18 table.)19
Good21 afternoon. We understand you have an22 amendment on this bill. We heard23 testimony on this bill at the prior24 hearing, which was recessed until today.25 10 6/6/11 - FINANCE - BILL 110297, ETC.1
Yes. I have a2 proposed amendment to Bill No. 110297,3 which adds a new Section 3 to the bill.4 The amendment is in your packet, and I'd5 like to offer this up to the6 Sergeant-at-Arms.7
Could we8 get someone to get the amendment, please.9 This is the exhibit to the10 original bill that we heard testimony on,11 right?12
Yes, it is. It's13 attached as Exhibit B. It's the fair14 lending plan.15
Yes. So if you18 recall from my prior testimony, the Bill19 No. 1102 -- 100129.20
-- required --22 yes. It required a fair lending plan to23 be submitted. At the time the ordinance24 that's being submitted to extend for one25 11 6/6/11 - FINANCE - BILL 110297, ETC.1 year the term of the payroll contract2 required that this fair lending plan,3 which would otherwise have been due4 later, for it to be included with this5 ordinance.6
Okay. So7 you're presenting it today as an8 amendment because it was omitted when you9 introduced at the hearing --10
I forgot12 the date, when we had the original13 hearing.14
We'll now2 hear -- you might as well stay -- 110371.3
Good afternoon,4 Councilwoman Tasco and members of the5 Committee on Finance. I'm Nancy Winkler,6 City Treasurer for the City of7 Philadelphia, and I'm here to testify in8 support of Bill No. 110371.9 Bill No. 110371 authorizes City10 depositories to hold City funds without11 posting equivalent collateral, to the12 extent that such funds do not exceed the13 insurance provided by the Federal Deposit14 Insurance Corporation or Federal Savings15 and Loan Insurance Corporation.16 Effective December 31, 2010,17 the federal government implemented18 Section 343 of the Dodd-Frank Wall Street19 Reform and Consumer Protection Act, which20 provides for unlimited insurance coverage21 for non-interest-bearing transaction22 accounts. Beginning December 31, 201023 through December 31, 2012, all24 non-interest-bearing transaction accounts25 13 6/6/11 - FINANCE - BILL 110297, ETC.1 are fully insured regardless of the2 balance in the account at all3 FDIC-insured institutions. The unlimited4 insurance coverage is available to all5 depositors, including consumers,6 businesses and governmental entities.7 This unlimited insurance coverage is8 separate from and in addition to the9 insurance coverage provided to a10 depositor or deposit accounts held in an11 FDIC-insured institution.12 Interest-bearing accounts are separately13 covered by FDIC insurance up to $250,000.14 The proposed ordinance will allow15 authorized depositories to use FDIC16 insurance as collateral for17 non-interest-bearing transaction18 accounts.19 This concludes my testimony. I20 am happy to answer any questions you may21 have at this time.22
And I would25 14 6/6/11 - FINANCE - BILL 110297, ETC.1 also -- I don't know if this is the right2 time, but ask to suspend the rules.3
Thank you.7 Next you have Bill No. 110375.8 (Witness approached witness9 table.)10
Good afternoon11 again. I'm Nancy Winkler, City Treasurer12 for the City of Philadelphia. With me is13 Joseph S. Clare, III, Deputy Water14 Commissioner for the Philadelphia Water15 Department. We are here to testify on16 behalf of Bill Nos. 110376 and 110375.17 Bill No. 110376 would provide18 authorization to issue Water and19 Wastewater Revenue Bonds in an aggregate20 principal amount of up to $450 million,21 exclusive of costs of issuance and22 certain other items.23 The bonds will provide new24 capital to partially finance capital25 15 6/6/11 - FINANCE - BILL 110297, ETC.1 projects approved and authorized in the2 FY12 through '17 capital budget and plan.3 Proceeds from the sale of the bonds shall4 be used exclusively for improvements to5 the City's water, wastewater and6 stormwater systems, including treatment7 plants, pumping stations, conveyance and8 collection piping and related equipment9 and facilities and for10 transaction-related costs.11 Bill No. 110375 authorizes the12 refunding of up to 240 million of13 currently outstanding Water and14 Wastewater Revenue Bonds for savings.15 Candidates for refunding shall be16 identified and selected based on our17 existing debt policy. It is the City's18 general practice to issue refunding bonds19 when the average debt service savings to20 be realized from a refunding is at least21 3 percent. It is expected that the net22 debt service after the authorized23 refundings will be lower than the24 existing debt service, providing25 16 6/6/11 - FINANCE - BILL 110297, ETC.1 potential debt service expense reductions2 to offset increases in other water fund3 costs.4 This concludes my testimony.5 I'm happy to answer any questions that6 you may have at this time. And, again,7 I'd like to ask for a suspension of the8 rules.9
Thank you10 very much.11 Who are the participants on the12 bonds? Have you made those selections13 yet?14
We have not fully15 completed the selection of the team16 members. We presently have selected17 co-bond counsels, which are Andre Dasent18 and Ballard Spahr. We have issued a19 request for proposals for financial20 advisors, which is underway, and four21 firms have been short-listed, and we22 expect to have co-financial advisors23 appointed within the next several weeks,24 after which time we would proceed with25 17 6/6/11 - FINANCE - BILL 110297, ETC.1 the selection of underwriters. But it is2 our practice and our intent to have a3 diverse team of financial advisors and4 underwriters participating, along with5 the selected co-bond counsels.6
Does the7 Office of Equal Opportunity participate8 in this process?9
The Office of10 Equal Opportunity has been invited to11 participate in the process and informed12 of our process and of the dates of our13 meetings and evaluations, yes.14
Thank you.18 Have they attended any of your19 meetings?20
They did not21 attend the short-list meeting for -- they22 were invited, but they did not attend the23 short-list meeting.24
Okay. To25 18 6/6/11 - FINANCE - BILL 110297, ETC.1 what extent is the focus of these2 meetings on involving Philadelphia-based3 underwriters in the short list for4 underwriters?5
We have not had6 any meetings related to the selection of7 underwriters.8
Do you plan9 to attempt to have at least four10 Philadelphia-based underwriters as part11 of the co-management team?12
We do weight13 Philadelphia -- whether or not a company14 is Philadelphia based or has a strong15 Philadelphia presence in the selection16 process. I'm not sure we have a minimum17 number of firms as a standard practice,18 but it's a factor in the selection19 process.20
So you21 haven't issued an RFP for these22 underwriters yet?23
There was an RFP24 issued two years ago, which -- well,25 19 6/6/11 - FINANCE - BILL 110297, ETC.1 there was an RFP which was concluded and2 which established a team of authorized3 underwriters authorized to serve as a4 senior manager in the co-manager pool for5 the water revenue bonds. That pool is6 already in place and will be in place7 until the end of this calendar year. So8 what we'll be doing is selecting from9 that pool which already exists.10
Okay. I ask15 this question every time there's a bond16 offering about local participation, and17 you get the question about minority and18 women-owned participation, and every time19 you come before us -- and it's not you.20 It's happened for three years and five21 months of my presence on City Council --22 it's never known, and then we pass the23 bill and then like a week later the24 underwriters are picked.25 20 6/6/11 - FINANCE - BILL 110297, ETC.1 And so I personally want to try2 to see you have the answers to those3 questions prior to us authorizing this.4 You've had the list for over two years.5 You know who you're going to pick or you6 know who you're going to recommend in7 those meetings, and it's not appropriate8 for you to come and ask us to approve9 something when you're not coming here10 prepared to give us all of the11 information. And I think who the12 underwriters are and how this is going to13 get sold is an appropriate thing for us14 to know prior to giving you the15 authorization to go to market.16 So I don't really have any17 questions. I just want to put that on18 the record, and that will be my stance19 going forward. I will vote to get this20 out today.21
We'll vote25 21 6/6/11 - FINANCE - BILL 110297, ETC.1 it out of Committee, but before we pass2 it, we'd like to have that information,3 please.4
We'd like7 to see the list of the underwriters that8 you have approved.9
Yes, he is.24 (Witness approached witness25 22 6/6/11 - FINANCE - BILL 110297, ETC.1 table.)2
So good7 afternoon, Councilwoman Tasco and members8 of the Committee on Finance. I am Nancy9 Winkler, City Treasurer for the City of10 Philadelphia. With me is Joseph R.11 Bogdonavage, Interim Executive12 Vice-President and Chief Financial13 Officer for the Philadelphia Gas Works.14 We are here to testify on behalf of Bill15 Nos. 110445 and 110447.16 Council Bill No. 110445 would17 authorize the issuance of Twentieth18 Series Gas Works Revenue Bonds (the19 "Twentieth Series Bonds") in an amount20 not to exceed $19 million in proceeds.21 The proceeds of the sale would pay the22 cost of refunding or redeeming a portion23 of certain outstanding Sixteenth Series24 Bonds and other project costs.25 23 6/6/11 - FINANCE - BILL 110297, ETC.1 Council Bill No. 110447 as2 originally submitted would provide3 authorization to issue up to 106 million,4 exclusive of costs of issuance and5 certain other items, of Tenth Series Gas6 Works Revenue Bonds (the "Tenth Series7 Bonds"). Today we are submitting a8 proposed amendment to that ordinance to9 authorize up to $145 million of Tenth10 Series Bonds, and I have that amendment11 here with me and it should be in your12 packet as well.13 Candidates for refunding shall14 be identified and selected based on the15 City's existing debt policy. It is the16 City's general practice to issue17 refunding bonds when the average debt18 service savings to be realized from a19 refunding is at least 3 percent. It is20 expected that the net debt service after21 the authorized refundings will be lower22 than the existing debt service, providing23 potential debt service expense reductions24 to offset increases in other Gas Works25 24 6/6/11 - FINANCE - BILL 110297, ETC.1 fund costs. Given the interest rate2 volatility in the current market, the3 ordinance is structured to permit us to4 determine based on interest rates at the5 time of issuance to select several6 structures for the refunding. We are7 evaluating and will monitor the market8 for potential partial termination of a9 swap as part of this transaction. The10 proceeds of the sale would pay for the11 cost of refunding or redeeming certain12 outstanding Gas Works Revenue Bonds, any13 termination payments which may come due14 under a Qualified Swap Agreement in15 connection with the redemption or16 conversion of all or any portion of a17 certain Gas Works Revenue Bonds and other18 project costs. These transactions, if19 fully executed, could result in net20 present value savings over the life of21 the transaction in excess of 4 percent,22 or $4 million.23 This concludes my testimony.24 I'm happy to answer any questions you may25 25 6/6/11 - FINANCE - BILL 110297, ETC.1 have at this time, and I'd like to ask2 for a suspension of the rules.3
Now, does4 your department, do you select the team5 for these bonds also?6
So where we are10 with that is, we have selected the11 co-bond counsels for that, which is Andre12 Dasent and Phoenix -- I'm sorry; Andre13 Dasent and Blank Rome, and the14 co-financial advisors are Public15 Financial Management and Phoenix16 Advisors.17
We are still --23 just by way of background, for both the24 Water and the PGW, we recently ran a25 26 6/6/11 - FINANCE - BILL 110297, ETC.1 competitive process, which is not yet2 concluded, for letter of credits. The3 City has letters of credits out that are4 coming to the end of their terms in5 August and early September for the GO,6 the Water and PGW. And so what we chose7 to do was to run a competitive process8 for all three of them, trying to get much9 better pricing and better business terms,10 and we're evaluating those responses and11 are thinking about the effect of the12 value of the savings and benefits that13 the City is deriving from that RFP14 process and factoring that into the15 selection of the underwriting teams.16
So it would be --19 we're probably a couple of weeks away20 from having gone through a process of21 evaluating those responses and then22 factoring that into the team, building23 the teams on the two transactions.24
Do you25 27 6/6/11 - FINANCE - BILL 110297, ETC.1 also factor in our concern for diversity2 and local preference?3
I don't think10 we're going to be able to have completed11 that for the Water by June 16th, because12 we won't have selected the financial13 advisor, and we would anticipate14 financial advisor would participate with15 us. We don't have any meetings scheduled16 to evaluate the underwriters by then,17 but --18
Probably -- well,21 the PGW letter of credit expires on22 August 19th, so we will have concluded --23 we would hope to have sold the bonds in24 July. But it may be -- it would be25 28 6/6/11 - FINANCE - BILL 110297, ETC.1 probably towards the end of July, would2 be my guess.3
We've4 discussed in private and before in public5 the potential of doing auction sort of6 processes with respect to -- instead of7 firm underwritten offerings and revenue8 bonds seem especially well suited to9 that, Water, et cetera. Is there any10 plan to look at these offerings as the11 potential to go that route?12
Well, the Water13 transaction is a new money transaction14 and a refunding transaction, and it would15 be somewhat challenging to incorporate16 the refunding, although it's possible, to17 incorporate a refunding transaction.18 It's far less common to do that in a19 competitive sale.20 We're also -- so, no, we don't21 at this point for the Water, which22 it's -- we could theoretically sell those23 competitive. I think to try to sell24 the -- I don't think it's feasible to25 29 6/6/11 - FINANCE - BILL 110297, ETC.1 sell the PGW bonds competitive. However,2 I have had conversations with you about3 seeking to create -- to look at4 competitive opportunities, and we are at5 this point seriously considering and will6 most likely proceed with a competitive7 sale of the City's trans.8
Any other11 questions?12 (No response.)13 COUNCILWOMAN TASCO:14 Mr. Bogdonavage, would you please explain15 why PGW believes it is a good idea to16 refund certain of its long-term bonds?17
Certainly.18 Good afternoon, Councilwoman Tasco and19 members of the Committee of Finance.20 Right now PGW has, as21 Ms. Winkler pointed out, two ordinances22 before you, one to refund up to $1923 million of the 1975 ordinance bonds and24 up to $145 million of the 1998 ordinance25 30 6/6/11 - FINANCE - BILL 110297, ETC.1 bonds. The combination of both of those2 transactions will result in a net present3 value savings of about 4 percent, or4 north of $4 million, which would save PGW5 and the ratepayers that interest cost as6 we go forwards. So at this point in7 time, with the favorable interest rates8 that are in the marketplace, we think it9 is very prudent to take advantage of the10 market and also to at this point in time11 have about a $4 million plus savings that12 we can pass on through the reduced13 expenses that PGW is paying to the market14 right now for interest.15
Why does16 Bill 110447 need to be amended to17 increase the maximum refunded bonds from18 106 million to 145 million?19
Initially we20 had done some sensitivity analysis, along21 with our financial advisors, and the22 reason that the increase up to 14523 million, there is a component of PGW's24 Eighth Series Bonds that are variable25 31 6/6/11 - FINANCE - BILL 110297, ETC.1 rate. Right now there's $255 million of2 those outstanding. PGW is in the process3 with the City of looking at the financial4 economics of whether or not we would be5 switching these over to a fixed-rate6 mode, and if that's the case, obviously7 when the ordinance was introduced at $1068 million, it did not give us the9 flexibility to consider refunding some of10 these bonds or converting them from11 variable rate to fixed. The amendment up12 to 145 now gives us the ability to, if it13 is economically possible, to refund these14 or convert these bonds that were not15 contemplated in that 106 million16 ordinance as it was originally17 introduced.18
In your19 testimony on , you state there20 could be a total savings of $4 million if21 all of the anticipated transactions are22 done. Could you please break down the23 savings between the two bills. Is the 424 million savings figure based on the25 32 6/6/11 - FINANCE - BILL 110297, ETC.1 106 -- I think you just did that, said2 that -- or on the 145 million?3
Well, the4 components that make up the in excess of5 $4 million, the Bill 110445, which is the6 up to $19 million of 1975 ordinance7 bonds, at today's rates look like about8 somewhere between 800,000 and a million9 dollar savings of that 4 million that I10 mentioned. And then additionally, in the11 Bill 110447, up to $145 million, there's12 two components of that. We would be13 refunding some Series A bonds of the 199814 ordinance, Series 2 and 3, and that has15 about $2 million of savings with it. And16 if PGW goes ahead and converts some of17 the variable-rate bonds to fixed, there18 would be an additional savings of19 probably up to about a million and a half20 to $2 million of additional savings.21 So they're the three22 components. The first bill for the 1923 million is about 800 to a million24 dollars. The second bill, 447, is about25 33 6/6/11 - FINANCE - BILL 110297, ETC.1 roughly three to three and a half million2 dollars of savings on the 1998 issued3 bonds.4
Also, I don't10 know if Ms. Winkler had asked, we'd like11 for a suspension of the rules on the12 bill.13
Thank you.16 We will now hear testimony on17 Bill 110373, Mr. Alan Greenberger.18 (Witness approached witness19 table.)20
Good23 afternoon, Madam Chair, members of the24 Committee. I'm Alan Greenberger, Deputy25 34 6/6/11 - FINANCE - BILL 110297, ETC.1 Mayor for Economic Development and2 Director of Commerce. I'm here to3 testify in support of Bill No. 110373 as4 offered today, which includes one small5 technical correction suggested by the6 City Solicitor's Office. There's a7 change of a single word.8 This bill amends Section9 19-2600 of The Philadelphia Code relating10 to the business privilege tax by11 excluding from the tax certain12 investments made under the Department of13 Treasury's New Market Tax Credit program.14 New Market Tax Credits are an15 economic development tool created by the16 federal government to encourage private17 investment in low-income communities.18 Local economic development financing19 providers like the Philadelphia20 Industrial Development Corporation have21 received allocations in the past, along22 with national financing providers like23 Wells Fargo and The Reinvestment Fund.24 The program requires the creation of a25 35 6/6/11 - FINANCE - BILL 110297, ETC.1 single-purpose entity to act as a conduit2 for the tax credits allocated to each3 project.4 A strict interpretation of the5 current requirements of the Code would6 make these single-purpose entities7 subject to the business privilege tax.8 This local tax inadvertently reduces the9 benefit of an important federal incentive10 program to low-income areas of the City.11 Decisions about which projects the12 credits are applied to are up to each13 economic development financing provider,14 so it is important that Philadelphia's15 treatment of this benefit is consistent16 with the rest of the United States.17 Taxing the federal credits18 passing through single-purpose entities,19 created solely to comply with New Market20 Tax Credit regulation, reduces the amount21 of the federal incentive available to22 actually close project funding gaps for23 City-based projects. When seeking24 funding from a national financing25 36 6/6/11 - FINANCE - BILL 110297, ETC.1 provider, Philadelphia projects actually2 compete nationally for the limited3 resources provided throughout the New4 Market Tax Credit program. Without5 action, we run the risk of discouraging6 national financing providers from7 investing in projects here if there is a8 perception that Philadelphia is unique in9 taxing these benefits.10 This change would also benefit11 projects seeking New Market Tax Credit12 through local financing providers. For13 example, PIDC was successful in securing14 $60 million in tax credits for investment15 in areas identified by the Census Bureau16 as low-income communities throughout the17 City. PIDC's allocation leveraged $14818 million of private investment into19 Philadelphia, which would not have20 occurred but for the availability of New21 Market Tax Credits in Philadelphia.22 There are very few cities in23 the country where the local tax code has24 this unintended consequence. Washington,25 37 6/6/11 - FINANCE - BILL 110297, ETC.1 DC encountered the same problem with its2 business tax and they amended their code3 to remove this tax liability from the4 program. Philadelphia needs to take5 similar action to remain competitive.6 Let me emphasize that this does7 not exempt the private developer from8 payment of the BPT in full on their9 business activity in the City. This10 exemption only affects revenues of the11 new special-purpose entities created to12 implement the program which revenues13 would otherwise be exempt.14 This concludes my testimony. I15 ask that the Committee report this bill16 out with a favorable recommendation, with17 a recommendation that the rules of18 Council be suspended to permit first19 reading at the next regularly scheduled20 meeting of the whole Council.21 Thank you for opportunity to22 testify. I'll be happy to answer23 questions.24
Are there25 38 6/6/11 - FINANCE - BILL 110297, ETC.1 questions?2 (No response.)3
Thank you4 very much.5 DEPUTY MAYOR GREENBERGER:6 You're welcome. Thank you.7
We will8 now hear from Commissioner Michael9 DiBerardinis relative to Bill 110363.10 (Witnesses approached witness11 table.)12 COMMISSIONER DiBERARDINIS:13 Good afternoon.14
Good15 afternoon.16 COMMISSIONER DiBERARDINIS:17 Councilwoman Tasco, members of the18 Committee, my name is Michael19 DiBerardinis, Deputy Mayor and Parks and20 Recreation Commissioner. With me today21 is Mark Focht, First Deputy Commissioner22 for Parks and Facilities. It is a23 pleasure to be here with you today, and24 before I start my formal testimony, I25 39 6/6/11 - FINANCE - BILL 110297, ETC.1 want to thank Councilwoman Reynolds Brown2 and Councilman Kenney for their work on3 this ordinance and their continued4 support of the Parks and Recreation5 Department.6 I appear before you today to7 present testimony in support of Bill No.8 110363, which, if adopted, would allow9 the Department to retain needed revenue10 from competitively bid agreements to11 support the Fairmount Park system to a12 safe, clean and ready-to-use state for13 all Philadelphians. This ordinance would14 establish a Parks and Recreation Programs15 and Facilities Fund into which revenue16 would be deposited from competitively17 awarded agreements that utilize areas and18 facilities in the Park. The Department19 of Parks and Recreation would then be20 authorized to spend money from this fund21 to support programming and/or care for22 the facilities in the Fairmount Park23 system.24 Two recent agreements which25 40 6/6/11 - FINANCE - BILL 110297, ETC.1 demonstrate the benefits of revenue2 generation and retention are special3 event management at the Fairmount Park4 Horticulture Center and the new Cosmic5 Cafe at Lloyd Hall. In both cases, a6 concessionaire was selected through a7 citywide competitive RFP process. Parks8 and Recreation worked with the Budget and9 Finance Offices to determine the amount10 to retain and how these funds would be11 used to support operations, programming12 and/or capital needs of the specific site13 or the Fairmount Park systemwide. This14 process allows for funding generated by a15 private operator to be reinvested in a16 facility or site, removing that cost from17 the City's operating or capital funds.18 This ordinance is rooted in the19 history of our Fairmount Park, when in20 1868 the Pennsylvania General Assembly21 first directed the Fairmount Park22 Commission to deposit revenue generated23 from activities in the park to a fund24 established exclusively for the purpose25 41 6/6/11 - FINANCE - BILL 110297, ETC.1 of caring and enhancing the park system.2 Numerous other municipal park systems3 utilize similar arrangements to support4 programming, operations and maintenance.5 These municipal park systems include St.6 Louis, New York, Los Angeles, Seattle and7 Minneapolis. I am happy to share this8 best practices data with the Committee.9 Therefore, I am requesting this10 Committee's favorable consideration of11 Bill No. 110363, and I ask that the rules12 be suspended so that the ordinance may be13 passed upon the second reading of14 Council.15 I would also like to thank the16 Parks and Recreation Commission and17 specifically the Commission's Revenue18 Enhancement Committee for their19 leadership and work. I would also like20 to thank our colleagues in the Law,21 Budget and Finance Department, as well as22 our own Parks and Rec staff who worked23 hard on this ordinance.24 Thank you for your attention.25 42 6/6/11 - FINANCE - BILL 110297, ETC.1 I'd be happy to answer any questions.2
Thank you3 very much.4 You have a special events5 person now that runs the Horticulture6 Center? If there's an event there, do7 you work with this concessionaire?8 DEPUTY COMMISSIONER FOCHT:9 Correct.10 COMMISSIONER DiBERARDINIS:11 I'll allow Mark to answer that.12 DEPUTY COMMISSIONER FOCHT:13 Mark Focht, First Deputy Commissioner.14 The special events of the15 Horticulture Center are currently managed16 by Stephen Starr Catering. They were the17 successful firm selected through the18 competitive RFP process that was held19 about two years ago.20
So if an21 individual wants to utilize the22 Horticulture Center, they would negotiate23 with him --24 DEPUTY COMMISSIONER FOCHT:25 43 6/6/11 - FINANCE - BILL 110297, ETC.1 Correct.2
-- in3 terms of all of the details?4 DEPUTY COMMISSIONER FOCHT:5 Yes. Yes. They book the facility for6 special events.7
Do they8 operate out of that? Otherwise, do they9 have a restaurant or something in there?10 DEPUTY COMMISSIONER FOCHT: Not11 at the Horticulture Center. It's only12 open for special events.13
So it's14 just the managing outside events?15 DEPUTY COMMISSIONER FOCHT:16 Correct.17
Thank you.18 Any other questions?19 Councilman Green.20
Thank you.21 How does this -- the end of the22 ordinance states that any monies to be23 spent from this special fund must be24 authorized in the budget and by25 44 6/6/11 - FINANCE - BILL 110297, ETC.1 ordinance. How does that relate to like2 next year where we won't have authorized3 any funds from this fund to be spent on4 behalf of the park, at least when we pass5 the budget this month, unless there's an6 amendment that is forthcoming?7 DEPUTY COMMISSIONER FOCHT:8 Councilman, we believe there is an9 amendment forthcoming. We have provided,10 at the request of Budget and Finance, the11 projections of revenue from both the12 operators at the two facilities, Cosmic13 Cafe at Lloyd Hall and the Hort Center14 special events agreement, provided the15 projected revenue from both the operators16 and the associated projected expenses.17
And what are18 the revenues?19 DEPUTY COMMISSIONER FOCHT: The20 revenues combined between the two21 concession agreements is about $135,00022 in Fiscal Year '12.23
Between the24 two concessions?25 45 6/6/11 - FINANCE - BILL 110297, ETC.1 DEPUTY COMMISSIONER FOCHT: The2 two combined. It's about $30,000 from3 Lloyd Hall and about 105,000 from the4 Horticulture Center. Again, they are5 projected bookings that were in response6 to the RFP.7
Good11 afternoon. Please speak in some12 additional detail around the catering13 contract and how that -- where you14 started and where you ended up in terms15 of the announcement to the world that it16 existed, how many persons ultimately17 submitted a proposal, et cetera.18 DEPUTY COMMISSIONER FOCHT:19 This would have been for the Horticulture20 Center. We released an RFP approximately21 just shy of two years ago now. I do not22 remember how many folks attended the23 pre-proposal meeting, but there were24 many. We believe we received, if I25 46 6/6/11 - FINANCE - BILL 110297, ETC.1 recall correctly, four proposals. It was2 narrowed to two firms. We had3 face-to-face interviews with two firms,4 and ultimately selected Stephen Starr5 Catering. The selection was made by a6 committee that included representatives7 of Parks and Recreation, Procurement and8 the Office of Economic Opportunity.9
Would you10 please submit to the Chair the list of11 all contracts held by restauranteurs who12 do business with any of the Fairmount13 Park and Recreation facilities?14 DEPUTY COMMISSIONER FOCHT:15 Certainly.16
And let me17 just ask one subsequent question. So the18 current contract is in place for how many19 years and what is the renewal?20 DEPUTY COMMISSIONER FOCHT: The21 agreement -- I'll take them separately.22 The agreement with Stephen Starr events23 for Lloyd Hall was a one-year agreement24 with three one-year renewals. We just25 47 6/6/11 - FINANCE - BILL 110297, ETC.1 exercised the beginning of the second2 year. And then the Cosmic Cafe at Lloyd3 Hall, which your committee approved this4 morning, would be a five-year agreement5 with a five-year extension.6
Okay. So7 if you will submit that information to8 the Chair, that will give us a broader9 picture of what's happening systemwide10 when it comes to how well the City is11 doing with contractors, et cetera. I'll12 leave it there.13 DEPUTY COMMISSIONER FOCHT:14 Certainly.15
One of the17 concerns I have is the cost of utilizing18 these facilities prior to -- I don't know19 what the fees are here or the scale, but20 when the City was managing this, the21 costs were very high. An average person,22 middle-income person, found it very23 difficult to rent, utilize those24 facilities.25 48 6/6/11 - FINANCE - BILL 110297, ETC.1 Are the costs going to be in2 the range where Ms. Average Philadelphian3 can rent these places, utilize these4 places, or are they going to be so5 expensive only the wealthy can use them?6 DEPUTY COMMISSIONER FOCHT: No,7 Councilwoman. We believe that in both8 cases -- let me speak specifically about9 the Horticulture Center, because that's10 the one that's used for more special11 events. There's a multi-tiered price12 structure for the use of the event, and13 it's kind of like a menu of different14 options depending on which rooms, how15 much time. There is also a non-profit16 rate that's for the use of the facility.17 So there's a base facility rent, and then18 depending on the extent of catering or19 other service you want, the price20 obviously goes up from that. But we feel21 that the base rent, the base fees, are22 very competitive throughout the City and23 then there is a non-profit discount on24 that.25 49 6/6/11 - FINANCE - BILL 110297, ETC.1
They're2 competitive you think with the local3 hotels or catering facilities?4 DEPUTY COMMISSIONER FOCHT:5 Yes. Yes. They're very competitive with6 local hotels or catering, considering7 that at the Horticulture Center you have8 both an indoor and outdoor option. So9 you can book your event outdoors and if10 it rains that day, you can move it11 inside, and also we have a 300-car12 parking area. There are many different13 benefits to that facility that make it14 very competitive with other facilities.15
Thank you.16 The Chair recognizes Councilman17 Green.18
Thank you.19 Are you doing the same sort of20 thing with libraries? Is there a plan to21 set up a special fund for concessionaires22 in the library system or in the23 libraries?24 COMMISSIONER DiBERARDINIS: Not25 50 6/6/11 - FINANCE - BILL 110297, ETC.1 at this point. There may be. But it2 would sort of fall in the realm of the3 foundation -- the library foundation in4 terms of leading that. But certainly not5 opposed to it, but it would have to be6 worked out with the trustees and the7 foundation to see if their interest is8 strong to move this forward.9
Okay. I10 mean, it's just parks, libraries, recs,11 it seems like we're on a very slippery12 slope where we're taking dedicated13 funding out of the City's revenue pool14 and putting it into these resources. Is15 the intention to spend this money on16 things that are not being spent on the17 Park or is it to supplant General Fund18 dollars with the money that's then in19 these funds, or that will depend on a20 year-to-year basis?21 COMMISSIONER DiBERARDINIS:22 Look, certainly my hope is it is not a23 dollar-for-dollar replacement. I mean,24 so my hope is this enhances both our25 51 6/6/11 - FINANCE - BILL 110297, ETC.1 capital funds, enhances that capital fund2 investment that the City makes, leverages3 it, but my hope isn't that we raise4 hundred thousand dollars or whatever in5 the future, we raised 500,000 and that6 goes against our capital budget. I hope7 it doesn't work that way. It's not my8 assumption. My view is this adds to our9 ability to invest in our infrastructure10 over time, not that it remains a flat11 gain.12
But it will13 be our discretion by ordinance as to what14 we appropriate given what's in the fund15 every year, et cetera?16 DEPUTY COMMISSIONER FOCHT:17 Correct.18 COMMISSIONER DiBERARDINIS:19 Yes.20
And this23 is just for the Park facilities, not the24 Recreation Department facilities?25 52 6/6/11 - FINANCE - BILL 110297, ETC.1 COMMISSIONER DiBERARDINIS:2 That's correct.3
Thank you4 very much. Do you want a suspension of5 the rules?6 DEPUTY COMMISSIONER FOCHT:7 Yes, please.8 COMMISSIONER DiBERARDINIS:9 Thank you.10
Thank you.11 Next we have Water Department,12 Bill 110446.13 (Witnesses approached witness14 table.)15
Thank you.16 Good afternoon. Would you state your17 name for the record and begin your18 testimony.19 COMMISSIONER NEUKRUG: Good20 afternoon, Chairwoman Tasco and members21 of the Committee. I am Howard Neukrug,22 Water Commissioner, appearing before you23 this afternoon to testify regarding Bill24 No. 110446. I'm joined by Joe Clare,25 53 6/6/11 - FINANCE - BILL 110297, ETC.1 Deputy Commissioner for Finance for the2 Water Department, and Joanne Dahme,3 General Manager for Public Affairs.4 This ordinance closes a5 loophole that currently allows property6 owners who apply for a discontinuance7 permit, otherwise known as D-Permit, to8 avoid stormwater service charge billing.9 A D-Permit is an accounting tool used by10 the Water Department and the Water11 Revenue Bureau to signal that a12 property's water and sewer services have13 been turned off or discontinued. The14 current language in the Code did not15 anticipate the new method for charging16 for stormwater services and thus this17 clarification or correction is needed.18 By closing this loophole, we19 will help ensure that property owners pay20 for their share of the cost to treat21 stormwater, even during periods when22 there is no water or sewer service to a23 property, and that's since stormwater and24 the cost required to treat its impact can25 54 6/6/11 - FINANCE - BILL 110297, ETC.1 never be shut off or discontinued.2 As you know, the Water3 Department initiated a new parcel-based4 stormwater billing system for5 non-residential properties on July 1st,6 2010. These charges are currently being7 phased in over four years. More8 recently, we have recognized that the9 impacts of these changes on our most10 highly impacted customers have justified11 early action for additional assistance.12 Our four-part plan to help these13 customers includes, one, established a 1014 percent cap for Fiscal Year 2011 and 201215 for these mostly high impacted customers;16 two, implemented a Customer Advisory17 Committee to review the phase-in process18 and other issues for the stormwater19 rates; three, initiated a low interest20 loan program and are investigating other21 innovative incentive-based programs to22 provide parcel credits; and, four, we've23 offered to support for this legislative24 action to close the D-Permits loophole.25 55 6/6/11 - FINANCE - BILL 110297, ETC.1 Indeed, this information was2 shared with the Customer Advisory3 Committee in a meeting on May 19th, and4 the members have indicated their5 preliminary support for this action. In6 general, they felt that every parcel7 contributes stormwater runoff to our8 system and that these costs need to be9 shared by all who benefit.10 Thank you for your11 consideration and this opportunity to12 testify. I'd like to ask that the rules13 be suspended, and I'd be happy to address14 any questions you may have.15
Thank you.16 The Chair recognizes Councilman17 Greenlee.18
Thank19 you, Madam Chair.20 Good afternoon. I know in your21 testimony you say about that you expect22 the actual collection rates will be low23 initially. Are a lot of these24 properties -- you say there's 19,000 of25 56 6/6/11 - FINANCE - BILL 110297, ETC.1 them. I assume when somebody takes one2 of these D-Permits, they're not intending3 to do anything for a long time, I guess,4 right?5 COMMISSIONER NEUKRUG: That's6 generally correct, yes. These D-Permits7 are for the actual physical disconnection8 of the water service line.9
Right.10 Right. So, I mean, are these -- I guess11 that's why you say they will be low12 initially. Is your thinking eventually13 these folks will start to do something14 with the properties and then -- I mean,15 would it be normally that you think they16 would pay the bills while they're not17 doing anything with the property?18 COMMISSIONER NEUKRUG: Well,19 some of these properties are vacant or20 not paying their taxes nor water bills.21
That's22 what I was getting at.23 COMMISSIONER NEUKRUG: And we24 will continue to certainly for the year25 57 6/6/11 - FINANCE - BILL 110297, ETC.1 term have those kinds of issues into the2 future, but we're also looking at a3 number of properties that have D-Permits4 that may be a parking lot or may be5 another type of facility that has either6 its entire or a piece of its property7 under a D-Permit condition.8
Now, the9 property once these -- the ones you just10 talked about that aren't paying taxes,11 water bills, whatever, or any kind of12 bills whatsoever, when they want to do13 something with the property and they -- I14 don't know what the word is --15 discontinue the discontinuation, I guess,16 are they expected to pay everything17 before they get that permit to restore18 water service?19 COMMISSIONER NEUKRUG: Yes, and20 there are a number of different21 variations to that theme, but generally22 if the City is taking over the property,23 the City is exempt, the RDA is exempt24 from this process, and it is certainly25 58 6/6/11 - FINANCE - BILL 110297, ETC.1 the intent of both the City of2 Philadelphia and the Philadelphia Water3 Department, who'd really like to see4 these sites developed -- we'd much rather5 have a water/wastewater/stormwater6 customer than a stormwater-only customer.7 So we're looking forward to working with8 any property owner who is looking to9 redevelop their property.10
Last11 question. Do many people, once they take12 these permits out, do a lot then13 eventually move to reopen it, to restore14 service, or are the vast majority of15 these places eventually taken over by a16 government entity?17 COMMISSIONER NEUKRUG: I think18 the past trends that -- I'm speaking very19 generally here -- is that not a lot has20 happened with these vacant lots, but I21 think as we see the City of Philadelphia22 move to redevelop and become a bigger and23 better city, that we will see more and24 more action to put these vacant lots back25 59 6/6/11 - FINANCE - BILL 110297, ETC.1 into the private payroll.2
So you're3 talking mostly -- are you talking about4 mostly lots here? Is that what you're5 talking about mostly?6 COMMISSIONER NEUKRUG: These7 are parcels that have no water service or8 sewer service. So you can imagine that9 there may be some entity such as parking10 lots that may not require water service,11 but most certainly all homes and most12 businesses require at least a toilet.13
You use14 the word "lot" as opposed to structure15 only, or were you just using that as a16 general term?17 COMMISSIONER NEUKRUG: It could18 have a structure on it, but, again, the19 structure would typically be unoccupied.20
Right.21 Okay. Thank you.22 Thank you, Madam Chair.23
The Chair24 recognizes Councilwoman Blackwell.25 60 6/6/11 - FINANCE - BILL 110297, ETC.1
Thank2 you, Madam Chair.3 I do have a question about4 this. I think this could be a5 disincentive. We're already with our6 stormwater rates trying to -- or7 earmarked to collect $120 million. This8 is another 5 million, and it seems to me9 that -- this sounds and feels like a tax10 increase to me. And we have been talking11 a lot about where we want to -- if we12 want to deal with tax increases and how13 we want to do it. And in addition, it14 seems to me that this is a disincentive15 to businesses.16 Lots where we may be able to17 get people to invest on all of the sudden18 have another bill that they didn't know19 about. I think we need to consider this,20 Madam Chair, before we act.21 Thank you.22 COMMISSIONER NEUKRUG: Is that23 a question for me?24
Yes.25 61 6/6/11 - FINANCE - BILL 110297, ETC.1 COMMISSIONER NEUKRUG: Okay.2 Well, thank you, Councilwoman, and as we3 have talked, this, first of all, is4 certainly not a tax increase. This is a5 recovery of utility funds, and right now6 we are approximately a $120 million year7 utility, and those funds are required to8 be received by the Water Department from9 the ratepayers of the City of10 Philadelphia. And I guess the question11 going back is, who should be those12 ratepayers, and the more -- the larger13 the group of people that are out there14 that are supporting this through their15 parcel-based system, the lower the fees16 could be for everyone.17 So we're looking at this as18 part of the relief package that we have19 here for those customers who are highly20 impacted and those others within the City21 of Philadelphia who are being hit with22 stormwater fees, that everyone pay their23 fair share, and that includes vacant24 parcels, that includes properties such as25 62 6/6/11 - FINANCE - BILL 110297, ETC.1 Loews and other sites where they may have2 a piece of parking lot that has a3 Discontinued Permit associated with it.4 So it's a reasonable approach5 to take. No one likes to be charging6 anybody for any product, but the7 stormwater service fees do have to be8 collected.9
We10 have not yet received the 120 million11 that we're trying to get, in addition to12 squeezing out the last penny, and it just13 seems to me that those who may invest in14 small businesses don't know if --15 everybody who invests is not Loews or16 another big business, and this just17 pushes it a little bit over the edge, in18 my opinion.19 COMMISSIONER NEUKRUG: Okay.20
Thank21 you.22 COMMISSIONER NEUKRUG: And for23 us, it's a question of fairness to the24 ratepayers for the City of Philadelphia.25 63 6/6/11 - FINANCE - BILL 110297, ETC.1
Do you2 want to put on the record that everybody3 is paying the stormwater fee, that we all4 pay the stormwater fee.5 COMMISSIONER NEUKRUG: Everyone6 should be paying the stormwater fees.7
So right8 now these individuals are not paying the9 stormwater fee?10 COMMISSIONER NEUKRUG: That's11 correct, yes.12
But13 this is new fees.14 COMMISSIONER NEUKRUG: If I can15 clarify.16
Would you,17 please.18 COMMISSIONER NEUKRUG: Yes.19 The $5 million is not associated with a20 new fee above the 120. The $5 million21 represents the ability of us to22 reapportion that $120 million and find23 another class of customer that should be24 contributing to pay in that 120. So it's25 64 6/6/11 - FINANCE - BILL 110297, ETC.1 not 120 plus 5. It's 120 million is the2 utility costs that we are trying to3 recover, and here is 19,000 parcels in4 the City of Philadelphia that are not5 contributing to that $120 million. The6 portion of that that we're thinking about7 is somewhere around $5 million worth of8 recoverable funds. So it's finding --9 and when you do that, then, of course,10 everyone's fees are reduced throughout11 the customer classes.12
Thank you.15 Just if you can remind me, the16 City is exempt from this fee, the general17 fee that applies to all commercial18 properties?19 COMMISSIONER NEUKRUG: That's20 correct, yes.21
Is the state22 and federal government exempt?23 COMMISSIONER NEUKRUG: The24 City-owned properties.25 65 6/6/11 - FINANCE - BILL 110297, ETC.1
How about2 state and federal?3 COMMISSIONER NEUKRUG: No.4
How about8 property owned by -- I can't remember the9 name of the -- Delaware River10 Corporation?11 COMMISSIONER NEUKRUG:12 Waterfront Corporation?13
Entities14 owned by the City?15 COMMISSIONER NEUKRUG: Only16 vacant land or land that is underutilized17 owned by the City would be considered18 exempt.19
So City Hall20 right now, is it exempt?21 COMMISSIONER NEUKRUG: No, it22 is not.23
Okay. Just24 vacant land?25 66 6/6/11 - FINANCE - BILL 110297, ETC.1 COMMISSIONER NEUKRUG: Vacant2 land.3
So what4 about the Navy Yard?5 COMMISSIONER NEUKRUG: The Navy6 Yard is not exempt.7
Is not8 exempt? Okay.9 So basically it's 120 million a10 year sort of in perpetuity that we're11 raising from this charge?12 COMMISSIONER NEUKRUG: That's13 correct. And it's the same -- and we had14 been collecting that money in the past.15 We're just changing the manner in which16 we charge for it. And when it was17 associated with a water meter, there was18 some more sense that made sense. If you19 got a D-Permit and you discontinued the20 water meter, we never really thought21 about the fact that the stormwater charge22 was not being charged properly.23
So there is24 no increase in the amount of stormwater25 67 6/6/11 - FINANCE - BILL 110297, ETC.1 money that we are collecting from2 customers or from citizens or businesses3 in Philadelphia?4 COMMISSIONER NEUKRUG: Not any5 more than the general rate increase that6 we've experienced last July 1st and about7 to experience this coming July 1st.8
And how much9 is that?10 COMMISSIONER NEUKRUG: I11 believe it's 5.9 percent this July 1st.12
So basically13 the stormwater changes created a lot of14 winners and losers?15 COMMISSIONER NEUKRUG: It16 created a number of people whose17 stormwater bills would be reduced and18 others who what we are considering highly19 impacted and who has been a primary20 concern for us over the last number of21 months and years.22
And who are23 the winners?24 COMMISSIONER NEUKRUG: The25 68 6/6/11 - FINANCE - BILL 110297, ETC.1 people that benefit most from this change2 are those who use -- who are our best3 water customers. So those companies that4 use a lot of water for their processes5 for the buildings and do so on a6 relatively small surface area. Those in7 terms of a water business who highly8 efficiently use water are the ones whose9 stormwater bill will be reduced.10
So like a11 very tall Center City building is a12 winner?13 COMMISSIONER NEUKRUG: Would14 typically have their stormwater costs15 reduced.16
And a17 spread-out manufacturing facility18 employing a couple thousand people would19 be a loser?20 COMMISSIONER NEUKRUG: Would21 pay more, yes.22
And so --23 COMMISSIONER NEUKRUG: And24 that's why --25 69 6/6/11 - FINANCE - BILL 110297, ETC.1
-- could you2 explain why that's the way we want to3 incentivize essentially taxation in the4 City? I mean, we could choose to take it5 from a Center City office building or we6 can choose to take it from a manufacturer7 paying a living wage to families, and we8 didn't make that choice?9 COMMISSIONER NEUKRUG: Well, if10 you look at the 550,000 properties11 throughout the City of Philadelphia, you12 can always find examples that seem very13 unjust, and perhaps you've picked out two14 of them, but in general, the process15 makes a lot of sense and cities all over16 the country are moving in this direction,17 because the cost of stormwater is based18 upon the size of a property, and if19 there's someone who owns a five-acre20 parking lot in North Philadelphia, the21 costs to the City for collecting that22 stormwater is significantly higher than,23 let's say, a half-acre forested or green24 area.25 70 6/6/11 - FINANCE - BILL 110297, ETC.1 So, yes, there is a2 differential that may not have been3 played out in the old form of rates that4 is more clarified now and generally is a5 better way to do things, but on any6 specific case, there are issues, and7 we're very aware of that. We're very8 concerned about that, and that's why we9 came to an agreement with the most highly10 impacted customers to limit the increase11 on those properties to 10 percent a year12 for the next two years.13
Does that14 cost you money on the other side, or you15 just don't lower the rates as quickly on16 the other side?17 COMMISSIONER NEUKRUG: Well, we18 will need to recover our costs. So, yes,19 there are costs associated with any kind20 of change we make here, yes.21
So when you22 increase the rate limit to 10 percent,23 you essentially decrease the amount of24 cut, say, a Center City office building25 71 6/6/11 - FINANCE - BILL 110297, ETC.1 was going to get on stormwater fees to2 pay for that?3 COMMISSIONER NEUKRUG: Well,4 no, we did not, and that's why -- in my5 testimony I talked about the four6 different points of what we're doing to7 move forward to deal with this perceived8 or real inequity in some of our customers9 by not just putting a cap on the10 increases, but also by convening the11 Customer Advisory Committee so that all12 types of parcel owners could have a13 chance to understand and to react to how14 we charge for stormwater, and then come15 before you again for the next rate16 process to see what we can do in terms of17 a long-term fix.18
So you did19 not cap the decrease?20 COMMISSIONER NEUKRUG: No, we21 do not cap the decrease.22
Does that23 not create a shortfall in cash flow?24 COMMISSIONER NEUKRUG: Is that25 72 6/6/11 - FINANCE - BILL 110297, ETC.1 the correct way of saying it? Yes, a2 shortfall in revenue, yes.3
That will4 never be recovered because you're not5 going to go back and recover what you6 would have otherwise recovered this year.7 COMMISSIONER NEUKRUG: Right.8
So how much9 is that on an annual basis?10 COMMISSIONER NEUKRUG: We're11 looking at four and a half million for12 the first year and about nine for the13 following year. We're hoping that before14 we hit that following year, we'll have a15 new rate process in place so we won't16 even have to deal with that. So we're17 really talking Fiscal Year '12, four and18 a half million dollars.19
Well, I20 mean, I wouldn't plan on that.21 Let me ask you this: Can we by22 ordinance change the rates for stormwater23 fees sort of however we want? I mean,24 can we go back to charging Center City25 73 6/6/11 - FINANCE - BILL 110297, ETC.1 office buildings what they were paying2 prior to this change?3 COMMISSIONER NEUKRUG: Can City4 Council do that?5
That's all I8 need to know.9 Thank you.10 COUNCILWOMAN TASCO:11 Councilwoman.12
Thank13 you, Madam Chair.14 This is a follow-up on what15 Councilman Green asked about this16 decrease. If you say you are looking for17 120 million, then it seems to me then18 Jane Q business should then be -- you19 should be looking for 115 if you're20 trying to raise 5 million from this; is21 that correct?22 COMMISSIONER NEUKRUG: Not for23 this coming year, but, yes, we're looking24 for -- as we go through our next rate25 74 6/6/11 - FINANCE - BILL 110297, ETC.1 process, if we have more parcels that are2 sharing in the cost for stormwater,3 everyone's bills will go down. That is4 the intent, and that's why we're here.5 We're looking to reduce in -- this6 particularly hits the residential7 customer and the highly impacted customer8 if we don't move forward with this.9 Those are the two customer classes that10 we're looking to support through this11 process.12
What13 about the 10 percent cap, which I think14 my colleague also asked about. How does15 that fit into this new charge?16 COMMISSIONER NEUKRUG: The 1017 percent cap is another piece of a18 four-pronged approach to supporting those19 businesses that are highly impacted. One20 piece is to limit the percent increase to21 the 10 percent and the second piece of22 this is to issue this change in ordinance23 to cover up this loophole so that there's24 a larger share of customers to share in25 75 6/6/11 - FINANCE - BILL 110297, ETC.1 the costs and benefits of the stormwater2 service charge.3
So are4 these new people, these 19,000 people you5 want to charge, do they get -- where do6 they fit into a 10 percent cap?7 COMMISSIONER NEUKRUG: They8 will fit into the 10 percent cap in the9 same way, as I understand it, as if they10 had been paying all along.11
When12 is this bill effective should it pass?13 COMMISSIONER NEUKRUG: This14 bill is effective upon passage.15
So16 this bill is effective immediately.17 Thank you, Madam Chair.18 COMMISSIONER NEUKRUG: And,19 Councilwoman, we've heard from many of20 our customers and have heard only21 positive response on having this occur.22 COUNCILWOMAN BLACKWELL:23 Customers calling say they're glad they24 have a new bill?25 76 6/6/11 - FINANCE - BILL 110297, ETC.1 COMMISSIONER NEUKRUG: No.2 Well, the educated customers, which are3 typically the ones from the UBOAP and4 others like that who have become educated5 in this issue, understand the importance6 of this bill.7
What's8 UBOAP?9 COMMISSIONER NEUKRUG: United10 Business Owners Association of11 Philadelphia. They're a group of12 self-formed entity that came into being13 because of the stormwater charges14 changing and who testified here in15 February 8th, were here testifying16 concerned about the increase in the17 stormwater rates.18
So what19 happened?20 COMMISSIONER NEUKRUG: What21 happened was, we issued this four-point22 approach to solving the issue23 temporarily. One is -- it's basically to24 cap the increases to 10 percent. Some of25 77 6/6/11 - FINANCE - BILL 110297, ETC.1 them were -- most of these businesses2 were going to see a 100 percent increase3 this July 1st. We limited it to 104 percent. And we looked at forming this5 Customer Advisory Committee, where they6 and others have a voice on how the future7 of the rate system should be put together8 for the City of Philadelphia. And the9 last piece of it was looking at this10 D-Permit and getting this D-Permit11 loophole eliminated.12
Good15 afternoon.16 COMMISSIONER NEUKRUG: Good17 afternoon.18
Please19 state the name of the organization you20 mentioned that you said is very familiar21 with this new initiative.22 COMMISSIONER NEUKRUG: Right.23 Well, first of all, there's the Customer24 Advisory Committee that has 2225 78 6/6/11 - FINANCE - BILL 110297, ETC.1 representatives on it from all walks of2 life of the City of Philadelphia who are3 getting a firsthand education in how4 stormwater rates are created in5 Philadelphia and how they're charged so6 that they can help us come up with some7 new mechanisms to see how we can make8 things better in Philadelphia.9 The group in particular that I10 was referring to is the United Business11 Owners Association of Philadelphia.12
Are they13 an arm of the Greater Philadelphia14 Chamber of Commerce?15 COMMISSIONER NEUKRUG: I do not16 believe so.17
So what do18 we do for those businesses that are not19 members of this professional20 organization?21 COMMISSIONER NEUKRUG: Well, we22 could not look at this organization as a23 customer class. Instead, we looked at24 what we considered the most highly25 79 6/6/11 - FINANCE - BILL 110297, ETC.1 impacted customers, and those were ones2 that we considered whose annual increase3 in stormwater rates were going to be4 above 10 percent. We made that5 threshold, because some of these have6 seen an initial increase of 1,0007 percent, going from $10 a month to $100,8 $200, $3,000 a month. So there's some9 pretty large increases for some of our10 customers. So we looked back and11 realized that a 10 percent increase a12 year seemed to be a reasonable cap and a13 reasonable expectation that businesses --14 not that -- they're still not paying15 their fair share, but they're moving more16 in that direction at a more comfortable17 clip.18
And your19 response to Council Lady Jannie20 Blackwell's question was that if passed,21 this would be effective immediately?22 COMMISSIONER NEUKRUG: This23 would be effective immediately. Just the24 D-Permit loophole.25 80 6/6/11 - FINANCE - BILL 110297, ETC.1
Just the?2 COMMISSIONER NEUKRUG: The3 D-Permit loophole. What I'm testifying4 here today is just one aspect of this,5 which is a number of customers in the6 City of Philadelphia who have parcels who7 don't have water service, do not have8 water service -- so you can imagine what9 kind of parcels we're talking about10 here -- and who are not required today to11 pay for stormwater. So any parcel that12 does not have water service does not have13 to pay for -- that has a D-Permit doesn't14 have to pay for stormwater service. So15 we're trying to close this loophole so16 that the stormwater fee is uniform17 throughout the City so that we don't have18 this acreage of land that is not19 accounted for and, therefore, residential20 and other businesses have to pick up21 their costs.22
Their fair23 share.24 COMMISSIONER NEUKRUG: Their25 81 6/6/11 - FINANCE - BILL 110297, ETC.1 fair share.2
So the3 goal is laudable, but I believe we as a4 government have a responsibility in5 keeping consumers and citizens and6 taxpayers informed about surprises, and7 what I'm not hearing is some space given8 to educating, informing, enlightening and9 then some folks got to hear it seven10 times before they get it or then see it11 in a bill. I'm missing that in this12 dialogue.13 I don't believe that that's14 fair for us to institute anything where15 we're not giving taxpayers and citizens a16 chance to become acquainted with this new17 reality.18 Thank you, Madam Chair.19
What20 outreach have you done to these customers21 that you're trying to collect from, that22 you will try to collect from?23 COMMISSIONER NEUKRUG: Excuse24 me?25 82 6/6/11 - FINANCE - BILL 110297, ETC.1
Hi. Joanne Dahme,4 Public Affairs Manager for the Water5 Department.6 We have been working with all7 of our customers, including the customers8 with D-Permits, to do a lot of public9 education, general information about the10 new stormwater fee for the past three11 years. So a lot of these properties are12 aware that the reason they're not being13 charged is because they do have a14 D-Permit. They have to essentially apply15 to us, because we don't always have16 information about what properties have17 D-Permits and which don't. So they put18 an appeal in and they note they're a D19 property owner and we give them an20 exemption.21 So they're very much aware, a22 lot of them, not all of them, but many of23 them are very much aware that this24 D-Permit process exists, and they're25 83 6/6/11 - FINANCE - BILL 110297, ETC.1 taking advantage of that. So they2 recognize they have an opportunity not to3 pay. But we will certainly -- they know4 we're working on this. We've been very5 up front about -- we're hearing from6 other customers who are impacted that7 they want us to do this. Howard8 mentioned the United Business group.9 They had sent us a letter with a list of10 things they'd like to see happen. This11 was one of them, because a lot of their12 members and other customers go on our13 parcel viewer site and see properties14 that aren't paying, and they call us and15 say, Well, why isn't this property16 paying? That's not fair. And we agree,17 and that's one of the only things18 sometimes some of the impacted customers19 in the Water Department agree about, that20 everyone should pay what they're supposed21 to be paying, because they do feel as if22 they're sharing a greater burden. So we23 did make a commitment that we would24 continue to pursue this working with City25 84 6/6/11 - FINANCE - BILL 110297, ETC.1 Council.2
Thank5 you, Madam Chair.6 Not to elongate this, but just7 so I'm clear from what you said,8 Ms. Dahme, so a lot of these people who9 have D-Permits have gotten bills or they10 are aware? When you say they're aware,11 I'm just trying to be clear, how are they12 aware?13
Initially some of14 these properties were getting15 stormwater-only bills from us, because we16 weren't aware there was a D-Permit on the17 property. They came back to us and said,18 By the way, you know, I got a19 discontinuance permit on this property20 years ago, I shouldn't be paying. And we21 looked into the existing Philadelphia22 Code and saw that that was indeed the23 case with the way the Code is written24 today. So we had to get back to them and25 85 6/6/11 - FINANCE - BILL 110297, ETC.1 say, We will give you a temporary2 exemption from that, but be aware that we3 don't want that exemption to be forever,4 because we don't think that is right, and5 our customers who are now paying don't6 think that is right either.7
So how8 many of those, just roughly9 percentage-wise, would you say?10
Out of the 19,000?11 I'd have to get back to you on the12 percentage.13
Just on14 Councilwoman Reynolds Brown's point about15 being aware, because I know that was16 always raised from day one on the whole17 issue of the stormwater, how early we18 knew, how much preparation we were given.19 So there were people who had the20 D-Permits that you were aware of that did21 not get the bill?22
Everyone25 86 6/6/11 - FINANCE - BILL 110297, ETC.1 did get a bill?2
Everyone did get a3 bill. So some of these properties came4 back to us to note that they had5 D-Permits. There are many properties --6 when Howard mentioned a lot of these7 vacant parcels out there who have been8 abandoned --9