Committee Hearing, December 12, 2001

COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING BEFORE THE COUNCIL COMMITTEE ON FINANCE - - - Room 401 City Hall Philadelphia, Pennsylvania Wednesday, 12/12/01 9:15 a.m. - - - BILL NO. 010694 - NTI bill. COUNCILMEMBERS PRESENT: Jannie L. Blackwell, Chair Marian B. Tasco, Vice Chair Darrell L. Clarke David Cohen Frank DiCicco Wilson W. Goode, Jr. James F. Kenney Donna Reed Miller Michael A. Nutter Angel L. Ortiz Blondell Reynolds Brown Frank Rizzo Anna C. Verna, Council President - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 12/12/01 FINANCE COMMITTEE - BILL 010694 INDEX WITNESS Lance Rothstein, Capital Programs Office......... 6 Pat Smith, NTI Project Manager................... 9 Bob Solvibile, First Deputy Commissioner, L&I.... 15 Joyce Wilkerson, Mayor's Chief of Staff.......... 35 Rob Dubow, Deputy of Finance..................... 36 Jonathan Schmidt, Policy Analyst, NTI............ 37 Maxine Griffith, Executive Director.............. 44 City Planning Commission Herbert Wetzel, Executive Director, RDA.......... 54 Reverend Isaac Miller, PIA....................... 66 Jeremy Nowak, President, Reinvestment Fund....... 81 Richard Sauer, Phila. Assoc. of CDCs.............124 Steve Culbertson, Exec. Director, Frankford CDC 134 David Thornburgh, Pennsylvania Economy League....142 Carlos Peraza, Senior Program Director, LISC.....149 Rev. Steven Avinger, Sr. Greater St. Matthew.....163 Baptist Church, South Philadelphia EPOP Reverend Dr. Carolina Harris Ram Sue.............167 Black Clergy, Snyderville CDC Delores Shaw, EPOP...............................169 G. Whitman, Temple U. Center for Public Policy 173 Glen Bryant, Director, Office of City............181 and Community Relations, University of Pennsylvania Wayne Johnson, Secretary-Treasurer...............186 District Council 33 Jeff Brown, President, AFSCME Local 1971.........187 and District Council 33 Tom Zamartis, Business Agent, Local 222, AFSCME 209 3 12/12/01 FINANCE COMMITTEE - BILL 010694

Good morning. Thank you, everyone, for coming back this morning. Before we begin our hearing, I would just, on another matter, like to thank everyone who came out last night to 3801 Market where we hosted an annual holiday party for 1000 people who don't have places to be. In fact, I want to just thank everyone who volunteered from all the community groups in West Philadelphia, including University City District, my substations, police officers, you name it. People from across the City as well: Neil Stein from Striped Bass; Gabe Maribella, Avenue B; Giuseppi Sanala (ph), Famiglia Restaurant; Penn Mutual. You name it. AmeriChoice. All the people who volunteered. I will tell you that you can imagine what it looks like with almost 1000 kids running around. We never ran out of food and never ran out of gifts. In fact, we have some left. Martha Washington just asked for some. We thank God for his mercy and for the ability to try to do our part to make a holiday season nice. We thank Power 99. We also had all kinds of games. They were on the radio. We just 4 12/12/01 FINANCE COMMITTEE - BILL 010694 had a grand time. We give God the glory. We accept the fact that we are our brother's keeper. This hearing is all part of that. Trying to transform neighborhoods is certainly an example of the fact that we are our brother's keeper. We have a responsibility to improve the quality of lives for people and to improve the neighborhoods and commercial corridors in which they live. Thank you, Glen Bryant from Penn for being there. Thank you everyone who can hear me who participated in any way. The hundreds of volunteers who served the food, everyone, everywhere, we thank you for coming. We thank you for volunteering. We thank you for participating. Let me formally begin our Council hearing. This is the continuation of the Finance Hearing with regard to Bill No. 010694that we began yesterday. When we ended, we had members of the technical staff who were at the witness table. We would like to clarify that issue. Madam President, are they here? We can clarify the issue.

I thought we did that yesterday. 5 12/12/01 FINANCE COMMITTEE - BILL 010694

The question was whether or not the issue was clarified yesterday. Let me say, to my left, we have President Verna; to her left, Vice Chair Marian Tasco. To my right, Councilman James Kenney; to his right, Councilman Michael Nutter. The President said she thinks we had the issue clarified. I'm not sure of that so I'll defer to her or to whomever.

The technical staff did meet with the Administration last evening. We'll call them up at the appropriate time. They are working on something presently.

They're not ready now, but they will be ready?

Yes.

We'll defer the issue of the project review team and its participation until further down the line in our hearing. Does the Committee have anything to say otherwise? Since we will defer that issue for a little later, we will go right into our panels.

I would like to 6 12/12/01 FINANCE COMMITTEE - BILL 010694 ask Lance Rothstein some questions.

You mentioned that last night. Mr. Lance Rothstein, would you come forward? (Witnesses come forward.)

We thank you for agreeing to defer to this morning, Madam President. This is Project Director for the Capital Program Office, Lance Rothstein. Coming with him is Pat Smith. Please identify yourself for the record. Thank you for coming in.

My name is Lance Rothstein. I'm the Project Director at the Capital Program Office for the Neighborhood Transformation Initiative.

Thank you. I note in the testimony that was provided to us yesterday that there are a number of subcontractors under the Hill structure. Can you tell us what each of these subcontractors were paid or will be paid? What specific functions have they done or will do? Who 7 12/12/01 FINANCE COMMITTEE - BILL 010694 are the principals in these companies?

Today I don't have the physical cost values of each of the subcontracts. We'll have to get back to you on that.

Will you have that today?

I'll have to go back to my office and get it during the hearings today.

Do you want that faxed? I'm sure you could go into one of the offices and they could fax it to you.

As far as the leads and the company owners go, I believe there should have been a page in the Power Point Presentation package that came. If not, I can get that to you as well.

And the principals?

Actually, there's another document that lists more extensively the principals of each of those companies. I can get that too --

I'm sorry. Could you direct us to which of the presentation package and what page?

I don't have a copy with 8 12/12/01 FINANCE COMMITTEE - BILL 010694 me of Bill 010694 right at the moment. I didn't bring it with me today.

How many subs are there?

There are a number of subs.

More than five, more than ten?

Between five and ten.

You don't know the names?

I know all of their names, yes.

Give them to us verbally, if you'd like.

Hill International is basically what amounts to the leader on the project. Under Hill's role, they've hired a number of subcontractors. As part of the presentation that you received yesterday, American Community Partnerships is responsibility for the community outreach aspects of community notification. Gannet Fleming is responsible for the computer support model we've been discussing. We've 9 12/12/01 FINANCE COMMITTEE - BILL 010694 also got several other people on the team. We've gotten Envision, Ltd, doing scheduling.

Scheduling of what?

The master schedule, which is one of the primary pieces of the deliverables under the scope of work.

I think that you ought to get us more -- the information, as I said. Any number of our offices have fax machines. I'm sure if you called your office, they could fax you the information we're asking.

We'll have Mr. Rothstein do that. We should explain that the Hill International Group put together a team of subconsultants to support specific parts of the work product. In doing so, also met the City's requirements around minority, female and disabled participation as part of that. Overall, you can almost look at the project having three major components; the technical side of the project, which deals with master schedules, budgets and things of that nature that they managed. They're program managers. What they 10 12/12/01 FINANCE COMMITTEE - BILL 010694 do is put together -- group people together, like customized to your project and to your needs. We also have a series of environmental consultants because of the scale of the project.

Not to be redundant, but why don't we just wait until we're provided with the information and you can explain to us what each subcontractor is doing and is responsible for.

I have a list of each of the sub's names. I can explain to you briefly now what --

No. I think I've asked you how much are the subs being paid, who the principals are in the companies and what functions will the subs do. So rather than give us a portion of what we're asking for, I would like you to come back with the information in whole. Thank you.

Thank you.

Thank you very much. The Chair also notes that we received a communication from Joyce Wilkerson with regard to 11 12/12/01 FINANCE COMMITTEE - BILL 010694 information requested yesterday. In front of me is the Vacant Property database that Councilman Nutter requested. These binders. No. 2, the estimates NTI bond program budget for Fiscal Year 2005 to 2007 that Councilman Nutter also requested. It's in our packet and being re-duplicated now. I'll pass that out when it comes back. That's another chart. We do have that information that was requested yesterday. Do we have outstanding issues that the Committee would like to mention? Perhaps, Madam President, it would be helpful, I would like to ask Bob Solvibile if I could ask you a question. Is that all right? With Pat Smith and Joyce, unless you would like to respond yourselves. I've been thinking about this last night. What might help to clarify all of this -- we're now passing out again the chart, NTI Bond Program for Fiscal Year 2002 to 07 that was requested by Councilman Nutter yesterday. The Committee has that information in hand. I was trying to think last night about what would be helpful and what would kind of ground 12 12/12/01 FINANCE COMMITTEE - BILL 010694 this whole program so that it becomes a tangible real thing for everybody to see. We all understand that, you know, communication is everything. I always say that in an elected official, we spend 75 percent of our time translating English into English. That's part of the problem. For example, my understanding, and you can correct me, with Hill Company -- and let me thank Michael Griffin who passed out toys last night, vice president and regional manager for passing out toys to some thousand kids last night, along with all the other volunteers at 3801. My understanding is that what the Hill Company is doing, on the one briefing, it's really organizing the blight part of NTI. Again, Members of the Committee, I'm speaking for myself to try to make it real and ground it for everybody. Hill has the contract to organize demolition and encapsulation of prioritizing. In my district, I've done all that. We've done our background work. I can give you a photo of every property I want demolished. I can give you tax information. I can do that. We did that. When the Mayor said "blight," we started running. I have 13 12/12/01 FINANCE COMMITTEE - BILL 010694 a lot of volunteers, community people and developers who worked with me. " I've been quite about my district. I've got posters, formal booklets from my district. If necessary, I'm glad to use it as an example and to produce information that might help members of this committee and my colleagues, if we can do that. Having said that, my understanding is that, for example, in Mantua, in some areas we will need to defer, which is the hardest part of the demolition encapsulation. We will have to defer some demolition where we want to move people into other neighborhoods. We'll have to treat those other neighborhoods, do some property acquisition, do some rehab. Then we can move people into the neighborhoods and do the demolition. " The first phase is to get rid of those imminently dangerous properties, to encapsulate and to clean and seal properties. My question is, once you decide on a list, given that you worked with the District 14 12/12/01 FINANCE COMMITTEE - BILL 010694 Councilperson to determine priorities -- and also let me also say to the Committee that I submitted a proposal for every area in my district. I want my people who live there to know that. I didn't just do Mantua. We have proposals for everybody from Gloria Guard to Parkside Historical Preservation Coalition, Saunders Park, Mill Creek, West Philadelphia Coalition of Neighbors and Businesses. We have one binder with just proposals that we submitted to the administration. I've done my district. Also what I think we need to realize is that when one chooses an area, you can't do it in a vacuum.

You have to choose an area and relate it to commercial revitalization, to businesses, other social service agencies, like rec centers, hospitals, health centers, commercial corridors. All that has to be considered along with a Neighborhood Transformation Initiative. Councilman Clarke, who has more vacant lots than anybody, you can't create an oasis in a desert. It's a lot more difficult to create that. You almost are forced, in my opinion, in his area to kind of create a commercial corridor or some 15 12/12/01 FINANCE COMMITTEE - BILL 010694 institutional program along with housing in order to make it work. It can't feed off itself. You have to have some way to integrate these things. I'm trying to ground this. Generally, as Committee Chair, I try to be a facilitator. It seems to me that somewhere, somebody has to try to make it real so that we all are together moving in one direction and we understand what that is. That's what I'm taking time to do today. I hope it's okay with everyone. Having said all that, Mr. Solvibile, given an address that the District Councilperson agrees to and a general program where encapsulations are helpful, where demolitions are helpful, where clean and seals are helpful, where in the last phase you have to do demolition with the hopes of creating with the developer a whole new neighborhood, how long would it take to do those things? I understand we're going to have to submit bids regularly to get this stuff done. I'm trying to give the Committee a sense of timing of how it goes. If we're doing these proposals, as Path Smith said it at a former meeting or told us, we would have to submit RFPs every week, I'm trying to get 16 12/12/01 FINANCE COMMITTEE - BILL 010694 the Committee a sense of what demolition means and how it fits into everything.

Bob Solvibile, First Deputy Commissioner, Licensing and Inspections. With the proposal we're working with Hill on, 150 every two weeks to do -- roughly, the first year would be 2500 planned for demolition, encapsulation. We're estimating 500, but haven't finalized it. Then gearing up to about 3500 a year the second year for demolitions. All together, the five-year plan that the Mayor has stated and Chief of Staff looks like the reality of the situation.

Our overall goal is what again?

With respect to demolition, over five years. We're projecting 14,000 properties. That's dealing solely and exclusively with dangerous, imminently dangerous type buildings. Based on that number, we expect to do 2500 in the first year, ramp it up to 3000, then 3500 and start stepping it down to meet that five-year production goal. We also at the same time are looking at seeing if we can do 500 encapsulations a 17 12/12/01 FINANCE COMMITTEE - BILL 010694 year to reach our goal of 2500 over five years. We may also have to step the encapsulation up. We're a little concerned and constrained by capacity on the contracting side. How many demolition contractors will be able to bid and carry this work out? You also asked questions not only about the demolition, but then how does all this tie into a redevelopment process. The way we envisioned this, as you said, if some people, like your office and other officers, there are community organizations who know that they want certain types of demolition and encapsulations to happen in their neighborhood. At the same time, we need too look at redevelopment proposals. Maxine Griffith, Executive Director of the Planning Commission, talked about one of the things we failed to do in the past is when people plan, they say we want to do this type of rehabilitation or this type of redevelopment in our neighborhood. We may plan it in terms of the idea, but there was very little linkages in terms of resources. Now we can say we're going to identify what dollars can move which projects forward in which particular order. Do we need to do 18 12/12/01 FINANCE COMMITTEE - BILL 010694 acquisition in order to acquire property which might be at this point not imminently dangerous or occupied in order to assemble a lot. That would then trigger a whole series of other actions, like finding a house for an individual. So the trick of this or the challenge for us as an Administration is to plot out all the detail that go into this on a master schedule. So if we know in year two we want to do a land assembly to support a project that there's developer interest in and resources that can brought to the table, we know we may have to start doing certain actions now. That's the type of work that the Hill Group will do for us; this master scheduling. If you will, you should think of them as our tools. I think that's very important. They're not the decision makers. They will help us working with the Council put together bid packages, arrange the orders, make sure we have the right bid spec, make sure we do the environmental control, make sure the streets that have to be closed down, when they have to be closed down, when the sewer laterals have to be capped, If you will. They're our tools and extension of government in terms of the technical 19 12/12/01 FINANCE COMMITTEE - BILL 010694 side. But the decision-making is still here. The City will continue to do things -- you know, the procurement process. We're issuing bid packages. We'll be subject to all the procurement rules and regulations of the City, including lowest responsive bidder. We will still be doing inspections and legal notices you have to do in order to take action against a dangerous property.

Who will be doing the inspection?

L&I. We've increased the inspection capacity of L&I in recognition of the fact we're trying to move from approximately 1300 demolitions a year to ultimately, at our peak year, 3500. That's almost tripling the rate of what we're doing now. It becomes a really multiple -- managing multiple bid packages on the street at different times. If you will, you can think of them as the conductor of an orchestra. The City has a role. Council has a role. They're just making sure everything -- sort of like the music, to get some harmony, that the music comes together and we're not 20 12/12/01 FINANCE COMMITTEE - BILL 010694 stepping over one another. We made a very strong commitment that we need to be in neighborhoods talking to people with the District Councilperson so that people understand what's happening, why it's happening, why we have to do demolitions, when we can encapsulate. We've also, in the program statement that we had given out as well as in our individual briefings when City Council put out the encapsulation priority principles and things of that nature, have gone into communities and talked about that. As we said, we'll be working at the direction of the District Councilpeople in setting up community meetings, making sure that we reached people who need to be touched with. My objective, and I feel strongly about this, is that people in neighborhoods need to have adequate notice about what's going on and when it's going on and why it's going on.

Thank you. I say this because again we note that nothing happens in a vacuum. Demolition, clean and seal, encapsulation is also affected by private investment. If I have a 21 12/12/01 FINANCE COMMITTEE - BILL 010694 developer -- for example, I have a developer who has invested 50 million in private dollars in my area. We've built over 1000 new units in my area. In fact, they are prepared to invest another 50 to 75 million if we can work with the City in getting them the properties. So when they go in a row house block where there are three abandoned homes, they may tear them down or they may gut them and do rehab. They pay for that. That doesn't become a City's expense. That's why I say to Members of the Committee and colleagues, nothing happens in a vacuum. That's not an expense that is born by the City, unless we consider if they've been able to acquire those properties through the City what that means. That is why I say nothing happens in a vacuum and why it is important that we work with the District Councilperson to get this done. The other thing I wanted to make clear is that the whole issue of who runs what in terms of the City. I've been thinking about that as well. In terms of who is going to make the decision, I understand -- in fact, I spoke with Ms. Wilkerson just before the hearing started about it. That's 22 12/12/01 FINANCE COMMITTEE - BILL 010694 one of the reasons I asked Bob Solvibile to come up. In terms of demolition and L&I functions, Hill may help put the package together. But it is certainly the City, in this instance, and even when we move over to development, it is the City agencies who will run -- who will run NTI. I've been asked and talking about, is the City putting out bids? Will we have a new project manager? Is there some other entity coming aboard? I'm told it's the City and the agencies that we've traditionally worked with; albeit we'll have a new consolidated housing structure. It will still be City agencies who will drive all of this. Is that correct?

Yes.

All of us know and love Bob Solvibile. We have an L&I question from Councilman Kenney.

Thank you, Bob. I love you, too. We're talking about demolition. What is the current average cost per demolition for a normal residential structure in Philadelphia as we are demolishing houses today? 23 12/12/01 FINANCE COMMITTEE - BILL 010694

Counting the environmental and stucco, which is the 10,000 number yesterday, I read all the components that go into the demolition at roughly $10,000. The average for the 1300 last year --

The average for 1300 last year was $10,000 per?

Counting the asbestos removal, the actual demo bid that you've had some experience with comes in around 65 for a two-story row home.

That's what I'm talking about.

You take the stucco of both walls adjacent, it's about $1200 each roughly, two-story home, that's $2400 additional on the 65. And any environmental that has to be done. In today's world, every building that gets demolished has to have an asbestos inspection. In most cases, when asbestos is found, it's another $1000 onto the bill. The 10,000 average is an average for demolitions, all demolitions in the City.

I understand that 24 12/12/01 FINANCE COMMITTEE - BILL 010694 particular component. It's my understanding the $6200 number was the number. You're saying on average we spent ten?

Counting the stucco and everything, it averages roughly to 10,000.

How many properties do you think under the NTI plan that are demolished in a string will need to be stuccoed? I would probably argue that none, because they're being demolished in a string.

Our estimative when we were doing it with Hill and talking with Hill is that roughly it would be 60 percent string and 40 percent hand demolitions.

So the 60 percent string won't need stucco?

Not every one. If you do five in a row and you come to a property, that gets stuccoed.

The number of stucco opportunities is significantly reduced due to the fact we're intending to take down larger swats of land.

Presently, Councilman -- 25 12/12/01 FINANCE COMMITTEE - BILL 010694 and it will more than likely change with the NTI initiative -- if we demolish 1300 homes a year, we'll stucco roughly 650. It's usually half of what you bid. You stucco walls for half of that. So NTI would be a little less than that.

How do we know that if we don't have addresses of what's coming down?

We do have addresses.

We don't know what the schedule of addresses for the demolition are.

That's what they're working on now, which house at what point and what bid package. For example, as you know, I think Councilmen Ortiz and Goode mentioned yesterday the importance of economic opportunities. One of the other things we're looking at in terms of packaging properties is we will look at combination of different types of bid packages and different sizes. We can be much more inclusive in terms of the contracting community having the opportunity to bid on different size packages. So you don't, if you will, preclude the little guy. The other thing we're looking at is a part of the budgeting piece. It's some related 12/12/01 FINANCE COMMITTEE - BILL 010694 activities that we, the City, might not do right now. They may not be -- they may be adding things. For example, we get a lot of complaints from developers in terms of what happens to the debris that's left afterwards. Do you let it sit and cover it over? Do you right now take it all and make sure you have clean fill left behind? As Herb Wetzel can talk about, we end up paying -- if we don't put in the right compaction now, we end up paying for it when the developer comes because increased development cost. Do we in certain community hydroseed? We're talking with the Pennsylvania Cultural Society. Do you do something immediately after demolition to treat the land afterwards? There will be a cost related to that. What we want to do in terms of the budget -- we are being conservative for budget numbers. We'd rather over-budget in a sense, if you may, and then come under that on average, as opposed to coming under. You know, saying it's going to be 65 or 75 and we end up -- because of change circumstances, we feel pretty good about that 10,000 budget number. 27 12/12/01 FINANCE COMMITTEE - BILL 010694

I've been in City government ten years. I've never seen a project come in under budget. Never seen a project come in under budget. The question I have for Bob is that if we're going to do large-scale demolition, as opposed to what we're doing now, taking out the bad tooth in the middle of the block, do we not get economies of sale that would bring down the cost of demolition? Because we are going to be potentially bidding out larger numbers that can be done at once, as opposed to coming back and forth on curbside bids on individual houses. Shouldn't we be experiencing some economy of sale?

We would have economy of scale. In looking at that number, $10,000 number, long and hard, and I was a part of that decision, what the average would be, is that with all of the unknowns and the asbestos removals and how that's increased dramatically, Councilman, it's -- the 6200 is a bid that was little row homes in South Philadelphia that we did with the Keller project. But with the homes in Councilwoman Blackwell's area and Councilman Clarke's area, west of Broad, big three-story row homes, it's about $8800. 28 12/12/01 FINANCE COMMITTEE - BILL 010694 There's always asbestos. The environmentals have been driving our costs up through the ceiling every year. It's been up about $2000 in the last three years.

If you're telling me now in a North Philadelphia three-story row house or West Philadelphia larger home, larger than South Philadelphia with the asbestos issue and the stuccoing it's 8800, it's still not 10,000.

I thought you were concentrating on demo costs. Not counting the stucco. Stucco west of Broad is --

Are there more than 10 west of Broad?

Absolutely. West of Broad should be around 11 or 12. In areas of Mantua where the homes are bigger and three-story houses to stucco, the average cost, I believe, is $2800 a wall. On a two-story it's about $1500. The environmentals are really a lot more in the bigger homes.

40 percent of the homes are scheduled to be taken down by hand, the way you describe it. I assume it's accurate as far 29 12/12/01 FINANCE COMMITTEE - BILL 010694 as people climbing up on a scaffold or something and pulling the house down brick by brick. How many people are going to be hired to do that? Do we have any estimate as to how many people we'll need to do -- of 14,000 demolitions, how many people are we --

A crew to demolish by hand consists of a foreperson and usually three laborers. Anything more than that to actually do the demolition is just too many people around that can get hurt. Then it would be a trucking company or container company to put debris in.

I should multiply 40 percent of 14,000 by 4? That's how many people?

40 percent of 14,000, which would be hand demolition by four, yes. Three actual laborers and a foreman.

Where is it envisioned these individuals will be coming from?

Again, one of the roles of Hill is to make sure that we reach out and work closely with contractors around so we can meet our economic opportunity goals on both the employment side of the equation as well as the vender contractor side of the equation. 30 12/12/01 FINANCE COMMITTEE - BILL 010694 If I may, I want to note just for the record another potential impact on cost which no 4 one --

Can I interrupt you for one second. I want to get to the issue of cost as it relates to demolition. We're attempting to utilize local contractors and local people in the hand demolition, the 40 percent hand demolition. Have we in any way analyzed wage rates -- for example, what is the hourly rate, if you know, of a hand demolition worker on a given row house property?

I'm not sure. It would be the prevailing wage, roughly 18-something an hour, plus benefits. I'm not sure.

We can get back to you on that.

That's paid by the contractor?

That is part of their cost.

We're going to be needing a substantially larger number of people, I suspect. Have we analyzed the wage rates of both union and non-union companies? 31 12/12/01 FINANCE COMMITTEE - BILL 010694

That's some of the work going on now as putting together the budget, master budget.

What is the wage rate of a laborer in union contract company, as opposed to a non-union company?

I'm not in a position to answer that question.

Bob, do you know?

No. I'm aware of what the prevailing wage is. I'm not sure of the actual union versus non-union.

Could someone provide that information? I want to ask one question while Ms. Smith is here on an issue of economic impact that you raised in your answer. There's a letter dated December 10, which is a response to a letter written August 3 to Councilman Rizzo, relative to his question on return on investment. Actually, the second paragraph struck me. I can't imagine how this analysis was conducted. Let me read for the record the response: "What is the return on investment?" "Over the course of the NTI bond's 30-year debt service 32 12/12/01 FINANCE COMMITTEE - BILL 010694 schedule, the expected additional benefit to the City of Philadelphia's economy totals over $47 billion. This estimated benefit consists of $295 million in bond expenditures, 1.1 billion in related housing construction and preservation expenditures, 10.4 billion in wages from new City residents, and 35.8 billion cumulative in increased real estate values. "The cost of the NTI bonds over the 30-year debt service schedule is 585.2 million. Therefore, the return on investment for the program over the 30-year period is estimated to be 8000 percent return on investment."

The multiplier is 80.

It says 8000 percent, the $585.2 million cost. Where did that analysis come from? I've never seen a return on investment of 8000 percent.

What we did was work with the Budget Office in trying to capture the various aspects of this. For example, based on the NTI goals -- and we had to make some assumptions around this. What I can do, since this is not my area of expertise, we 33 12/12/01 FINANCE COMMITTEE - BILL 010694 can have the individual who worked with Mr. Dubow walk us through that. Essentially, for example, one of our goals is 16,000 new housing units. If we were to achieve that production goal, there's a multiplier effect that people use. So we generated numbers off of that.

Maybe Mr. Dubow can answer. Certainly we want to look on the bright side of life. Don't you think this is a little overly naively ambitious. The concern that I have is if this is some of the assumptions that we're working with, I'm beginning to have increasing doubts as to the ability to carry forth this program. This is something that is like absolutely fantasy.

We were trying to be responsive to the Councilperson's request. This type of analysis and the way he couched is was a difficult one. Because, again, the challenge with NTI, as I said yesterday, is that it's not a single project like the Convention Center. It's not a single program. It's really a multiplicity of different things. So we made an effort. We had said in April that one of the 34 12/12/01 FINANCE COMMITTEE - BILL 010694 objectives -- can we increase the population base? We assumed if we did that what the impact was. In one way, we were trying to be responsive to the question that was being asked of us in using --

When Councilman Rizzo got this letter, if he believed it he must have been jumping up and down doing handstands. It's astounding to me that -- Rob, maybe you can bring some clarity to this. I think this is the kind of information that makes people believe this may, in fact, happen. When, in fact, our poling data, and any poling data shown, shows that people leave the City because of schools and taxes. If the schools aren't being fixed, where are these new people coming from and all this wage tax revenue and new residents buying middle-class, market-rate housing? This is extremely misleading. I would like to see some specific analysis of how these numbers were reached. With an 8000 percent return on investment, how do I invest my money in this? I can retire.

Of the 16,000 housing units, are any market-rate housing? 35 12/12/01 FINANCE COMMITTEE - BILL 010694

No. No. 3

It's 16,000 units, but a big number of them are subsidized housing?

We were looking at the construction cost, whether they're subsidized or not. Construction costs create jobs and things of that nature.

They create jobs when they're getting built. However, once they're built, I don't see the job creation that goes with that. I mean, the job creation is during the building. I don't see within the plan a long-term objective of job creation that will create employment for 10, 15 years of people.

This is Joyce Wilkerson. I'm Chief of Staff. First of all, these numbers are not included in any of our five-year plans or any of our projections that the City has. As I indicated yesterday, our proposal is not predicated on the ability to generate revenue off of this program. I think there will be some revenue generation happening. I would like to have Rob Dubow explain to 36 12/12/01 FINANCE COMMITTEE - BILL 010694 what the response -- what the response was made to and walk through the details of the analysis.

What we looked at was a couple of the reports from EPOP. We looked at what they assumed would be the impact on housing values from getting rid of abandoned houses, from building new houses what that would mean in terms of --

I don't want to interrupt you. It says right here in the letter that "the EPOP analysis of a reduction in value of properties on blighted blocks of $6720 is not included in this analysis."

No. But they did make assumptions --

No. It says here what the numbers are. Then it goes to and says, "Please also note the estimated benefit does not include induced benefits associated with increased real estate values of properties near NTI activities." In their report, Blight Free For Philadelphia, the EPOP Organization writes, "The presence of an abandoned house on the block reduces the value of all other properties by an average of 37 12/12/01 FINANCE COMMITTEE - BILL 010694 $6720." That is not included in the analysis. So I guess we should ratchet it up even more if we were to include that part of it. As Councilwoman Blackwell said, I want to make this a little real and ground this. To me, this isn't grounding; this is a helium balloon.

Could I call to the table the policy analyst that worked with the budget analysis? (Witness comes forward.)

Good morning. My name is Jonathan Schmidt, policy analyst, NTI.

Good morning. You're associated with a firm?

NTI.

What is your background as a policy analyst?

I recently graduated from the Wilson School of Public Affairs.

You're not associated with any consulting firm?

No. In generating these numbers, we did struggle with coming up with the methodology for doing this. We did assume the NTI 38 12/12/01 FINANCE COMMITTEE - BILL 010694 goals would be achieved. Which meant that what we assumed as far as housing cost was $110,000 per house in the construction value.

What was that based upon?

The cost of affordable housing in the City at the moment is approximately 110,000. Much of that is being subsidized; nevertheless, the overall cost is 110,000. In some cases, the market-rate housing values might be higher. We did 110,000 for all units, whether market rate, preservation or affordable housing. We assumed at the market rate, that that would be fully provided by the market. For the affordable housing, we went with the NTI assumption or goal that we would reduce the subsidy to 40,000 per unit, which meant the private leverage or external leverage from the City would be 70,000 additional. We assumed that the -- while we didn't take into account the EPOP analysis of the effect on other properties, we did take into account that the new development would likely occur on vacant land or land that is currently not paying taxes. Which 39 12/12/01 FINANCE COMMITTEE - BILL 010694 meant that approximately 50 percent of the land that would be used currently is not paying taxes and would be in the future.

This would be on residential development?

Yes.

Including the ten-year tax abatement for new construction?

The other key part which is --

No. 13

-- it's done over 30 years. It's over the lifetime of the bond. It's a 30-year projection. It does take into account the tax abatement and the kicking in after year ten.

What I would like, I'd be interested in seeing a detailed report on the analysis and the factors that you used and the assumptions made to get to this amazing number. Now that I've read it. I'm so excited.

I'll be happy to provide that.

Thank you. The Chair also notes that in attendance 40 12/12/01 FINANCE COMMITTEE - BILL 010694 are Councilwoman Reynolds Brown, who has a question, Councilmembers W. Wilson Goode, Jr., Ortiz, and Clarke. Let me ask a question. How are fencing of lots, adding mulch or whatever those tree pieces are called, murals and benches, are they in the L&I cost or someplace else?

That type of cost cannot be paid for directly out of the bond proceeds, with the exception of maybe some hydroseeding greening directly tied to a demolition activity. What we have done and are beginning to do is to look to other resources to support greening activities for the vacant lots, including really using as our model the work that's been done in the America Street Empowerment Zone and New Kensington Community Development Corporation where they do a lot of tree planting and post and rail fencing to help in terms of a beautifying objective. It may not deal with security issues. As I said, we are looking to fund greening activities over and above basic cleaning, through private resources. An example of that is in federal grants the managing director's office is going to be 41 12/12/01 FINANCE COMMITTEE - BILL 010694 bringing someone on who is very familiar with funding programs that we might be able to tap at the federal level coming out of, say, like the agricultural department. We were successful in securing a small grant from the William Penn Foundation to start modeling some of our greening activities for them and to create an overarching strategic plan and resource development plan. So we can't, unfortunately, use bond proceeds for that activity. We'll be looking to outside money for that. One of the things that I personally think is a wonderful opportunity is a concept of what we've been calling "the Green Fund." We began to have conversations with some of the major foundations about this, including the Philadelphia Fund. It's a model in part that may be the way with the stadiums. We created a Children's Fund. Could we create a Green Fund and use it as a basis as a large-scale community campaign? Contribute a dollar toward the planting of a tree. It doesn't have to be a street tree. The Empowerment Zone model shows that if you plant trees around the parameter of a lot and even though it's not completely fenced off, 42 12/12/01 FINANCE COMMITTEE - BILL 010694 that does tend to deter things like illegal dumping.

Thank you. I note Mr. Coates is here. Thank you for your support last night. Thank you to the Anderson family as well. We have questions from Councilwoman Reynolds Brown and Vice Chair Tasco.

Good morning, members of the Committee. Pat Smith, you've already partially addressed the answer to my question. My interest is very specific and narrow. It stems from past experience in the arts and current role as Chair, Recreation Parks and Culture Affairs. The context is, as an example, ten years ago, Philadanco, the leadership there saw fit to actually rehab houses adjacent to that artist cultural institution to accommodate dance artists who needed housing. Given that as an example, when we look at the percent for arts that currently exists with large-scale projects, what kind of thinking or strategy has been given to ensuring that arts and culture organizations are a part of this NTI initiative? You've discussed the green space 43 12/12/01 FINANCE COMMITTEE - BILL 010694 point with Philadelphia Horticultural Society, which is the second part of the question. Now can you focus on artists and arts and cultural organizations, especially when we know the economic impact they bring to Philadelphia.

We had some preliminary conversations with the executive director of the Avenue of the Arts. They're undergoing a strategic planning process. Part of our conversation was the role they can play, particularly in the northern part of the Avenue of the Arts in connection with NTI. As they do their strategic planning, would there be any opportunity for linkages there? Another thing is on the City's side, under the leadership of Jane Golden in the Murals Art Program, looking to tie the mural program closer to greening activities within neighborhoods. I think one of the most wonderful examples of an artistic approach to greening is the work that Lilly Yep has done with the Village of Humanities in the Art. Those would be the type of things we would like to replicate with that. In terms of house and other development 44 12/12/01 FINANCE COMMITTEE - BILL 010694 activities, the Planning Commission has also been looking at the concept of artists zones and lots, lost-type zone areas. Particularly, again, people think maybe in the northern part north of Broad could there be some opportunities along that way? I don't know if Maxine is able to talk about the North Avenue of the Arts work you're doing.

May we note that we're very proud that under the graffiti arts program, we're number one in the nation. We're very pleased with the new experimental program Jane Golden has to try to create some senior citizen lots, benches and mural programs. We love every single bit of it. We think that our City is doing a great job in that regard. (Witness comes forward.)

Identify yourself for the record. Thank you for being here.

Maxine Griffith, Executive Director of the Planning Commission and Secretary for Strategic Planning. Good morning, Members of the Committee. We've been working at the Planning Commission for sometime on a comprehensive plan and 45 12/12/01 FINANCE COMMITTEE - BILL 010694 development strategy for Avenue of the Arts North. We expect to have a draft plan before Avenue of the Art Board of Directors or their subcommittee by late January. This includes not only the usual planning elements. Our community planning group has also been working with the various entities along North Broad. They have been working in concert with a contract that's been let by the Mayor's office to look at operating expenses, how to get a grip on the fiscal picture of these organizations, and how to weave that into an overall development strategy. In addition, recently as part of our purview as coordinators for the capital budget, we've been looking at capital budget strategies for especially the small arts organizations. So as, unfortunately, our capital resources diminish, we do not leave those groups standing alone. We help them figure out a way to provide capital support and infrastructure support for them.

That's exactly what I would ask we be mindful of. The City's Mural Arts Program is wonderful and great. It's unprecedented in terms of it's accomplishments. 46 12/12/01 FINANCE COMMITTEE - BILL 010694 In no way to diminish that already great effort, we should be mindful of other arts programs not Center-City based in various districts around the City. We've heard District Councilpeople voice clearly how they want to be involved in that process. It's important that we be mindful there are artists and culture organizations around the City that should be a part of this strategic plan. That's my fear, that we not miss out or miss the opportunity to include them across the board.

We'll be sure to work with you and your staff and other Councilmembers as we move forward.

Thank you. Ms. Griffith, don't leave. Let me say to all who are here, I'm hearing the grumbling that people have to go and this is your second day. I'll ask my colleagues and members of the Committee to allow us no more than ten minutes for questions. We'll call you on and we'll go back to our questions. We'll try to give you your respect. We thank you for your patience. 47 12/12/01 FINANCE COMMITTEE - BILL 010694

Thank you. Good morning. I had time to read your letter. I did not get it yesterday. I have some questions related to your response to my inquiry. I was under the impression when we left the meeting that we had regarding how to best think about the redevelopment of the Logan area, the way we might be able to do it that would not be costly to the City but be a way to encouraging developers to look at that valuable land along the Boulevard. While you mentioned one developer who was interested, there have been several inquiries. Based on that, we believe we could create some competition and interest in that area which could also help us deal with the revitalization of the surrounding community. What disturbs me -- and then after that meeting -- I thought we had a good meeting. I thought something was going to happen. I see it's not happening. I am concerned. I'm more concerned that your letter states that your main concern is that the designation of the new redevelopment area will create expectations that there will be a high level of public dollars, NTI 48 12/12/01 FINANCE COMMITTEE - BILL 010694 proceeds and others, committed to the neighborhood when this may not necessarily be the case. So when we attempted to try to put the revitalization of the surrounding area on the table, that did not come through. We were disappointed with that. I guess what I'm saying, are you saying and is Ms. Smith saying that the people in the surrounding areas, not the sinking-home area, but the periphery, cannot look forward to any development that may come from proceeds of the NTI bond?

No, of course not. Let me restate something I said yesterday. I didn't realize you hadn't yet reviewed the letter. It was based on the letter. What we're saying is in terms of the establishment of urban renewal areas or the expansion of urban renewal areas, we're seeing that we've been asked to see it by NTI leadership as part and parcel of the program. We have a backlog of about 15 requests for expansion. We have on staff now six community planners that do that work. So the decision about how to move forward is part of the NTI investment 49 12/12/01 FINANCE COMMITTEE - BILL 010694 strategy; looking at acquisition costs, looking at community plans and how to move forward. So we're definitely not saying that the whole area was not to be included. As a matter of fact, we were trying to say, and perhaps the letter was worded poorly, the exact opposite. Because we wanted to do comprehensive plans, we saw this as part of the overall NTI strategy. However, we also said, and there might have been some staff-to-staff miscommunication, because I got another sort of verbal communication from your office subsequent to the meeting, we had thought you wanted to respond specifically to a specific developer who had a plan and wanted to move forward. What I was suggesting in the letter is if that was the case, to talk to Joe Leonardo. There might be some more focus instruments. I was thinking about Act 94 that would not be staff intensive and not be global to respond to that specific need. Because that's what my staff had told me that was of more timely concern to you. We were certainly not trying to say, and I apologize if we gave you that impression, that we 50 12/12/01 FINANCE COMMITTEE - BILL 010694 were not looking globally at the whole community. That's what NTI is about.

If I may, to follow up, the idea would be before we might have went ahead and created an urban renewal area. And that would have been the end of it, without thinking, do we have dollars for acquisition, dollars for development? As Maxine talked about, we have a whole list of requests for expansion. Now we want to sit down with people in Council districts and say with the Councilmen, Create an urban renewal areas. What are the redevelopment plans similar to -- you know, like, Councilwoman Blackwell, you have X-number of developers. This would be the demand on the other part of the City's resources. I think a lot of times just one piece of the pie gets done. You end up building up frustration because when it comes time to do the second part, we don't have the dollars. So you still don't get what you need. That's what we're talking about, this concept of comprehensive planning and thinking about not just the activity of creating the area, but making sure we're going to have resources. 51 12/12/01 FINANCE COMMITTEE - BILL 010694 We try to look at the picture in its entirety instead of one slice of the pie. That's what we're trying to do differently.

I would add, as I said yesterday -- and I think I made reference to RDA as well -- the Planning Commission in a way is not making independent decisions. We're making decisions as part of a global program, a more comprehensive program. So when we get a request, we have conversations with RDA, we have conversations with Pat's office. We look at moving forward with that project in light of, as Pat said, what resources are available to complete the project from soup to nuts. Yesterday Councilman Nutter made reference to a project that we had worked on together with all the best intentions and a lot of energy from all sides doesn't seem to have gone anywhere. That's because the resources weren't in place, the agencies that have to implement -- as you know, Planning has no money. We're not an operational agency. So the connection between the work we do and the work of OHCD, Commerce Department and other implementing agencies, that connection was not 52 12/12/01 FINANCE COMMITTEE - BILL 010694 there. That's what we hope to remedy under NTI. But to do that, it means in a way we give up a little bit of our independence as an agency.

I really am concerned. We've gotten a lot of people who are interested in that area. I'm looking at it from a point of view where if the interest is so high, they may be willing to spend the money.

That's why I asked -- you might have gotten a call this morning. It's the reason why Rich Lombardo wasn't here. I asked Rich to actually call your office this morning to try to follow through on that letter. We realized you had spent a lot of time here at the hearing. We wanted to see if there's ways we can be responsive and still work within the NTI framework.

If NTI is going to cover everything, what if you don't want any of the bond proceeds? What if you want to proceed with the development, say, in the Logan area and we may not need NTI, what happens? Everybody in the City believes the whole blight program, everything they say is going to be solved by $295 million or some sense of this program. If you don't -- if the 53 12/12/01 FINANCE COMMITTEE - BILL 010694 dollars are not there, how does one deal with development absent NTI?

Let me give the short answer and then let the NTI director give the broader answer. The way that NTI works is actually to leverage other dollars. It's a leveraging mechanism. That leverages private dollars, but it also leverages governmental dollars and state and federal dollars. In a way, NTI is less a program that's discrete and more a way of leveraging money to do what we need to do. That answers your question in one way.

Suppose I want to do a project and you say, Well, it's not part of NTI. It's got to be a part of NTI in order for us to leverage these other dollars? I have put together a developer. I have private funding. I have XYZ. I want this project to go forward. I don't want someone to tell me it's got to be part of the NTI program to get moving.

What I've done is ask Herb Wetzel from the Redevelopment Author to come up. I thought it would be helpful to walk through a 54 12/12/01 FINANCE COMMITTEE - BILL 010694 development project which was completely privately funded and financed in the way that it interfaced with City systems as an example.

Good morning. I'm Herbert Wetzel, Executive Director of the Redevelopment Authority in the City of Philadelphia. Councilwoman Tasco, we recently engaged in a process with a private developer in Councilman DiCicco's district over in the brewery town section. The developer wanted assistance to acquire additional land. The developer bought the old Schmidt's Brewery site, but was in need of additional land to create the entire parcel for the development program he wanted to engage in. He was able to come to the Redevelopment Authority as a result of support from the Councilman to authorize, in which we came before Council, an ordinance to condemn additional land to assemble the overall site for the development. In this case, the developer was willing to pay for all costs associated with land assembly. The City would not have to provide any funding for the land assembly. As a result of that, we obviously came before Council, got the ordinance, 55 12/12/01 FINANCE COMMITTEE - BILL 010694 filed a Declaration of Taking, and are assembling the land for a major redevelopment project. Both the land assembly and the entire project itself will be paid for by the developer. In a similar situation, as Councilwoman Blackwell mentioned this morning, we've assembled properties for a private developer in West Philadelphia. Although that developer has not paid for the land assembly or the assembly of buildings, we have used City resources to assemble the buildings. But the entire redevelopment, post the land assembly, has been paid for by that private developer. Those are examples where the private developer is paying all the development costs, including land assembly or paying for post-land assembly development cost.

Those are the alternative methods I mentioned at the end of my letter.

In fact, it gives one the opportunity to get rid of blight. In my area, for example, the same developer in question, we had a property on the corner of Chestnut Street in one of the main thoroughfares to come in Center 56 12/12/01 FINANCE COMMITTEE - BILL 010694 City. If you go down 58th Street, you'll hit Chestnut. People go from the Airport and come down and always see blighted properties at that corner. So we said, look, we need you to develop those properties. Now there's a bright, shinny corner. Where I have three corner properties coming along that corridor, we've been trying for the last couple years to get those. We have those listed in a package to try to acquire. If we try to really focus on development, community development, we can change neighborhoods. Because in this instance, we're part of the designing process. You are not going to see that blight in that corridor if you come through West Philadelphia because we're going to try to get rid of that. Those are the kinds of things that after a while, you can get into when you form partnerships with private developers, with the City. Just like on the front of my last news letter you received, you see big, shiny playground equipment. That is in a park that was a drug-infested park. We went to our private institutions and asked for money. There's $200,000 worth of playground equipment from the Children's Hospital of Philadelphia there. The 57 12/12/01 FINANCE COMMITTEE - BILL 010694 City has invested over as much for their part. We have a private developer who is rehabbing 75 houses on the perimeter. The fourth side of that, which is Huey School, is on 52nd Street so it's part of a commercial corridor. We've done this to spur development on that commercial corridor. Across from that is the church. We believe in public, private, institutional, governmental partnerships in order to change neighborhoods. You know, my philosophy is each person is a committee of one who has to fight to improve your area. If we decide and focus that we want to create these partnerships, all things are possible. I'm willing to work with any of my colleagues to talk about what works for me to show you what I have done for a success story. It really keeps you motivated. When you see successes, it keeps you pushing on to get through all the millions of steps to get the stuff done for the next project.

I would just like to add, Councilwoman Tasco, that the frustration you feel is the frustration that the development community feels. There's a fundamental real estate reality, 58 12/12/01 FINANCE COMMITTEE - BILL 010694 and that is site control is everything. If we own that site you're talking about now, those developers could compete today to develop that land. That's the change we want to make. We want to make sure we have land ready in the inventory so when they knock on your door, we're able to deliver the land.

To my understanding, and because I have limited knowledge about housing development, during the course of our discussion, I thought the urban renewal process would help us gain site control at a rate that would be much less than what we would pay because it's a unique area. The dollars would make it attractive for the developer who might want to pay to gain site control. That's was my impression. What I was pushing for the urban renewal for was to make it easier for the developer to acquire the land. We might not ever have the money to develop the land. If we find a way -- if the urban renewal process is the way that we can do it to create the competition, because it is valuable land, that way -- that is why I was pushing for -- not to ask you to pay for it. I want to make the process easier 59 12/12/01 FINANCE COMMITTEE - BILL 010694 for the developer to gain sited control to move forward. Otherwise, I will not be here, and none of us will be in our lifetime, when the land is developed.

The only difference is that the development of an urban renewal area is only one way you can acquire property. What we're suggesting is another way that is less labor intensive, frankly, on the City side given limited staff resources that would get you to the same end.

At the same cost? That's what I'm talking about, cost. We don't need to talk about the specifics here. That's something for us to have a discussion about. I want it to be clear that it is the way to help us acquire the land, given the unique circumstances of the Logan area. And creating the competition where we may not have to ask the City for any dollars. If the process, acquisition process, is made easier, then we can work with developers to look at that land.

The last person to ask questions before the Panel No. 1 comes up is Councilman Nutter. After that, we'll start the 60 12/12/01 FINANCE COMMITTEE - BILL 010694 panels and work it out.

Thank you. In the same area where Councilwoman Tasco was a second ago, the Chair made reference to the binders where we're sitting. Mr. Wetzel, my recollection from yesterday is a question was asked with regard to the amount of property or land in the City's inventory or the various agencies. I think when the question was initially asked, we did not know the answer. I think at the tail end of the day, there was a chart produced that showed what that number was. I think in actual total as well as the percentage. I think the percentage was percent. 16 Have copies been given to the Chair for distribution? Do you know, Ms. Smith?

We put this together late last night, this morning. I don't know. This was the breakout based on the dangerous-building database, as well as the vacant property survey. Again, that was as of January 2000. The City-owned properties that were dangerous buildings is 7.6 percent. RDA owned 1.4 percent. PHA owned 1.4 percent. 61 12/12/01 FINANCE COMMITTEE - BILL 010694 With respect to --

In that regard, just so I understand, 7781 properties in our database from January of 2000, we figure that number has probably grown if some of the other buildings haven't fallen down on their own, the government and its various entities own 10.4 percent of those properties; 801 of them. Do we have any idea how we ended up owning these properties?

There's probably a lot of 62 different ways. Some of those might have been acquired under urban renewal programs as long as 20, 30 years ago that were never marketable properties. There are those acquired through sheriff sale for which the City bid on them and there's been no end user. Those are probably the main reasons why. PHA has had the scattered sites that have been abandoned.

We have 801 properties in our current inventory within the government. A part of the debt proceeds will now be used to demolish dangerous properties that we own that we acquired, for whatever reason we acquired them for. 62 12/12/01 FINANCE COMMITTEE - BILL 010694 And 10,000 a piece -- I think you add three zeros.

It will be approximately 10,000 per property.

10,000 per property. That's million dollars. $8 million of the 7 proceeds used to tear down properties that the 8 government owns?

Right.

Part of the proposal here is that the government aggressively acquire a lot of property; is that correct?

Land.

Already demolished?

Right.

Vacant sites we're going to acquire. Okay. Now, the second chart, are these the vacant lots?

That is also vacant lots as well as vacant buildings that aren't considered dangerous is on the second chart. That was based on the -- it's out of 59,796 parcels in the City that either vacant buildings or vacant lot. Remember, we have 26,000 vacant houses and 63 12/12/01 FINANCE COMMITTEE - BILL 010694 31,000 vacant lots.

Out of the 26,000 vacant buildings, 8000 of them are dangerous; is that correct?

Yes, approximately. It varies.

Out of that number, we own 801?

About 10 percent.

In the second chart, you combine the vacant buildings and vacant lots, which gets us the large number of 59,421. Out of that, the government owns, and its agencies, 9750?

That's correct.

The 9750 number, does that also include the 801 number?

Probably does. The vacant property survey included everything.

How many of the 9750 are vacant lots?

We didn't do the run on that basis. We can. That's one of the reasons we're starting to get refined numbers, because of the work that Gannet Flemming has been doing. 64 12/12/01 FINANCE COMMITTEE - BILL 010694

For the people who have been involved in this, do we know how many vacant lots of the 31,000 are owned by the City or any of its various agencies?

We will run those numbers. We can run it. I would be guessing, to be frank.

Mr. Wetzel, when you were talking with Councilwoman Tasco about the need to acquire land or property, obviously site control is king, what have we been able to do with the property that we already own in terms of redevelopment opportunities? How quickly can we dispose of property we own.

We can dispose of properties that we already own in 90 days or less. That's never been the real problem. The real problem has been on the acquisition side rather than the disposition side. In many cases, what we've tried to do -- I'll give you a recent example. The Redevelopment Authority acquired a parcel near 5th and Jackson in '71. It was an old movie theatre. It was demolished. Nothing happened on that until last year. 65 12/12/01 FINANCE COMMITTEE - BILL 010694 The Presbyterian homes decided they wanted to finance and secure funds for an elderly housing project at that location. The parcel we owned at that location was too small for the project. We worked with Presbyterian Homes and condemned additional sites adjacent to the project, which had become vacant land. As a result of that, we were able to dispose of that old parcel as well as add new parcels. Now a 62-unit subsidized elderly housing project, that will be about a $6 million development, will happen at that site. A lot of the stuff that we own is not necessarily marketable because it's a lot on this block surrounded by other vacant lots, which are still privately owned, for example. Part of the land assembly process is the consolidation of that land into marketable parcels. Individual lots, unless they're next door to a homeowner, are impossible to offer for redevelopment. So if you look at PHA scattered sites, you could go -- there are blocks in this City that have land or land and buildings owned by the Redevelopment Authority, PHA, City of Philadelphia 66 12/12/01 FINANCE COMMITTEE - BILL 010694 and by PHDC. There could be four separate public owners on the block. Again, what we want to do is consolidate those titles and then assemble the rest of the vacant land. So it's a single parcel with one ownership.

For the Davis Buildings of the 801 owned by various governmental entities, 109 are owned by PHA. Do you plan to use bond proceeds to demolish dangerous buildings owned by PHA?

If it's still going to be in Housing Authority inventory, they have access to demolition proceeds. Some of what we're seeing now, though, are private parties acquiring some of the vacant lots and parcels from the Housing Authority.

Selling them?

In connection with other developments being done. For example, Cecil B. Moore Homes happening in North Philadelphia involve some sites being acquired from the Housing Authority. I think the Schmidt's development that Herb was referencing includes lots. I think some structure is being acquired from the housing 67 12/12/01 FINANCE COMMITTEE - BILL 010694 authority. If it's going to be reused by the Housing Authority, there would be federal funds available. If it's disposed of to an entity outside of the Authority, the bonds proceeds might be used for that demolition.

Say it's a dangerous building and it comes down and the City does the demolition, we do bill the Housing Authority for the cost of that demolition.

Do they pay?

Yes.

It didn't seem me we would use tax payer bond proceeds to demolish PHA-owned properties when they have their own budget. Let me ask the questions I wanted to ask.

Could we please defer and get some of our panels started? Or we're going to lose our people. I know Councilman Ortiz has questions. Councilman Kenney has another question. Our panels are saying they've been waiting two days. If we don't get started, they can't stay. 68 12/12/01 FINANCE COMMITTEE - BILL 010694 Can we work it in between? Panel, question, Panel, question? Would the Committee agree to that?

Fine with me. I'll be tremendously cooperative.

Thank you. Panel Number One, General Overview - Federal, State, Regional and Local Stakeholders. Philadelphia Interfaith Action, PIA. I have a PIA development in my area along what is called "The Dusty," the Nehemiah Project. We're very, very proud of it. Jeremy Nowak, President of the Reinvestment Fund. David Thornburgh, Pennsylvania Economy League. Carl Greene is at a graduation where I'm supposed to be guest speaker. He's not here. Richard Sauer, President Philadelphia Association of CDCs. I see my friend Steve Culbertson who has been here. He may be here as well. Finally, EPOP's Gordon Whitman who is part of this group. (Witnesses come forward.) 69 12/12/01 FINANCE COMMITTEE - BILL 010694

We're very happy to have you speak in any order. Thank you very much. Identify yourself and make your testimony. We do thank you for your patience.

My name is Reverend Isaac Miller. I'm testifying on behalf of Philadelphia Interface Action and the 30 congregations and organizations throughout the City that PIA represents. The Neighborhood Transformation Initiative, NTI, is the best and boldest plan to rebuild the City of Philadelphia. PIA has labored hard to bring such a plan about. For over a year PIA pressured Mayor Street to come up with a plan that was large enough in scale to address the magnitude and the depth of the crisis that has caused our City to sink and crumble. Mayor Street did. On April 19th, nearly eight months ago, Mayor Street presented to you, the City Council and to us, the citizens of this City, his Neighborhood Transformation Initiative. NTI will do what no other initiative has ever done. It is a public safety and a pre-development strategy. NTI means that 14,000 70 12/12/01 FINANCE COMMITTEE - BILL 010694 abandoned, mostly dangerous buildings will be demolished. Not only will NTI make the City safer for our firefighters, police officers, children and residents, it will create the opportunity to reconstruct. NTI will create buildable sites where developers, both for profit and not-for-profit, can build a wide range of new developments. New construction is the key to turning the tied on the massive evacuation of people leaving the City. You can't have a City when people a day are packing 13 their bags and moving out. The only winners are the 14 moving companies. 15 PIA knows this can work because our sister 16 organizations in the Industrials Areas Foundation 17 have done it. We have built over 5000 Nehemiah 18 homes. Rebuilding an entire section of Brooklyn and 19 the South Bronx. In East Brooklyn the number of 20 murders went from 126 to 10. Home improvement loans 21 doubled in areas around the new Nehemiah Homes. 22 Major new commericial developments opened. 23 Here in Philadelphia, as you have just 24 mentioned, PIA tried to build 1000 Nehemiah Homes. 25 We successfully built 135 in West Philadelphia. Why 71 12/12/01 FINANCE COMMITTEE - BILL 010694 didn't we build 1000 homes? Because then Mayor Rendell would not deliver buildable sites for construction. This is a City that is losing population. This is a City where land is our greatest asset. But as long as the land is hidden, no developer will build. NTI will make the land buildable and available. The right role for government is to do the pre-development work, not to micro-manage the market. The City suffered 30 years of government neglect dominated by a culture of avoidance and denial. Now you, the Members of City Council and Mayor Street, must regain the ground lost under Mayor Rendell and previous Administrations. You cannot do that if you continue to delay. You cannot do that if you continue to put what most citizens consider to be re-districting ahead of the life and death of communities. You cannot do that if you and the Mayor allow personal disputes to get in the way of resolution. We are here to ask you to be leaders in making NTI a success. For that to happen, this Finance Committee and City Council as a whole must 72 12/12/01 FINANCE COMMITTEE - BILL 010694 approve NTI. We know there are now two versions of NTI; the City Administration's plan and Council President Verna's plan. PIA believes the Mayor's plan is superior. However, PIA understands that there needs to be a compromise. In fact, we offered to host talks between the Mayor and Council President to come to an agreement. There are two things that threaten the success of NTI. One is not starting. The biggest threat to NTI is not starting. PIA is asking you to reach a reasonable agreement and to vote on it by December 20. No one wins with further delay. The second threat to the success of NTI is over controlling and micro-managing. If City Council insists on micro-managing NTI, then you will strangle it. You will kill it. You will guarantee its failure and the death of the City.

President Verna's amendment this morning goes some way to alleviating these concerns. But her bill will still burden the City Administration with too much bureaucracy and red tape. It will guarantee that our City will never compete with Conshohocken and West Chester. The only thing built in Philadelphia will be the little efforts that have 73 12/12/01 FINANCE COMMITTEE - BILL 010694 dotted the landscape for the last 30 years. The exodus of people out of the City will continue. To conclude my testimony, we in Philadelphia Interfaith Action call on this Finance Committee and the City Council as a whole to move forward on NTI. Reach a reasonable resolution that does not compromise the success of NTI. Vote on NTI by December 20. We've had people who have had to leave because of the amount of time that has been taken. Let me summarize the comments of Reverend Geneva, First Reform United Church was going to make to you. I believe you've got copies of it. On behalf of Reverend Geneva, last week, I and five representations from five Center City congregations met with Councilman Frank DiCicco to express our concern that the Neighborhood Transformation Initiative be passed by December 20. Councilman DiCicco told us last week he thought it would be political suicide for City Council not to pass an NTI bill. The time is running out. Less than ten days remain. We urge you to move on the Mayor's plan because it coordinates and streamlines the management process so that all segments of the City can cooperate to 74 12/12/01 FINANCE COMMITTEE - BILL 010694 make NTI successful. It would be tragic if members of City Council were the ones to block this bold initiative because of internal squabbling. The citizens of Philadelphia expect more from their elected leaders. This is on behalf of Reverend Gordon Simmons from Reformation Lutheran Church since he had to leave. First, PIA has members and allies in every City Council district in the City. And your district, Councilmember Tasco, we have five member congregations. PIA as a whole in these institutions, and residents in particular, want to make it clear to you that we're looking forward to your leadership on this issue. We're tired of delay. PIA is also clear that NTI is a plan to rebuild the City, not one neighborhood over another. It is time to stand for the whole. Philadelphia is greater than some of it parts. Some areas are more blighted than others. Different areas will need different kinds of investment. NTI will fail if the central question becomes narrowly asking, What's in it for me? Again, on behalf of Reverend Simmons, I 75 12/12/01 FINANCE COMMITTEE - BILL 010694 conclude, we in Philadelphia Interfaith Action call on this Finance Committee and City Council as a whole to move forward on the NTI, reach reasonable resolution that does not compromise success. Vote on NTI by December 20. Thank you.

Thank you, Reverend Miller. Councilwoman Tasco.

I thank you and appreciate your comments. I appreciate the comments of Reverend Simmons. I would like to say that the people of the district elected me to be their representative in government. They elected me to be a responsible representative. They elected me to review, analyze and make decisions based on the things that are before me. In the end on NTI, my question has always been, what will the City look like from today's map to tomorrow's map? In the end, they're going to ask me, what did it mean to the 9th Council District? That is not being narrowly focused. That is representing my district in the 9th Council District 76 12/12/01 FINANCE COMMITTEE - BILL 010694 who sent me here to represent them. As I sit and deliberate, that is what I'm doing. I'm exercising my leadership to make sure they're taken care of in the NTI program.

Thank you. I appreciate the opportunity to respond. You asked what the City will look like? One, I think the City of Philadelphia when we pass NTI that makes sense and stands the chance for success, I think it would look like a model for the nation as a whole for what the whole of the nation struggles to do, especially since the terrible strategy of September 11. We've got to figure out how in the world we, as a country and a nation, move forward in ways that really honestly bring some hope and some meaning for the country and the democracy that we hold dear. I believe that you'll see a City of Philadelphia that's an example for all of the great older cities of this country. Cities that the reputation of this country were built on beginning to stand and rise again. A place where folks are not leaving our communities, where institutions like 77 12/12/01 FINANCE COMMITTEE - BILL 010694 the church that I represent doesn't have to beg, borrow and steal for talented people in the pew so that the work of the church can begin to happen. I think you're talking about a City where neighborhoods are beginning to blossom again with good, solid people that once moved to Jersey and beyond City Line Avenue begin to say we want to come back to the City because it was once great and it is in the process of being great again. I think the same thing applies to your district, Councilwoman Tasco. We're not trying to tell you how to vote. We're trying to speak to you in a sense of the kind of hope and concern, the vision that we have for the City that member institutions in your district have for the district and for the City as a whole.

We don't disagree with you.

Amen.

Thank you very much. Mr. Nowak.

I have written testimony. If you'd like, I have copies. 78 12/12/01 FINANCE COMMITTEE - BILL 010694 (Testimony attached to transcript.)

Thank you. We have one question.

Thank you. In your testimony, you itemize a number of issues that seem to me have nothing to do with money. Let me try to characterize what you said and talk about some of those issues. Streamlining codes. The code issue, so people can read and more understand the City codes. Streamling licensing and zoning processes. Changing state law to expedite property acquisition processes. Collapsing housing agencies into one governance body so we don't have all these agencies running around. Change the issues around the cost of construction. It delineates a few others. You've been working on this program for about two years?

On and off about a year.

The Administration ran on -- one of the primary components of the election campaign was NTI, because it's gotten so much attention. 79 12/12/01 FINANCE COMMITTEE - BILL 010694 What kept any of this from happening already? There's no need for a $250 million or $300 million bond ordinance to streamline our codes in the building section of our code, City Codes. There's no need for 200, 300 million bond ordinance 7 to streamline licenses and zoning processes. These are things that we're involved in. We have control over them. We could have these expedited in any way. This Council would have been happy to get legislation that would begin to start that process or change the process from the cumbersome it is now to something that would attract people to want to invest and not go through a terrible process. Changing state law to expedite property acquisition. Is there a legislation that's been drafted, that's been asked to be introduced in the state legislature? Is the chairman of the Community Affairs Committee have legislation that the City drafted for him to introduce? Has John Perzel been talked to as far as putting forth legislation? Collapsing housing agencies into one. It's been two years. I don't remember anybody in this Council ever saying, "Please don't collapse 80 12/12/01 FINANCE COMMITTEE - BILL 010694 those housing agencies. We need to keep it the way it is." Change the issues around the cost of construction. $300 million bond ordinance is not necessarily going to change the wage rates in Philadelphia vis-a-vis Conshohocken and West Chester as the Reverend told us. I guess part of the problem here is while we're grappling with all these issues, over the last two years if the attention had been made not just to the money but to the other processes that needed to be changed, we could have been doing this thing all along. All of a sudden, all of it needs to be done at once. I understand there's work going on. It all centers around the money. I guess the frustration here is, no one in this Council ever said from the L&I Committee, Streets and Services, Hey, don't change those rules. We like them the way they are. We received no 21 legislation from the Administration to do one of these things to change the way of climate in this City, except for the money. It comes back to the money. It's an important element. It does allow for property 81 12/12/01 FINANCE COMMITTEE - BILL 010694 acquisition, land-bank accumulation. All these other areas we have not done yet that are not working its way through the legislature in Harrisburg, that's not working its way through the Council in the City of Philadelphia are still not done. I guess the frustration the community has and we have, because we're being characterized as someone being an obstacle because we won't just cut the strings on the money, none of this other stuff has been given to us to do. I guess that's the frustration I would like to echo to you. You're a good guy, a competent guy. You've been very open and honest with us. This is all about the money. If it's all about money, fine. I can deal with that too. All those other things you ran down could have been done or be in the process of being done as we sit here today against another deadline of December 20. This is the Administration of deadlines. This Council should not be saddled with a list of undone things that need to be accomplished in order to make this City a more developable place. That's just my opinion, for the record. 82 12/12/01 FINANCE COMMITTEE - BILL 010694 I'm not looking for you to respond on behalf of the Administration. I'm just curious as to the number of things you listed in addition to the money could have been done or should have done in the last two years.

When we first worked with the Administration to help think through an NTI strategy we said, and I think the Administration agreed and encouraged us, that money is a piece. Again, it's one of the necessary but not sufficient conditions for getting this moving. You need money because no 13 developer is going to pay the cost of making this land into an asset because the value is not there yet. In order to do it, to be competitive many of these other things have to be done. The Administration -- including the cost of housing production. The Administration said to us, We agree. And then asked us -- we've only been one part of this -- to look at and work with them on several of these issues. Let me talk about two of them. I'll tell you where we are.

This is nothing new. Our zoning codes, housing codes, licensing process 83 12/12/01 FINANCE COMMITTEE - BILL 010694 property acquisition problems all have been in existence for decades.

Somebody said yesterday the City has been in population decline for 50 years. The problem is we have systems of doing business that reflect 50 years of decline. This is the problem. The broad problem is to survive, cities have to be competitive. In the first 50 years of the 20th Century, cities had a jurisdictional monopoly. That jurisdictional monopoly went away. Some cities figured it out; some didn't. This one didn't figure it out, unfortunately, I think until recently. Therefore, it's now saying, What do I have to do to be competitive? To be competitive, the City has to be competitive as a real estate market, as a labor market and as a site for business location.

How about the education market?

That's what I meant by labor market: The business's taxes. Although, one thing I would say about taxes, I think at the end of the day it's what some economists refer to as "devalue 84 12/12/01 FINANCE COMMITTEE - BILL 010694 proposition." At the end of the day, what do I get for the goods you give me? In some instances, I'd be willing to be in a City and pay more if I get greater goods. Or if there's something about the place that gives me a premium. I can't reproduce Rittenhouse Square in -- I'm willing to do that.

Like San Diego's climate?

Right. The problem for the City is in many of its neighborhoods, what's its real locational benefit and what's its competitive advantage? NTI works with just a piece of this broader competitiveness problem. I think on the Housing Agency issue from everything I've been a part of, the administration is doing the most serious work that has been done on this issue. I mean this. I also was a part of what the Rendell Administration did in the early '90s. I mean that they're the first one to seriously say, Let's figure out can you streamline this. And then look at all the regulatory, legal, all the muck of 30 or 40 years to try to figure this out. It's gone through an extensive law review. 85 12/12/01 FINANCE COMMITTEE - BILL 010694 Before they want to go anywhere too far with this, I think they want to do what Joyce Wilkerson said: Sit down with the labor unions, talk to the workers, work these things through.

Any day now. In all fairness, the only thing before us Is a request for the authorization to borrow $250 million. Other than that, none of this is before us now or has been before us in the past. Had it been before us in the past, I assure you we would have passed it. We would have analyzed it, reviewed it, discussed it and passed it. The only thing before us that came from the second floor was request for authorization to borrow money. That's it.

On the housing cost issue, what the Administration asked me was to look at what the cost drivers are. I can talk about some of those, if you'd like. I'm not done the research, even though it's overdo. That's my fault. To look at that research and say what are some recommendations that were doable, that make sense, that get the cost going down. The major problem for housing costs for the City is at the 86 12/12/01 FINANCE COMMITTEE - BILL 010694 level of the production of new middle-class housing. It's a problem for all. We irrationally subsidize high cost at the low end. We use subsidy to make up for irrational costs. It's what we do. We're all part of the problem. I financed a lot of the projects. At the highest end, particularly where there are high-end rentals, people are willing to pay the premium to make the numbers work. The problem is the $120,000 to $150,000 townhouse that we can't be competitive with.

It's "the Washington Township syndrome."

Right. There what I think is important to do is to lay out what are the costs -- understand very clearly what are the cost drivers. You need to say where can you make change in those cost drivers. It's complicated. Some cost drivers are things like environmental remediation. We've got 150 years of industrial history. Some cost drivers might be a labor cost. Maybe we can get a better residential rate. Maybe we ought to think about a better residential rate. Maybe there's an opportunity to 87 12/12/01 FINANCE COMMITTEE - BILL 010694 do that if you expand the supply of development. Some cost drivers are the social convenants that are built into federal, state and local and regulatory processes. You name it. Some of those are good things that are important things. The question is, is there a way to do it where it doesn't drive up cost too high? If it takes six or eight weeks or more or several months to get City subsidy, I'm going to structure in the line of credit cost to you that I wouldn't somewhere else. Some of it is if I'm going to do five or ten houses at a time, the economy of scale doesn't let me do that. There's a variety of different things. At the end of the day, as a community, we have to look at those cost drivers, decide which one of those we can take on and take them on, or it will be very difficult to get this thing moving. This is the risk that I think is inherent in all of us. I think it's easier to avoid these issues when you've got low levels of residential development. It's interesting. If you look at the building permit numbers in Philadelphia in the 1990s for a City of 1.5 million, it's spooky. This is the 88 12/12/01 FINANCE COMMITTEE - BILL 010694 time of robust economy. It is spooky how low those numbers are. We need to use demand to some extent, use increased demand, increased opportunity to drive some of the systems change. Because you've got other voices talking. Home builders we talk to -- and this is for other work we do -- say that there is a real window of opportunity right now. The climate around suburban sprawl really has made it tough for lots of -- the Washington Townships are filled up. This is a region that doesn't grow; it just spreads out. It's like my hair line. It just thins and doesn't have a lot of growth. The question is, can we take that window of opportunity and push it in? We've got two risks: We've got the risk of doing nothing, which is continue to decline, or we've got the risk of trying to move on this and not making enough systems change or burdening that 250 or 290 million bond with the same processes which would also be problematic. I'm convinced that the Administration wants to change their systems. If they don't, fair game would be my view. You've got to change a lot of those systems. That's what we've got in front of 89 12/12/01 FINANCE COMMITTEE - BILL 010694 us. We've let them atrophy for 50 years, not just the two years of this Administration.

Understand from my perspective, as a member of the Board of Directors of this $3 billion company, beginning to engage in a process that is a one-shot deal for us we need to have the information, the knowledge that we're making a decision that makes sense, and the ability as some point in time if the project goes off, to bring it back on track. That's what those amendments in my view do. They don't hamper. They don't obstruct. They don't compartmentalize. What they do is give this Board of Directors, who has the fiduciary responsibility and elective responsibility to help lead this City forward, the tools to make sure that happens. Once it's out of the barn on the current plan without amendments, none of us on this Board of Directors will be able to pull it back. That's our concern. That's what this discussion is all about. It's not about squabbles, personalities. It's about the one last shot the City has to make a difference. We're not going to let it just be 90 12/12/01 FINANCE COMMITTEE - BILL 010694 frittered away without some controls and input. That's where this discussion goes. Part of my (indiscernible) with my initial question to you was a lot of these things, with the exception of the things that cost money to accumulated and other things, could have been done or at least have been discussed by now in Harrisburg and in this body. They're not being discussed. It's all tied to "Give me the money. We'll take care of it and see you in a couple years." We have responsibility to do better.

Let me note we received this information. The letter reads, "Documents requested at hearing on Bill 010694. Dear Councilwoman, I'm pleased to provide you with additional information that was requested on December 11. The following information is being supplied at this time: A, Briefing materials supplied to district Councilmembers. Councilman Kenney's request. B, NTI housing investment strategy working groups. Councilman Kenney's request. Overview, affordable housing working groups, chairs and members. New urban communities working groups, 91 12/12/01 FINANCE COMMITTEE - BILL 010694 chairs and members. Process at a glance. Examples of issues being addressed. C, Pending unfunded real estate acquisition. Councilman Nutter's request. D, Memo from Licenses and Inspections regarding daily fines for code violators. Councilman DiCicco's request. As additional information is copied, it will be provided." We have this information.

Can I make a comment? It was related to a question you had before about the multiplier of return on investment. The one that I focused on wasn't the -- just in the work we did was not what happens over the 30-year period. I think, frankly, it's is a tough one to figure out. The one that I focused on was what's the multiplier of the housing development in the original plan. That was for the kind of housing, the average-cost housing and the type of housing we would do, all the multiplier data that I looked at got us at about two and a half dollars to one on the housing investment side. You could take the number. 92 12/12/01 FINANCE COMMITTEE - BILL 010694

The Washington Township syndrome issue -- and these are my peers. These are the 12, people I grew up with. Nine or 5 ten are gone. These are the people who didn't want 6 to leave the City, but their wife wanted a house 7 with a deck, garage, family room. They looked 8 around and found it in Washington Township. 9

That's a product issue. 10

The other issues that 11 drive a resident to stay or to come home is not just 12 this. You've said that. There's no discussion. I 13 started out my questioning yesterday with issues surrounding both education and tax structure. When those people who are my peers figured out that they could take their kids out of parochial schools and move to New Jersey and save 3200, 4000 a year per child on their educational expenses, pick up more in real estate taxes, buy another car, save on auto insurance, at the end of that legal pad, we've got to go. It makes sense financially. The other stuff isn't being addressed. When you want to do this analysis down the road, 30 years out, unless the tax structures are fixed and schools are fixed -- a big "if" -- I don't 93 12/12/01 FINANCE COMMITTEE - BILL 010694 know whether this retains or attracts the people that we're looking to multiply the investment on.

One thing that's useful, and I don't think any of us did a careful analysis on it, from what kinds of people in what kinds of circumstances is there demand for urban housing? That's the broad question. For example, we've recently looked in one of these committees who is renting over the new development over there? What was interesting and surprising was how many of them came from outside the City. Clearly largely single without kids. Many of them attached at the university, many not. If you look at the Westrum (ph) Development, the single-family home ownership development in Councilman Nutter's district, ask yourself what percentage of them are City workers. It's a reasonable question to ask because they have to be there. I think part of the question becomes is there -- there's a market for whom? To survive, the City can't just be a market for those who don't have choice. We're dead. It's got to be a market for those who have choice. There's some people that want to live -- I mean, University City 94 12/12/01 FINANCE COMMITTEE - BILL 010694 in Councilwoman Blackwell's district is a hot area for all kinds of people right now. You can build off of it in different ways. These are some of the segments that want -- that might be different than the friends you talked about. It may be for a different segment. The question is, can we build enough product? Can we get the tax structure moving in the right direction to get those decisions your friends made reversed?

What we struggle with is the investment we're being asked to make prior to our involvement pretty much in the dark, from my standpoint, other than our deliberations and amendments, prior to that, pretty much in the dark is a big investment to make when you counter-balance it against the financial needs of both the schools and the tax. We've done incremental tax reductions. They haven't worked. They need to be sped up. There's a cost associated with that. There's a cost associated with borrowing money for blight. There's a cost associated with all those things. We have to have the information and the input necessary to make 95 12/12/01 FINANCE COMMITTEE - BILL 010694 those ideological philosophical decisions on when we spend this money, are we going to get the return. Somehow the spin, the spin in the media, the spin in the community is that this Council is an obstructionist Council. It's not. What it is are people who think. They think about things and care about things. They know they make a decision -- when I say aye or nay, it's a decision I have to live with. And when we make this decision -- I think we'll get there. There's got to be enough protection and enough involvement that we can, again as the Board of Directors of this company, keep this program on track without all the other extraneous pressures on it. Whenever you put $300 million in a pot, there's a lot of extraneous pressures to do certain things with it. We want to make sure that all the things you're talking about, that money gets used for.

Thank you very much. It's my understanding that you're familiar with Controller Seidel's land tax proposal. What is 96 12/12/01 FINANCE COMMITTEE - BILL 010694 your opinion of it and how it relates to NTI?

That's a question I didn't expect.

After that we'll entertain a question from Councilman Goode.

I think land tax -- I did look at it. I think land tax proposal -- you know, there's the land tax proposal and then the broad Saidel package. I think the broad Saidel package -- and, again, I'm not -- I think it probably doesn't concentrate enough on the wage tax, in my view. I think the land tax, under certain circumstances, for some neighborhoods works; some it doesn't move the incentives in the right direction. There have been some very good experiments in Pennsylvania with that kind of land tax. Probably the best has been in Harrisburg. At least the one closest in size has been in Harrisburg. I think it's actually helped with vacancy removal. I think land tax has got some possibilities, although I think you've got to be careful about where it puts the incentives and doesn't put them.

We had Mr. Saidel 97 12/12/01 FINANCE COMMITTEE - BILL 010694 out in my area that is directly affected, and this is in University City. The Realtors and the community groups all were supportive, even though they understand that they would be the ones primarily affected by it. Their taxes would go up.

I do think, and this is just my view, that the issue of tax structure and whether the -- I know this is a hard issue to take up now because of the recessionary climate and all the fears. I understand when the City says this. I think they're being appropriately cautious about the climate we're in in terms of the revenues. But the issue long term for the City, and this would be a critique I'd have going back to the Rendell Administration, as to whether those incremental tax cuts were really enough. My view is the first one was the most effective because it was symbolic. Then afterwards, it really had lost its impact. It had the imagine of moving in the right direction. It certainly was the right direction. This is a broader, more complicated issue. We are not for many people and many businesses tax competitive. There's no doubt it is an issue.

Thank you. 98 12/12/01 FINANCE COMMITTEE - BILL 010694 Councilman Goode.

I have a series of questions to try to move through quickly. First, I'll make brief comments. I have a tremendous amount of respect for the nationally recognized, if not internationally recognized, institutions you've built. There's some concerns about what it means related to NTI -- actually, the Reinvestment Fund's involvement. When we talk about market-driven approaches, to a lot of people, that means making government more efficient. I hear certain people talk about market-driven approaches related to NTI. My question is: Driven by who? Obviously it's not driven by the people who were not investing in these areas before. Obviously it's not driven by banks that have redlined our neighborhoods. It's driven by intermediaries and driven by public, private community partnerships that want to not so much drive a market, but develop a market. I have a list of quick questions. I appreciate quick responses. What is or was Community Development Institute? 99 12/12/01 FINANCE COMMITTEE - BILL 010694

A subsidiary of ours that did training for community development corporations in the region.

Was it funded by OHCD?

Yes. OHCD partially. It was partially funded by Foundations.

How much CDBG per year did you receive?

I don't know. It was in the seventy-five or hundred thousand range.

What years?

I have to check.

What else did you receive from the City? Did you receive access to the databases?

We received access to City data when we were hired to do the NTI analysis.

Under the Community Development Institution Program?

No. 22

At the beginning of CDI's relationship with the City, what was the size of your portfolio of investments. Say ten years ago. 100 12/12/01 FINANCE COMMITTEE - BILL 010694

Ten years ago? I'd say we were probably a $10 million institution.

You're now a $120 million institution?

We manage $120 million, yes.

What will be your portfolio of investment after NTI?

No idea. I would expect --

Project five years from now.

I would think we'd be managing in the $160, $170 million level. We're trying to do less on our balance sheet and more through affiliate or through just-in-time financing.

What opportunities do you envision for other community development institutions in Philadelphia?

In NTI?

In NTI and in general?

I think it's an open, competitive field. I think what you need to do --

I would strongly disagree with that.

I think at the end of the day 101 12/12/01 FINANCE COMMITTEE - BILL 010694 what you want is to create more demand and more product and have people compete in that field.

Have you been approached by the Administration to play a role in the Philadelphia CD Fire Fund?

No. 8

That was my understanding from John Kromer. How much NTI-related investments do you expect to come from banks?

I don't think anyone thought that through. You're saying -- NTI investments mean a lot of different things.

NTI-Related investments.

I don't think anybody knows exactly.

We've had all types of projections --

If you're saying of the 16,000 housing units that are being built, what percentage comes from banks? I'd have to go back and look at that private sector money. Then I'd have to decide how much -- what proportion of that do I think banks 102 12/12/01 FINANCE COMMITTEE - BILL 010694 would do versus mortgage companies versus -- we could play it out.

There was a $47 billion multiplier thrown out there. Of that 47 billion, or anything you might want to use, what portion of private investment would flow through banks?

I don't know.

What percentage of that would flow through the Reinvestment Fund? You're saying only 40 million or so?

No. You're confusing the growth of the Reinvestment Fund, which is regional and does things that has nothing to do with NTI, with the growth of NTI.

Are you anticipating any growth of the Reinvestment Fund on the basis of NTI?

The only growth of the Reinvestment Fund that would relate to NTI is if NTI helps create housing development products that way. And if we're competitive as a construction lender and people want our construction loans, like any other bank or any other investor, we would make money. 103 12/12/01 FINANCE COMMITTEE - BILL 010694

I'm confused. We're talking about how this massive investment of public money is going to do such great things across the City, change the City of Philadelphia in the future. You are the major financial intermediary in markets where people don't go into, and definitely don't go into the level you go into. You're saying --

There's no way to know.

-- the impact to your business is minimal?

There's no way to know. You can even argue it would be affected in the other way. You could argue that you would create so much of a competitive dynamic, that -- in fact, what you want in those markets --

Not if you maintain a monopoly.

What's a monopoly? A developer can go to whoever they want.

I'm talking about community development finance.

A developer can still go to whoever he wants. Universal Community is behind me, or Mazo and Levine, because they do development in 104 12/12/01 FINANCE COMMITTEE - BILL 010694 Councilwoman Blackwell's area, if they want to go to me, they can go to me; if they want somebody else, they can go to somebody else.

It --

Let me finish. They do what developers ought to do, which is go with the best deal they can get. What you want to create with NTI is a marketplace where there's more opportunity for more developers and for more investors. The more competition, the better.

More opportunity for community development financial institutions. Yet, you're the one talking to the banking community on behalf of the Administration?

I and Pat Smith have had conversations --

Pat Smith said she went to one bank: Fleet. You said you went to all six on behalf of the Administration.

We went to tell them what NTI is. All we did is explain NTI. We didn't ask for anything. We said that if NTI gets off the ground, it will create more opportunities. As those opportunities emerge, there will be particular 105 12/12/01 FINANCE COMMITTEE - BILL 010694 products we've got to figure out how to get at.

Discussing product development with the banking community on the basis of a $250 million public investment, knowing that you're going to pattern your products after those products the banking community is going to use --

You've got a pretty fancy conspiracy here, but there's nothing to it. It's not what is happening here. The Administration -- let me finish. You're making serious acquisitions here. The Administration, as part of what I've done in my contract with them has asked me, along with -- and sometimes there have been meetings Pat was at, there's meetings Joyce was at with foundations, meetings the Mayor has been at, and asked me in various instances to go to private sector actors to help explain what NTI is, to build private sector investment support. We went to and talked to Dean Adler, who runs a big real estate and business investment company, to say this is what it is. When NTI gets off the ground, here is the kinds of opportunities we think will be there. What do you think the gaps 106 12/12/01 FINANCE COMMITTEE - BILL 010694 are? We did as much listening as talking. That's it.

Your vested interest is minimal?

My vested interest is significant in the following way: All of us do better. Whether it's a community development corporation that somebody here runs, whether a lender like me, all of us do better if there's more product, more opportunity and more competition. I believe in --

Which is why I've always supported NTI. My issue is very serious though. In Philadelphia, you have the Financial Services Center, SABA, Community Capital works, Economic Opportunity Fund, Impact Loan Fund, NCCA, New Horizons, Philadelphia Neighbor Housing Services, et cetera. I do not believe they all have the same opportunity here in terms of community development finance because of your role in this case. You say that is false?

You'd have to talk to the Administration. All I can tell you -- 107 12/12/01 FINANCE COMMITTEE - BILL 010694

It's your business. You would know.

All I can tell you is, our approach to this has been to be in an honest, hard-working way, a consultant for the Administration to help where we think can we add value, whether it was on data development or help thinking about the role -- a variety of roles for the private sector. We have not taken that on with the idea that we're trying to monopolize anybody's business.

You don't remember what years the community development institute had a relationship with OHCD?

I'd have to go back. It hasn't been around for two years.

Why did you end that relationship with OHCD?

We closed down the Community Development Institute.

Why did you close down the Community Development Institute?

We made a decision in our organization that we were better at lending and 108 12/12/01 FINANCE COMMITTEE - BILL 010694 investing than technical assistance. That was a business decision around our core competency. And, frankly --

Did you change your lending and investment strategy, too?

I think we got more aggressive. I think we diversified more into facilities like daycare and charter schools and independent schools. We began to do a lot more small business lending.

I remember you discussing how we needed to do market-driven things rather than play space strategies. I remember talking about building affordable housing in the suburbs.

We do a lot of that.

I remember a lot of different things you said related to why you change your business. You seem to be back in business again. I'm trying to figure out why.

We never left --

Why you're back in business with the City if it didn't work during the '90s. 109 12/12/01 FINANCE COMMITTEE - BILL 010694

I want to explain. We never left the City. In fact, we were more of a lender in the City when we were saying those things. What we were saying, and continue to say, is that it's an important conversation to regionalize affordable housing. The hardest place to create affordable housing in this region is in job-rich suburban counties. We fight that fight. That is a tough zoning fight. It's got lots of tough subtext in there. It's just as important to have affordable housing in Bryn Mawr as it is in North Philadelphia. At the same time, we're probably the biggest financier of construction lending anyway for community development corporations doing affordable housing. We do both. That's our view. We think there's something about housing policy, and the study we did recently says this, that has gotten us to think about the City is only the place for affordable housing, and the region is only the place for markets. I think that that is, long term, a problem for all of us. We will have a city that is just the place of concentrated poverty where low-income people will 110 12/12/01 FINANCE COMMITTEE - BILL 010694 not have the opportunity to build asset value. We'll have the suburban places who don't have to incur the cost of services and all the rest that the City incurs.

My last question is: Is the NTI a market-driven or a play-space strategy. And if it's a market-driven strategy, is it a regional market or a Philadelphia market?

NTI takes advantage of a certain regional dynamic by trying to create market value in vacant land and playing off the strengths of particular places to create value in that land. So it's got elements of all three of what you asked. It's got regional elements. There's an opportunity for it play now --

Are you trying to jump-start a regional housing market or a Philadelphia housing market?

Philadelphia housing market as it relates to NTI.

That's what you mean by "market-driven"?

I'm talking about Philadelphia markets as it relates to NTI. If you ask me as 111 12/12/01 FINANCE COMMITTEE - BILL 010694 somebody who invests in housing all over the region, I care broadly about regional housing.

Thank you.

The Chair recognizes Councilman Clarke.

Thank you. Good morning. I'm obviously a strong supporter of NTI. One of the things that piqued my interest was the thought that the process would be streamlined to a large degree. Having had opportunities to work with community groups, CDCs and continuing to hear about the difficulties associated with their ability to do business, working with for-profit developers, commercial entities, their difficulties associated with having to deal with government made we really want to do it in addition to some other things. I actually agree with Councilman Kenney, in that we probably need to expedite that process. We probably should have started that sometime ago. I agree with that. I have some potential concerns. Even if we, in fact, expedite the process, remove some of the existing impediments, that there's the potential to create some new impediments 112 12/12/01 FINANCE COMMITTEE - BILL 010694 to replace the ones we currently have. I'd like for you to give me a sense of how important do you think it would be to send the appropriate signal as we move ahead to get that for-profit developer or get that individual to move back into the City and invest in the City as it relates to the NTI program and the new process that we could create, that it wouldn't simply replace the old burdensome process and add a new burdensome process under another name.

Well, I think there are some -- I think that developers are, in some ways, pretty simple. When you talk to developers, suburban developers, for example, they talk about community development corporation in a separate -- suburban developers are pretty simple. What they've gotten used to is they've gotten used to a licensing process which is much easier, much more transparent than what we have, buildable green space they can pick up without a lot of environmental problems. They know that municipalities and civic groups are going to ask them for certain things. But it's usually pretty transparent. The cost of doing business is predictable enough and profitable enough, that if they've got to build something or 113 12/12/01 FINANCE COMMITTEE - BILL 010694 put in sewer lines, it's not a big deal. When they come into the City or think about coming into the City, the hardest thing for them is the lack of transparency and lack of buildable sites. It's the lack of being able to understand the system, not knowing why there isn't just a quick way to go through the licensing system. They don't understand the -- they sometimes feel like, through the zoning process, through conversation with Council people, that they're being hit from so many directions they're not sure about what they're supposed to do, how they're supposed to -- you know, they feel beset on a bit. What's got to happen there is that process has got to be managed. Communities, Councilpeople, others make legitimate requests, try to build legitimate relationships with developers. But the transaction cost of that and the transparency of that has got to be something that's more approximate to their way of doing business. If they have other opportunities, they'll go in other places. What community development corporations have done, which is really remarkable and to some 114 12/12/01 FINANCE COMMITTEE - BILL 010694 extent sad, I've got to say, what they've done is figured out how to do business in an irrational environment. They figured out how to do business with all of the -- I think about what Councilman DiCicco is trying to do, what Jefferson Square has been doing for how many years. If you went to a for-profit developer and said, Would you do 80 units if it took you 4 years to go through that process? they'd say no. 11 We've created an infrastructure of community development groups -- and I applaud the five, ten extraordinary community development groups that have figured out how to do this. We've created an infrastructure to accommodate irrationality and high transaction cost. Given the fact we're an older city, given the fact there's all sorts of issues around environment, you know it's not just green space and the way it is in the suburbs, we'll never get it to be the way it is in the suburbs. We've got to get it closer to the way it is in the suburbs. I guess at the end of the day, I'd say we've got to start to judge ourselves or benchmark ourselves against those other kinds of processes that are better. 115 12/12/01 FINANCE COMMITTEE - BILL 010694 For example, the conversation I think the City has to have is how many months should it take to get through this licensing process. How many months should it take to get a piece of land acquired by the City. We need to have a system of benchmarking against that. What Pat Smith was saying yesterday is -- first, there are no clear benchmarks in the City. This isn't a thing of two years. This is 30 or 40 years. She's trying the figure out, first, how do we do it now? What is irrational about that? What do we've got to do to change that? How can we benchmark against that? My sense is that you can get developers to do some things within irrationality if the return looks good enough and they can incur the transaction cost. The more you can do to peel away those layers, the more demand you'll get from investors, from developers and from ordinary residents who want to buy a lot or buy a second house, something like that.

Someone used the term "iterative" yesterday. It's an iterative process. It's not like you do one thing before you do the other. 116 12/12/01 FINANCE COMMITTEE - BILL 010694 You've got to do many of these things simultaneously and one forces the other would be my sense.

Thank you very much. Do we have more questions for Mr. Nowak so we can move forward? Councilman Nutter, did you have a question?

Thank you, Madam Chair. One of the things I wanted to ask you about was in your testimony on . If you covered this already or if you responded to this already, just tell me that and I'll move on. I may have missed it. You've been asked a lot of questions. On of the testimony it talks about NTI has much more to do with lowering all of the barriers to development and investment, modernizing licensing processes, modernizing codes and zoning practices, making the production of housing more cost competitive and re-engineering the process of land acquisition and disposition. One, I would agree. Two, does the bill 117 12/12/01 FINANCE COMMITTEE - BILL 010694 before us, from your perspective, address any of those particular issues? How do those things happen in an NTI context, either with the bill in front of us, or are there other issues that have to be addressed to make those things happen?

I think there are some other issues here. I think when the Administration unveiled NTI in April, they said they wanted to do all these things and that the new success was part of that. Money was a piece, but systems changed. I think they used -- the term was to reform delivery systems. It was about rehabilitating government as much as it was about rehabilitating houses. Reorganizing the agencies, which eventually saves us some money and gets better processes going. I think that gets us in the right place. I don't have everything in front of you on this. I think in the original Administration submission -- again, you'd have to ask the Administration people again -- there's a reference to all these issues. What of that is legislative and what of that is an executive -- you know, what you can do in terms of some of those agencies that's executive 118 12/12/01 FINANCE COMMITTEE - BILL 010694 versus legislation? I just don't know that.

Do you know if a matrix or plan, if you will, has been put together to accomplish those items? And what needs to be done to make those things happen?

I know a tremendous amount of research and analysis, including legal analysis that has been done. What the time line for all that is, you'd have to go to the Administration.

To your knowledge, none of those things exist in a ready-to-change fashion? I'm trying to understand where we are in the whole scheme of things.

Where I think we are on agencies is a well -- a good vision, a well-researched legal analysis. And all of the complexity for the Administration for the people who work in those agencies is about implementation.

And zoning codes and building codes and the like?

I don't know that. I've been doing some research around the labor cost issue.

On of the testimony you talk about four investment strategies. 119 12/12/01 FINANCE COMMITTEE - BILL 010694 The four investment strategies will be operating departments in a new consolidated agency. I think we've heard about a new -- is it office of housing and neighborhood preservation?

Yes.

How will that agency be created?

That agency would have most of the functions around housing that you currently have in OHCD, PHCD, and the Redevelopment Authority. So that, I think -- so it's largely a consolidation of existing functions. Except, I think you're moving in a programmatic direction where the programs would support for goals of NTI. One would be an ombudsman for market-rate investment. One would be preservation investments on stable blocks. One would be affordable housing where the low-income housing tax credit work was done.

And these are all items to be done going forward?

Right.

In the sense that they are not ready to go at this moment? 120 12/12/01 FINANCE COMMITTEE - BILL 010694

Right. There's the "what is the best way to use existing resources to accomplish those goals," and then there's the operationalizing that in a department. I have to say as somebody that runs a large company, at the end of the day, no 7 matter what you do theoretically, somebody on the ground running the office of Housing and Neighborhood Preservation has to figure out how to put that together.

The legality of merging these different agencies RDA, PHDC, has there ever been a City solicitor's opinion gotten as to the legality of merging? We're putting in agencies that control federal dollars that are targeted to certain specific areas. RDA is an agency that, I believe, is created within the charter. PHDC is sort of an authority that has its own legal creation to it. So how do you go about really dissolving many of these agencies and instituting a supreme commander and a new agency?

It's not dissolving all the agencies. It's consolidating the housing functions. RDA does much more than housing. So it's 121 12/12/01 FINANCE COMMITTEE - BILL 010694 consolidating housing-related functions.

You still need some sort of legal situation, ordinance, some authority to be able to do certain of these transfers of duties.

As I understand, PHDC is a quasi-public agency.

Created by law.

The Office of Housing and Community Development is part of the executive branch, the Mayor's Office. The Redevelopment Authority is a State chartered agency.

We have a legal opinion on the legal issues that are involved in here. We have issues that have come up in terms of the union contract, in terms of job description, a whole series of things that may evolve and emanate from this.

I think on these issues, I would just defer to the administration. It's not -- I've been part of a process. My role has been to construct a vision. The Administration needs to move that.

Thank you. 122 12/12/01 FINANCE COMMITTEE - BILL 010694 - - - 123 12/12/01 FINANCE COMMITTEE - BILL 010694 - - - (Proceedings now being stenographically recorded by Josephine Cardillo, RPR.) - - -

I had a question of the witness from Philadelphia Interfaith Action who gave his testimony. I think he has possibly left, but I did want to ask questions of any Philadelphia Interfaith Action person based on the testimony. I had a couple questions. Is there anyone else from, do we know, from Philadelphia Interfaith Action?

Councilman, if you would like, would you like for us to try to reach out to them and ask them to come back this afternoon? Oh, no, I think there are some members of PIA still here.

Okay. I just had a question about --

Can someone from PIA come forward. Is there anyone in the room from PIA? Would they please come forward. 124 12/12/01 FINANCE COMMITTEE - BILL 010694 (No response.)

Obviously, there isn't. Councilman, would you like us to try to reach out to them?

That would be helpful, Madam Chair. The question revolves around the testimony on . It says that PIA tried to build 1,000 Nehemiah homes; they built successfully 135, they didn't build the entire 1,000. My question was: Where is the land they wanted to build the homes on and what actually stopped the production? They make reference to Mayor Rendell, but other than that, there's no 17 additional information. I don't know whether any of our various housing agencies may have any information about that, but it would be helpful to try to better understand that situation. Thank you, Madam Chair. That's all I have for this particular panel.

Thank you very much. 125 12/12/01 FINANCE COMMITTEE - BILL 010694 I believe Rick Sauer and my friend Steve Culbertson, Philadelphia Association of CDCs are next. (Witness comes forward.)

Please identify yourself and proceed with your testimony. Thank you for your patience.

Thank you, Madam Chair.

You're welcome.

Members of Council, My name is Rick Sauer, and I'm the Executive Director of the Philadelphia Association of Community Development Corporations, which is a citywide association of 78 CDCs and other organizations that are actively involved in rebuilding communities and revising Philadelphia's neighborhoods. I believe I had submitted a copy of my testimony yesterday; I don't know if that was circulated or not, but I have additional copies, if needed, right here.

Could we have a Sergeant-at-Arms, please. (Councilman Nutter picks up copies of Mr. Sauer's testimony.) 126 12/12/01 FINANCE COMMITTEE - BILL 010694

Thank you, Councilman Nutter. Thank you. Please begin.

The Neighborhood Transformation Initiative provides an opportunity, I thin, to build on what has been accomplished to date and implement a more comprehensive and coordinated strategy to address the housing and community development needs of our residents and neighborhoods. And I think what we've heard from a number of people is that if Philadelphia's going to be successful in revitalizing its neighborhoods and in spurring population growth, it's critical that the City implement changes to its development process to facilitate increased housing production and attract private investment. And in the previous comments right before I testified, there's a couple things I just wanted to quickly respond to. Given sort of the irrational development process that we have right now, yes, more for-profit developers are not coming in Philadelphia; they would much rather look at development opportunities elsewhere that are less problematic to carry out and 127 12/12/01 FINANCE COMMITTEE - BILL 010694 more lucrative to them. The CDCs that are based in our neighborhoods focussed on revitalizing a specific area of the City have been grappling with this process for quite some time. And I think it's important to note that they spend significant amount of times to maneuver in the system that we do have in place, and that if we are able to streamline the process, their production and their capacity would be significantly increased. And so, in certain ways, while CDCs have been able to create thousands of units in the last decade as well as a number of other community development activities, they've been very constrained by the current system to do more. And so by correcting that system, we could really ratchet up the capacity of the CDCs as well. Key among the issues that need to be addressed are the re-engineering of the City's land acquisition system, ensuring more competitive production costs, and creating a streamlined and customer-oriented delivery system. We do believe that NTI seems to address these tough obstacles. Whether we'll be successful in how long it will take 128 12/12/01 FINANCE COMMITTEE - BILL 010694 is going to be an important factor, but I think the goal there and the intention there is to address those obstacles. And I think the other critical thing about NTI is that it also provides critical resources needed for property acquisition and site preparation to support redevelopment efforts as well as preservation of our existing housing in neighborhoods. Both issues are critical: The streamlining of development processes as well as new resources. I wanted to focus my comments on just three areas. What is the overall acquisition disposition system? We strongly support the goal to streamline that process and to expedite property disposition through the creation of a land bank. We believe that the land bank needs to have clear criteria for how it will dispose of the property to end users, though. There's also currently a critical need for new funding to support acquisition for development projects that are currently in the pipeline. The current lack of funding for assisted condemnation is 129 12/12/01 FINANCE COMMITTEE - BILL 010694 not only stalling the creation of housing opportunities that respond to needs of residents our neighborhoods and future residents and spur revitalization, it's risking a significant loss in CDCs development capacity as well as opportunities to leverage millions of dollars in resources from non-City sources. To address this problem, we think two problems need to be done: First, that in the NTI bond ordinance that is approved, there needs to be a significant amount of private-activity bonds in Year 1 to support assisted condemnation; and secondly, we need an interim strategy to be in place until those bond funds are available to facilitate property acquisition for projects that are ready to proceed right now and may be lost if funds aren't made available in the short term.

I know there's been some amendments proposed, which I haven't seen. One of the amendments we also wanted to encourage the committee to act on is that right now in the ordinance, I believe it requires Council approval of the land bank management plan prior to any NTI bonds being spent for acquisition. And while we certainly 130 12/12/01 FINANCE COMMITTEE - BILL 010694 understand the need to make sure that there's a plan in place for properties that are to be land-banked for future unknown development opportunities, our concern is that requirement may constrain the ability to acquire properties that are needed for projects that are currently in the pipeline and are ready to proceed. So if that amendment has not been made, we certainly encourage the committee to address that issue. The second area that I wanted to touch on is housing and economic development. We know that most of the NTI bond funds are geared towards demolition or property acquisition sort of setting the stage towards future development. I think we need to look at the whole NTI process as being more than just the NTI bonds themselves. There are other funds out there, community development resources, whether they be Community Development Block Grants, etc. And historically, the City has spent a fair amount of its Community Development Block Grant funds to support acquisition of properties for development, for site preparation, to do preservation activities in the neighborhood. And I would hope that by making these bond funds available 131 12/12/01 FINANCE COMMITTEE - BILL 010694 for those specific purposes, it will help free up some of the block grant funds and other resources that could then go directly into housing and economic development activities. So we have the need to do sort of the predevelopment work, free up the dollars that are currently used for those purposes to spur additional housing unit creation and support economic development in our commercial corridors. I think it's a particularly important issue right now in that for the next fiscal year, I think the City's anticipating actually receiving a slight reduction in Community Development Block Grant funds, and so we need to look at how we can stretch those resources even further. Certainly if we can implement a housing reorganization strategy that would reduce administrative costs and also free up more block grand funds, that would be an important step as well. The third area I wanted to touch on is the role of CDCs in the overall process. We believe that a strong partnership between the City and CDCs is critical to ensuring successful neighborhood transformation. CDCs have built their capacity to 132 12/12/01 FINANCE COMMITTEE - BILL 010694 undertake a comprehensive approach to neighborhood revitalization, and they are grounded in these communities, they are interested. In some cases, they've already begun undertaking new or expanded roles to transform neighborhoods. And so while CDCs may traditionally be known for doing affordable housing development and economic development to spur commercial-corridor revitalization, groups are looking at what involvement they can have in more market-oriented developments as well as broader neighborhood preservation activities and vacant-land management. CDCs are also uniquely positioned to partner with and leverage resources from the public, private, and philanthropic sectors, and they're looking to work with the residents to bring about long-term revitalization not only in the physical environment but also to build the social fabric of the neighborhoods. We're certainly supportive of NTI, and we urge the City Council and the Administration to resolve any outstanding issues and provide maximum funding for the bonds so that implementation can proceed as soon as possible. 133 12/12/01 FINANCE COMMITTEE - BILL 010694 Thank you for the opportunity to testify.

Thank you very much. I hope there are no questions because we really have to -- we're going to have to end up recessing and letting Streets and Services come on. All right, Councilman Nutter.

Thank you, Madam Chair. Mr. Sauer, I read through your testimony, and I just wanted to ask you one question. As you've read through the materials, whether it's the ordinance or the backup materials, what do you envision as the role of CDCs in the NTI program? And what is it in any of the legislation floating around that are ensures the activity of CDCs in this program?

I think what NTI does is provide an overall framework for the strategies the City wants to pursue. I think you're right in the written documents that we, and I assume everyone else, have seen, it does not specify specific roles for individual actors, whether they're for-profit developers or community development corporations or 134 12/12/01 FINANCE COMMITTEE - BILL 010694 other entities.

So how do you access the dollars?

Historically, CDCs have played a critical role in many of these neighborhoods. They're the only actors that are there that are doing redevelopment activities. We certainly are trying to work with the Administration to ensure that CDCs will have a prominent role in the process, whether that's things they've done historically -- as I mentioned, affordable housing development and other activities, and economic development, but also looking at what new opportunities are out there. And frankly, groups have realized that in order to revitalize the neighborhood, a comprehensive approach needs to be taken. We need to both address the needs of lower-income residents who have been there for a long time, who don't have the choice to move away elsewhere, but we need to try to attract new residents as well that will strengthen the income mix. I think you're right: There's no 24 guarantees that CDCs are going to get a certain amount of funding or anything like that. Hopefully, 135 12/12/01 FINANCE COMMITTEE - BILL 010694 there will be RFPs issued for access to development funds; I think that's critical. And we're currently -- another key issue in the bond ordinance itself is funding for acquisition. That's the main obstacle right now faced by many of our members. Their projects cannot proceed until acquisition funds are made available.

Right. And you're saying that you have some projects that are, quote/unquote, in the pipeline that you haven't received acquisition bonds for?

To my knowledge, there have been very few new acquisition dollars made available in the past half-year-plus. And so, yes, there are many projects that are sort of stalled in the development pipeline right now. Either they already have a significant amount of project funding in place or, for whatever other reason, they can't proceed until properties have been acquired until those projects can move forward. So until we address that key stumbling block, the backlog of projects ready to go forward is just increasing.

What are your 136 12/12/01 FINANCE COMMITTEE - BILL 010694 recommendations for changes in the acquisition disposition process?

Well, I think from my understanding of sort of talking to the RDA and the Neighborhood Transformation Office, they're looking at some things that would try to expedite to a certain extent the current system. When you have a broken system, there's only so much you can improve it, but if they put a more --

What are those proposed --

-- computer MIS system in place so they know what properties, where they're at in the process, so they can hopefully provide some accountability so that as a property goes from City agency to City agency, we know if it's been sitting there for a week or two weeks, that it should actually have been moved on by that point so that research is not being -- so that the same research is not being conducted at every stage of the process, creating additional time barriers. I think that's something that needs to be addressed. The larger issue, though, which I think Herb Wetzel alluded to earlier today, is if you have 137 12/12/01 FINANCE COMMITTEE - BILL 010694 to wait for a developer, whether it's for profit or not-for-profit, comes to the City and says, I want to do this project, and you have to wait a couple years before you get those properties, it's just a major impediment for a for-profit to walk away and CDCs, it just adds to the cost.

I understand that.

So if we can acquire those properties up, have developable sites within a land bank so that when a project's ready to go, it can be transmitted quickly, that would significantly address that obstacle.

Right. When do you anticipate that the land bank will be created?

That answer the Administration has to address. I don't know their exact timeline. That's an important issue to address for both longer-term opportunities. We also, as I mentioned, have a number of projects in the pipeline that we know what properties that need to be acquired, and we want to see that move forward as soon as possible.

Last question. Tell us about the role that the CDCs have played in the 138 12/12/01 FINANCE COMMITTEE - BILL 010694 development of NTI.

I would not say that we've had much formal involvement. There were many CDCs involved in the early transition efforts that made recommendations of what the blight elimination strategy plan should look like. There are some CDCs that are active on these, four various housing committees right now --

Well, then if the CDC community -- I mean, in your words, was --

Let me finish responding.

Okay, Sorry, sorry.

So there are some -- there is limited CDC representation on these four housing committees that are giving input around affordable housing and preservation and market development, whatever. And then we have had a number of meetings with various Administration officials, whether it's people from the NTI Office, from the RDA, from the Planning Commission, to provide our input into the process. Now, I would certainly not say that all of our issues have been addressed. It's an ongoing process and -- 139 12/12/01 FINANCE COMMITTEE - BILL 010694

I understand. Was that in the earlier creation?

-- there needs to be public discussion and dialogue and input into that process.

You say there needs to be more?

It's a continuous process. I don't think that all the decisions have made, and I think that it's important to have not just involvement and oversight by City Council or the Administration, by I think there's a role for the community and community groups to play in both the development as well as the implementation of NTI.

Okay, thank you.

Thank you very much, Councilman. Mr. Culbertson, please identify yourself for the record.

Good afternoon. My name is Steve Culbertson, and I'm the Executive Director of the Frankford Community Development Corporation. I have written comments. I'll bring them up -- Councilman Nutter, you don't need to come up and get them. And I will, you know, just summarize 140 12/12/01 FINANCE COMMITTEE - BILL 010694 what I was going to say.

Thank you.

Clearly we're in support of NTI. And the main point that I wanted to make is that we're really ready to move forward, that CDCs are the instruments that have learned how to deal with the system as it is. And whatever happens in terms of the system, whether it stays the same or changes, we're ready to revitalize our neighborhoods. And Frankford is actually a test case, I think. We've had a plan since 1993, and we have been proceeding along the guidelines of plan to bring about change in Frankford, and we've seen property values increase, occupancy on Frankford Avenue increase, and we want to continue with that program, and we think NTI is the best way to accomplish that. Thank you.

Thank you very much. Councilman Goode, can we keep it short, because we want to allow the last three speakers, then we're going to, unfortunately, have to recess 141 12/12/01 FINANCE COMMITTEE - BILL 010694 until 2:30 to allow for the Streets and Services Committee, which was due to convene at 12, and Public Property, which is due to convene at 2:30, and we'll have to allow room for those at 2. So Since Streets and Services was due to start at 12, Public Property at 2, we're going to have to, as soon as this panel is over, recess until 2:30. (Responding to off-mic. speaker) I know, I know. As long as Councilman DiCicco is okay with us, then we will allow at least to get to the end of this committee hearing. We have David Thornburgh, Pennsylvania Economy League; Carlos Peraza, LISC, Local Initiative Support Corporation; and EPOP, Gordon Whitman. And we would like to hear from the rest of the members of the committee. If my colleagues will work with me, after Councilman Goode's question, if we could keep the questions short or hold them, we could get through the panels a little quicker. Thank you. Councilman Goode.

Thank you, Madam Chair. I'll be very quick.

Thank you. 142 12/12/01 FINANCE COMMITTEE - BILL 010694

Mr. Culbertson, you're not only a CDC director but you're also the former director of PACDC, the citywide association. I know for a fact that five or six years ago -- I believe it was '94, '95 -- you engaged the last mayor, Mayor Rendell, on what needed to be done in terms of impacted communities citywide. Can you recall for the record what that response was?

From the Rendell Administration?

Yes, from the meeting that took place in '94, '95 about what needed to be done in terms of community development citywide.

It was an ongoing conversation with the Administration at that time. There were many meetings about acquisition and many meetings about various aspects of community development. I guess what came out of that was --

I'm talking about a specific meeting that took place where PACDC told the prior administration what needed to happen citywide in terms of investment. And what was the response from the Rendell Administration?

There was limited 143 12/12/01 FINANCE COMMITTEE - BILL 010694 response, there was very limited response to what we did. I mean, the response was to work with us on a deal-by-deal basis, as they had always done.

0Okay, thank you.

No problem.

Thank you very much. Mr. Thornburgh, Mr. Peraza, and Mr. Whitman.

Thank you, Madam Chair.

Thank you so much. Could we keep the -- it's very difficult to hear. Could we keep our voices low, it's very difficult to hear. Thank you very much. Please identify yourself for the record, and thank you for your patience.

You're welcome. David Thornburgh. I am Executive Director of the Pennsylvania Economy League here in Philadelphia. I don't have a prepared testimony, but I have about four or five thoughts to share with you 144 12/12/01 FINANCE COMMITTEE - BILL 010694 that I hope add to this conversation. I'm here in my role as -- with the Metropolitan Philadelphia Policy Center, which is a partnership that was created about a year ago, funded by the William Penn Foundation, that includes the Economy Leagues, the Reinvestment Fund, and 10,000 friends of Pennsylvania. Recently, about two months ago, we issued this report that you may have seen called "Flight or Fight," which really looks at the last 30 years of this region and tries to tell the story of growth, or the lack of growth, at another level, tries to understand the choices that people have made about where they live, where they do business, where they start businesses. So today's remarks, I'll try to put the discussion about NTI and about blight removal in general in the regional context, which is a sobering one. I think one of the things that we began with is looking at population growth and job growth in the region. In the last 30 years, this region is 18th out of 20 regions in terms of population growth, 19th out of 20 in terms of job growth. The most compelling number that describes the condition 145 12/12/01 FINANCE COMMITTEE - BILL 010694 of the region over that time is one that has to do with housing appreciation. Essentially, if you compare the Boston area with the Philadelphia area, you buy the same house in 1975 in Boston as you do in Philadelphia area, you sell it years later -- 7 in Boston that house is worth about $325,000; in 8 Philadelphia, it's worth about $200,000. So 9 essentially that tells you -- that's a clear 10 indication, I think, of the long-term decline in 11 attractiveness of this region relative to a key 12 competitor. 13 What we're left with in this region is a 14 sense that we somehow have managed to have too much 15 growth and not enough growth at the same time. 16 There's a clear concern about suburban sprawl in the 17 suburbs and there's a concern, as there should be, 18 here in Philadelphia about urban blight. So 19 recognizing that as the region has not grown in 20 total, that these are really two sides of the same 21 coin, I think, is a very stark and useful 22 consideration to come to. 23 Just to share a couple of indicators, and 24 you've been, I'm sure, overwhelmed with indicators 25 of what ails the City and parts of the region, but 146 12/12/01 FINANCE COMMITTEE - BILL 010694 the ones that strike me is that according to the numbers developed by the Reinvestment Fund, that 72 percent of the children in this city live in severely blighted neighborhoods, which, I think, is a very troubling indicator of their future. When you look towards the suburban areas, I would suggest in the last few years, the concerns about sprawl, congestion, loss of farm land, and loss of open space have become the most prominent political issues and driving economic issues in the suburbs, and I think it's clear why. Since 1969, the region has lost about a third of its farm land, Montgomery County has lost 50,000 acres of open space. The waiting in traffic now costs the region about $2 billion a year, and traffic congestion has tripled since 1982. So, again, that's a reminder that we've some how got too much growth and not enough growth in a way that no one seems to be happy with. And I guess all that leads me to suggest is that at this point in time, there is a real window of opportunity for the City of Philadelphia and its neighborhoods if certain things occur.

Ways to rebalance the growth of the region to open up 147 12/12/01 FINANCE COMMITTEE - BILL 010694 development opportunities in the City, both for housing, commercial and industrial development may be the kind of opportunity that comes around once every years or so, and there's no guarantees that 6 it will last, because, frankly, developers, as 7 Jeremy Nowak suggested, are, I think, inherently 8 practical folks, and those who are looking for other 9 opportunities outside of the suburbs right now, if 10 they don't find them in Philadelphia, they're just 11 as likely to find them somewhere else, which is 12 certainly not to our advantage. 13 I guess the strategy that we suggest in 14 "Flight or Fight" is one that you may have seen 15 echoed in the Philadelphia Inquirer, I think, last 16 Sunday, or maybe the Sunday before, by Jane Eisner, 17 which is essentially, call it as it is, it's a 18 selfish strategy. It says that whatever communities 19 or parts of this region there are, each one of those 20 has to look at the assets and opportunities that 21 that community has and essentially to play that hand 22 of cards as best we can. 23 I think clearly when you look at the City 24 of Philadelphia and you look at all of the things 25 that the City and its neighborhoods has going for it 148 12/12/01 FINANCE COMMITTEE - BILL 010694 that play into this situation right now, it's the potential for available land that really sets it apart from other parts of the region, from the potential developable land. The urgency of this opportunity, I think, came home to me after we published this report, and we got probably 100 letters from around the region in strong support of the some of the ideas here, but there's one comment from a staff person at one of the county planning commissions who said that she was so thankful that we had put some of these ideas on the table, that we had created this conversation, because, she said, we're running out of land here in our county and we're running out of time. It seems to me if that's the urgency coming from some of the suburban counties, the sense that the City has land as a key competitive asset, again in this sort of selfish fashion, that if we have land and if we can move that land into the marketplace as quickly and efficiently as possible, that we can stand to capture much more future growth than we have in the past. Let me conclude with just an observation about how we ought to project that growth. I know a 149 12/12/01 FINANCE COMMITTEE - BILL 010694 lot of questions, the good questions that have been asked at this hearing and in other forums, have been to try to get a sense of how that growth occurs and who's going to make it occur and where the investments are going to occur and where would you begin. It occurred to me that if you take the historical perspective on the City of Philadelphia and its neighborhoods and its businesses and its factories and its retail stores, you have to recognize that in our 300-year history, it's largely been the private market that's built the houses and stores and shops and factories, starting, in fact, with William Penn, who was a bit of a real estate developer himself. I think that should give us confidence that given the proper circumstances, the proper conditions, and the proper availability of buildable sites, that the private market will again build Philadelphia going forward as it has in the past. Thank you. I'd be happy to answer any questions you might have.

Thank you. What was the figure you mentioned, 150 12/12/01 FINANCE COMMITTEE - BILL 010694 72 percent of children...?

That 72 percent of children ages 1 through live in what I think the 5 Reinvestment Fund has characterized as severely blighted neighborhoods.

That's what I thought you said. Thank you very much.

You're welcome.

Thank you. I thought your testimony was excellent. LISC, Mr. Peraza. Welcome. Thank you for your patience.

Thank you, good afternoon.

Good afternoon.

I have some copies of my testimony.

Thank you. Please identify yourself for the record.

My name is Carlos Peraza, P-E-R-A-Z-A. I am the Senior Program Director for the Local Initiative Support Corporation.

Thank you.

I am here both as a homeowner 151 12/12/01 FINANCE COMMITTEE - BILL 010694 and one of those people that chose to move to the City after living in the suburbs for many years and as a person that, over the last years, has worked 5 on helping rebuild neighborhoods throughout the 6 region. 7 I am the Senior Program Director at LISC, 8 the Local Initiative Support Corporation, and LISC 9 is the largest national organization providing 10 capital and technical support to rebuild distressed 11 neighborhoods. LISC works with 300 or so urban and 12 rural communities around the country to support 13 community development activities undertaken by 14 community development corporations. Since 1979, we 15 have invested over $4 billion to help build 110,000 units of housing and more than 14 million square feet of commercial space. Our chairman of the boards is the former Secretary of the Treasury, Robert Rubin, and our partners and investors include companies like Fannie Mae, State Farm, Nationwide Insurance, Bank of America, City Group, Fleet, Chase, Prudential, and the National Football League. In Philadelphia, we've invested about $190 million to renovate or build 4500 units of 152 12/12/01 FINANCE COMMITTEE - BILL 010694 housing and close to 1 million square feet of commercial space and community facilities. I would like to express my support for the Neighborhood Transformation Initiative and urge the Council and the Administration to resolve all of the outstanding issues and approve full funding for the implementation for NTI as soon as possible. And I would like to take a couple of minutes to bring up a few key points. First of all, I live here, I chose to live here, I love this city. But I have to say that there are very few places in the country that have neighborhoods with the challenges that the City of Philadelphia has. And being a part of a network working with like 300 sites around the country in the 30-something largest cities around the country, there are only a couple of cities around the country that face the challenges that our city faces in terms of neighborhood decay. And I think it's important to point that out because sometimes we don't realize the extent of the problem that we have. And I do believe that only a very radical initiative like neighborhood transformation will have some lasting effect on reversing so many years 153 12/12/01 FINANCE COMMITTEE - BILL 010694 of abandonment. The second point that I would like to make is that land control assembly and disposal of land is one of the most fundamental principles of real estate development. And our experience around the country reveals that those cities that have developed effective systems to assemble and dispose of large parcels of land are the ones that are most successful in reversing blight and redeveloping areas. You know, developers are there to make money, and they're not willing to wait five years to assemble a piece of land; they just go elsewhere, and they take, you know, resources with them elsewhere. We have a national program that has invested $20 million in retail development with supermarket anchors. And what we're seeing is that at a minimum, we need to assemble sites of 3 to 10 acres to be able to make these retail centers work. And in order to attract additional investment, Philadelphia definitely needs to work on assembling sites and making that process easier. I also would like to point that out that 154 12/12/01 FINANCE COMMITTEE - BILL 010694 over the last months or so, the pipeline or the resources for land acquisition has dried up, and as a result of that, we've seen really a halt on development of affordable housing, and we see that as an urgent issue that needs to be dealt with. And if it's not available, we predict that next year, we'll have even a more serious problem in terms of development of housing.