Again, if you look at where fund balances should be according to the GFOA, we're low. Sixty-four million is a very low fund balance on a $4 billion budget.
Oh, it is. You and I don't disagree about the need to build up fund balances once this recession is over.
Having a little bit of a contingency -- and four million is pretty little -- on top of the fund balance just seemed prudent to us.
Well, let me ask you -- no. I understand. How much are we raising taxes in each of the five years of the Five Year Plan, other than the first year? In the last four years of the Five Year Plan, how much are we raising taxes?
And how much 92 3/24/10 - WHOLE - BILL 100117, etc. is the fund balance --
Right, but basically we could get by in the Five Year Plan. Things would be tight. We may not be able to hire when we want to and other things, but there is the money every single year almost if we find a few more cuts of 20, 30 more a million a year. There is the money in each year of the Five Year Plan to not need taxes or fees; isn't that correct?
No, because it's 180 million per year, which means that over five years --
Can I finish? It's 93 3/24/10 - WHOLE - BILL 100117, etc. 90 million --
Yes. You're correct. I apologize. So still back to my $4 million question. There's $4 million reserved when we have a significant fund balance.
I think we just agreed that it's not a significant fund balance in the first year. I think you agreed that 64 million was a small fund balance.
So why would we put in a reserve for $4 million when we have the money available for the contingency, which is the whole point of a fund balance? 94 3/24/10 - WHOLE - BILL 100117, etc.
I think because it's a relatively -- it's a very small fund balance, and with a fund balance that small, we thought it was prudent to have a small contingency.
Okay. What would be the consequence to City services of Council removing that $4 million contingency?
It would just mean if you had something like snowstorms this year, you would have to find the money somewhere else.
Okay. Thank you. Thank you for your time today. I appreciate it. MR. McPHERSON: Councilwoman Brown.
Thank you very, very much. On the question -- good morning, first of all.
On the 95 3/24/10 - WHOLE - BILL 100117, etc. question of snowstorms, what are some other unexpected costs other than snowstorms that may arise throughout the year for Class 900 funds?
To give you an example, this year one of the things that happened, we were -- the state implemented a new billing system for reimbursements from the federal government for costs in the Department of Human Services. Because of some implementation problems and because of some changes in how the feds do things, our reimbursements have gone down there. So that created a little bit of a problem for us. There have been years, not this year because of what happened with population, but let's say the prison population goes in a direction we didn't expect it to, you might have more prison overtime than we thought.
You could have some 96 3/24/10 - WHOLE - BILL 100117, etc. kind of incident that required Police overtime. There are lots of different things that can lead to spikes in costs for us.
So are contingencies put in the budget to anticipate unexpecteds like that?
No. I mean, there probably were three or four years ago, but as departmental budgets have been squeezed year to year, there's less in that and then really none of that, and that's what you saw happen kind of with snow this year. I mean, we'd never have enough to cover this year's storms, but in the past there had been some room in the Streets Department budget to cover a regular amount of snow, but that's not really there anymore.
Okay. Lastly, in the budget it seems that the 97 3/24/10 - WHOLE - BILL 100117, etc. Fellowship Program has been discontinued.
And that's really the reason. The obvious reason is the only reason.
So it's gone forever, at least for this budget cycle?
Yes. And we understand that that was a really valuable program, and if we get to the point where we can put it back, we would really like to put it back. I mean, not just for kind of the short-term benefit, but we'd like to develop talent that can either work for the City or work elsewhere in the City. So we think it's a really important program. It's just --
The reality we're living in or trying to live through.
Okay. You state in your testimony that the School District received a payment of $60,000, was it?
It's an additional $60,000 to the usual subsidy. The way it works, if the wage tax goes down, the school income tax goes down, and we have to compensate them for that decrease. And the wage tax is going down because of the state money we get, so that means the school income tax goes down, and we have to compensate them for that.
You're welcome. Are there any further questions from members of the Committee? (No response.)
Seeing none, we will break for lunch until 1:30. (Luncheon recess.) 99 3/24/10 - WHOLE - BILL 100117, etc.
The Committee of the Whole is now back in session. We will hear from the Revenue Department. ) COUNCIL President VERNA: Good afternoon. Welcome. Please identify yourself for the record. COMMISSIONER RICHARDSON: Good afternoon, Council President Verna. Keith J. Richardson, the Revenue Commissioner for the City of Philadelphia. Again, good afternoon, Council President Verna and members of City Council Committee of the Whole. I again am Keith J. Richardson, the Revenue Commissioner. With me today to my left is Frank Breslin, the Deputy Revenue Commissioner, and to my right, Michelle Bethel, the Deputy Revenue Commissioner for the Water Revenue Bureau. We are 100 3/24/10 - WHOLE - BILL 100117, etc. pleased to be with you today to discuss the proposed FY2011 Operating Budget for the Department of Revenue. The Department of Revenue is responsible for the collection of all revenue due to the City and for the enforcement of tax ordinances for the City and School District of Philadelphia. The Water Revenue Bureau is specifically charged with the collection of all water and sewer payments. The Department performs these duties while delivering quality customer service to all customers and taxpayers. The FY11 General Fund appropriation request for the Department of Revenue is 15,049,812. This is a decrease of 3,718,398 from Fiscal Year '10 estimated obligations of 18,768,209. 6 million, and the transfer of funding for the Department's information 101 3/24/10 - WHOLE - BILL 100117, etc. technology requirements of 1,045,795 to the Division of Technology. The Department is requesting 12,463,851 in Class 100, personal services, to fund 262 full-time and one part-time position; 2,074,783 in Class 200, purchase of services; and 511,178 in Classes 300 and 400, materials, supplies and equipment. The FY11 Water Fund appropriation request for the Department is 15,144,046. This is a decrease of 3,514,734 from FY10 estimated obligations of 18,658,780. This decrease reflects the net effect of the following: The transfer of water funded information technology requirements of the Water Revenue Bureau to the Department of Technology, which is $4,125,020; the full funding of annual personnel requirements of 405,719, along with funding for two initiatives in the Public Service Concourse, a professional security assessment in the payment 102 3/24/10 - WHOLE - BILL 100117, etc. processing/cashiering area estimated at 70,000 and an analysis of space utilization in the same area, also estimated at 70,000. The Department is requesting $10,649,066 in Class 100, personal services, to fund 260 full-time positions; 3,578,000 in Class 200, the purchase of services; and 913,980 in Class 300 and 400, materials, supplies and equipment; and 3,000 in contributions. The FY11 Acute Care Hospital Assessment Fund appropriation request is 45,000 and is intended to cover the Department's cost to administer the new assessment. The assessment is levied on the non-Medicare net operating revenue of acute care general hospitals located in the City. The Hospital Assessment Program is intended to generate revenues to fund Medical Assistance expenditures for hospital emergency department services in 103 3/24/10 - WHOLE - BILL 100117, etc. the City. The program is also expected to generate additional funding to support the City's public health clinics. The FY11 appropriation is 30,000 Class 100, personal service; 15,000 in Class 300 and 400 for materials, supplies and equipment. The FY11 Grants Revenue appropriation request is $10 million, the same funding level as Fiscal Year 2010. The funding levels in FY10 and FY11 represent a contingency appropriation for the fees to the Administration of the Tax Amnesty Program for the City. The Tax Amnesty Administrator receives a contingency fee based on actual collection of delinquent taxes collected on behalf of the City.
The Department expects to collect the bulk of the revenue associated with the upcoming Tax Amnesty Program in Fiscal Year '10, but may see some collections associated with the Amnesty Program received in Fiscal Year 104 3/24/10 - WHOLE - BILL 100117, etc. 2011. In order to improve taxpayer accessibility to the Department, the following enhancements to the online experience were implemented: The Department added a business privilege tax/net profits tax fill-in form to the Department's website to improve return scanning for taxpayers who retrieve tax returns online. We added the capability of online filing of the business privilege tax long form for 2010. Added online filing form for non-tax liability for businesses that do not have payroll for a given period. This eliminates the downloading of a form, manual completion by the preparer and processing by the Department. This new function enhanced the Taxpayer Information Processing System in realtime and prevents the issuance of erroneous non-filer notices due to realtime processing. 105 3/24/10 - WHOLE - BILL 100117, etc. To prevent delinquency before it happens, the Department of Revenue is working to make Philadelphia's taxes easier to understand and pay. The Department, with the assistance of the Mayor's Commission on Literacy, updated the Philadelphia Tax Guide to improve its understandability and has increased the accessibility of the City's tax collection information by placing monthly revenue reports online. In 2009, the Department eliminated the mailing of tax returns to taxpayers who did not use prepaid returns mailed out in 2008. These taxpayers received coupons only and 62,000 less returns were mailed in 2009 for postage savings in excess of 75,000. Eliminated mailing of wage tax coupons to taxpayers who file ACH payments for 2010 mailings - 5,077 fewer books were mailed for a savings of $3,177 in printing costs and $5,114 in mailing costs. 106 3/24/10 - WHOLE - BILL 100117, etc. Focus on improving collection rates: The Department launched a number of initiatives designed at improving tax collection rates. For example, we're in the process of implementing the tax compliance program partnerships with the Philadelphia Parking Authority, the Pennsylvania Convention Center, the Redevelopment Authority and the School District of Philadelphia. Prior to businesses contracting with the aforementioned, a tax check will be conducted to ensure potential and current businesses are current with all the Department of Revenue tax requirements and liabilities. Working with the City Controller, the Department of Revenue initiated the Employee Indebtedness Program. million in revenue. 107 3/24/10 - WHOLE - BILL 100117, etc. 9 million in tax debt. 6 million. We have also been able to increase our audit staff. Other compliance activities have focused on increasing collections from parking lots, which has generated $176,411 in Fiscal Year 2010 and totaled 742,259 in Fiscal Year 2009. 3 million in new revenues over the 18 months through December of 2009, and collections from utilizing IRS audits, which contributed more than 50,000 to the City coffers so far this fiscal year. We launched the Tax Fraud Hotline in May of 2009. Leads generated through the hotline have resulted in 272 108 3/24/10 - WHOLE - BILL 100117, etc. tips, $143,000 in assessments and 6,000 in new revenue. The Water Revenue Bureau continued its efforts to improve on collections with the following: Launched a nine-month pilot outbound calling campaign to targeted commercial water customers who were one cycle or more behind in payments and residential accounts that were $500 or more past due. The pilot commenced in late March of 2009 and ended in late November of 2009. I am pleased to report that the program resulted in the collection of $830,865 in delinquent water/sewer revenue.
Implemented the automated movement of cases to collection agencies and Municipal Court from basis2, which are the enforcement tools utilized in our partnership with the Law Department. In July of 2009, the Water Revenue Bureau successfully introduced a new water bill design that customers are 109 3/24/10 - WHOLE - BILL 100117, etc. finding more informative and easier to read and understand. The upcoming Tax Amnesty Program: As you know, the Department will be administering the Tax Amnesty from May 3rd through June 25th of this year. We estimate that the amnesty will result in an additional to 30 million 10 in Fiscal Year 2010 collections, net of 11 all costs associated with this 12 initiative. The amnesty will be 13 available for all tax types, except the 14 sales tax, which is administered by the 15 Commonwealth and will be eligible for 16 amnesty under the state's program running 17 concurrently, and the recently enacted 18 Acute Care Hospital Assessment. 19 To ensure the success of Tax 20 Amnesty, we solicited requests for 21 proposals through eContractPhilly and 22 received responses from some of the top 23 tax collection firms in the country. I 24 am happy to report we have engaged the 25 services of General Revenue Collections 110 3/24/10 - WHOLE - BILL 100117, etc. to act as the City's administrator for this initiative. We have also engaged the services of the Star Group, a leader in the advertising field, to raise awareness of this limited-time opportunity and to motivate participation in the amnesty. The Department's professional services contracts: To assist the Department in fulfilling its mission to collect revenues for the City and School District, the Department contracted for $9,123,230 with eight firms for professional services in Fiscal Year 2010. 4 percent are with WBE. 4 million contract with a locally based woman-owned firm that is awaiting City WBE certification. percent are MBE, 111 3/24/10 - WHOLE - BILL 100117, etc. are WBE, of professional services contracts for normal operations in Fiscal Year 2010 are with MBE/WBE firms. 94 percent, respectively. Thank you for your time and this concludes my testimony. We are available to answer any questions you may have, and should any Councilmember wish to engage in further discussions on any of these matters, we are more than happy to meet with Councilmembers at their convenience.
Thank you very much. On of your testimony, you deal with, quote, "focus on improving collection rates," end of quote. What are the Fiscal 2011 initiatives that you will be undertaking to generate additional revenues? COMMISSIONER RICHARDSON: What we're looking at working on right now for 112 3/24/10 - WHOLE - BILL 100117, etc. Fiscal Year 2011, we're hoping -- we're working on an ordinance right now, potentially working with City Council, trying to make mandatory electronic payments by the taxpayers, and we're looking to do that, phasing them in, for those taxpayers who are paying us monthly about $15,000 a month on various taxes, to make them mandatory that they're paying us electronically and phase it down as we move forward with other businesses. We're looking also to move forward with potentially electronic mandatory e-filing of your tax returns. Everyone right now is probably filing federal and state electronically, which is ease of convenience, and that will also assist our department as well. Again, we're looking at also researching potentially what will be the advantage of having an outbound call center. Again, when you're making outbound phone calls to taxpayers or 113 3/24/10 - WHOLE - BILL 100117, etc. water customers, it's about who gets there first. So if they're hearing from us first, they may pay us first before they may pay their Visa or Sears or Penney's first as well. We're going to continue to engage in looking at doing outside audits, going outside of the Philadelphia tri-state area, more travel audits as well. I think also as the Amnesty Program will come to an end, we'll have more new data on a lot of taxpayers, and it will help us to start looking at potentially scoring cases that may be more readily available for us to collect on as well.
As you're well aware, City Council has had extensive hearings dealing with delinquent taxes. There has to be some initiatives that you can undertake to generate additional revenues. My question is, how can we help you in this effort? 114 3/24/10 - WHOLE - BILL 100117, etc. COMMISSIONER RICHARDSON: Good question. I think partnering with City Council I think most importantly is getting the message out to the taxpayers that now is the time to take care of your responsibilities. We're not trying to be Monty Hall, Let's Make a Deal. We want to work with folks. I think if you have folks that are on the phone that are delinquents and they want to contact or work with us, we want to hear from you and/or them. Have them come over to our office or set a time that they can come in, because we want to sit down with each and every one possible to work on what is delinquent with them and try to move forward with this. Again, as we said several weeks ago, if you see activities out in the communities or the districts that you're in and you're suspecting of it, please let us know. I mean, we can't cover everywhere every day, but the more you give us, the more opportunity we have to 115 3/24/10 - WHOLE - BILL 100117, etc. go out there in the communities, look at the construction sites where there may be folks doing things illegally, looking at various businesses that may be in the communities, and you may have in your mind and say, Are they registered, let us know if you think about it. If you see something in the paper that you're reading, let us know. I mean, the more ammunition we have, it's better for us to go out there and attack the delinquents in the City.
Thank you very much. Can you explain how the delinquent tax collections contained in the Five Year Plan were estimated? COMMISSIONER RICHARDSON: Can you reframe your question again, please?
I wanted you to explain how the delinquent tax collections contained in the Five Year Plan were estimated. (Witness approached witness 116 3/24/10 - WHOLE - BILL 100117, etc. table.)
Hello. The Revenue Department really doesn't do them, and we talked to them about where they think collections will be. What we assumed is that we would see a spike in '10 from the amnesty with a little bit on the property tax and a little bit of a spillover into '11, and then we would probably go back to kind of fairly normal delinquencies. And if you saw any kind of benefit of the amnesty, you'd see that in more people going up to paying current amounts. So you wouldn't see a big run-up in delinquent collections in the future years. It would be relatively level.
Mr. Dubow, you might as well stay there. Something just occurred to me and I don't know whether the Administration is doing anything about it. When we did in fact have the hearings regarding delinquent taxes, we were told that some of the delinquents on file were approximately 30 117 3/24/10 - WHOLE - BILL 100117, etc. years old. And I know that there are times when I receive calls from my constituents saying, There's an empty house in my block, the owner has died, his children have died, and yet that property sits there only to gather more delinquent taxes. What are we doing about that? The average person reading the paper says, Oh, the City wants to raise $300 to collect trash. Why don't they go out after the tax delinquents? What are we doing about that? Because people read that, and here we are holding on to -- and I don't know of any business that does that -- holding on to delinquent taxes for 30 years.
Right. Well, the first thing we did is took a look at those numbers and did what you're talking about, say, Well, it doesn't make sense to count as collectible something that's been owed for 27 years, 28 years. So we took -- and that doesn't mean that we won't still try to collect, but carrying 118 3/24/10 - WHOLE - BILL 100117, etc. it on our books doesn't make sense. So we looked at what that number -- I guess the famous number is the 955 million -- would look like if you really looked at General Fund collectible items for the last six years. The principal amount of that is about $200 million, but that's really just kind of the first cut. The other thing we need to do -- and I think we actually have a meeting scheduled this week to do it -- is then look at that $200 million and look at other factors that may make that not really collectible. For example, the scenario you gave. If someone has died and the house is just sitting there, we're not going to collect. Or if a business has gone out of business and the principals are gone, we're not going to collect. So we've taken that first cut to get the number down, but we need to take a deeper cut, which we plan to do this week. 119 3/24/10 - WHOLE - BILL 100117, etc.
Thank you. The Chair recognizes Councilman Rizzo.
Thank you, Madam President. I'm going to read this because I want to be right on the money. When a non-profit or a community development corporation acquires a property from an entity such as the RDA, there are often prior delinquencies such as taxes or water liens associated with that property. The non-profit -- am I correct that the non-profit or CDC is not responsible for those delinquencies? DEPUTY COMMISSIONER BRESLIN: I'm Frank Breslin, Deputy Revenue Commissioner. In many cases, that is the case, that the current owner/purchaser is not responsible for the prior debts.
Could you 120 3/24/10 - WHOLE - BILL 100117, etc. please confirm that a tax clearance can be issued based on proof or history that the delinquency cited is for prior and not the current owner's responsibility? DEPUTY COMMISSIONER BRESLIN: Yeah. It generally comes down to responsibility, not necessarily the date of acquisition, and I don't understand all the intricacies of all of the liabilities there, but generally what we do is, if there's debts that are deemed not to be the responsibility of the current owner, then we usually run it through our Law Department and a tax clearance is issued.
Do you know if the RDA maintains a complete list of the properties that we just described? DEPUTY COMMISSIONER BRESLIN: I'm not sure if they have a complete list of the properties. I mean, I know they are in the process of -- or my last conversation, they were in the process of researching all the properties that they 121 3/24/10 - WHOLE - BILL 100117, etc. had a list for.
Well, wouldn't you think that Revenue would need a list to expedite tax clearances for those properties? DEPUTY COMMISSIONER BRESLIN: And we have requested a list from the RDA.
So presently we don't, but -- DEPUTY COMMISSIONER BRESLIN: That's correct.
-- you need that to do your work? DEPUTY COMMISSIONER BRESLIN: That would assist us, yes, in the tax clearance process.
So there's no list at all. So what happens? You have to go one by one when you have a situation like that? DEPUTY COMMISSIONER BRESLIN: That's correct.
Let me see. 122 3/24/10 - WHOLE - BILL 100117, etc. You just mentioned that the Law Department is part of the process? DEPUTY COMMISSIONER BRESLIN: They are.
Well, that answers some questions. And by the way, I want to thank you for your help with the zoning variance legislation. I appreciate it. DEPUTY COMMISSIONER BRESLIN: You're welcome.
I just wanted this to get on the record, because there's some confusion on exactly whose responsibility it is and who it isn't, because I think there's some misinformation about this particular issue. Thank you very much. DEPUTY COMMISSIONER BRESLIN: You're welcome.
You're welcome. 123 3/24/10 - WHOLE - BILL 100117, etc. The Chair recognizes Councilman Greenlee.
Thank you, Madam President. Good afternoon, everyone. COMMISSIONER RICHARDSON: Good afternoon, sir.
Question about the Tax Amnesty Program, and as one of the many co-sponsors, I'm certainly a supporter of it. The question on the advertising, the Star Group, do you know how much is being paid to them and could you -- do you know generally what their plan is to advertise? COMMISSIONER RICHARDSON: The advertising cost approximately for that contract is going to be about $1.4 million. The tag line for amnesty is, "Now is the time."
"Now is the time." COMMISSIONER RICHARDSON: They primarily would be working to get the 124 3/24/10 - WHOLE - BILL 100117, etc. word out. They're working with our administrator for this, setting up with the website as we speak right now. We will be doing mailings within water bills that are going out, trying to work with SEPTA potentially on their monthly and weekly TransPasses getting the word out. They'll be working with eight various electronic boards, 95, different highways throughout the Southeastern Pennsylvania area. Again, they will be getting the message out sponsoring traffic. You'll be hearing this on the radio stations within the City of Philadelphia as well. So they will also be working with us to do our public relations meeting with various associations like the Bar Association, state and local tax, PICPA and other entities as well.
That sounds great. Thank you. I know there's questions come up, I guess, every year about how quickly the Department deposits money that they 125 3/24/10 - WHOLE - BILL 100117, etc. get, funds that they get, and there seems to be some concern that sometimes it doesn't get deposited right away. What officially is the policy of the Revenue Department as far as depositing checks, however they're gotten, first of all, money, however they're gotten? COMMISSIONER RICHARDSON: If you're getting the check to us, by example, for Monday, it is in the bank by Wednesday or Thursday at the latest. That right now we'll say is our non-peak season. After April 15th, again, you have to understand we're getting about 70,000 or more returns are in, plus checks, and unfortunately a lot of businesses will send their returns in and send their check somewhere else to another post office box. What the concern for us is, again, as we said it to you last couple of years, we have a lot of exception processing. So, for example, the last two months we have over 56,000 checks 126 3/24/10 - WHOLE - BILL 100117, etc. that have come in. They may come in with just an amount. There may be no BRT number on there. There may not be an address on there. So we have to do a lot of research. So when you have a unit of six people doing 55,000 exception processes, that slows the process of getting that money in the bank. So, again, for last year, we got everything within the bank within four weeks. Again, my goal is, again, I told you in 2008, was to cut that down from eight or nine weeks and cut it in half. We do also have two timeframes. We have folks working an evening shift as well now to get more money in the bank. And you have to take into account also we have to take care of the Water Revenue Bureau at the same time getting their money in.
Sure. So those checks that are -- where they don't give the proper information, account 127 3/24/10 - WHOLE - BILL 100117, etc. numbers, addresses, that kind of thing, is that separated so the others that are gotten properly go in right away? COMMISSIONER RICHARDSON: Yes. Again, that goes to the Exception Processing Unit. When we get a coupon and a check, that goes right through our RemitPro system. That is not a problem, but it's those who send us a check without the coupon that takes the -- or they send us a check and a coupon and they say, I want to pay principal only. Then we have to make another coupon sometimes.
You have to separate that. COMMISSIONER RICHARDSON: And, again, this is a situation that Council can help us with their constituents. You have to send in the coupon with your real estate or your BPT to make sure that it will get into our system much more faster than the several weeks you may say it's happening. So it's kind of a two-way 128 3/24/10 - WHOLE - BILL 100117, etc. street. You have to ask them, What did you send?
No. I appreciate that. In all those years of constituent service, I do ask those questions, and the back of the check when they say it was paid and all like that. Online payments, can bills be paid online? COMMISSIONER RICHARDSON: Bills can be paid online, but you have to pay with credit card. And, again, it's the service fee. We're trying to move forward with that direction working with the Department of Technology.
And is that all taxes you could do that or all payments? COMMISSIONER RICHARDSON: You can pay your taxes online, yes, and water also.
And how does that change as far as depositing? What timeline is that? 129 3/24/10 - WHOLE - BILL 100117, etc. COMMISSIONER RICHARDSON: It's about a day process. When it's going online through the credit card companies, then we have to get the information from them to get into our banks as well.
One last question on a little different area, the WRAP program, which I know is a good program. We've gotten people in -- worked with them. I ran into one situation. This could just be an exception, but I know every year there's supposed to be an annual sort of reapplication; is that right? Is that pretty much happening? Because I had one situation where a person at least doesn't realize they even entered into the program supposedly, and we're working on this like 1998 or something, and said they never got the bill, were never told that they had an outstanding balance, was never asked to reapply, and just late summer got a bill 25 for like $4,000 and it was like, Where 130 3/24/10 - WHOLE - BILL 100117, etc. did this come from, you know? DEPUTY COMMISSIONER BETHEL: My name is Michelle Bethel. I'm the Deputy Revenue Commissioner. And, yes, there is an annual reevaluation of WRAP applicants, and what that person was talking about is, in our previous water billing system, when a person would go into the WRAP Program, or Water Assistance Program, and they went into a specific program called the Water Revenue Bureau Conference Committee -- WRBCC is how we call it -- what happened is that balance went into what we consider a suspended account. On the old water bill they did not see that amount any longer. So let's say, hypothetically, someone came in and they owed $5,000 in the '80s and then we keep moving forward. They didn't see that bill. Well, now with the new bill that started in July, we are now showing our WRAP customers what that bill -- what the old bill was. 131 3/24/10 - WHOLE - BILL 100117, etc. So although we may not be enforcing on it, it reminds people what their delinquency really was when they first entered WRAP, although they're only paying their current bill now and their payment plan. It didn't really go away. So now with the new bill, it's reminding people so that when they will go to settlement -- let's say, for instance, something happens and they went to go sell the property, the next time they will hear about it was at the title search at the table. So now that it's on the bill, everyone should hopefully see what their old balance was and they can always pay toward that and what their WRAP payment is.
I think I'll have another question on that, but my time is up, so I'll wait. I mean, it's a follow-up.
Just real 132 3/24/10 - WHOLE - BILL 100117, etc. quick, then. Does the person -- like in this case, the person doesn't remember at least ever entering into it. Is there some evidence of that? Is there a copy of their original application or contract available? DEPUTY COMMISSIONER BETHEL: I guess it would depend on how far back they actually entered into the program. So our retention -- we don't keep -- we have people say they didn't have the balance and was years ago, but in our 14 system, we would show that they entered 15 WRAP on this date. So we do have -- and we had people come forward who forgot, and once they got -- that bill was a shock, it was a sticker shock, and those people who came in, we were able to produce the information that indicated that when they went into the program.
The 133 3/24/10 - WHOLE - BILL 100117, etc. Chair recognizes Councilman Clarke.
Thank you, Madam President. Hi. How you doing? COMMISSIONER RICHARDSON: Hi.
Just a couple of quick questions. In the City -- actually, I think in the State of Delaware they have an accelerated penalty process where on an annual basis the fees for penalties for vacant properties increase automatically, and I don't know if within our government we are allowed structurally to do something like that without having to introduce an additional ordinance. Would you know? COMMISSIONER RICHARDSON: I couldn't -- I could find that out. I could talk to the Law Department and Mr. Zwolak or somebody in the office there about that. I don't know.
Could you also find out if we can do that, if you had the technology to implement such a 134 3/24/10 - WHOLE - BILL 100117, etc. program so those bills would automatically increase in agreed-upon increments? Because I want to ask that before I put the bill in to implement such a program. COMMISSIONER RICHARDSON: We can speak to the Law Department for you to find out.
Okay. Last week when we had the community testimony and there was a lady here -- actually, I think she's from Council President's district, Tracey Gordon, and Tracey came in, it was formatted as a press release, but it was an analysis of, I think it was, two square blocks. COMMISSIONER RICHARDSON: I think this was 91 properties in Southwest Philadelphia?
Okay. Is there any validity to that? 135 3/24/10 - WHOLE - BILL 100117, etc. COMMISSIONER RICHARDSON: It could be very valid. I think one is, this is a Revenue and L&I issue to work together because of the properties, and they probably have more than three different units in there. L&I may be going out to look at those units. First of all, are they registered with the City. We need to find that out. Are they registered through L&I. A lot of the situations, properties may need to have mandatory hard-wiring of the fire alarm systems. So that's something that L&I can go out and look for, for code violations. A lot of times we find when people have rental properties, they're designed for minimal tax that they're going to pay back to us, because of all the expenses they're going to incur for using or having properties. So we've looked at this several years ago. It wasn't like it's going to bring millions of dollars in. However, on the licenses 136 3/24/10 - WHOLE - BILL 100117, etc. side, the $300 up front, the $50 per unit, that's where the revenue will be generated more for that. But that's something I sent to Commissioner Burns last week.
Right. And the reason why it piqued my attention is because there is an area -- several areas actually, but primarily around the Temple University area where a number of people have converted single-family dwellings into multi-family dwellings to take advantage of the need for student housing, and I know, one, they haven't gotten zoning; two, they have not gotten it obviously because they don't have the zoning, the proper permits, and I'm wondering if there is a way, without using a significant amount of person power, to determine when a property becomes a multi-family unit as opposed to a single-family dwelling; therefore, skirting the ability to pay or the requirement to pay the additional fee for 137 3/24/10 - WHOLE - BILL 100117, etc. having commercial property. COMMISSIONER RICHARDSON: We can research that. Again, we will talk to L&I about that. We don't really know when properties are changed unless we get the deed information that's come across --
Is there any way -- let me ask you this: If a person takes a unit and they convert it to a multi-family unit and the assumption is they might actually have different meters -- because I see different mailboxes, so I'm assuming they might meter them -- is there a way when you get multiple meters in a property that Revenue is alerted that this has been converted to a multi-family unit? COMMISSIONER RICHARDSON: We would be known of that on the Water 138 3/24/10 - WHOLE - BILL 100117, etc. Revenue side because they may be converting also for the water.
Well, normally water wouldn't be the case, because most tenants don't pay water. COMMISSIONER RICHARDSON: Right. Most of the times it's probably a single meter. But, no, we really wouldn't get notification of that. If they got the zoning permit and approvals that way and things were changed, the BRT would have the information, then we would get it that way, but if they haven't, we don't really know.
Is there a way -- and I guess gas since we own gas and the fact that we don't own PECO, is there any interaction between the two or a way for you to contact them that there's a way that you can be -- the City can be alerted when there's a conversion to multi-family units? I'm assuming that most of them would have gotten the proper zoning permits, but with that snapshot 139 3/24/10 - WHOLE - BILL 100117, etc. that she showed, that was a substantial number of properties in that targeted area. So you have to think that in a number of areas, that the possibility that it would be similar numbers in some other areas. COMMISSIONER RICHARDSON: We can reach out to our sister agency, PGW, and talk to them.
And can you get back to us before we conclude our budget hearings -- COMMISSIONER RICHARDSON: We will do our best, sir.
-- with whatever response? COMMISSIONER RICHARDSON: Yes, sir.
140 3/24/10 - WHOLE - BILL 100117, etc. You're welcome. The Chair recognizes Councilwoman Sanchez.
Thank you. Good afternoon. COMMISSIONER RICHARDSON: Good afternoon, Madam.
I just want to say for the record I appreciate all of your hard work and cooperation. We've been working a lot on this revenue collection side, and although we don't always agree on everything, I appreciate the fact that we can work through some of our challenges. I wanted to start off with your MBE pieces. I want to congratulate you, because I think you're one of the few departments that kind of had a real number that you could really meet. COMMISSIONER RICHARDSON: Thank you.
So in 141 3/24/10 - WHOLE - BILL 100117, etc. light of the fact that you met your goals, I wanted to know what are your goals for next year since we're moving up. COMMISSIONER RICHARDSON: Our projected goals for FY11, the total goal is 23.7 percent, of which is 9.1 percent in MBE, 14.6 percent in WBE. So those are our goals for next year.
Why aren't we being more aggressive there if you've done so well? COMMISSIONER RICHARDSON: Well, I think what you will find again is because this year with amnesty that's involved, that's why we've had --
Right. And I'm separating that one. If I were 142 3/24/10 - WHOLE - BILL 100117, etc. to count that one in your number, it's not -- COMMISSIONER RICHARDSON: Again, the Department doesn't have a lot of contracts, and, again, moving forward, the Division of Technology is taking over our contracts. We don't have many contracts that are coming to the table like a lot of the other departments do during the course of a fiscal year.
Okay. Let's talk about the amnesty. The first thing that I will say, especially as it relates to the PR campaign, it is very important that that campaign provide for different languages. So I want to say that now. COMMISSIONER RICHARDSON: Well, just to let you know, we already recognized that and we're hoping from discussions with you back in January 13th in your office that it will give us the opportunity to come on your radio station when you're speaking one day, too. 143 3/24/10 - WHOLE - BILL 100117, etc.
Well, more than my radio station, because that's free. COMMISSIONER RICHARDSON: Yes. We are --
You are welcome, and we will continue to do that. Absolutely. As it relates to the amnesty and our current outside providers, what's going to be the communication and the interactive on those accounts that they're currently managing? COMMISSIONER RICHARDSON: The current providers that the City is using, the Law Department sent a letter to them to know that as of March 31st, they're to cease and desist their collections of letters going out. Our vendor will start on April 19th with a location here in Center City. They will start sending out letters. They will send out about four letters during the amnesty time, and they also will be contacting the customers by 144 3/24/10 - WHOLE - BILL 100117, etc. phone as well for outbound calls.
So those folks are going to lose the ability to manage those contracts? If folks come in and want to take up amnesty, they can't issue those? COMMISSIONER RICHARDSON: No. 9 We need to work with one vendor and not with five or six different vendors.
How has been the impact? What has been their response to that in light of the fact that they've worked with us for many years? COMMISSIONER RICHARDSON: Unfortunately, it's the cost of doing business. They don't like it, but they understand it, and the clause in the contract is that the Law Department has the right to pull any cases at any time.
So at the end of the term, they can resume their collections? COMMISSIONER RICHARDSON: After 145 3/24/10 - WHOLE - BILL 100117, etc. amnesty is over and we do some post-amnesty work, we look forward to getting the cases back to the Law Department to get back out to the collection agencies sometime in July or so.
Are there going to be lots of gaps in time between those transitions? COMMISSIONER RICHARDSON: There should not be a lot of gap in time. We're hoping that a lot of folks pay off so they won't get as many cases, but there won't be that big a gap in time.
As it relates to going back to the questioning of Councilman Clarke, are we -- and I notice we've been doing a lot more cross referencing in BPT and others. Are we cross referencing with use and occupancy? COMMISSIONER RICHARDSON: We cross reference with all our taxes in the system.
So use 146 3/24/10 - WHOLE - BILL 100117, etc. and occupancy is one of them, because I figured that may be another way to get at your question about when folks do the conversions. You mentioned this quickly. How much do people actually pay right now for online payments and stuff? COMMISSIONER RICHARDSON: Right now I think it's a 2.49 percent fee that is paid for a credit card. Again, the folks are going online -- or not online. They're paying through their bank. There's no fee for that. But, again, through official payments, it's a 2.49 percent fee.
Yeah. It's important that we continue to tell that to folks. Councilwoman Tasco and I were just talking about if you use Philadelphia Credit Union and some other folks, it's free. I'm trying to encourage folks to do that. And you mentioned the fact that we're moving to be able to have that 147 3/24/10 - WHOLE - BILL 100117, etc. internal capacity to process these so we don't have to charge -- have an outside vendor charging the fee? COMMISSIONER RICHARDSON: Well, any time a business comes to us and wants to set up ACH debit or credit, we can do that for them, and there's no fee at all for doing that with us. So, again, that's something we're looking hopefully to move forward in the Fiscal Year 2011, hopefully sometime in January to move forward with that happening.
Now, we talked a little bit -- and this is more for the record, and I was encouraged by what I heard Rob Dubow mention about what our real debt is, because we all get slammed for that number, and you and I had the conversation about what's a real number and what's just this number that we've put out there that now we got to own all the time, that that is our aegis. I still have a concern with the large number of delinquency. For my 148 3/24/10 - WHOLE - BILL 100117, etc. colleagues' knowledge, I have ten percent of the City, but percent of the 4 delinquency at the tune of $50 million. 5 I'm very interested in figuring 6 out, as you guys narrow down those 7 numbers, if there is a way that we can 8 track either large increases of 9 delinquencies so that we can come up with 10 a preventive strategy in making sure that 11 people are signed up for our low-income 12 program, because there is going to be a 13 large amount of money that's just going 14 to be left out there with these folks. 15 So, again, as you guys narrow down that 16 field, I'd be interested in figuring out 17 how do we do some pilots around getting 18 some folks to pay some of that debt, 19 because, again, as I expressed to you, my 20 concern is if you owe 800 -- and of that 50 million, 10 million is in fines and fees, but the number gets to an amount where people just give up because they don't think there's no hope. So, again, I'm looking for -- 149 3/24/10 - WHOLE - BILL 100117, etc. COMMISSIONER RICHARDSON: Just for the record, you're talking about water or taxes?
I'm talking about water. COMMISSIONER RICHARDSON: Again --
That's my water delinquency. COMMISSIONER RICHARDSON: Okay. We want to work with all the Councilmembers and your constituents. Hopefully you'll be getting brochures from us in your office in the next week or two in regards to the various programs that we offer as well. Again, as we said to you back in January 13th, we are more than willing to come out to the various Council districts when you may have a town hall meeting to talk to your constituents about the various programs that we do offer.
Maybe we can use the Tax Amnesty PR campaign as an 150 3/24/10 - WHOLE - BILL 100117, etc. opportunity to go out as we're talking about that and then also kind of tack in the water piece as we inform people. Since we're going to have a campaign and I encourage you to look at when we're sending out Tax Amnesty information, to use those mailing opportunities to maybe include some of this water stuff since we did not include it in the water amnesty, because you asked me not to, that we figure out a way. I'm just saying, it's a campaign and it's an opportunity to send another message to people that we want you to pay and we want to work with people as they pay. I don't know what that response is, but that's what PR folks are paid to figure out. So I'm sure they can come up with something. I'll wait for my next round. Thank you.
Thank you. The Chair recognizes Councilman 151 3/24/10 - WHOLE - BILL 100117, etc. Jones.
Thank you, Madam President. Good afternoon. COMMISSIONER RICHARDSON: Good afternoon, sir.
First of all, I think I should say that whenever we call your office with a constituent service issue, you are responsive. We always don't get the answer we want, but we always get an answer, and usually it is a fair answer, considering all of the circumstances. So I wanted to put that on the record and say that you've been responsive. In our earlier hearings, I mentioned to you about the ratio of hiring internally collectors versus the yield that each collector brings versus things like one-time amnesties where we're talking about gearing up $10 million to get back somewhere around 25 to 30 million, one time, when we can do 152 3/24/10 - WHOLE - BILL 100117, etc. this in an internal manner and get that all in time. And before you tell me why you're putting bad receivables on the books, some are uncollectible, but even if we discounted it by half, that's a half a million dollars in revenue per revenue examiner we hire, and I'm just vexed about why we don't do it that way versus farming it out. COMMISSIONER RICHARDSON: Well, again, we're looking at it in the department about what does additional staff have. Again, you have to realize an auditor is great to have. All they're going to do is continue to do maybe 750,000 to a million dollars in assessments. That doesn't mean the money has been collected. Now, I assess you. You may go to the Tax Review Board to fight your case. That may take six months or so. We may lose that case. So that's not real money. Again, as I said to you before, we're looking at the idea of a potential 153 3/24/10 - WHOLE - BILL 100117, etc. call center. When you're making an outbound call to the taxpayers who are delinquent or we got your non-filed information, that hits the point. That's more of the hammer that gives us an opportunity to collect more money.
Even if we discount it further, even if I say we only get real money, a quarter of the money that that million dollars represents, it does bring more revenue in on a consistent basis. The other issue is that -- and I was surprised that my colleague Councilwoman Sanchez didn't raise this -- when we start talking about revenue enhancements, the automatic issue that arose by some of the stakeholders that this impacts is that we don't collect the revenues that we have on the books and that in fact it is common knowledge in some of the stores that it is better to take the lottery chance that you will come there versus actually owning up to 154 3/24/10 - WHOLE - BILL 100117, etc. all that they may be liable, responsible to give to you. And if we hire those people internally, those percentages of them getting an actual audit goes up and it goes out into the community that, Hey, I better pay up now before I get caught, and it sends out a deterrent, if you would, to those other people who kind of say, I'll just take my chances. And so, again, even if we get just a quarter of it, it does so much more by sending out the fact that we are looking, we are monitoring, we will come knock on your door. COMMISSIONER RICHARDSON: Duly noted.
All right. So I don't know what that means. Does that mean that's something that we're going to seriously look at? COMMISSIONER RICHARDSON: Well, again, as we embark on the next fiscal year, we're hoping to partner with some agencies like L&I, for example, going to 155 3/24/10 - WHOLE - BILL 100117, etc. start looking at various business districts and maybe going out there doing a sweep for the day. When you do that, it let's folks know that you are out here and about. I think, again, a lot of initiatives that we have taken on in the last fiscal year or so has started to get out there; for example, the parking lot audits that we have done, being out at the stadiums. The word gets out there and tells the association members, the liquor tax audits that we do. Folks start talking. Well, the Revenue Department was here, I wasn't expecting this. So the word gets out. So, again, we're going to continue to move in that way of doing things, be more on the spot. We want to be on Cecil B. Moore Avenue. We want to be on 60th Street. We want to be on 52nd Street. We want to be on 22nd Street. We want to go do Aramingo Avenue or Bustleton Avenue. So we have to do those 156 3/24/10 - WHOLE - BILL 100117, etc. in pilots in the various projects and things.
I just think that it gives us cover when these interest groups tell us, Well, look, you have enough revenue enhancements on the books. We are liable for this, that and the other, but we don't have to pay it. And that kind of common knowledge scares me by way of what -- if we put something else on the books, okay, that's nice, it's a paper revenue enhancement, but until it is collected, it doesn't do us any good. So at least that you're giving thought to it gives me some degree of confidence and also come-back to them that we are going to aggressively go after revenue that is owed us. Because when we don't, I mean, they're looking at us like, Okay, we'll just ignore that too. And so I appreciate that you are at least considering it, and I'm not going to forget. I'm going to ask you that and 157 3/24/10 - WHOLE - BILL 100117, etc. how we're progressing on that. So at least if we do the analysis and you can give me some real kind of quantitative analysis that says this is not good for us, but this process of outsourcing gives us greater yield, I mean, I just want to really kind of take that -- COMMISSIONER RICHARDSON: Well, let me say it to you this way again. You have to realize once the case is delinquent, after 90 days, it goes to the Law Department. Again, we can try to do much up-front compliance as possible on audits. Again, as I said, we're looking at research of making those outbound calls, which are very proactive and help out a lot. To sit here and give you an analysis today or tomorrow if you want responses back as part of this hearing, I can't really quantify it and analyze it for you. Will I say collection agencies are good? Yes, I will say that, because there's more in the collection agency 158 3/24/10 - WHOLE - BILL 100117, etc. company who can make those outbound calls, because they're using a predictive dollar system. After they hang up with you, they're on the phone with the next person.
What I've been saying to all Commissioners is, outsourcing versus in-sourcing, it's not a given to me and I don't think to this body that that always creates the greater yield for the City. I always want to check, double check what the market is bearing and what our own internal staffing costs would compare to that and see which one actually is better. And if we do that as a city every time we do that analysis and if you're right or if I'm right, at least the City gets it right by way of which one is a better course of action. And that's all I'm challenging all Commissioners to do. So don't tell me that we can't build a rec center cheaper than what we're getting based on ten years ago analysis. We know 159 3/24/10 - WHOLE - BILL 100117, etc. things change, and we want to constantly check the meter to see if we're on the right course, and that's -- not today or tomorrow, not today or tomorrow, but in our long-term planning and thinking. Whether it's your department, whether it's the Solicitor's department, it doesn't matter to me. It comes into the same kitty and pays for the firemen, policemen and librarian. Thank you, Madam President.
Thank you. The Chair recognizes Councilman Rizzo.
Thank you, Madam President. I just want to go back. I didn't want to take too long in the first round, so I just have a couple more questions about the conversation that we were having earlier about the RDA. Is there some timeline or deadline that you believe that you will 160 3/24/10 - WHOLE - BILL 100117, etc. have the information that you need to resolve some of the problems that we've discussed today? DEPUTY COMMISSIONER BRESLIN: I believe we should have that relatively soon. I don't have a definite date. I know that they're analyzing the accounts, and my understanding was, they were three-quarters of the way through the process. So I would anticipate in the next few months, but it's dependent on them.
In our business it's always nice to hear a number. So in the next few months. That's great. Is the only -- I think that probably answers the question. I just wanted to nail you down to the point where we can have a reasonable timeline on having that process work. As you know, we're trying to make some amendments to the legislation where in fact you cannot get a zoning variance 161 3/24/10 - WHOLE - BILL 100117, etc. without your taxes being paid, and there were some legitimate concerns about the relationship, but I think today you've explained that that problem of acquiring a property through the RDA for a CDC should not, again, be the problem -- be a problem for a person since they will not be responsible for any of those back revenues. DEPUTY COMMISSIONER BRESLIN: Right. They should be able to -- if they have no responsibility for the debt, they should be able to get a tax clearance and should not be held up in the process.
You're welcome. Commissioner, what are the anticipated revenues from the Acute Care Hospital Assessment Fund? COMMISSIONER RICHARDSON: I'll get back to you with that answer. I do not have it in front of me. 162 3/24/10 - WHOLE - BILL 100117, etc.
Thank you. In your testimony, one of the bullet points was increasing collections from parking lots, which generated $160,000 in FY10 and totaled 742,000 since FY09. Can you elaborate on that, please? COMMISSIONER RICHARDSON: Yes, Madam President. Again, we took an aggressive approach in Fiscal Year '9 of starting to look at parking lots. We currently have under the program, as you said, the collections, we have several parking lot cases in front of the Tax Review Board coming up, which will probably hopefully net the City well over a million dollars or more if they find in favor for us. Again, as we said, 742,000 has been collected since we started this in September of '08, I think it was, during the football season, but it's been progressive. But, again, we think we will be well over the million-dollar 163 3/24/10 - WHOLE - BILL 100117, etc. mark.
Does that include parking lots in the City? COMMISSIONER RICHARDSON: That includes parking lots in the stadium, within Center City and other parts of the City, yes.
Wonderful. Thank you. COMMISSIONER RICHARDSON: You're welcome.
Are there any other questions from members of the Committee? (No response.)
Commissioner, it's my understanding that Councilman Green has a number of questions. I have suggested he forward them to you in writing. Would you please make certain that your response goes to every member of Council, please. COMMISSIONER RICHARDSON: Yes, ma'am. 164 3/24/10 - WHOLE - BILL 100117, etc.
Thank you. Councilwoman Sanchez, did you want to be recognized?
Yes. Just one last thing. As we look at our housing redevelopment strategy, particularly in neighborhoods, the water piece -- and I had this conversation with Mr. Richardson, and I just want him to know that I followed it up all the way up the chain of command and will circle back down. Our ability to look at water debt as a vehicle for redevelopment is very, very important, and I had an opportunity to spend time with the Mayor and the housing folks, RDA and the Office of Housing and Community Development, and I was encouraged, because they did have a conversation with you about -- at least they mentioned that they had been talking about the water debts, tax delinquencies and so forth. 165 3/24/10 - WHOLE - BILL 100117, etc. So I wanted to let you know that we will continue to work at figuring out how we can turn these properties around and get both property taxes and water collections from them, but understanding that our keeping these bad debts slows up our opportunity to redevelop, particularly in challenging neighborhoods. So I appreciate your willingness to look at that from a broader perspective. I know it's hard to look at the Water Department and their silo, Water Revenue being another silo, but I can tell you that you could add tremendous value to that discussion if we put all those numbers together and look at how government sometimes is in the business of creating blight if we're not willing to look at these debts in a different way. And I was very encouraged by the Mayor when we had the broader discussion around let's line up all these issues. And I say that only because both you -- and I'll say the same thing to the 166 3/24/10 - WHOLE - BILL 100117, etc. Public Property Commissioner. If you guys are given a revenue goal, you're going to do your job, and unless we can articulate a more comprehensive articulation of, yeah, we want to collect revenue, but we also want to realize that our hammer sometimes does not help in the other work we're doing in neighborhoods around neighborhood redevelopment. So I just want to thank you and commit to continue to help all of you break down those silos so that we don't give you an unrealistic revenue projection if then at the same time we're asking you to help us on neighborhood redevelopment. And I get that, and I think people are starting to get that. So I appreciate, again, you're willing to listen and work with us on that. Thank you. COMMISSIONER RICHARDSON: You're welcome.
Councilman Jones. 167 3/24/10 - WHOLE - BILL 100117, etc.
Under your scenario, if we do not -- are you preparing a possible seven percent cut or are you one of those departments that they're going to be spared that no matter what? COMMISSIONER RICHARDSON: We have looked at the scenario, so we are prepared if it has to come down to that.
Just on that comment, I just think it makes no sense. You're the --
That's what I was about to say. Through all these cuts we've made over the last year and a half, one of the things that we've tried really hard to avoid is cutting anything on the revenue collection side, because we thought that would be counterproductive. So while Revenue did do an analysis of what that will look like, we never had 168 3/24/10 - WHOLE - BILL 100117, etc. any intention of cutting anything connected to collections.
Just for those listening, I'm not the Sheriff of Nottingham or anything, but when it comes to revenue collections, you're the guys and gals that go out and actually bring the money in, and it just seems counterproductive to do anything like that. I always felt that way about you and Licenses and Inspection. To cut inspectors at a time when they can actually do two worthwhile things - one, correct some of the blight in our community and also in the process receive fines and get revenues - just is counterproductive to me and I'm glad that you are one of the departments that are going to hire internal folks to go out and collect that. I'm glad to put that on the record. Thank you.
Any other comments or questions from members 169 3/24/10 - WHOLE - BILL 100117, etc. of the Committee? (No response.)
Seeing none, thank you very much. COMMISSIONER RICHARDSON: Thank you, Council President Verna. Have a good afternoon.
Thank you. We will now hear from the City Treasurer. (Witness approached witness table.)
Thank you. Good afternoon. My name is Rebecca Rhynhart, City Treasurer.
We'll do this very quickly. Please proceed with your 170 3/24/10 - WHOLE - BILL 100117, etc. testimony. Good luck to you, hon.
Thank you very much. Good afternoon, Council President Verna and members of City Council. I am Rebecca Rhynhart, City Treasurer of the City of Philadelphia. I am pleased to provide testimony on the proposed Fiscal 2011 Operating Budget for the Office of the City Treasurer. The City Treasurer's Office is responsible for the distribution of checks and electronic payments and the investment of bond funds and operating funds not needed for daily requirements. In addition, the City Treasurer's Office is responsible for new bond issuances and the management of over seven billion of outstanding debt, including debt issued for the General Fund, Water Fund, Aviation Fund and Philadelphia Gas Works. The Fiscal 2011 budget, as proposed, provides the necessary funding for the City Treasurer to accomplish 171 3/24/10 - WHOLE - BILL 100117, etc. these core responsibilities. The City Treasurer's Office is assuming complete responsibility of debt management during Fiscal 2011 with the transfer of debt contracts from Finance to the Treasurer's Office and the transfer of the one remaining debt-related position from Finance's budget to the Treasurer's Office. The highlights of the Fiscal 2011 budget request by proposed expenditures are as follows: The $745,937 in Class 100 funds represents 82 percent of the Treasurer Office's proposed budget. The 136,538 in Class 200 represents an increase over the $73,088 in the Fiscal 2010 adopted budget because of the transfer of debt-related contracts from Finance to the Treasurer's Office. The combined Class 300 and 400 amount is $22,224 for supplies and equipment, which is a slight reduction from the $24,224 budgeted in Fiscal '10. 172 3/24/10 - WHOLE - BILL 100117, etc. The City Treasurer's Office is focused on efficiencies in the distribution of payments as well as efficiencies in the deposit of revenue into City bank accounts. Direct deposit for City workers and pensioners is encouraged, and we have seen a steady increase in participation from 70 percent in Fiscal 2004 to 75 percent in 2007, 78 percent in March 2009 and 79 percent as of March 2010. There is an even higher participation among pensioners, as about 85 percent of pensioners receive payments through direct deposit. In addition, the Treasurer's Office has actively been working on analyzing fee structures across banking and money manager arrangements and negotiating new fee structures which are more beneficial to the City. The Office has been successful in negotiating more beneficial money manager fees through a request for proposals process completed during the last year. 173 3/24/10 - WHOLE - BILL 100117, etc. The credit crisis which began in 2008 caused the variable-rate bond market serious market difficulties which affected the City of Philadelphia. 9 billion of outstanding variable-rate debt, including General Fund, Water, Aviation and Philadelphia Gas Works when the problems began in the market. 9 billion since 2008, with 750 million being restructured or refunded during Calendar Year 2009. In addition, the Office coordinated the issuance of 145 million of Water Revenue bonds in May 2009 and 275 million of tax and revenue anticipation notes in October 2009. The Treasurer's Office plans to issue 145 million of general obligation bonds as early as fall 2010 to fund capital projects throughout the City. The Treasurer's Office 174 3/24/10 - WHOLE - BILL 100117, etc. commissions an annual study that analyzes the lending practices of the authorized depositories for the City. The most recent study for Calendar Year 2008 was delivered to members of Council in mid March. The Treasurer's Office issues an annual request for information to be completed each year by the authorized depositories in which they must state their community reinvestment goals, respond to the lending study and address any disparities in lending.
Fiscal 2010 appropriations supported one Treasurer's Office contract with Econsult Corporation and MFR Consultants in the amount of $47,500. The Office had a 50 percent participation rate in contracting opportunities for MBE and WBE firms in Fiscal '10. In Fiscal 2001, four additional contracts have been appropriated because of the transfer of debt contracts from Finance, to bring the total to 112,250. With the inclusion of these contracts, the Office has a total 175 3/24/10 - WHOLE - BILL 100117, etc. 3 percent for WBE firms. The Office also has a longstanding practice of hiring co-financial advisors and co-bond counsels on bond transactions. Thus, there have been minority or women-owned financial advisory firms, as well as minority or women-owned law firms on virtually every City bond transaction for the past five plus years. I appreciate this opportunity to provide testimony regarding the proposed Fiscal 2011 budget for the City Treasurer. I will be happy to answer any questions that Council may have regarding my testimony.
Thank you very much. The Chair recognizes Councilman Jones.
Thank you, Madam President. 176 3/24/10 - WHOLE - BILL 100117, etc. Recently in the papers it was reported that we received $3.4 million in federal checks that went uncashed for a year. Can you explain what happened?
I'm actually not aware of 3.4 that remained uncashed, but --
Yes, paper checks. And I think it was Item 14 of the Freshmen 15. We recommended electronic transfers for funds, particularly from the state, where we had realized that because of slow cashing and processing of checks, that we were missing close to a million dollars in revenue that we could have. And in this case, the Department of Defense had to reissue the checks and --
It was 3.4 million 177 3/24/10 - WHOLE - BILL 100117, etc. in wage tax checks that the Department had sent in 2005, and I think as part of an ongoing investigation, the IG discovered that that had never been deposited, contacted the Department of Defense and got the checks reissued.
So how much did we lose in interest payments based on that?
Based on three million over several years. Yeah, I mean, there is some lost money. I could speak to the bigger issue of direct deposit and funds coming in from the state and progress we're making on that. We're currently getting about $2 billion in direct deposit from the state, which is over 92, 93 percent of the total amount coming in. There still is over 100 million that we're working on getting moved over. A lot of that is smaller payments, but we are making progress.
We do sweeps. We do all kinds of nice neat 178 3/24/10 - WHOLE - BILL 100117, etc. fiscal stuff. Is that going to realize additional revenue over time? And do you have any idea what that means by way of additional revenue to us? Have you calculated that at all?
We haven't calculated it on a per-day/month basis, but I would say that the faster we can get the checks in, we want to do it. We get the interest rate on those monies. So if we can get it in two, three weeks faster by direct deposit, that's something we really want to do.
Well, I appreciate the progress, because that was something that came to our attention from the state, and when we're looking for every penny to count and we're talking about the dreaded revenue enhancements, these are efficiencies that we can do. And so I'm thanking you for doing that. What is the challenge to getting the other payables that the state has for us or reimbursables into that 179 3/24/10 - WHOLE - BILL 100117, etc. kind of electronic system? What is that challenge?
I think the challenge is really that a lot of them are smaller payments and we need to get the word out to the departments, which we've been doing, that they need to fill out the paperwork to get it moved over to ACH, to get it moved over to direct deposit from checks. So the Treasurer's Office has actively reached out to the departments. I know that the Grants Unit, when they receive paper checks, they call the departments and say, Here's the paperwork, fill it out, and we help them process that. So it's really just getting through -- some of the payments are on the smaller side. Every payment counts, but some of them are smaller and so it's just working around --
Well, we got the larger ones already in that system. I would anticipate DHS is such a large 180 3/24/10 - WHOLE - BILL 100117, etc. kind of reimbursable that we get from them. So is there a goal of a time when we will actually achieve that for the smaller payments?
We're continuously working on them. It's an ongoing process to get them all in the system. So there's not a set goal, but it's something that we work on on a constant basis.
Well, we'd appreciate it if you, as you make these benchmarks, to let us know, because we think that those are the kinds of efficiencies that I think mean so much. As the world looks to us to try to sharpen our pencils and get our act in order, these are steps that have been made to improve efficiency, and I think they should be noted.
Point of information. 181 3/24/10 - WHOLE - BILL 100117, etc.
What amazes me through this whole missing check thing is that the federal government never stepped forward and said, We have these checks that have never been cashed. You would think that their auditors would have picked up. And I want to turn it around a minute, and that's why I asked Mr. Dubow. If we sent someone a check and it's for a hundred thousand dollars and it never gets cashed, do you have a process to notify a vendor or someone that in fact -- maybe not a hundred thousand dollars, a $250 check that's still outstanding. How do we do business and are we paying with direct deposit transactions rather than paper checks? Are we trying to eliminate the amount of paper that we handle in that manner?
We are. I can speak to that. We do encourage -- in 182 3/24/10 - WHOLE - BILL 100117, etc. terms of the direct deposit, we encourage our vendors to go on to direct deposit. We encourage people, our employees to go on direct deposit. Whenever there's a check lost or stolen, we say to them that, Can you please go on to direct deposit. So we make efforts in that way. In terms of if a check hasn't been cashed, we do reach out to all people that haven't cashed their checks after, I believe it's, a year and we send them information saying that you need to contact us, we have on the records that this is an uncashed check. If it still goes uncashed, it gets sent to unclaimed monies at the state level.
How old does a check have to be before it's stale? Is there something on the check that says after six months, 90 days?
You mean that it's not cashable anymore? I believe it's four months. Four months, yeah.
Well, that's 183 3/24/10 - WHOLE - BILL 100117, etc. good to hear. But, Mr. Dubow, can you imagine the feds not contacting this government telling us that that money -- that those checks weren't cashed?
Mr. Agostini, who worked for the federal government, is nodding his head yes.
That makes me feel real confident. Thank you. Thanks, Madam Chair.
You're welcome. Councilman Green, our witness here is very pregnant.
So I am suggesting you keep your questions brief.
Madam Chair, I'm going to ask my questions just like everybody else.
But in the sweet tone that I have asked them to everybody else this budget season. Good afternoon.