Committee Hearing, February 8, 2011

COUNCIL OF THE CITY OF PHILADELPHIA2 COMMITTEE ON TRANSPORTATION AND3 PUBLIC UTILITIES4 5 6 Room 400, City Hall7 Philadelphia, Pennsylvania Tuesday, February 8, 20118 11:10 a.m. 9 10 PRESENT: COUNCILMAN CURTIS JONES, JR., CHAIR11 COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN WILLIAM K. GREENLEE12 COUNCILMAN JACK KELLY COUNCILMAN BRIAN J. O'NEILL13 COUNCILMAN FRANK RIZZO, JR. 14 15 RESOLUTION 100814 - Resolution authorizing the Committee on Transportation and Public16 Utilities to hold a public hearing to examine the impact, circumstances, and possible17 solutions to problems regarding the Philadelphia Water Department's implementation18 of new stormwater run-off fees on independent business owners.19 20 - - -21 22 23 24 25 2 1

Good2 morning. This is the Committee of3 Transportation and Public Utilities. We4 are now opening a public hearing on5 Resolution No. 100814.6 Would the Clerk read the7 purpose of the resolution.8

Resolution 100814,9 authorizing the Committee on10 Transportation and Public Utilities to11 hold a public hearing to examine the12 impact, circumstances, and possible13 solutions to problems regarding the14 Philadelphia Water Department's15 implementation of new stormwater run-off16 fees on independent business owners.17

Before we18 begin, I'd like to acknowledge my19 colleague Councilman Frank Rizzo. He has20 a statement he'd like to read in.21

Thank you.22 Good morning, everyone.23 Good morning, Councilman Jones24 and members of the Committee on25 3 2/8/11 - TRANSPORTATION - RES. 1008141 Transportation and Public Utilities. And2 we'd like to welcome our new Water3 Commissioner -- congratulations,4 Commissioner Neukrug -- and members of5 the Administration and all those in6 attendance. Thank you for being here7 today.8 The resolution that I9 introduced at City Council that called10 for today's hearings was a response to11 information I received from members of12 the recently established Unified Business13 Owners Association of Philadelphia that14 many of their businesses are being15 significantly financially impacted by the16 increase in stormwater management fees.17 We know the following to be18 true: For much-needed protection of the19 environment and to comply with both20 federal and state regulations, stormwater21 must be properly managed, and there is an22 unavoidable cost associated with such23 management, but the changes in assessing24 those costs to customers in some cases25 4 2/8/11 - TRANSPORTATION - RES. 1008141 resulted in drastic increases, dramatic2 increases in stormwater charges.3 Today's hearing provides the4 opportunity for those individuals who5 have spent many years successfully6 operating their long-established7 businesses in our city to share with8 members of City Council their concerns.9 The Committee will also be provided with10 background from the Philadelphia Water11 Department, PIDC and the12 environmentalists on this issue of13 critical importance.14 And, again, Councilman Jones15 and members of your Committee, thank you16 very much for taking this very important17 issue up today.18

Thank you,19 Councilman Rizzo.20 Also on the Committee I have21 serving today Councilman Greenlee and22 Councilman Kelly.23 Will the Clerk read the first24 panel.25 5 2/8/11 - TRANSPORTATION - RES. 1008141

Howard Neukrug, Sam2 Rhoads, Paul Lonie.3 Paul Lonie is not here.4 (Witnesses earlier approached5 witness table.)6 COUNCILMAN JONES:7 Commissioner, good morning.8 COMMISSIONER NEUKRUG: Good9 morning.10

Welcome to11 your new position, and please begin your12 testimony. State your name for the13 record.14 COMMISSIONER NEUKRUG: My name15 is Howard Neukrug, Water Commissioner.16 Good morning, Councilman Jones17 and members of the Transportation and18 Public Utilities Committee, and thank you19 to Councilman Rizzo for requesting this20 public hearing on this very critical21 issue.22 While we all like to talk about23 the weather, the topic of stormwater24 management or, as I prefer to call it,25 6 2/8/11 - TRANSPORTATION - RES. 1008141 rainwater management is not a topic2 typical of either parties or of Council3 Chambers, and the rain's impact on our4 utility costs and how we restructure the5 recovery of those costs is an extremely6 complex subject.7

9 You can choose to take the salient parts,10 that we might want to abbreviate. 13 Well, my testimony will cover14 three general topics. 21 Concerning the first topic, the22 extraordinary costs of stormwater23 management, these costs have risen24 significantly over the past decades. In25 7 2/8/11 - TRANSPORTATION - RES. 1008141 the past, before environmental2 regulations were in place, the goal was3 to move stormwater away as quickly as4 possible, without any significant concern5 for pollution or the degradation of our6 waterways. Costs for these services were7 nominal and were easily embedded into the8 fixed fees charged for water service. We9 adjusted the costs among homes and10 businesses based on the size of the water11 meter. This was standard industry12 practice at the time and accepted as the13 most reasonable approach for stormwater14 cost recovery. 23 Today, the new Clean Water Act24 regulatory requirements has increased the25 8 2/8/11 - TRANSPORTATION - RES. 1008141 service-level expectations for our2 customers with many new programs, and3 indeed this comes out to about $1204 million a year for our stormwater5 utility. These costs are for expansion6 of sewer and wastewater treatment plant7 capacity, basement and street flood8 management, sewer surcharges and9 overflows management, stream and river10 water quality enhancements, defective11 lateral removal programs, education,12 training and outreach, and upgraded13 system maintenance and renewal. 20 Beginning in the 1980s as21 stormwater costs began to rise, many of22 our large business customers complained23 of overcharging since we were charging24 them based on size of their water meter,25 9 2/8/11 - TRANSPORTATION - RES. 1008141 not on the amount of stormwater they2 discharged to our sewer system. In the3 1990s, the Stormwater Citizens Advisory4 Council was formed to seek out5 fundamental corrections to these6 inequities. 13 Transitioning the meter-based14 system to this parcel-based system15 involved many stakeholders and16 consultants, detailed investigations of17 best practices in other cities, and the18 identification of available accounting19 and mapping tools. The new system was20 first implemented for our residential21 customers in 2002 and, at the continuing22 urging of many large commercial23 customers, was implemented for24 non-residential customers through a25 10 2/8/11 - TRANSPORTATION - RES. 16 Well, first, we've been using17 notification of our customers through the18 formalized rate hearing process, followed19 in February 2010 with mailed20 notifications and a series of public21 meetings attended by over a thousand22 customers, as well as visits to all City23 Council offices and other various24 organizations. These activities continue25 11 2/8/11 - TRANSPORTATION - RES. 24 Seventh, we've partnered with25 12 2/8/11 - TRANSPORTATION - RES. 12 So in closing, where do we go13 from here? Well, first, we are very14 determined to become ever more proactive15 when it comes to customer communications16 and care and working with City Council17 and other stakeholders to move forward18 with building upon our customer19 assistance programs. 25 13 2/8/11 - TRANSPORTATION - RES. 19 Finally, to our all-important20 residential customers, we are working21 with our public advocate partners -22 Community Legal Services, Penn Future and23 Pennsylvania Environmental Council - to24 explore cost-effective, aesthetically25 14 2/8/11 - TRANSPORTATION - RES. 21

Okay. We'll22 reserve our questions, unless our members23 of the Committee would like to make a24 statement. We'll hear all testimony25 15 2/8/11 - TRANSPORTATION - RES. 1008141 before we start questioning.2 State your name for the record.3

Good morning,4 Mr. Chairman and members of the5 Committee. My name is Sam Rhoads. I'm6 Senior Vice-President of the Philadelphia7 Industrial Development Corporation. I'm8 here to testify today with respect to an9 innovative new financing program to10 finance stormwater management11 infrastructure, and I'm joined here by my12 colleague Jenny Crowther, who worked to13 develop this innovative new program.14 PIDC understands that many15 businessowners are seeing significant16 increases in the costs of their17 stormwater services and that this18 negatively impacts their ability to19 continue conducting business in20 Philadelphia. During these challenging21 economic times, many businessowners may22 find it difficult to absorb the increased23 costs associated with stormwater24 services.25 16 2/8/11 - TRANSPORTATION - RES. 1008141 In response, PIDC and the2 Philadelphia Water Department have3 partnered together to develop a4 low-interest loan program, the Stormwater5 Management Incentives Program, to provide6 impacted customers with the funding7 needed to implement stormwater mitigation8 measures. The PWD has allocated 59 million to this program.10 The Stormwater Management11 Incentives Program, also called SMIP, is12 available for any non-residential13 customer for the design and construction14 of a broad range of stormwater management15 practices. Loan sizes will range from16 $75,000 up to a million.17 The SMIP loans are available18 with very favorable terms, including a19 one percent interest rate. In addition,20 PIDC will not take out a lien against the21 property and will not charge the borrower22 any application or origination fees.23 The SMIP applications are24 available on the Water Department's25 17 2/8/11 - TRANSPORTATION - RES. 1008141 website at2 phila.gov/water/stormwater_where.html.3 And I have outlines of the program here4 which, if you'd like, are available to5 the Councilpeople as well as to the6 audience.7 The applications are also8 available by calling PIDC at9 215-496-8139. The Water Department will10 review the technical merit of all11 applications, and PIDC will review the12 credit of the applicant.13 I strongly urge all interested14 businessowners and non-profits to contact15 PIDC and to submit an application.16 Thank you for this opportunity17 to testify. I'd be happy to answer any18 questions when you're ready.19

Thank you20 for your testimony.21 Our next witness, please state22 your name for the record.23

My name is Paul24 Lonie. I'm the President of25 18 2/8/11 - TRANSPORTATION - RES. 1008141 AquaEconomics. It's a private enterprise2 at 1301 North 2nd Street in Philadelphia,3 Pennsylvania, and I'm here to give4 testimony on the private sector.5 As many of you know, I spent6 30-some years working for the City, and7 we've partnered with some former City8 employees to form a new company that9 basically is designed to do stormwater10 management in a design-build area that's11 economic for these people that are having12 difficulties doing this.13 What we've decided to do is to14 take a new approach to this outside of15 the usual way of having an engineer come16 in and do a lot of different things.17 We're a combination of different18 companies. Rodriguez Consulting is a19 small engineering company that does a lot20 of the engineering. Lou had worked for21 the Water Department for 18 years and is22 very familiar with the process over23 there. I deal with the surveying as part24 of that orientation, as with the 30 years25 19 2/8/11 - TRANSPORTATION - RES. 1008141 I was with the City of Philadelphia. And2 we've teamed with Bustleton Services,3 which is John Parsons, who is one of the4 major union construction companies and5 landscape companies in the City. And6 what we've been doing is designing a7 program where we'll come along and also8 help with Sam's program with PIDC to come9 in and work with a person on a one-stop,10 one-shop basis. We'll take them all the11 way through the process. As people know,12 the process doesn't really kick in if13 you're doing retrofitting until the14 things have already been installed and15 inspected. So we take everything right16 through the process for all these people.17 We have all the engineers, all the18 surveyors, all the landscape folks to19 help them with this, and we have20 maintenance coming that will do the21 maintenance of this afterwards.22 It's something in Philadelphia23 that's been needed, and since this has24 come into effect, it's a business that's25 20 2/8/11 - TRANSPORTATION - RES. 1008141 growing like crazy and we're actually2 trying to just help everybody as much as3 we can.4 So thank you for this time to5 testify, and I'd be glad to also answer6 any questions.7

Thank you.8 I defer to members of the Committee.9 Councilman Greenlee.10

Thank11 you, Mr. Chairman.12 Good morning, gentlemen.13 Commissioner, I don't know if14 you can answer this or maybe somebody15 else from your department. What I guess16 I'm trying to get clear on -- and I know17 the department did a lot of outreach18 before the bills went out. I guess what19 I'm trying to determine is particularly20 the people who had significantly high21 bills, how soon before they actually had22 to start paying them did they have an23 idea about how high they were? Am I24 making sense?25 21 2/8/11 - TRANSPORTATION - RES. 1008141 COMMISSIONER NEUKRUG: Yes.2 And we had a process that obviously3 started, as my testimony, in the 1980s4 and 1990s. But you are correct, that it5 was in February 2010 when the bills first6 went out that had the costs associated7 with the first July 1st, 2010 bill. So8 February 2010 and July 1st, 2010. Again,9 there was a phased-in approach so that10 even those most impacted were only11 impacted by 25 percent of that total12 bill. So, in essence, we are kind of13 still in that period of notification.14

Sort of15 phasing in?16 COMMISSIONER NEUKRUG: Phasing17 in.18

But when19 they got that first notice on February20 2010, their bill -- some people's bill21 anyway, particularly businessowners --22 went up rather significantly, right?23 COMMISSIONER NEUKRUG: Yes.24 There is -- and "significant" means25 22 2/8/11 - TRANSPORTATION - RES. 1008141 different things to different people.2

No, I3 understand.4 COMMISSIONER NEUKRUG: But in5 any sense, yes, there are quite a number6 of clearly frustrated customers who we7 are now in the process of trying to8 assist.9

And I10 know hindsight is 20/20 and all that good11 stuff, but just looking back -- and I12 know you weren't the Commissioner, but I13 wonder if there should have been a way to14 try to tell people maybe in six months,15 this is what's going to happen or16 something like that, so they're a little17 bit more prepared, particularly those18 people like -- maybe the regular bill19 didn't go up that much, so it's not that20 big a deal to people, but for folks that21 went up hundreds or whatever, it seems22 like that just hitting them one time --23 and I know Commissioner Brunwasser came24 around and explained to me and explained25 23 2/8/11 - TRANSPORTATION - RES. 1008141 to all the Councilmembers, but, you know,2 it wasn't real numbers, if you know what3 I mean. I think when you get real4 numbers, it has a little bit more of an5 impact.6 COMMISSIONER NEUKRUG: It's7 always best to give the most time and8 it's always best to work with every9 customer and make sure that they fully10 understand what is coming down. I11 believe that having worked behind the12 scenes at the Water Department for any13 number of years on this issue that the14 Water Department did everything that it15 humanly could within our organization to16 reach out to all our customers and let17 them know that this was happening.18 But having said that, that19 doesn't mean that people who have not in20 February 2010 seen or read their bills21 and understood that this was coming, that22 they certainly felt like they didn't get23 their six-month warning.24

I guess25 24 2/8/11 - TRANSPORTATION - RES. 1008141 that's the thing. I shouldn't say you2 talked in the abstract, but you certainly3 didn't have specific numbers, right,4 until February 2010?5 COMMISSIONER NEUKRUG: Until6 February 2010.7

Okay. I8 guess that's the biggest -- and I9 understand why you have to do this and10 all like that. That seemed to be the11 one --12 COMMISSIONER NEUKRUG: I am13 being corrected.14

Pardon15 me?16 COMMISSIONER NEUKRUG: I am17 being corrected from the audience.18

Mr. Lonie19 knows a little bit better.20 COMMISSIONER NEUKRUG: We did21 do notification with numbers beginning in22 2009.23

With24 specific numbers? With specific numbers?25 25 2/8/11 - TRANSPORTATION - RES. 1008141 COMMISSIONER NEUKRUG: Can I2 ask Joanne Dahme to come up? Joanne3 Dahme is the Public Affairs Manager for4 Philadelphia Water Department.5 (Witness approached witness6 table.)7

Hi. Thank you.8

State your9 name for the record, please.10

Joanne Dahme,11 Philadelphia Water Department, Public12 Affairs Manager.13 Certainly I think we're not14 disputing that we can always do a better15 job, and it's always a challenge getting16 customers to pay attention to something,17 particularly when it's not in place yet.18 Recognizing that we were looking to do19 this phase-in before our last rate case,20 we did start reaching out to what we saw21 then as the top impacted customers,22 people who were going to see their bills23 go up, back in 2009. And what we were24 doing at that point was giving them sort25 26 2/8/11 - TRANSPORTATION - RES. 1008141 of an estimated what we saw the rates2 might be over the next four years.3 We had -- what our goal was, to4 say this was going to be possibly5 happening, because the rate case was6 currently ongoing, 2008, 2009. We were7 offering to have workshops for these8 impacted commercial customers to come in9 to learn a little bit about what was10 going on, to really have an opportunity11 to explain to them what we expected to12 happen.13 We did have many of these14 commercial customers come to some15 workshops. So that was sort of the first16 round. The round Howard mentioned back17 in February 2010 when we knew this was18 going to be a reality, that there was19 going to be phase-in beginning in July,20 every customer did get a notification21 about what we saw their rates, their22 stormwater fees, being over the next four23 years. So they saw what was going to24 happen July 1st.25 27 2/8/11 - TRANSPORTATION - RES. 1008141

So they2 got real numbers, just so I'm clear?3

They did get real4 numbers, yeah, to show the full phase-in.5 It's being phased in over a four-year6 period.7 But, again, I think it's --8 those notices went out in February, and9 we tried to make them look very different10 from your typical water/sewer bill. It11 was in an eight and a half by -- or it12 was an envelope, which had "important13 information about your stormwater bill"14 on the front, but I think, again, what15 we're hearing from a lot of these16 commercial customers is, they're not the17 ones receiving these bills. The person18 getting them really doesn't understand19 them.20 But as a result of that21 February notification, we did have ten22 public workshops, and those were attended23 by over 1,000 commercial customers. So24 some people did see that. They did come.25 28 2/8/11 - TRANSPORTATION - RES. 1008141 Lots of concerns, lots of questions, but2 we did get the information out there as3 best as we could. Not to say that4 there's probably many other ways, and5 we'll probably hear from some of the6 commercial customers about other ways to7 do that.8

I'm not9 even trying to be critical. I'm just10 trying to get a clear picture of timing11 and when they really got a real like12 picture or real numbers about what they13 gave, even if it wasn't exactly specific,14 like it's going to be this, around this15 much.16

Right. No. They17 were fairly accurate enough to get people18 to come out to the meetings to ask us19 questions about it.20

I'm21 seeing some heads shake behind you, so22 there'll probably be some other testimony23 that will say something different, but24 that's okay.25 29 2/8/11 - TRANSPORTATION - RES. 1008141 All right. Thank you.2 Thank you, Mr. Chairman.3

Thank you,4 Councilman Greenlee.5 I have a couple questions.6 Number one, first is a statement. I7 clearly understand what we are struggling8 with here as a city and two converging9 interests kind of coming at each other.10 Number one, when we did the hearings on11 Marcellus Shale and the amount of brine12 that might come down through our13 waterways, one of the mining industry's14 counterpoints was that we get more brine15 and contaminants on rainwater runoff on16 an average snow event. And that was one17 of their arguments.18 So I understand the purpose of19 this is to try to change behavior to be20 more conscious of the rainwater runoff.21 So I get that part. What I need to be22 more clear -- and I also know that we are23 just now beginning to see the light at24 the end of the tunnel of a recession, and25 30 2/8/11 - TRANSPORTATION - RES. 1008141 that a lot of these businesses are on2 margins that are slim and some on margins3 that are none, and so, therefore, these4 new fees coming on are hitting them right5 at the time when they're trying to get6 some relief. So I understand what the7 polar opposites of this important aspect8 are.9 So what we're trying to do is10 get some clarity, and what we're trying11 to do is get some options here.12 A couple of questions that I13 have. You say revenue neutral, that this14 is going to be revenue neutral. You mean15 revenue neutral to the City or to the16 people who actually have to pay the tax17 or the fee?18 COMMISSIONER NEUKRUG: This is19 certainly not revenue neutral to an20 individual landowner. This is revenue21 neutral to the City. So last year we22 needed to recover $120 million or so for23 the stormwater utility, and next year we24 need to recover that $120 million. So25 31 2/8/11 - TRANSPORTATION - RES. 1008141 the question is, what is the most2 equitable way of having all the customers3 of the City of Philadelphia share in4 that, residential and non-residential,5 and within the non-residential class,6 take a look and see.7

So help me8 to understand the non-residential equity9 of this fee that we're applying to10 Philadelphia-based businesses. Help me11 how we're addressing that disparity.12 COMMISSIONER NEUKRUG: Well, in13 the past, the way that we charged was14 based upon the size of the water meter.15 The larger your water meter, the more16 potable water you used on your property,17 the more you paid your portion of the18 stormwater fee. So there were many19 customers who had large water meters,20 maybe even two large water meters, who21 had a very small footprint and they were22 paying the biggest share of the23 stormwater fee system, and they're the24 ones who clearly were unhappy, that they25 32 2/8/11 - TRANSPORTATION - RES. 1008141 felt there was an inequitable process.2 We brought together an Advisory3 Committee to look this over, and the4 Advisory Committee of all different sorts5 within the City of Philadelphia came to6 the same conclusion, that it wasn't an7 equitable process, and a more equitable8 way of charging for stormwater is based9 upon a true cost of service. So the more10 stormwater your property delivers to the11 sewer system of the City of Philadelphia,12 the more you should have to pay for that13 service.14

I'm still --15 I'm a little dense here. The Water16 Department is the smart department, so17 you'll have to dumb it down for me. But18 Crown Plaza is on City Avenue in19 Philadelphia in my district. It is maybe20 12 stories high, maybe, and they're21 straight up. Across the street is a22 plaza/shopping center that is flat. How23 do you determine the rates of that?24 COMMISSIONER NEUKRUG: You're25 33 2/8/11 - TRANSPORTATION - RES. 1008141 looking at the gross area, the acreage of2 land.3

So if4 they're going straight up, how do you5 determine that?6 COMMISSIONER NEUKRUG: Well,7 straight up doesn't matter. It matters8 whether it's impervious or pervious,9 whether it's allowing rainwater to soak10 into the ground or store it or retained11 on the site.12

So is a13 skyscraper --14 COMMISSIONER NEUKRUG: So a15 skyscraper and a parking lot that have16 the same acreage would have the same17 stormwater charge.18

And that19 makes sense?20 COMMISSIONER NEUKRUG: Yes.21

To who?22 (Applause.)23

Like I said,24 I'm not the smartest guy ever, but that25 34 2/8/11 - TRANSPORTATION - RES. 1008141 to me does not make sense, and I don't2 know how we factored that in.3 The second thing that I would4 ask is --5 COMMISSIONER NEUKRUG: I --6

So if you're7 both two skyscrapers, one in the City of8 Philadelphia, one outside, do you pay the9 same rate? So if the hotel moved across10 the street, what would it pay, Crown11 Plaza, what would it pay differently12 being a non-City resident?13 COMMISSIONER NEUKRUG: I'd have14 to get back to you to find out what kind15 of system of rates and taxes they have in16 Montgomery County.17

So based on18 your fees, however, if Crown Plaza moved19 exactly across the street, they would not20 have to pay this fee?21 COMMISSIONER NEUKRUG: If they22 were not in the City of Philadelphia, no.23 But they would still -- but everyone pays24 for stormwater management, everyone --25 35 2/8/11 - TRANSPORTATION - RES. 1008141

But they use2 our water system, both the supply side3 and the sewage side, right? Yes?4 COMMISSIONER NEUKRUG: Not the5 stormwater.6

So the7 stormwater process --8 COMMISSIONER NEUKRUG:9 Stormwater is a separate system and --10 everyone in the United States pays for11 stormwater. It's sometimes embedded or12 hidden.13

So we don't14 process their water? We supply their15 water, but the runoff goes where?16 COMMISSIONER NEUKRUG: Runoff17 goes to --18

Their19 system?20 COMMISSIONER NEUKRUG: Their21 system, their separate stormwater system.22

Okay.23 That's some clarity. You got that one.24 All right. By way of green25 36 2/8/11 - TRANSPORTATION - RES. 1008141 programs -- no. The fees in phasing them2 in, you said that it's a four-year3 process?4 COMMISSIONER NEUKRUG: That's5 correct.6

So what did7 the -- in February, what did the8 businesses, what portion of the bill did9 they get?10 COMMISSIONER NEUKRUG: They --11

One-fourth12 of it?13 COMMISSIONER NEUKRUG: They saw14 what it would be, I belive, over the15 entire four years. So they saw the16 phase-in of four years. It was explained17 to them that we phased in over four years18 and one-quarter of the total bill as of19 four years hence was what would be20 charged to them beginning July 1st.21

So if it was22 $100, they had to pay this year 25?23 COMMISSIONER NEUKRUG: That's24 correct.25 37 2/8/11 - TRANSPORTATION - RES. 1008141

So over the2 four years, gradually they'll pay the3 entire 100?4 COMMISSIONER NEUKRUG:5 Gradually they'll be paying more.6

All right.7 And what does that represent by way of an8 average increase to business on their9 fees?10 COMMISSIONER NEUKRUG: Can you11 repeat that?12

This new fee13 on top of their old water bill, what14 percentage increase on average would that15 represent based on your --16 COMMISSIONER NEUKRUG: Well,17 some would see an increase and some would18 see a decrease.19

On average.20 COMMISSIONER NEUKRUG: Because21 it was -- on average, over the City I22 would say it was cost neutral.23 Is there a better answer than24 that?25 38 2/8/11 - TRANSPORTATION - RES. 1008141

Sixty-five percent,2 I'd say.3 Joanne again.4 I'm just going to -- as Howard5 is talking, the kind of information we6 sent -- and I think it gets back to your7 question -- they received a fact sheet,8 which had a photograph of their property,9 so taking an aerial photograph. So they10 got to see what we were charging them11 for, how big their property is and then12 how many hard surfaces, manmade surfaces,13 were on that property, which is really14 the runoff co-efficient, which really15 counts for how much is being impacted or16 contributed to our system. And so with17 that, they had sort of the four-year18 phase-in.19 When we look at our customers20 overall, it's hard to say what percent21 increase per customer, because it's kind22 of by property type. When you think23 about properties that are large and have24 a lot of hard surfaces, like parking25 39 2/8/11 - TRANSPORTATION - RES. 1008141 lots, like buildings, and they had small2 meters or no meters at the property, like3 a parking lot, it would be a big percent4 increase for them, because they were sort5 of underpaying based on their meter size,6 not because they wanted to underpay but7 because the meter size was having them8 underpay and other people were9 subsidizing that.10 A similar property -- as Howard11 was saying, there were a lot of winners.12 Properties that were like your Crown13 Plaza might have a large meter, because14 it has to get water pressure to the top15 floor, might have two meters, they were16 paying a lot of money, so they saw their17 new stormwater fees go down18 significantly, because they were sort of19 overpaying all those years when it was20 based on the meter size. But when we21 look at our customers overall, we have --22 about 60 percent of our customers are23 seeing either no change, a real small24 change or a change within $500 of25 40 2/8/11 - TRANSPORTATION - RES. 1008141 increase over the year. So you do have2 then on both sides of the spectrum some3 customers who are being severely4 impacted, seeing a large increase -- and5 probably a lot of the customers in this6 room -- and then on the other side, you7 have a lot of customers who are seeing8 their fees go down significantly.9

I appreciate10 your guesstimate, but do you have actual11 figures that you can provide this12 Committee?13

Yeah, we can14 certainly provide some information.15

And that's16 an ask, that we would have a view.17 One other thing while you're up18 here. You are talking about a loan19 program and it's $5 million. Can you20 give me the terms and how much the21 amounts are?22

I'm going to let23 the loan expert talk about that.24

And this25 41 2/8/11 - TRANSPORTATION - RES. 1008141 loan is designed to do what again?2

This loan program3 was developed together with, in4 partnership with the Water Department.5 They capitalized it in the total amount6 of $5 million. It's designed to provide7 financing, low-cost financing, to8 companies or businesses that are seeing9 an increase in their bills and want to10 implement or put in stormwater management11 infrastructure, such as green roofs,12 detention basins, porous parking lots --13

What is the14 average retention basin, how much does it15 cost? Average.16

It's really hard to17 say average-wise, because it's based on18 how much of the square footage we're19 looking to really manage. But taking a20 look at some of the recent estimates, for21 four acres we had a detention basin that22 was costing about $200,000 in order to23 manage.24

So $200,000?25 42 2/8/11 - TRANSPORTATION - RES. 1008141

And that's just2 rough, for four acres of management,3 which might be about 80 cents per square4 foot.5 So the practices aren't6 inexpensive certainly, and that's why we7 were looking at the loan program.8

Do you think9 that that loan program is slightly10 inadequate to address all of the -- if11 everybody in this Chamber just wanted a12 loan to address that, that loan fund13 would be exhausted.14 What are the terms of15 repayment, how long?16

The terms of17 repayment are one percent and can go up18 as long as 15 years depending on that19 nature.20

So that21 could be exhausted today in this Chamber22 if we actually took advantage of that,23 correct?24

I would say two25 43 2/8/11 - TRANSPORTATION - RES. 1008141 things. One is that it is a revolving2 loan fund, so to the extent that loans3 are repaid, we will put them back out4 again.5

But over 156 years -- I was in the lending business7 for a while. So that could go today. So8 that's not a lot of money dealing with9 the number of clients that will be10 affected by this. That's number one.11 And when you talk about remediation of12 rainwater runoff, what are your cafeteria13 selections? What can a company do, and14 is it common knowledge that they know?15 Instead of paying this, you can put in16 rain barrels, you can put on green roofs.17 Is there a list of options? And I heard18 one company that does it, but how many19 companies are there that we've expanded20 the universe to?21 COMMISSIONER NEUKRUG: There is22 a list of options that are available and23 it's available on --24

Give me some25 44 2/8/11 - TRANSPORTATION - RES. 1008141 of those.2 COMMISSIONER NEUKRUG: You can3 go as simple as a suburban-style4 detention basin to a green roof to a5 bioswale.6

So consider7 a detention basin. How do you calculate8 what it does to their fee?9 COMMISSIONER NEUKRUG: We take10 a look and see how much water is stored.11 We're looking to capture the first inch12 of runoff, very similar to the stormwater13 regulations for new development. In14 fact, if you have a new building that's15 been developed, it will get the full16 credit from the stormwater fee. So we17 have some engineering calculations that18 are done that assesses the before and19 after costs of a treatment technology.20 We have --21

So if22 someone doesn't want to put in a $200,00023 bio-retention basin, they can do what24 other cost-effective things?25 45 2/8/11 - TRANSPORTATION - RES. 1008141 COMMISSIONER NEUKRUG: It2 depends. It's very site specific, and we3 have an engineering consulting firm that4 will come out and give support to the5 property owner to identify what the most6 effective techniques are for that7 property. If it's a large parking lot8 that has sheet flow running to the edge9 of the property, then perhaps a bioswale,10 otherwise known as a ditch with plants,11 along the edge may be sufficient. It may12 be if it's a parking lot that all comes13 to one center drain, it's perhaps maybe a14 more structural piece where you're just15 making a bigger vault to hold the16 stormwater back.17 So there are a number of18 different technologies that are19 available. They're all very simple in20 thought, because they're all about just21 holding water and draining water and22 infiltrating water. So they do exist,23 but the costs can be high. They're very24 site specific. They won't work at every25 46 2/8/11 - TRANSPORTATION - RES. 1008141 site.2

And the cost3 to retrofit this is higher even than to4 design it into a new construction or a5 new project?6 COMMISSIONER NEUKRUG:7 Certainly. It's always more expensive to8 retrofit than it is to build into a new9 facility.10

My final11 question is, what other cities do this?12 COMMISSIONER NEUKRUG: You're13 seeing this happening in most cities14 throughout the United States. They're15 all looking at this whole issue of16 stormwater.17

Does New18 York do it now, today?19

They're moving to20 it.21 COMMISSIONER NEUKRUG: They're22 moving towards it.23

The question24 is, today does New York implement this?25 47 2/8/11 - TRANSPORTATION - RES. 1008141

Not on a parcel2 base.3

Does Boston?4 COMMISSIONER NEUKRUG: Well, if5 I can just -- and I know you don't want6 me to change your question a little bit,7 but does it cost money for the City of8 New York to manage stormwater? Most9 definitely. Does the City of New York10 residents pay for that and businesses pay11 for that? Most definitely. The manner12 in which they pay for it differs from13 city to city.14

All right.15 I appreciate your question. Now I'm16 going to try mine again.17 Today, does New York do it?18 Yes or no?19 COMMISSIONER NEUKRUG: I do not20 know the practices --21

You know the22 answer. Come on, it's okay.23 Do they have this fee?24

The question is,25 48 2/8/11 - TRANSPORTATION - RES. 1008141 are they doing parcel-based billing2 today? No. They're developing a system3 very similar to ours.4

Does5 Washington --6

We can give you7 cities that do -- oh, yes.8

The answer9 is no.10 Does Washington have it?11

Yes, they do.12

They do have13 it?14

DC has done this,15 yes. They're doing it.16

They are17 doing it today?18

They've been doing19 it, yes.20

Okay.21 Boston?22

Moving towards it.23 Not today.24

Not today.25 49 2/8/11 - TRANSPORTATION - RES. 1008141 All right. So of the comparable cities,2 does LA do it?3

Yes.4

They do?5

They do.6

All right.7 So can you provide us a list of the top8 cities, top ten cities, and whether they9 have it today or not? And not that we10 can't be cutting edge. Philly can be at11 the head of things, and I don't have a12 problem. I just need to know how they13 are dealing with it and how they're14 phasing it into the cost of doing15 business in their city, and we can learn16 from them by what impact it has had on17 small businesses.18

Certainly.19

That's my20 intention.21 All right. Do you have any22 other questions? Councilman.23

Thank you,24 Mr. Chairman.25 50 2/8/11 - TRANSPORTATION - RES. 1008141 Commissioner, I just want to2 know, what businessowners were involved3 for determining the process and4 methodology for the stormwater fee5 system?6 COMMISSIONER NEUKRUG: I'm7 going to ask Joanne to answer that one.8

This is going back9 to when we had the stormwater CAC --10

Well, how11 many of the large corporations? One of12 the largest manufacturers in Philadelphia13 is Cardone Industries.14

Right.15

We have16 Sandmeyer Steel. You have a lot of large17 still, believe it or not, in this city,18 we still have some manufacturers in this19 city.20

At the time -- the21 list of the CAC members -- I'm thinking22 industrial customers -- included Allied23 Signal, Rohm and Haas. We had Van24 Sciver, the furniture company. They were25 51 2/8/11 - TRANSPORTATION - RES. 1008141 probably some of the largest customers.2 The Citizens Advisory Committee when we3 put it together in the '90s, the real4 goal of that had the diversity of5 stakeholders. So it also had --6

Were these7 corporations invited to participate?8

They were, yes.9

They were10 all invited?11

One of the goals12 was to make sure we had a diversity of13 stakeholders, because at the point when14 we were working on this, we didn't know15 quite what this parcel-based billing was16 going to look like and how it was going17 to impact a large variety of customers.18 So we had small businesses, we had large19 businesses, we had universities, we had20 hospitals, we had utility companies, we21 had transportation companies, and we had22 citizens and civic associations, because23 we wanted everyone at the table at that24 time. And we did have a representative25 52 2/8/11 - TRANSPORTATION - RES. 1008141 of City Council, technical advisor.2

I just want3 to go back to revenue neutral here. When4 you say it's revenue neutral, these fees,5 the subsequent fees that you're6 requesting, they would more than cover7 the cost, is that true, for --8 COMMISSIONER NEUKRUG: Yes. We9 need to cover our costs for a stormwater10 utility.11

And suppose12 you receive -- if the fees come in well13 above that, would you be willing to cut14 back or would you continue to spend and15 spend and spend?16 COMMISSIONER NEUKRUG: We go17 through a rate process approximately18 every four years, at which time these19 numbers would be reviewed and adjusted.20

Well, that's21 four years, in other words. Is that what22 you're saying?23 COMMISSIONER NEUKRUG: In a24 four-year -- well, not four years from25 53 2/8/11 - TRANSPORTATION - RES. 1008141 now, but --2

This is a3 four-year plan; is that true?4 COMMISSIONER NEUKRUG: This is5 a four-year phase-in.6

Phase-in,7 yes.8 COMMISSIONER NEUKRUG: Well,9 it's not the same four years, no. We're10 about two years into a four-year rate11 process.12

And you13 anticipate the new fees to more than14 compensate for the cost of putting in15 this new system; is that true?16 COMMISSIONER NEUKRUG: We're17 looking for -- we're looking to recover18 both prior to this time and post this19 phase-in period to be collecting the same20 $120 million required for the stormwater21 utility.22 COUNCILMAN KELLY:23 Mr. Chairman, I'm just interested in24 hearing the other side of this. I want25 54 2/8/11 - TRANSPORTATION - RES. 1008141 to hear from some of the businessowners2 and the problems that they're going to3 have facing these increased fees.4 Thank you.5

Thank you,6 Councilman Kelly.7 Councilman Greenlee.8

Very9 quickly and just piggyback on what10 Councilman Kelly said. I ask this not11 because I'm doubting what you're saying,12 but is there some chart or some numbers13 you can actually show us showing the14 revenue neutral aspect to what you're15 talking about, either now or in that16 four-year period you talk about?17 COMMISSIONER NEUKRUG: Be happy18 to get that for you, Councilman.19

If you20 can forward that to the Chair, I'd21 appreciate it.22 Thank you.23

One last24 question before the panel goes. And I25 55 2/8/11 - TRANSPORTATION - RES. 1008141 see Councilwoman Blackwell joining us.2 Thank you.3 AquaEconomics, what is their4 relationship with the Water Department?5 You can answer that, Commissioner.6 COMMISSIONER NEUKRUG: I don't7 know our relationship.8

Oh, okay.9

We have no10 relationship with the Water Department11 whatsoever.12

But you are13 one cottage industry that has developed14 to consult businesses; is that what I15 understand?16

Correct. We're17 engineers and surveyors, because a big18 part of this program requires the19 engineering and the different things like20 that. So that's where we are.21

Has there22 been a list developed of such companies23 that has been made available to impacted24 customers?25 56 2/8/11 - TRANSPORTATION - RES. 1008141 COMMISSIONER NEUKRUG: There is2 a group from the Sustainable Business3 Network. It's called BUC, the Businesses4 for Unified -- Uniform Conservation, and5 they've been working very closely with us6 to develop this industry and understand7 what this industry would be and how to8 move forward.9

Okay. All10 right.11 Councilwoman Blackwell, would12 you like to...13

I14 certainly would. And I'm late, I'm out15 of order, I may repeat the question, but16 at any rate, on my way in from the17 meetings in my office, I ran into a18 gentleman who told me his initial bill19 was $300. Now it's 4,000. You know, an20 increase is one thing, but to go from 30021 to 4,000 is just about obscene. It's22 just -- it's not fair. It's not right.23 And what are we doing in that regard?24 That's not an increase. That's just25 57 2/8/11 - TRANSPORTATION - RES. 1008141 downright murder. You can't do that to2 people. We can't do that to our3 businesses and people who do business in4 our city. That's just not right. That's5 not fair.6 So what do I say to him?7 COMMISSIONER NEUKRUG: I think8 you -- yes, I think you said it very9 well. And it is a very difficult10 situation that we're finding ourselves11 in, where these bills for a true cost of12 service, the cost of providing that13 service is perhaps for the first time in14 many, many years being adequately15 forecasted in our bills, and that doesn't16 take away from the fact that it's17 significant increases, and we need to18 work with every one of those customers19 who are being impacted in that way and20 try to find a way to help them out,21 because clearly there is a significant22 issue there, and I agree with you, but23 within the system of equity, because just24 for that same property, there's another25 58 2/8/11 - TRANSPORTATION - RES. 1008141 property that's been paying $4,000 a2 month for many, many, many years and3 their stormwater charge really should4 have been in the hundreds.5

They6 say this about taxes. That's why,7 colleagues on this committee, I don't8 vote for an increase in taxes, because9 every time they say they're going to10 right it, everybody pays a lot more. And11 if the City says now we're getting it12 right, it's still not right. It's not --13 it sounds right if you say it. Now we're14 going to finally make it straight,15 everybody should pay what they should.16 But no matter where we go, human beings17 work in all of these offices and make all18 of these plans, and it's not right. It's19 not right to take somebody from $300 to20 4,000. It doesn't even make common21 sense. I don't care how right one says22 it is. It's not right.23 (Applause.)24

And25 59 2/8/11 - TRANSPORTATION - RES. 1008141 certainly I support the Chairman. They2 tell me he's asked all the right3 questions. He always does his homework.4 And I will work with him to see what we5 can to right some of this, you know. I6 believe well-intentioned people and7 right-minded people can straighten out8 these problems, and that's why we're9 elected, the government, to do our part.10 I will work with the Chairman to see what11 we can do to correct some of this.12 Thank you. Thank you.13

Thank you.14 You might have been late, but you are15 right on time.16 (Applause.)17

Are there18 any other questions for this panel?19 (No response.)20

Can the21 Clerk read the Panel No. 2.22 Thank you for your testimony.23

Members of the24 Unified Business Owners Association of25 60 2/8/11 - TRANSPORTATION - RES. 1008141 Philadelphia - Stuart Parmet, Jeff Allen,2 David Wolf, Daniel DiBruno, David3 Iacobucci and Richard Gorodesky.4 (Witnesses approached witness5 table.)6

Thank you.7 Who is testifying first? Who do we have?8

Jeff Allen.9

Now, feel10 free -- again, I make the same offer to11 the private sector -- to paraphrase your12 testimony.13

Thank you.14

Read your15 name for the record, please.16

Good morning,17 Chairman Jones. My name is --18

You can19 sit.20

Oh, sit? Thank21 you.22 Good morning, Chairman Jones23 and members of the Transportation and24 Public Utilities Committee. Thank you25 61 2/8/11 - TRANSPORTATION - RES. 1008141 for having our members speak. I2 represent -- I'm Co-Chairman of the3 Unified Business Owners Association of4 Philadelphia. And I don't want to -- if5 I could just see a show of hands of the6 businesspeople that are here that are7 representing the Unified Business Owners8 Association of Philadelphia.9

This is two10 months.11

Stuart, myself,12 Arty Elgart from Robert Elgart & Son,13 David Wolf and Jay Barrow formed this14 association when we got the bills about15 stormwater fees in the mail. The16 companies that are represented here today17 are companies that have been in the18 City -- one of our members has been in19 the City since 1732, if I'm correct. 22 We're celebrating 101 years in the City23 of Philadelphia this year, and I just24 want to give you a brief background on25 62 2/8/11 - TRANSPORTATION - RES. 2 My grandfather started my3 business in 1910. He was succeeded by my4 father. We're a small minority of5 third-generation companies that are still6 in existence. 7 I have union labor. I pay healthcare. I8 pay benefits. I have a good job in my9 facility. My management people have10 healthcare. 12 We're a leading convenience13 store distributor in the Northeast14 corridor. 21 I bought this property 13 years22 ago. It was a vacant, depressed23 property. It had been vacant for, I24 believe, somewhere between two and three25 63 2/8/11 - TRANSPORTATION - RES. 1008141 years. 4 In February, I just -- you5 know, it was great to hear the people6 from the Philadelphia Water Department,7 because some of the things they said did8 make a lot of sense to me, and, that is,9 that in February of 2010, myself and my10 constituents got notices in the mail of a11 stormwater charge that we were going to12 start to get on our water bills, which I13 understand the stormwater charge. 15 I understand all that stuff. 17 My fee was a 275 percent18 increase. So I went from about a hundred19 bucks a month to $1,300 a month, which is20 a real big fee. 24 She said, But, Honey, who is25 64 2/8/11 - TRANSPORTATION - RES. 1008141 going to buy your property? 12 So my water tax is enormous,13 and some of my members' water taxes are14 much higher than mine. Mine is going to15 cost me about $16,000 to $18,000 a year16 increase. 17 We were notified in February of 2010 from18 a letter from the Water Department with19 no date on it, no day date. It just said20 February 2010. Please participate in our21 meetings to explain this to you, and then22 they gave us four dates in February of23 2010 that they were having those24 meetings. So needless to say, none of us25 65 2/8/11 - TRANSPORTATION - RES. 3 One of the things that I4 guess -- we met with Joanne Dahme, who5 spoke today. There was, I believe -- I6 could be wrong. 22 COUNCILMAN GREENLEE:23 Mr. 24 What percent -- like what are you25 66 2/8/11 - TRANSPORTATION - RES. 1008141 defining as grossly increased? Is 1002 percent? 4

We took the 1,0005 losers, and the 1,000 losers collectively6 represent a 500 percent increase,7 cumulative water bills.8

Okay.9

I'll try to cut10 this a little short now.11 There were a thousand companies12 who were unfairly increased. I sent a13 letter to the Mayor's office. I got no14 response. We met with -- he had actually15 forwarded my letter to Bernard16 Brunwasser, who was the Commissioner of17 the Philadelphia Water Department. My18 constituents and I, Stuart, Arty, Jay, we19 met with the Water Department and Joanne20 Dahme. We spent two hours with the21 Commissioner rehashing the same22 well-rehearsed conversations we had with23 Ms. Dahme, and basically we got a history24 of the Philadelphia Water Department.25 67 2/8/11 - TRANSPORTATION - RES. 1008141 That's what we got.2 A lot of my members have3 increased their facility size. A number4 of our members are very philanthropic in5 the City. One of our members has a6 church in his community at 10th and7 Butler that he gives to the neighborhood,8 to the people in the neighborhood.9 Stuart's company built a Police Athletic10 League on their facility. One of our11 members built a greyhound recovery or12 hospital, veterinary hospital, on his13 property.14 So I only want to say that one15 of the things that was mentioned was it's16 the worst economic time in our country.17 We got these increases, and really all18 we're asking is some -- we understand19 there's increases. We understand they're20 not going to rewrite the entire book21 about the increases, but there has to be22 a way to phase this in maybe over a23 ten-year period where we could breathe a24 little bit and afford to pay this thing.25 68 2/8/11 - TRANSPORTATION - RES. 1008141 That's all I have. Thank you.2

Okay.3 Thank you.4 The members will be back in a5 minute. Maybe whoever else would like to6 testify.7

Daniel DiBruno.8 Daniel.9 MR. DiBRUNO: I guess it's good10 afternoon.11

13 MR. DiBRUNO: Chairman Jones,14 other Councilmen and women, if they're15 still here, my name is Daniel A. 17 Darby & Son, Incorporated. We have been18 in the City since 1854. It's a19 family-owned business. 22 My story is simple. I did23 think that Councilman Jones was24 perceptive about businesses and how25 69 2/8/11 - TRANSPORTATION - RES. 7 Darby & Son. It's a small family-owned8 business. We trade as Pennsylvania Wire9 Works, and we are one of the oldest wire10 cloth companies in the United States,11 over 157 years in the City of12 Philadelphia. At one time we employed13 250 people. Now we are down to 15, as14 wire cloth manufacturing moved overseas15 in the '60s. It was Germany and then16 Japan and Taiwan, Korea and now mostly17 China. 23 We employ many men who are within walking24 distance to our facility. We have25 70 2/8/11 - TRANSPORTATION - RES. 1008141 witnessed and have been a significant2 partner in the improvement of our3 neighborhood. We've been there over 254 years. And what I mean, there's more5 police presence, the graffiti hotline6 works, there's less crime, less arson,7 and there is even some new housing. " I'm an engineer, but I13 don't think you have to be an engineer to14 be intuitive about this. 20 I think, Councilman, you were21 hitting on this. It's just so intuitive22 that a parking lot and a 40-story23 building have different profiles. And24 water sheds on the impervious glass of25 71 2/8/11 - TRANSPORTATION - RES. 1008141 all the facades. So I feel that all the2 exposed area should be used in the3 assessment calculation, not just the4 footprint. This will provide fairness to5 the parking lot people, the tall6 buildings and, as I am, I'm somewhere in7 between. 11 And what I did -- and not to be12 clever or smart, but, I mean, I just used13 my intuition. And we have the skyline of14 Philadelphia, and water sheds and15 impinges and falls from these areas if16 they're not green and restricted. And I17 don't think -- I mean, I'm ad-libbing18 now. 24 My appeal is, as I say,25 72 2/8/11 - TRANSPORTATION - RES. 1008141 intuitive. 13 The monthly stormwater charge14 does not include the impervious facade of15 our building, nor does it reflect the16 entire impervious facades of other17 buildings in Philadelphia. We contend18 that rain and snow events also shed water19 from the facades of impervious tall20 buildings, and by not counting the total21 of impervious area, this unfairly22 penalizes our building configuration and23 benefits tall buildings. This is not an24 equitable assessment, and results in25 73 2/8/11 - TRANSPORTATION - RES. 9 When our health insurance goes up 1010 percent, 15, 20 percent, we absorb it,11 but to have costs go up 4,400 percent and12 1,100 percent, it's like how do you deal13 with it? 14 So with that, I'll close. 18

Thank you19 for your testimony. We take increases20 either way, decreases, very seriously,21 because it impacts the operation of our22 city. You are valued members. You pay23 taxes. We want you to survive so that we24 can as well.25 74 2/8/11 - TRANSPORTATION - RES. 1008141 MR. DiBRUNO: Thank you.2 You're very intuitive with your3 questions.4

Thank you.5 Next witness, state your name6 for the record, please.7

Good afternoon,8 Chairman Jones and members of the9 Transportation and Public Utilities10 Committee, and thank you for giving us11 the opportunity to speak. My name is12 David Iacobucci. I'm employed by Baker13 Properties, which is the owner of a14 217,000 square foot warehouse building15 located in Northeast Philadelphia.16 In 2006, Baker Properties made17 an investment of over $9 million in that18 building, and the building is presently19 occupied by a single tenant on a20 long-term lease. It's a net lease. This21 was our first investment as a company in22 Philadelphia, and in light of the23 imposition of these stormwater fees, it's24 possible it might be the last one, too.25 75 2/8/11 - TRANSPORTATION - RES. 1008141 By way of background, Baker2 Properties invests in income-producing3 commercial real estate for its own4 account. We are a dispassionate investor5 who can put our money anywhere we think6 there's the prospect for a decent future7 income stream and growth from asset8 appreciation.9 The implementation of a10 stormwater management fee on our property11 has a direct detrimental effect on our12 bottom line, on the value of our property13 and on our prospects for retaining our14 tenant at the property. In the simplest15 of financial terms, after full phase-in,16 the stormwater tax -- and make no17 mistake, you can call it a fee if you18 want, but it's effectively a tax -- will19 add 18 cents a square foot, or about20 $40,000, to our operating costs. At21 today's acceptable trading values for22 real estate like our building, that23 imposition translates into a real24 reduction in market value on the property25 76 2/8/11 - TRANSPORTATION - RES. 1008141 of over a half million dollars.2 Our building functions just3 like other buildings of its type across4 the country. It's leased to our tenant5 on a triple-net basis, which means that6 in addition to paying us a base rent, our7 tenant reimburses us as its landlord for8 all the operating costs of the property.9 Our tenant happens to be a10 multi-national, multi-billion-dollar11 company that provides about 100 jobs at12 this property location. Before their13 lease expires -- and, by the way, it14 expires later this year -- they will15 actively seek to move to competitive16 buildings, not only within Philadelphia17 but in the Philadelphia suburbs, across18 the river in New Jersey as well. In19 order for us to offer them a competitive20 deal versus their options in Burlington,21 Camden or Gloucester County, New Jersey,22 we'll have to level the playing field,23 and we'll have to do that by paying the24 cost of the stormwater tax without25 77 2/8/11 - TRANSPORTATION - RES. 1008141 passing it on to our tenant.2 The reduction in --3

I'm sorry.4 Would you happen to know if any of those5 counties charge a similar fee?6 They do not?7

We are8 investors in South Jersey real estate,9 and they do not in any of our South10 Jersey buildings.11

Thank you.12

So we're really13 competing to retain that company and14 those 100 jobs in the City. And as a15 dispassionate multi-billion-dollar16 company, this tenant can relocate17 anywhere it wants, anywhere it feels it18 can do business with the lowest overall19 cost. The impact on us is the reduction20 of the net rent paid by our tenant, the21 reduction in cash flow on our investment22 and the prospect of future increases in23 the stormwater tax, not to mention the24 precedent set by this regressive25 78 2/8/11 - TRANSPORTATION - RES. 1008141 imposition of a fee will all serve to2 devalue the property, not to mention put3 those hundred jobs at real risk of flight4 elsewhere, maybe not just out of the5 City, but out of the state. So that's a6 big issue for us.7 In closing, I strongly urge the8 City to rethink the imposition of these9 fees on property owners. They're10 disproportionately unfair to many11 commercial businesses and investments,12 and if not repealed, they stand to do13 more long-term harm to the basis of14 property valuation in the City and to the15 business climate in general in16 Philadelphia.17 Thank you for this opportunity18 to testify.19

Thank you.20

Councilman, we have21 a few more members.22

Before you23 guys leave the panel, do you have any24 questions?25 79 2/8/11 - TRANSPORTATION - RES. 1008141 Councilman Greenlee.2

Thank3 you, Mr. Chairman.4 Just a question. You heard the5 previous witnesses talk about the loan6 program. Just I was wondering generally7 what's your thoughts on that?8

Well --9

Do you10 think it helps?11

Well --12

Speak into13 the mike, please.14

Yeah,15 speak into the mike, please. The16 stenographer can't hear you.17

Just to kind of18 shorten that, we have a member that's19 going to speak who represents about nine20 million square feet of real estate in the21 City, and he can eat that loan program up22 pretty quick. Bottom line is, we're23 getting ready to enhance our facility,24 which I have to decide whether I want to25 80 2/8/11 - TRANSPORTATION - RES. 1008141 spend money on stormwater or creating2 another 20 jobs by increasing my3 warehouse space by 20,000 feet.4

So you view5 it as I can either be in compliance with6 some of the rainwater runoff or I can do7 something to enhance the operation?8

We understand that9 this project that they worked on needs to10 be -- that they had to implement11 something. The problem we have is that12 as the 1,000 losers, to have an increase13 of something for myself, which was 27514 percent -- some of the members have15 higher increases -- the increase is16 astronomical. It doesn't make sense.17 Why should a business that's been in the18 City for 101 years all the sudden turn19 around and go, Wait a minute, where am I20 getting 20 grand from? And there's no21 end to it. We don't know what happens in22 year four. We don't know what -- we know23 what happens in year four. We don't know24 what will happen in year five, year six,25 81 2/8/11 - TRANSPORTATION - RES. 1008141 year seven. We're burdened with the tax.2 We consider it a tax, and it's going to3 devalue our properties. A couple of our4 members have already gone to reassess5 their properties, because the value is6 going down, and when you hear from some7 of the other members, it will -- everyone8 has got a little bit of a different take9 on this. So I thank you for your time.10

I appreciate11 your testimony. Thank you very much.12 Will the Clerk read the -- oh,13 this is the same panel. Okay.14

16 My name is Stuart Parmet. I'm the17 founder of the Unified Business18 Association and Co-Chairman. I wanted a19 couple of people to speak first, but I'm20 going to ignore this. I want to thank21 Theresa for her help. I can't tell you22 how hard it was to even get here to have23 people hear us on this issue. I mean, it24 took us months of very harsh letters to25 82 2/8/11 - TRANSPORTATION - RES. 1008141 the City and threats to just be heard. 4 I've been in the City. I'm a5 simple person. I've worked very hard to6 build a large business. I've never7 needed the City's help in anything. 21 I said, What's that? 24 I said, What? I never heard of25 83 2/8/11 - TRANSPORTATION - RES. 1008141 storm runoff. 3 I'm very excited because I4 don't understand why the Water Company5 and Ms. Dahme and stuff are being6 adversarial. 7 They know there was in some cases 4008 percent increases. We've asked -- I've9 spent over $10,000 already of my own10 money and numerous hours, which I really11 can't afford to do, to try to address12 this to get the attention that we are13 here today. I don't understand -- the14 meeting that we had with the Water15 Company, that we went to, there's a16 tremendous, tremendous issue here that we17 haven't even discussed, which is the18 impact on real estate to -- I invested in19 the SEPTA bus terminal, which is in a20 very depressed area, and I spent a lot of21 my own personal money to develop the22 building, and, quite frankly -- I lost my23 train of thought here. But the reality24 is is that we -- when we went to the25 84 2/8/11 - TRANSPORTATION - RES. 10 So I said, So let me guess, you11 implemented something of this magnitude12 and this impact without really discussing13 all the ramifications. 19 I'm not upset as much with the20 tax. I think if we did it over 2021 years -- I'm extremely upset with it,22 believe me. I think it's outrageous, and23 I think all the things that I've gotten24 involved with over the last couple of25 85 2/8/11 - TRANSPORTATION - RES. 1008141 months tiplified how ridiculous this2 really is. I'm not saying three, four3 hundred. And like Jeff said, the4 insurance company, like Blue Cross, that5 goes up 15 percent, I hate that. 7 But a 300 and 400 percent increase on8 something I've never heard of before,9 that's outrageous. 11 But I think it's also --12 Ms. Dahme said something about the13 representation. It's another thing. I'm14 a businessman. We couldn't get away with15 what was done as businessmen. I would16 lose all my business. When they said17 that we had representation, we didn't18 have representation. 21 Jack Kramer Delicatessen, that was the22 guy who the Water Company used to23 represent small business. That's what24 was told to us by the Water Company. I25 86 2/8/11 - TRANSPORTATION - RES. 1008141 mean, I don't understand that. I pay hundreds of thousands of4 dollars in taxes. I took $2 million of my own personal6 money to renovate a building in an area7 that's completely depressed. 13 The last thing I want to say, I14 developed this building four years ago,15 five years ago. A friend of mine who is16 a philanthropist said that he wanted to17 put a Police Athletic League on our18 property. 19 That's priceless to have that kind of20 acreage. I felt that because we're the21 inner city area, that I should give back22 to the City. Okay? And we gave an acre23 of property to this person to build a24 magnificent state-of-the-art $14 million25 87 2/8/11 - TRANSPORTATION - RES. 4 Because this whole operation5 with the Water Company was so secret for6 so many years -- and I don't understand7 why you guys aren't trying to help us8 instead of give us rhetoric. I really9 mean that. 10 We're businesspeople that are trying to11 survive. 12 I have little kids. I'd like to have a13 legacy to give them this building. 16

That's okay.17 Take your time.18

If I had known19 about this issue, about the whole process20 of the Water Company and what they were21 doing -- and they purposely kept it22 secret. And, Commissioner, you've23 stepped into this, so we're sorry that24 you had to jump into this, because this25 88 2/8/11 - TRANSPORTATION - RES. 1008141 is none of your doing. You're just2 getting the brunt of it.3 But the fact that they kept4 this secret on purpose, because they know5 this would have been -- would have never6 passed, the businessmen would have been7 up in arms, and rightfully so. I8 developed my building and gave that9 location, which was the most appropriate10 location for that runoff where that would11 have been to fix it right and then and12 solve this problem quickly. But having13 had their engineers out, they told me my14 costs would be close to $350,000 to15 remediate the building right to the way16 they like it, and for that, I would17 lose -- I would gain 20 percent of that18 revenue they were going to pay. So I'd19 still be paying close to $30,000 a year20 in this tax or assessment, whatever you21 want to call it, that I never heard about22 it before. And I know of no other23 state -- Ms. Dahme might have also said24 that people are doing it, like25 89 2/8/11 - TRANSPORTATION - RES. 1008141 Washington. I guarantee they don't have2 a thousand losers like we have. They may3 have did it amiably so that people did it4 right, but they didn't take -- what they5 did was -- and she told me this6 specifically. She said, We took the7 people that complained the most, which8 were these big buildings, Blue Cross,9 Comcast, all these buildings, and who had10 rightfully had an issue because their11 meters were bigger and they were paying a12 lot of money. I agree with that, but13 what they did was, they put that burden14 on us, and that's what we have a problem.15 They took their issue and put it on the16 businessmen, and that's why we're so up17 in arms.18

Do I19 understand you to say that the cost of20 remediation of your water runoff problem21 would have only yielded you a small22 percent of the total bill charged anyway?23

Yes, sir. Yes,24 sir, out of over a $300,000 charge.25 90 2/8/11 - TRANSPORTATION - RES. 1008141

So what your2 testimony says to me is, you're bringing3 into question what is this remediation4 worth by way of the corresponding5 reduction or credit that you get towards6 that and is that formula equitable; is7 that --8

Yes. It was not9 successful one bit, and everybody I've10 heard who have tried to cooperate also11 had it not successful whatsoever.12

So you're13 saying even when consulted --14

Yes.15

-- the cure16 outweighed the --17

There was no cure.18 It was still a bad, bad cut.19

All right.20 Thank you.21

Thank you very22 much.23 This is Rich Gorodesky, who is24 with a real estate company that's also --25 91 2/8/11 - TRANSPORTATION - RES. 1008141 like to give you the insight and impact2 that it will have on current purchasing3 and selling of real estate in the City of4 Philadelphia, which was not even5 considered at the time of this.6

Good afternoon,7 Chairman Jones and members of the8 Transportation and Public Utility9 Committee. My name is Richard Gorodesky.10 I'm Senior Vice-President, Industrial11 Division, of Colliers International.12 We're a commercial and industrial real13 estate brokerage firm. Our office covers14 the eight-county Philadelphia15 metropolitan region, which includes all16 of Southeastern Pennsylvania, Southern17 New Jersey and the State of Delaware.18 Since word of this recent19 change has started to spread, many of the20 companies that I work with are now21 considering this new cost in their22 relocation plans.23 For example, I am currently24 working with one company that is25 92 2/8/11 - TRANSPORTATION - RES. 1008141 considering expanding their current2 60,000 square foot distribution facility3 in Philadelphia, but because of the new4 stormwater charge, they have asked me to5 show them buildings in South Jersey.6 Another Philadelphia-located7 client with about 100 employees is8 seeking to relocate to more efficient9 space for their distribution needs, and10 they have asked me to explore Bucks11 County and South Jersey, specifically12 citing the new stormwater charge as,13 quote, one more reason, close quote.14 Bucks, Montgomery, Delaware,15 Chester, Gloucester, Camden and16 Burlington Counties are all part of the17 commercial and industrial hub that is18 anchored by Philadelphia County, and none19 of these counties, to my knowledge, has20 made this change in stormwater billing.21 This has created an imbalance and one22 more reason for companies to choose the23 suburbs over the City. And you can be24 sure the surrounding counties will use25 93 2/8/11 - TRANSPORTATION - RES. 1008141 this against Philadelphia as one more2 reason for them to win the job creation3 battle.4 There were countless5 transactions made over the years, sales,6 leases, their related mortgages. All of7 these were underwritten, which were all8 put into place with a particular set of9 assumptions about the economics of the10 particular property. The new method of11 charging for stormwater runoff changes12 these economics, which will have a ripple13 effect on many levels. This is clearly14 an additional operating cost, and any15 additional operating cost reduces the16 valuation of the underlying property.17 Many industrial buildings in18 the City of Philadelphia are older, inner19 city facilities with physical20 limitations. Many of these buildings21 have no extra ground, and the buildings22 and their parking lots cover corner to23 corner. While real estate taxes can rise24 and fall based on economic-based25 94 2/8/11 - TRANSPORTATION - RES. 1008141 valuation, the traditional concept of2 utilities can be controlled by usage.3 Stormwater runoff is not economically4 controllable for many of these older5 inner city properties.6 It was recently reported that7 sprinkler systems may be required in new8 residential construction. While this is9 certain to reduce the risk of fires and10 save lives and reduce property damage,11 obviously the policymakers recognized12 that it would not be economically13 feasible to install them in existing14 structures, and they will be15 grandfathered in. Another example is the16 Americans with Disabilities Act. Items17 like ramps and accessible bathrooms are18 required in new commercial and industrial19 construction and renovations. Again,20 policymakers recognized that it is not21 economically feasible to install these22 items in pre-existing structures, and23 they are grandfathered in.24 In my opinion, existing25 95 2/8/11 - TRANSPORTATION - RES. 1008141 commercial and industrial buildings2 should be grandfathered in, and3 stormwater management should be applied4 to new construction and to significant5 additions to existing construction, where6 feasible. In this way, the economics of7 change will be factored into the system8 going forward, and gradually the City9 will improve stormwater management as we10 grow over time.11 Any questions?12

No. I13 thought you were taking a pause. No.14 Thank you for your testimony.15

Thank you, Rich.16 Next speaker is David Wolf of17 Wolf Investments. He is the biggest18 loser.19

What a title.20

One of the21 things I've learned in government, when22 you have winners and losers, we all lose.23

I'm going to go into24 the winners and losers, Mr. Chairman.25 96 2/8/11 - TRANSPORTATION - RES. 1008141 Mr. Chairman, thank you, and members of2 the Transportation and Public Utility3 Commission. Thank you for the4 opportunity to speak with you.5 I see a friend up there now,6 Councilman O'Neill.7

Let the8 record reflect Councilman O'Neill has9 joined the Committee.10

I'm so happy to have11 this opportunity to speak after the Water12 Department, because I think of this room13 as a big balloon filled with water and14 I'm the guy with the bow and arrow and15 I'm going to shoot holes in it, but16 unfortunately I didn't bring umbrellas.17 So everybody is going to have to deal18 with the fallout, and there's a lot of19 fallout here. So I would like all of the20 people that are losers to please stand21 up.22 (Some audience members23 standing.)24

I'm a loser 15 times25 97 2/8/11 - TRANSPORTATION - RES. 1008141 over, 15 times. 2 The Water Department did not say and did3 not give an answer to the way water4 billing used to be done. 7 So if you had a great big pipe coming8 into your building that has to go 509 stories up, it might cost you $5,000 per10 month, I used to call it, for the11 privilege of having this big service, and12 that's how stormwater has historically13 been paid. 18 Now, we know by the City's own19 admission that in 1996 they started20 talking about changing the system to one21 where it deals with roofs and square22 footage and blacktop and taking it away23 from those people that have had the24 significant burden previously. Of25 98 2/8/11 - TRANSPORTATION - RES. 1008141 course, the people that have the2 significant burden are those people that3 may be renting buildings for $50 a square4 foot or $20 a square foot. We rent our5 buildings for $3 a square foot or $4 a6 square foot. 8 On the presentation that I gave9 to you, I listed probably about 2010 properties. 11 2005 Market Street currently pays $4,55012 per month. Their rate will go down to13 $598 per month. 1835 Market Street14 currently pays $2,277 a month. Their15 rate will go down to $267 a month. 18 I've been a property owner now19 for over 20 years. No one during that20 period of time has told me anything about21 stormwater management. If they had, if I22 think I'm a smart businessman, I would23 have taken steps. Every time I did some24 blacktop work and spent $20,000 or25 99 2/8/11 - TRANSPORTATION - RES. 1008141 $30,000 for that blacktop work, we would2 have done it differently so that we could3 make changes to deal with stormwater4 management. 5 In the year 2006, contrary to6 what we had always done before, we built7 two buildings totalling 44,000 square8 feet. The Water Department held us up in9 terms of stormwater management how they10 wanted us to fit out the space for 1811 months, and ultimately it cost us12 $200,000 so that we could deal with about13 100,000 square feet of parking and 44,00014 square feet of building space. Now --15 this was 2006 -- I have an adjoining16 170,000 square foot building that I could17 have retrofitted if someone had said to18 me, Mr. 25 100 2/8/11 - TRANSPORTATION - RES. 1008141 When I went to the first meeting from the2 Water Department, I asked if anything was3 in place. They had now been studying4 this since 1996. I asked them if5 anything was in place for people to6 borrow money at a lower interest rate,7 and that was in February or March of8 2010, and there was nothing in place to9 help us. 15 And I said, That's great. And16 of course, what was the first question17 out of my mouth? 21 And I said, Well, that's going22 to take care of me, my companies. What23 about everybody else? And I think the24 City has not -- pardon me. Water25 101 2/8/11 - TRANSPORTATION - RES. 4 So I believe, if I backtrack5 the numbers from my company to everybody6 else that's at risk, the number isn't 57 million, it's not 50 million, it's not8 500 million. It's $5 billion of cost, $59 billion. And they have 5 million. 11 The cost to Wolf Investment is12 $400,000 at the end -- or in July 2013,13 per year. 21 This is the list of the thousand biggest22 losers. The pink people is the City of23 Philadelphia. So we can go page after24 page after page of pink things, and this25 102 2/8/11 - TRANSPORTATION - RES. 1008141 is just the top thousand. 3 For the School District of Philadelphia,4 it's 625,000. That's just skimming the5 top thousand. 8 The Water Department says,9 Well, it comes out even when we're all10 done. Well, most of those people are11 under water. When I asked Joanne about12 the City being part of the top thousand13 losers, she said, Well, we haven't14 figured out how much we're going to be15 able to mitigate that and how much is16 parks. But this is supposed to be17 revenue neutral. If I've heard it once,18 I've heard it a hundred times.

This is19 not revenue neutral, because if the City20 has to take out of one pocket and give21 the Water Department, that means it's not22 getting money from somebody else. 25 103 2/8/11 - TRANSPORTATION - RES. 1008141 I have buildings that have one2 drain. My sewage, water and my3 stormwater are all in one pipe. Those4 buildings are almost impossible to5 retrofit. We have to go inside the6 building. We have to divert drains. We7 have to find a way to send the water8 somewhere else. We have to hold the9 water. We have to hold that first inch10 of water. 11 So I suggested to the Water Department,12 Well, I have six acres in Northeast13 Philadelphia and it's just sitting there,14 and we have the Byberry Creek that runs15 by. 19 I paid in 2009 to the City of20 Philadelphia $342,000 in real estate21 taxes, $167,000 in business use and22 occupancy tax, $80,000 in net profits23 tax, and 17,000 in business privilege24 tax. Six hundred and seven thousand25 104 2/8/11 - TRANSPORTATION - RES. 1008141 dollars. And I think for $607,000 I2 would get something back. Well, one of3 the things that I think I should get back4 is the streets, but the streets, some5 little fairy came by and said the streets6 are exempt. They're not part of the7 stormwater system. And the City -- no8 one pays for the streets. I have to pay9 for the streets. You have to pay for the10 streets. 12 This is a plan that is13 inequitable, unfair, deceptive and14 non-transparent from the beginning. They15 could have told us 15 years ago they were16 going to do this, and now they gave us17 three months' notice and we're already18 implemented 25 percent. So I have things19 that went from $115 now to $1,500 as the20 first 25 percent. 22 What can the City do to -- I23 have -- backtracking for a second. I24 have submitted to you a copy of the plans25 105 2/8/11 - TRANSPORTATION - RES. 1008141 that show some of the deception that the2 City gave us, and everybody got this in3 the mail, and this is how we first4 learned about stormwater management. 9

We heard10 about it.11

We have the best12 kennel in the City of Philadelphia. I13 invite everyone from City Council to come14 and visit it. It's fantastic. We see15 more greyhounds in surgery than anywhere16 in the world.17

What I'd18 like you to do, Mr. Wolf, is summarize so19 that -- we have an ambitious amount of20 people that are interested in the21 subject, so...22

I have just one23 thing in conclusion, Mr. Chairman. The24 City can solve this with a more equitable25 106 2/8/11 - TRANSPORTATION - RES. 1008141 plan, which Atlanta has done, and2 basically the City pays for the3 stormwater management fees and has4 increased taxes proportionately for5 everyone. So I pay $400,000 in taxes. I6 will pay more proportionately than7 somebody that pays $150 or $200 in taxes,8 but I am not walking over hot coals. So9 this would be a way to do it instead of10 taking a club and hammering down people11 who can ill afford to pay these charges.12 Thank you for your time.13

Thank you14 for your testimony. I'm going to begin15 with -- we'll hold questions. Would you16 like to make a statement, Councilman17 O'Neill?18

Just a19 couple of observations. One, the Water20 Department or the Water Commissioner,21 because he makes the final decisions, I22 believe made a grave mistake in this, but23 it's a mistake that they're allowed to24 make under the City Charter,25 107 2/8/11 - TRANSPORTATION - RES. 1008141 unfortunately. One, this is not a bad2 concept, neither was the American for3 Disabilities Act a bad concept, but what4 Washington did -- and they're not exactly5 known for getting it right -- they6 decided that the cost of implementing7 those ramps and other things that were8 required under the Act would only be9 triggered with new construction or major10 renovation, so that anybody that was11 playing by the rules up to that point12 would not be penalized. Going forward,13 there was a clear understanding.14 The ADA was a perfect model for15 this that wasn't used. Now, granted,16 that would take a very long time to17 implement this if that happened. The18 alternative -- and I'm not saying that19 what you're talking about, more20 equitable, spread it over taxpayers21 instead of ratepayers, isn't something22 worth considering or shouldn't have23 been -- should have been considered, but24 the four-year phase-in with the cost, the25 108 2/8/11 - TRANSPORTATION - RES. 1008141 real cost, to some property owners versus2 others being so much higher probably3 should have been a 20- or 25-year4 phase-in. And I don't know if that can5 still be considered.6 Chairman Jones mentioned even7 if it's done another way and the cost8 increase could be no more than a certain9 amount until you hit. You might go do10 that in five years if it were ten11 percent, and that's the number that was12 just thrown out, or it may take you 3013 years to have that happen, but it's14 something manageable, especially while15 the Water Department's educating and16 partnering with the kind of things they17 are doing. I mean, Joanne didn't make18 this decision. She works for the Water19 Department. I can't imagine anybody20 being better at trying to help people21 within the framework of what we're22 dealing with and explaining it, caring,23 trying to help.24 But the question is, can the25 109 2/8/11 - TRANSPORTATION - RES. 1008141 Water Department reconsider this in some2 way, shape or fashion that is more3 palatable and more -- less anti-business,4 I guess is the best way of saying it.5 You know you're going to hurt somebody6 any time you give them an increase, but7 do you want to destroy them, and in8 certain cases, the increases are so high9 that you're going way beyond just hurting10 them a little bit. As you said, all the11 mitigation in the world isn't going to12 help some properties.13 But when you follow their14 theory, you at least understand where15 they're going. They make that very16 clear. The question is, how do you get17 from here to there, and I think in that,18 there wasn't enough conversation with19 stakeholders.20 Thank you.21

Thank you,22 Councilman.23

Thank you,24 Councilman. I think that's the whole25 110 2/8/11 - TRANSPORTATION - RES. 1008141 issue here, is when we leave today, where2 do we go from here? I mean, I still have3 to write a check next week for 4,000, or4 whatever the proportion amount is from my5 water bill, and every time I do it, it6 makes me sick to my stomach, because it's7 not fair. And that's all we're asking.8 That's why businessmen have taken the9 time to come here out of their precious10 days to let you know that.11 Now, what we need to do is,12 where are we going to go from here?13 We just have a couple more14 people.15

Come on. We16 work for you.17 I've kind of lost track after18 Mr. Wolf. So state your name for the19 record and begin your testimony, please.20

My name is Arty21 Elgart. I'm a Philadelphian and a22 wholesale owner of supply business. 24 We employ 85 employees. We have 8525 111 2/8/11 - TRANSPORTATION - RES. 3 I've been there for 20-some years and4 more recently in my new building for the5 last ten years. 19 At one time while I lived in The20 Philadelphian, which is the apartment21 house just adjacent from the Art Museum,22 I lived there for a bunch of years. And23 eventually at one point in time I was24 asked to join the Board, and I was on the25 112 2/8/11 - TRANSPORTATION - RES. 1008141 Board. I ran for office and I was on the2 Board there. We had a problem, not just3 The Philadelphian, but 2601, The4 Philadelphian, the Parkway House and all5 the other towers all over the City, and6 the problem was that when they built all7 these buildings in, I believe, the 1940s8 or '50s the 2601 was built, the size of9 the water meter was extremely large,10 larger than what they needed to support11 the water usage in the building. The12 Philadelphian has 769 apartments. That's13 including office buildings on the first14 floor. 17 Again, you have an apartment house, you18 have a roof that's three sections, The19 Philadelphian, which faces the Art20 Museum, and the water on the roof -- we21 have a small roof, but we also have22 seven -- I guess closer to a thousand23 toilets. My building, I have 12 toilets,24 and in my building I have some urinals,25 113 2/8/11 - TRANSPORTATION - RES. 1008141 and that's all the water we use. My bill2 is $300-and-some a month. 4 But getting back to The5 Philadelphian, they complained and the6 homeowners -- not the homeowners, but the7 association for all the high rises and8 parking lots complained that they were9 paying too much money for water. The10 Water Department agreed and said, You're11 right, we have to kind of spread this12 out. Hence I believe that this was the13 beginning of this whole thing. This is14 what started it. And there was no15 thought. They did not let businessmen16 know. We were told that they spent17 $100,000 advertising, and Jack Kramer,18 who happened to run the deli, he owns no19 property that I know of in the City of20 Philadelphia. He rents. He's in the21 deli business. And he's the only one22 that showed up. One businessman. Yes,23 they called Rohm and Haas. 25 114 2/8/11 - TRANSPORTATION - RES. 1008141 They didn't call the businessman, the one2 who is going to get squeezed the most,3 the in-between guy, the wholesaler, the4 distributor. And that's what you have of5 people behind me. You have real estate6 people. And the water tax is what it's7 really called. They call it an8 assessment. 9 It's a tax. 10 It's also protected. If you11 look at the Sterling Act of 1932, check12 on . Okay? I've read it. It's13 illegal what they're doing. It is not14 legal to just tax people and not give15 them anything more for their taxes. Do16 something. Provide a service. Do17 something different. Do something18 different. If they're going to spend the19 money on the water system and change the20 sewers, the underground, the21 infrastructure, that's one thing. That's22 not what is happening. They're depending23 on the businessman. And no one has24 touched about the wages and the people in25 115 2/8/11 - TRANSPORTATION - RES. 8

Good morning. My9 name is Wesley Firkin. I'm the Property10 Manager for WTA Real Estate Management11 Company. I represent the Thackray family12 from Thackray Crane Rental. Thackray has13 been in Philadelphia for over 75 years.14 I'm sure if you've seen a Thackray crane15 before, you've seen it building the Linc,16 working on City Hall, putting up the17 Comcast building. I think you know what18 kind of service we provide for the City19 of Philadelphia. Extreme amount of20 loyalty as well.21 Our properties are industrial22 properties. Some are owner occupied,23 some tenant occupied. Our company and24 the majority of our tenants mostly25 116 2/8/11 - TRANSPORTATION - RES. 1008141 consist of businesses in the2 construction, property and auto repair3 and maintenance, and distribution4 industries, and we employ lower- to5 middle-income people, also known as6 blue-collar folks. We have jobs like7 crane operator, truck driver, mechanic,8 machinist, handler, secretary, processor9 and janitor. What we consider a big10 business may employ 50 to 100 people, and11 there are dozens of small businesses that12 employ only two or three people that only13 exist to provide services to these larger14 businesses.15 Over the past three years now,16 I've seen several of these small17 businesses, some of them our tenants that18 employ two to three, maybe up to even ten19 employees, go completely out of business20 or, in their words, flee the City of21 Philadelphia and move to Bucks County,22 Montgomery, Delaware, even New Jersey.23 I'm now dealing with the prospect of24 losing some of our larger business25 117 2/8/11 - TRANSPORTATION - RES. 1008141 tenants and customers of our own company.2 And just to even consider moving Thackray3 Crane Rental anywhere other than4 Philadelphia isn't even something I want5 to even discuss. That's a scary idea.6 Of the top 1,000 losers on this7 stormwater fee list, I manage five of8 those properties. Before the increase to9 the stormwater, the combined annual bills10 for these properties was about 14,000 per11 year. After this increase, just these12 five properties alone are going to equal13 163,000 per year. That's a 1,130 percent14 increase. This is an additional $148,00015 in operating expenses.16 The average annual increase for17 these five properties is about $30,00018 per year, a typical 40-hour job. Per19 week this is -- this equates to five20 jobs. Five jobs. That's what we're21 talking about. It breaks down to about22 $14 an hour. It's two times the minimum23 wage, when you look at these numbers.24 How do you make up this difference?25 118 2/8/11 - TRANSPORTATION - RES. 1008141 I want to use one quick2 example. Thackray Crane's headquarters,3 2071 Byberry Road, right now our PWD bill4 is about $2,700 per year. That's going5 to now become $35,000 per year. That's a6 1,285 percent increase over four years.7 That's kind of tough to swallow.8 Compare a $32,000 increase in9 the stormwater fees for this one property10 to our real estate taxes in 2010, which11 were about 58,000, these stormwater fees12 are the equivalent of a 55 percent real13 estate tax increase. Why not just raise14 our real estate taxes 55 percent over the15 next four years? Try that on. Try that.16 Try running on that or presenting that to17 the public. Since the real estate taxes18 have already been increased ten percent19 for 2011, that's only 15 percent per year20 more for the next three years.21 I've spent an entire year22 trying to research this and get a handle23 on it. So one quick suggestion before we24 can -- why not freeze the increase at 2525 119 2/8/11 - TRANSPORTATION - RES. 1008141 percent right now. Just freeze it until2 we can figure this out.3 That's all I have to say.4 Thank you.5 (Applause.)6

Thank you7 for your testimony.8 Can we call the next panel, or9 do we have some more from this panel?10

That's it.11

Thank you12 sincerely for your testimony.13

Thank you. We14 leave it in your hands. We're not going15 to let this go, because we can't, and we16 can't afford to. So we really hope and17 pray that you guys will take care of us.18

We are19 taking this seriously, the members of the20 Committee and the Administration. You21 know, believe it or not, it's in our best22 interest to keep you in the City and be23 competitive with the surrounding counties24 and to make sure that you employ people25 120 2/8/11 - TRANSPORTATION - RES. 1008141 and, God forbid, pay a tax or two. So2 we're going to take this into3 consideration and work with the4 Commissioner and the Administration to5 figure this thing out. All right?6

Thank you.7

Thank you8 for your time and taking the time off9 today.10 Can the Clerk introduce the11 next panel.12

Joe Starosta, Alex13 Grella, Michael Chapman and Kenneth14 Curry.15 (Witnesses approached witness16 table.)17

Thank you,18 gentlemen. We're going to move right19 along. If you could just decide who is20 going first. State your name for the21 record.22

My name is Joe23 Starosta.24

Could you25 121 2/8/11 - TRANSPORTATION - RES. 1008141 spell that, Joe?2

S-T-A-R-O-S-T-A.3 I'm the Vice-President of Plant4 Operations for Case Paper Company.5

Which is6 located?7

It's in the 7th8 District on Tioga Street.9 Case Paper Company occupies two10 buildings with nearly 600,000 square feet11 of roof area, located on Tioga Street in12 the 7th District. We have been at this13 facility for 25 years as a paper14 converter and distributor, employing 15015 union and salaried employees who enjoy16 good manufacturing wages, company-paid17 medical, dental and pension benefits. We18 operate our own union trucking fleet and19 have customers all over the United States20 and Canada. We even export outside North21 America from time to time and are proud22 that we contract out very, very little23 work. While our sales volume is very24 large with approximately 9,000 truck25 122 2/8/11 - TRANSPORTATION - RES. 1008141 loads shipped out of the facility every2 year, regretfully paper is sold in3 pennies per pound. The margins in this4 industry are tight, and nearly all of our5 customers are somewhere other than6 Philadelphia. All of our competitors are7 located outside of Philadelphia.8 Just over 11 years ago, Case9 Paper had decided to move outside of10 Philadelphia into Bucks County. This11 would get us closer to New York, which12 was our prime market at the time. Land13 was purchased and plans were drawn up for14 a new building. It seemed like we were15 going to follow Roosevelt Paper, one of16 our closest competitors, who moved out of17 Philadelphia for New Jersey a few years18 before. Through the hard work of members19 of Philadelphia government, including20 then Mayor Rendell, and owners of Case21 Paper, we found a way to stay. Since22 that time, we have invested well over $2523 million in repairing a building that is24 falling apart while modernizing our25 123 2/8/11 - TRANSPORTATION - RES. 1008141 equipment. We recently spent just under2 $1 million to replace one-third of one of3 our building's roofs.4 Right now I am pleased to say5 Case Paper is competitive in a very tough6 market because of the investments we made7 in modernizing our equipment. In 2010,8 we were able to add four employees to our9 payroll and essentially eliminated10 contracting out of any of our11 manufacturing work. Frankly, had we not12 invested, I don't see how we would be13 here talking to you today as employees of14 Case Paper.15

Excuse me.16 Gentlemen, could you take your17 conversation outside. Thank you.18

I will be19 candid, though. The future will be a20 challenge. We compete with companies who21 are located closer to our customers, do22 not pay union wages, contract out all of23 their manufacturing and are foreign based24 while subsidized by their government. At25 124 2/8/11 - TRANSPORTATION - RES. 1008141 the same time, we recognize that labor,2 pension, medical and trucking costs,3 which are a significant part of our4 business costs, are not going to stand5 still.6 We respectfully request that7 Councilmembers reconsider the addition of8 the stormwater charges. This will allow9 us to continue to focus on making added10 value investments to our business.11 Thank you.12

Thank you.13 We're going to have to try to14 be persuasive, because we can't make the15 decision. If we could change it, I think16 it would have been changed already. The17 Charter is clear on that. And hopefully18 with the Deputy Mayor and the new Water19 Commissioner here, we can have a20 conversation about that and maybe we'll21 go in the right direction.22 Thank you.23

Good afternoon24 and thank you. My name is Michael25 125 2/8/11 - TRANSPORTATION - RES. 1008141 Chapman from Chapman Auto Group. I2 represent myself with three locations in3 the City of Philadelphia, as well as the4 Auto Dealers Association of Greater5 Philadelphia.6 ADA, the Auto Dealers7 Association of Philadelphia, is a8 regional organization of 179 new car9 dealerships. We have less than 20 in the10 City of Philadelphia today. We employ11 about a thousand individuals, most of12 whom live in the City. These dealers13 represent significant tax revenues for14 City government, specifically City wage15 tax, close to $2 million, business taxes,16 more than a million and a half, as well17 as sales tax generated for 700 million in18 sales for the state.19 It is no secret that the20 current recession has hurt the auto21 industry especially hard. Just a year22 ago, dealers first started hearing about23 this new fee structure through an insert24 in our water bills. So when we learned25 126 2/8/11 - TRANSPORTATION - RES. 1008141 our bills might increase by hundreds of2 thousands of dollars, we immediately3 requested a meeting with the Water4 Department last March. We were told that5 we had been -- that they had been working6 on the new system for over a decade,7 resulting in regulations being put in8 place in 2009. At no point did it occur9 to anyone to reach out to the auto10 dealers, despite their literature11 frequently citing our industry as one of12 the most negatively impacted by their13 proposal.14 We as an industry were15 disappointed that the Water Department16 did not appear to be concerned about17 their actions' impact on struggling18 businesses. So we turned to Council19 President Verna, who coordinated a20 meeting and urged that some type of21 financial assistance program be created22 to help businesses implement stormwater23 improvements. In June, we were told such24 an incentive program would indeed be25 127 2/8/11 - TRANSPORTATION - RES. 1008141 created, but we received our new bills in2 July without any new details. In3 November, a program did appear, and it4 turns out that the PIDC does not feel the5 auto dealers would qualify for their6 assistance.7 Just a point, they were8 offering up $5 million. The impact if9 all the auto dealers were to comply so10 they would have zero increase would be11 over $22 million.12 The ADA wants to support the13 sustainability efforts of the Nutter14 Administration, but we do not support the15 idea that businesses on whom the most16 rain falls must be the ones penalized.17 This proposal will increase rates on many18 of our dealers tenfold. On top of this19 Administration's recent property and20 sales tax increases, many dealers in the21 City are fearful for their ability to22 stay in operation.23 We understand that the state24 mandated that the City create a25 128 2/8/11 - TRANSPORTATION - RES. 1008141 stormwater management plan, but we also2 heard that the state DEP has given3 extension to other cities and counties4 across the state in order to prepare for5 the impact. We ask that City Council6 push the Water Department in requesting7 an extension, and we also ask that City8 Council instruct PIDC to improve the9 incentive program so that businesses will10 be able to utilize it to improve their11 stormwater management while surviving12 these increased fees.13 Several decades ago most of our14 dealerships were located within the City,15 but today the vast majority of these16 dealerships have closed or moved to the17 suburbs. Various City policies over18 those decades helped accelerate that19 exodus, and I ask that you not increase20 the burden on the dealers that have21 chosen to stay in Philadelphia.22 Thank you very much.23

Thank you.24 Please begin your testimony.25 129 2/8/11 - TRANSPORTATION - RES. 1008141

Good afternoon,2 Chairman Jones, Councilman O'Neill. My3 name is Alex Grella. 11 I am on the executive committee12 for Building Owners and Managers13 Association of Philadelphia, commonly14 known as BOMA. For a point of reference,15 BOMA Philadelphia is a non-profit16 organization whose members provide over17 117 million square feet of workspace in18 and around the tri-state area. In the19 City of Philadelphia alone, BOMA member20 buildings provide approximately 4421 million square feet of office space for22 over 200,000 building occupants and23 employees. Our member buildings define24 the skyline and are a tremendous economic25 130 2/8/11 - TRANSPORTATION - RES. 2 BOMA and its member buildings3 have long supported the implementation of4 a parcel-based stormwater fee structure5 that is currently being phased in by the6 Philadelphia Water Department. 13 Under the previously imposed14 meter-based billing scheme, we might well15 ask, How does the size of a water meter16 correlate to a property's contribution to17 stormwater? The short answer is, There18 is no correlation. For example, we offer19 a 32-story high rise which would20 typically occupy a parcel of21 approximately 25,000 to 35,000 square22 feet of impervious surface. This same23 property would be served by a three-inch24 meter and often, for redundancy purposes,25 131 2/8/11 - TRANSPORTATION - RES. 1008141 a second meter of equal size would be2 installed. For two three-inch meters the3 cost for stormwater management would be4 approximately $1,365 a month, or $16,3765 a year. 13 We would also consider a car14 dealership occupying approximately15 152,000 square feet having two restrooms16 and a few hose connections being fed by a17 single one-inch meter. They would pay18 $116 per month, or $1,387 per year for19 its stormwater contribution. 22 As these examples clearly23 demonstrate, those properties occupying24 the least amount of impervious surface25 132 2/8/11 - TRANSPORTATION - RES. 9 From our perspective, our members should10 not be required to shoulder the burden11 and subsidize those who are not paying12 their fair share. 21 We recognize that whenever22 there is a change in the system, there is23 some adjustment required for all parties24 involved. Those who pay the lower rate25 133 2/8/11 - TRANSPORTATION - RES. 1008141 under the meter-based system will2 presumably be paying a higher rate under3 the parcel-based system. 7 BOMA endorses the suggestion8 that the City's stormwater runoff and9 sewage system be made more efficient so10 that the City's businessowners and11 residents alike will benefit from a12 cleaner city. 21

I just22 have a question. I understand what23 you're saying. There's winners and24 losers, and your people are winners25 134 2/8/11 - TRANSPORTATION - RES. 1008141 because they've been losers. I mean, if2 you reverse it.3 The question of implementation4 and phase-in and all that I think are5 different issues that mostly have been6 discussed today and fairness going in7 that regard, but there's another issue.8 Is the Commissioner still here?9

He's here.10 Will you please come back up.11

It's not12 before us, but, Commissioner, you might13 as well comment on it.14 Sixty percent of this city15 still lives in the pre-1945 world of16 combined systems, the older parts of the17 City. Newer parts built since about 194518 or so are in separate systems, separate19 pipe coming in and out for water and a20 separate pipe for sewage. So that if you21 live in a combined area or your building22 is in a combined area -- and most high23 rises are in combined areas because24 they're nearer to Center City -- all your25 135 2/8/11 - TRANSPORTATION - RES. 1008141 water, in addition to all your sewage, is2 very expensively treated at the water3 treatment plants. Separate systems, very4 efficient. Their water goes out to the5 creeks and tributaries and eventually the6 river, and only their sewage is treated.7 That's number one.8 Number two -- and that's not9 treated that way. We're not billed10 accordingly. There's no lower bill for11 separate systems than there are for12 combined systems.13 Secondly, the gentleman who was14 here -- and I believe he left --15 mentioned that his business has 1316 toilets and where he used to live has17 1,300. I don't think there's any sewage18 volume bill in place or has ever been.19 I've never heard of it anyway. But20 certainly in fairness and equity, if21 somebody had 1,300 toilets and somebody22 had one toilet, you'd think that23 something is wrong with this program if24 that's not fairly split up between the25 136 2/8/11 - TRANSPORTATION - RES. 1008141 one and the 1,300. And I don't think it2 is.3 So you're saying your industry4 would be in favor of tackling the sewage5 system the same way we're tackling6 stormwater, by drilling down as far as we7 could to see how we can more equitably8 charge those producing the sewage and9 sending water into the treatment plants10 more than the people who don't have much11 sewage and are taking their water and12 sending it through a separate system13 directly, not to the treatment plant but14 directly to the streams and eventually15 the river. And you don't have to answer16 that, but I want to ask the Commissioner,17 first of all, if he's heard anything18 worthwhile today, new -- I know you're19 not new at the Water Department, but new20 on the block in this position. It's one21 thing to do things in a capsule -- and22 oftentimes in our offices, statistically23 everything is working out well, we know24 we're being fair to this group and that's25 137 2/8/11 - TRANSPORTATION - RES. 1008141 going to cost this group, but it's still2 fair. And those issues that the Chairman3 mentioned and that others have mentioned4 dealing with, wow, did you really think5 through 14,000 to 160,000 and the6 Thackray example for five buildings and7 the others that have been mentioned?8 But, first, if you could talk about9 the -- is there any plans to keep trying10 to be as fair as possible and getting11 into the sewage costs, which are12 enormous? Sewage treatment, that is.13 COMMISSIONER NEUKRUG: First of14 all, in terms of the sewage treatment,15 there is a wastewater sewer bill. That's16 separate from the stormwater bill, and17 we're very careful about separating those18 two.19 In terms of the stormwater20 costs, we recognize that there are21 different types of treatment for22 stormwater in a separate system than in a23 combined system, but the reality is is24 that there are significant costs25 138 2/8/11 - TRANSPORTATION - RES. 1008141 associated with all stormwater, and as a2 matter of fact, much of our program is3 based upon looking at stormwater4 similarly throughout the City and5 managing stormwater on the land before it6 gets into our sewer system.7 So there are significant costs8 associated with different parts of our9 programs. Some are unique to stormwater,10 some are unique to combined sewer11 systems, but all in all, it seems to12 measure out.13

Well, you14 agree that it costs you more to treat15 water that didn't need treating at the16 sewage treatment plants for 60 percent of17 our customers than the other 40 percent18 who have separate systems and only send19 sewage there?20 COMMISSIONER NEUKRUG: Only if21 you're only looking at the cost of22 treating the rainwater at the sewage23 treatment plant, which, of course, is an24 expense, but also our programs involve25 139 2/8/11 - TRANSPORTATION - RES. 1008141 defective lateral systems, which are2 unique to the separate system. We're3 looking at our rivers and streams, like4 the Poquessing and the Pennypack, and5 you're looking at issues there. So there6 are a significant level of costs. And if7 you look at any one spot in the world,8 there would be unique circumstances9 dealing with the water, wastewater and10 stormwater issues.11

Right, but12 I just want to know if the Water13 Department is also working on the14 inequities involved. You're never going15 to convince me that sending that water16 that doesn't have to be sent to the water17 treatment plant and as expensive as water18 treatment is, that there's not a19 different cost. I don't care if it's not20 double, if it's a minor cost. Is anybody21 looking at, hey, we're going to start22 doing this in an equitable way? That's23 the first question.24 COMMISSIONER NEUKRUG: And to25 140 2/8/11 - TRANSPORTATION - RES. 1008141 answer that first question, I believe2 that we've been looking at how to do this3 most equitably, and I believe that we4 have found this equitable balance here5 between stormwater and wastewater. There6 are other factors such as I&I,7 infiltration and inflow, into a separate8 system that -- a sanitary system that9 does go to the wastewater treatment plant10 also. So it is a very -- it's a much11 more complicated discussion than perhaps12 right here.13

I would14 agree on that, but I've never heard that15 combined systems don't cost more because16 of the treatment of things that don't17 have to be -- of product that doesn't18 have to be treated than separate systems,19 which may not be cost free on the water20 side, but we're not sending them to --21 COMMISSIONER NEUKRUG: And22 whose costs are going to go up in the23 near future because of new regulations on24 the stormwater system being put together25 141 2/8/11 - TRANSPORTATION - RES. 1008141 by EPA. So we are looking -- it is a2 balancing act, and perhaps I can say I3 should get back to you before I --4

Okay.5 Now, the real question is -- because it6 came up today, and I think the gentleman7 was making a point. He may not have8 stayed, but I'd like to know whether9 he -- give me the 1,300 toilets versus10 the 13, or whatever it was. Are they11 equally charged for the amount of sewage12 they produce that has to be treated?13 COMMISSIONER NEUKRUG: Yes,14 they are.15

How do you16 do that?17 COMMISSIONER NEUKRUG: We do18 that through the usage of the water19 measured by the water meter.20

Okay.21 COMMISSIONER NEUKRUG: The22 assumption is that some percentage, some23 very high percentage, of all the water24 that's consumed in the water meter also25 142 2/8/11 - TRANSPORTATION - RES. 1008141 goes through the toilets and other2 apparatus in the homes and businesses.3

Well,4 thank you. If I see him again, I'll tell5 him about that, because I had not thought6 that through.7 The last thing is, I'm not8 going to argue that what you're trying to9 do isn't equitable in the long run. If10 we could have a magic wand and it didn't11 cost anybody anything, winners and12 losers, it was small amounts going here13 and small amounts coming from there, but14 these are fairly enormous amounts. Do15 you have any intention to review this as16 to whether there's any way you can soften17 the blow?18 COMMISSIONER NEUKRUG: Well,19 first let me agree with you and I think20 you make a very good point and I think21 it's been well heard here today, and I22 think the people at Philly Water have23 understood this for a while, this idea24 that, yes, it's a good idea, what we're25 143 2/8/11 - TRANSPORTATION - RES. 1008141 doing seems to be fair and appropriate2 and cost neutral, but there are a heck of3 a lot of people out here, who we've4 witnessed today, who are going to be in5 trouble with this new rate.6

And they7 all played by the rules and the rules8 changed.9 COMMISSIONER NEUKRUG: And we10 want to work with them. We feel like we11 have been working with them, but clearly12 from the sentiment I heard here today,13 we're going to have to double our efforts14 and try even harder. The problem is is15 that someone in the City of Philadelphia16 is going to have to pay the stormwater17 bill. So for every dollar we don't18 collect from the true cost of service19 analysis goes somewhere else, either to20 another business or to a homeowner.21

Right.22 COMMISSIONER NEUKRUG: So23 that's the balancing that we're doing24 here.25 144 2/8/11 - TRANSPORTATION - RES. 1008141 So we want to help as best we2 can, but we have to recognize that we are3 a utility that doesn't print money like4 you guys -- like the City of Philadelphia5 doesn't, and we need to have a balanced6 budget at the end of the day. So the 1207 million is what we need to bring back in,8 and we need to find a way to do that9 equitably and to provide the least amount10 of pain as possible to all our good11 customers.12

I'd love13 to work with you on that, and I want to14 reemphasize that you could not have a15 better staff out on the street trying16 to -- they can't change this system17 that's in place right now. You can, but18 they can't. But given that, they19 couldn't be trying to be more helpful.20 They have really worked hard.21 Thank you.22 COMMISSIONER NEUKRUG: Thank23 you.24

Thank you,25 145 2/8/11 - TRANSPORTATION - RES. 1008141 Councilman.2 Before you go, this loan3 program is strictly for businesses?4 COMMISSIONER NEUKRUG: Yes, it5 is.6

So let me7 get this -- you weren't here, but I get8 to give that presentation to your9 predecessor on Thursday for his years of10 service. But do you not recall me asking11 for the same program for laterals for12 residential customers? Do you not13 remember me asking to have the dual14 lateral problem and having these kinds of15 special programs?16 COMMISSIONER NEUKRUG: Well,17 regardless of -- I trust that the answer18 is, yes, you did ask. I was not here for19 that, but I'd be happy to relook at that.20

All right.21 Thank you for your time.22

I'll23 definitely be in that discussion. That's24 been going on for 20 years.25 146 2/8/11 - TRANSPORTATION - RES. 1008141

As a matter2 of fact, I got the idea from you.3

Okay.4 Thank you.5

Thank you so6 much.7 Are there any other folk here8 to testify? Okay.9 Thank you. We're winding down.10

Yes. I'll make it11 short and sweet, I hope.12 My name is Ken Curry and I'm13 Director of Facilities with Cardone14 Industries. With me today somewhere in15 here is Brian Preski. He's esquire on16 behalf of Cardone as well. We appreciate17 the opportunity to express some of our18 concerns here with respect to the19 additional fees imposed upon businesses20 such as ours by the PWD implementation of21 new stormwater runoff fees.22 Given the stated reason for the23 implementation of this new fee and the24 environmental stewardship that it hopes25 147 2/8/11 - TRANSPORTATION - RES. 1008141 to foster, I can tell you that the very2 nature of Cardone's business is an3 environmentally conscious model. Cardone4 restores used automotive parts back to5 their original equipment quality using6 only about 15 percent of the energy7 needed to build a new part. These parts8 would otherwise end up in a landfill or9 scrapped for their raw material value.10 Cardone Industries was awarded the11 Governor's Award for Environmental12 Excellence in 2003 and 2007.13 The remanufacturing of used14 parts is not the only area in which15 Cardone is environmentally friendly. In16 addition to the 60,000 tons of discarded17 or non-usable auto parts that Cardone18 remanufactured, the company also recycled19 the waste and by-products generated20 during the remanufacturing process.21 Eight thousand five hundred tons of scrap22 metal, 6,800 tons of cardboard, 2,50023 tons of municipal waste were recycled24 into electrical energy, the equivalent of25 148 2/8/11 - TRANSPORTATION - RES. 1008141 approximately 1.8 million kilowatt hours.2 Fifty-three thousand gallons of waste oil3 recovered from cores and cleaning4 processes were recycled into fuel. Seven5 hundred and twelve tons of wood skids6 were sent to a recycler and reused, and7 the list goes on and on.8 Simply put, I am here to relay9 a very simple message. Cardone employs10 over 4,000 Philadelphians. We are part11 of the neighborhood and have made every12 effort in recent to stay a viable company13 in the face of competition from Mexico,14 India and China. That has made us very15 cost conscious, not only for the company16 but for the people that we employ.17 Cardone has become more than18 just an employer. We have endeavored to19 become interwoven into the community in20 which our facilities are located. We21 have opened a healthcare facility on site22 for our employees, and just recently, we23 also even plowed the streets around our24 buildings in Philadelphia to relieve the25 149 2/8/11 - TRANSPORTATION - RES. 1008141 load off of the City.2 That being said, these3 excessive charges will have a negative4 effect upon our ability to continue to5 conduct business in Philadelphia. As you6 are aware, our current fee is based on7 water meter, but will change to be based8 on property size and area of the property9 that are impervious, such as asphalt,10 building, concrete, et cetera. We have11 calculated the potential cost to Cardone12 and we believe that this additional cost13 will impact Cardone for an estimated14 $410,000 a year.15 We must be cognizant of these16 additional charges and the impact they17 have upon our business and our ability to18 continue in the face of the international19 competition that seeks to undercut our20 prices. We ask you for your help in21 getting relief from these fees.22 Thank you for the opportunity23 to speak here today.24

And thank25 150 2/8/11 - TRANSPORTATION - RES. 1008141 you for your environmental stewardship.2 That was impressive by way -- and I think3 understated a lot of times how companies4 are beginning to evolve, one, because of5 social consciousness, but also it impacts6 their bottom line to reduce, reuse and7 recycle. So it makes a lot of sense.8

Sure.9

I remember10 when you were our largest private11 employer and you had about 1,700. So12 4,000 is really a great story as well.13

Thank you.14

As is your15 business model. Thank you.16

Thank you17 for your testimony.18

Thank you very19 much.20

Clerk, would21 you read the next panel.22

Citizens for23 Pennsylvania's Future, PennFuture, and24 Pennsylvania Environmental Council.25 151 2/8/11 - TRANSPORTATION - RES. 1008141 (Witnesses approached witness2 table.)3

Thank you.4 State your name for the record and you5 can begin your testimony.6

Good afternoon.7 I'm Patrick Starr. I'm Senior8 Vice-President of the Pennsylvania9 Environmental Council, and I wanted to10 thank you for this opportunity to speak11 today. I have copies of my testimony12 here. I will depart completely from my13 written testimony, given what we've heard14 this afternoon, and comment on some of15 the things that have occurred. And I16 just want you to know the Council is a17 statewide organization that does have18 hundreds of business members, and so I'm19 very sensitive to some of the things20 being discussed here today.21 I want to go back to some22 basics. Stormwater runoff is not an act23 of nature. It is an act of manmade24 changes to the land. I think everybody25 152 2/8/11 - TRANSPORTATION - RES. 1008141 here understands that. And in some ways,2 you could say the stormwater runoff is a3 pollutant. And I think we have a general4 agreement in our society that the5 polluters should pay for the pollution6 they cause. And so I just want to say7 that this is a fee because we are8 allocating fairly the cost of the runoff9 to those who generate the runoff. And so10 that is where it is a fee, not a tax, and11 I think you all understand that, and I12 just wanted to kind of underscore that13 point, which is also embedded in my14 testimony.15 That said, you know there's a16 list of 1,000 top winners in this city in17 terms of this fee. You could requisition18 that 1,000 top winners list and you could19 review it. You will find there are20 thousands of other winners on that list.21 Gentlemen, you're elected22 officials. You know that the winners23 very rarely show up at public hearings.24 It's the losers who show up at public25 153 2/8/11 - TRANSPORTATION - RES. 1008141 hearings. So it might be interesting to2 hear the economic impact to the winners3 of the jobs they might create with their4 reduced stormwater fees, of the5 investments they might make with their6 reduced stormwater fees.7 So I just think that it's8 important to take into account that9 unless my math is wrong, Councilman, in10 answer to your question, what would be11 the average change in the stormwater fee,12 it's zero. If it isn't zero, then13 they're lying to us. I understood that14 this was a neutral, cost neutral, change15 in fees. So zero is the average change.16 That means somebody is winning and17 somebody is losing.18 Now, what is this really about?19 It is about that no one likes the rules20 of the game to be changed in mid play.21 We all know that. We all hate that.22 It's annoying, and it has real impacts on23 the losers. Real. I mean, these could24 be disastrous in some cases.25 154 2/8/11 - TRANSPORTATION - RES. 1008141 So I want to compliment you on2 focusing on the equitable approaches to3 the impacts on the losers, because we4 don't want to lose their jobs. We don't5 want to lose their commitment to our6 city. These businesspeople impressed me7 enormously the commitment that they've8 made. As you know, to still be in9 Philadelphia after so many others have10 left, we need to treat them with kid11 gloves and try to figure out how to12 retain them, but let us not miss the13 point here. This is a fair fee14 allocating a cost, and it has a benefit15 to our society of reducing pollution, and16 that also has economic value to our city.17 We will have cleaner rivers, we will have18 cleaner streams, and that improves our19 community as well. We see it on the20 Delaware riverfront and other riverfronts21 in our city that are rebounding after22 decades of pollution, causing people not23 to want to be there.24 So I will sort of end with25 155 2/8/11 - TRANSPORTATION - RES. 1008141 that. I mean, I had a prepared2 testimony, but I just felt compelled to3 share those thoughts with you. I think4 that the focus on trying to mitigate the5 impact on the thousand biggest losers is6 really key, but let's not lose sight of7 the benefits and the fairness inherent in8 a fee allocated properly.9

Thank you.10 All testimony will be entered into the11 record.12

Thank you very13 much. I appreciate that.14

Thank you15 for your abbreviated comments, and they16 were very well taken and pointed. We got17 it and appreciate it.18

19 Thanks for having me. My name is Rachel20 Vassar and I am the Philadelphia Outreach21 Coordinator for PennFuture, and22 PennFuture is a statewide environmental23 public interest membership organization,24 and we work to create a just future where25 156 2/8/11 - TRANSPORTATION - RES. 7 And we have been noted from the8 Philadelphia Inquirer as Pennsylvania's9 leading environmental organization, and10 we're also the lead organization behind11 The Next Great City initiative, which is12 a coalition comprised of over 10013 organizations in the City of14 Philadelphia, representing public health15 organizations, faith-based communities,16 labor, social service organizations and17 civic associations. 22 And one of the ten policy23 recommendations we had and the reason I'm24 here today was Next Great City advocated25 157 2/8/11 - TRANSPORTATION - RES. 1008141 to stop sewer backups and flooding, and2 that recommendation was identified by3 polling businesses and residents in4 Philadelphia. And in that polling, we5 identified that 21 percent of residents6 had had a basement flood in the past year7 and that 31 percent of businesses8 suffered property damage as a result of9 flooding in the previous year. And those10 residents and businessowners also both11 agreed that when they were asked what12 their top -- the top five challenges13 needed to improve livability in the City14 were, two of those top five15 recommendations were, one, to reduce the16 amount of sewage and other pollution17 entering our rivers, and, two, to fix the18 City's water and sewer system to stop19 leaks and water main breaks. And through20 those recommendations, Next Great City21 formed a stormwater subcommittee to find22 how to best address those issues. And23 The Next Great City Stormwater Committee24 found at that time that Philadelphia25 158 2/8/11 - TRANSPORTATION - RES. 1008141 collected its fees for stormwater for2 non-residential customers based through3 the customer meter size, which has been4 discussed previously. And in looking at5 how other cities address the stormwater6 problem, Next Great City found that over7 400 cities and towns -- and this8 addresses some of the ones you asked,9 like what cities are doing it. So10 Austin, Texas included; Cincinnati, Ohio;11 Los Angeles, California, which was12 mentioned; Miami, Florida instead charge13 a fee for stormwater management based14 either wholly or in part based on15 impervious surface. 25 159 2/8/11 - TRANSPORTATION - RES. 19 The first is, we believe that20 stormwater runoff quality and quantity21 has been identified by the EPA as the22 number one source of pollution in our23 rivers and streams, and, as we said,24 businesses and residents identified that25 160 2/8/11 - TRANSPORTATION - RES. 1008141 as a concern. 6 Stormwater has also caused7 flooding and basement backups in several8 City neighborhoods. 18 So that refers to the federal laws that19 are required for the City to reduce its20 overflow. 23 There are other examples where24 the City spent and will spend millions of25 161 2/8/11 - TRANSPORTATION - RES. 1008141 dollars to better manage stormwater. 22 Also, for the first time, bill customers23 whose properties are not served by the24 meter but continue to contribute to the25 162 2/8/11 - TRANSPORTATION - RES. 5 Perhaps most importantly,6 however -- and this is one of the real7 reasons that PennFuture supports this --8 is that the reallocation program actually9 incentivizes private on-site stormwater10 management, as some customers to receive11 the stormwater credits to reduce their12 stormwater fees will implement stormwater13 management practices, some of which were14 touched on by others, which I could talk15 about a little bit, being like rain16 gardens or infiltration islands or17 vegetated swales, et cetera.

And an18 overall reduction in stormwater runoff19 would reduce the pollution to our20 streams, alleviate flooding and basement21 backups, diminish exposure to the City of22 potentially crushing liability and23 lessening the need for many of the24 services that support the stormwater fee,25 163 2/8/11 - TRANSPORTATION - RES. 3 Many of these stormwater4 management practices also have secondary5 quality of life benefits for ratepayers,6 including cleaner air, more attractive7 surroundings, lower energy costs, higher8 property values and new green jobs, such9 as those discussed by Mr. 18

Thank you19 for your testimony.20

Good afternoon.21

Good22 afternoon. State your name for the23 record.24

My name is Brian25 164 2/8/11 - TRANSPORTATION - RES. 1008141 Glass and I'm a Senior Attorney at2 PennFuture. 10 As you know, the Philadelphia11 Home Rule Charter authorizes the12 Philadelphia Water Department to fix and13 regulate rates and charges for services14 that are provided City residents. In15 turn, The Philadelphia Code provides the16 standards by which the Water Department17 is to fix and regulate those rates and18 charges. One of those standards provides19 that, quote, The rates and charges shall20 be just, reasonable and21 non-discriminatory as to the same class22 of consumers. All non-residential23 properties are in the same class of24 consumers. As such, their rates and25 165 2/8/11 - TRANSPORTATION - RES. 4 The recently approved5 stormwater rate design satisfies that6 standard. Under the new design,7 customers are charged for stormwater8 services based on the size of their9 properties and on the amount of hard10 surfaces covering those properties, which11 are both good indicators for how much12 stormwater those properties actually13 contribute to the sewer system. So14 customers pay for the operation and15 maintenance of the City sewer system16 based on how much they use it, no more,17 no less. This design is eminently fair,18 just and reasonable. 20 Under that design, customers were charged21 for stormwater services based on the size22 of the water meter servicing their23 properties, which bore little to no24 relationship to how much stormwater those25 166 2/8/11 - TRANSPORTATION - RES. 1008141 properties actually contributed to the2 sewer system. 10 One court considering the11 previous rate design in which stormwater12 rates were based on a customer's meager13 size commented on whether such a design14 was in fact non-discriminatory. Although15 he ultimately did not decide the issue,16 Philadelphia Court of Common Pleas Judge17 John Herron in a case called Public18 Advocate versus City of Philadelphia19 acknowledged that this method of charging20 for stormwater collection appears to21 present a discriminatory rate among22 consumers of the same class. Let me say23 that again. The method for charging for24 stormwater that is based on the size of a25 167 2/8/11 - TRANSPORTATION - RES. 4 Given that rather candid5 acknowledgment, it would be imprudent for6 Philadelphia to return to the previous7 stormwater rate design, which likely8 would expose the City and the Water9 Department to legal challenge from10 customers who were overpaying under that11 design. You heard from one of them12 today. 15 Fortunately, there is another16 way to help customers who have seen their17 rates increase as a result of the18 recently approved rate design. Because19 under the new stormwater design, charges20 are based in part on impervious area,21 customers can take steps to reduce those22 hard surfaces on their properties and23 capture stormwater that would otherwise24 flow into the City sewage system. There25 168 2/8/11 - TRANSPORTATION - RES. 1008141 are a number of stormwater management2 practices. You've heard about them. I'm3 not going to go into them. And the Water4 Department is offering a number of5 programs. 9 But for all of these reasons, PennFuture10 and Next Great City urge the Committee11 and Council to keep the stormwater rate12 design in place. 20

Councilman21 O'Neill.22

I guess23 you guys all feel like winners in this24 even though you're not involved in the25 169 2/8/11 - TRANSPORTATION - RES. 1008141 financial give or take. But I just have2 a question for you, and it's really a3 question for the Commissioner as well.4 When you get into the how do you do this5 equitably, you've made the equations work6 equitably, but how about the7 implementation? How do you do it without8 putting somebody out of business or9 crippling their competitiveness, those10 kind of things?11 One way -- we talked about12 it -- is just looking at the impact,13 trying to spread it out, trying to14 mitigate it, all those things. There's15 another part, though. We're downstream.16 We're at the bottom of the hill,17 Montgomery County, Bucks County, counties18 above them. When we talk about fracking,19 we're not talking about Philadelphia20 fracking. Nobody is fracking in21 Philadelphia. Why are we concerned about22 it? We're concerned because it's coming23 eventually down into our water system.24 If Cardone Industries, the last25 170 2/8/11 - TRANSPORTATION - RES. 1008141 company that testified, with 4,000 jobs,2 almost all inner city, just a phenomenal3 story there, if they were in another4 jurisdiction upstream, my understanding5 is they wouldn't have this problem. I6 may be wrong on that, but that's my7 understanding.8 Doesn't it only get fair, we're9 not just punishing our own, when everyone10 upstream has the same program and is11 cleaning up their act, so to speak, or12 charging appropriately so they can clean13 it up and the water that's coming to us14 is in a condition that we don't have to15 treat that also in addition to our own16 water that we have to expend dollars for?17 What can you tell the Committee18 about where all that is in the big19 picture? Because it's very unfair to20 somebody downstream to be paying for21 somebody upstream, and if no one up there22 is paying, somebody down here is paying.23

I'll take a stab at24 it.25 171 2/8/11 - TRANSPORTATION - RES. 1008141

And I'd2 like to ask the Commissioner that, too.3

You would see in my4 testimony, Councilman, that I revealed5 openly no one else in Pennsylvania is6 doing what we're talking about doing here7 today.8

If we were9 at the top of the hill, we'd be a great10 example to everyone downstream.11

I might want to12 argue with you about top or down, but the13 point is, your point is well taken. It14 is a difficult situation when in fact it15 is a true statement that this is not16 being done outside the City of17 Philadelphia, nor is it being done in18 South Jersey. And so while we can sit19 here and tell you that this is a20 commonplace practice in many parts of the21 nation and many other major metropolitan22 areas already have it in place, we cannot23 sit here and tell you that it is24 commonplace in Pennsylvania or among our25 172 2/8/11 - TRANSPORTATION - RES. 1008141 immediate neighbors.2 So I just -- you should be3 joining us. What I also say in my4 testimony is, we would like to hold up5 the model of the Philadelphia Water6 Department in Harrisburg, because we7 believe that what it is doing is correct8 and we need this implemented throughout9 the State of Pennsylvania, and we have10 supported legislation that would11 encourage the creation of stormwater,12 what are called, stormwater authorities13 or utilities in Pennsylvania to charge14 similar fees. So our statewide15 perspective -- and I know my colleagues16 are supporters of the same thing -- we17 want this everywhere. That is not the18 situation we face now.19

Does the20 PUC have the same power statewide that21 the Philadelphia Water Department has22 within the borders of Philadelphia, city23 and county, to implement this?24

I can't address it.25 173 2/8/11 - TRANSPORTATION - RES. 1008141 I'm not an attorney. I don't know,2 Councilman.3

I can. I mean,4 there is a piece of legislation to change5 the stormwater --6

Forget7 legislation right now.8

Can you9 repeat --10

Right now there is11 an argument about whether or not12 municipal authorities can charge for13 stormwater. That's my candid --14

Even if15 they want to?16

Can --17

But that18 wasn't my question. My question is, can19 the PUC force them to?20

I was going to say21 it's really not an issue of the PUC being22 the driver in this instance, because it23 is not the driver. If there is a driver,24 it would be Clean Water Act and some of25 174 2/8/11 - TRANSPORTATION - RES. 1008141 the other national --2

No. Just3 answer the question. That's all. It's a4 simple question. Does the PUC have the5 authority to order this around the state6 the way the Philadelphia Water7 Commissioner is able to order it within8 our borders?9 COMMISSIONER NEUKRUG: I'll10 just repeat that everyone pays for11 stormwater in one fashion or another.12 Whether it's through your tax base, your13 property taxes, through a sales tax or14 through a utility fee, everyone is paying15 for this, and it's a little bit hard to16 find out where exactly it's coming from17 in different jurisdictions.18

If Marcellus19 Shale drilling and fracking is any20 indication as to where we're going as a21 state, I'm not encouraged by it. But22 that being said, that Philadelphia should23 be a leader in environmental stewardship.24 I think the question that my colleague25 175 2/8/11 - TRANSPORTATION - RES. 1008141 has is level playing field. As we try to2 counter-balance our need to and rightful3 need to protect our environment, does it4 mean -- and I understand this particular5 fee is designed to change behavior. You6 also change behavior by shooting someone7 dead, basically. I mean, you can change8 behavior that way. So the object is to9 balance, in a recession, how we get what10 we want out of the stewardship without11 killing the goose that's paying the12 bills. So that's what we're trying to13 do.14 COMMISSIONER NEUKRUG: And if I15 may, the purpose of this is not to change16 behavior. It's to make a more equitable17 system, but as a part of that, behavior18 change is one of the outcomes.19

I hope so.20 COMMISSIONER NEUKRUG: Yes.21 And --22

Do you23 have that going on anywhere upstream?24 That's kind of what I'm getting at.25 176 2/8/11 - TRANSPORTATION - RES. 1008141 COMMISSIONER NEUKRUG: First of2 all, I'd like to --3

I just4 want a whole picture here. That's all.5 COMMISSIONER NEUKRUG: I'd like6 to thank Councilman Jones for his7 leadership in the issue of Marcellus8 Shale and much of the work that's9 happened there. We at Philly Water are10 very interested in what happens upstream11 from us. We have a dynamic Drinking12 Water Source Protection program. We're13 connected in with partners all up and14 down the Schuylkill River and Delaware15 River. We're looking very closely to see16 how we can effect change not just with17 the Marcellus Shale issue, but all these18 stormwater issues and pollution issues19 and even quantity, the amount of water20 that makes it to the City of21 Philadelphia.22

We hold you23 in high regard. And as a kid, I'll never24 say "Schuylkill punch" again. It's great25 177 2/8/11 - TRANSPORTATION - RES. 1008141 water. We want to keep it that way. The2 question becomes, how do we implement our3 good intentions so that it doesn't have4 an unintended consequence of decimating5 the economics of our industries here.6 COMMISSIONER NEUKRUG: In7 fairness of how you enact things -- and8 we can only be responsible for obviously9 for the City of Philadelphia, but we are10 working with EPA and we're working with11 the state to look at how stormwater is12 managed everywhere, and we are advising13 EPA on what we think would be a good next14 phase for its stormwater regulations.15 And I would say that the suburbs are16 behind us, but -- "behind us" meaning in17 time, but they will be seeing the same18 kind of ratcheting down that we're seeing19 here.20

Thank you.21

Thank you.22 Is there anyone else here to23 testify?24 (No response.)25 178 2/8/11 - TRANSPORTATION - RES. 1008141

Seeing none,2 we will thank all of the participants3 today. I saw an article and the headline4 said, "The rain falls on the just and the5 unjust alike." So what we want to try to6 figure out after the follow-up is who is7 just, what is unjust, and let's fix it,8 and fix it in the positive direction9 that -- and thank you as environmental10 advocates for moving us in the right11 direction. The question now is for us to12 get it right in the implementation phase.13 So thank you.14

Thank you15 for your testimony. It was very fair and16 balanced.17

This18 concludes the hearing, and thank you all19 for your participation.20 (Committee on Transportation21 and Public Utilities concluded at 1:5022 p.m.)23 - - -24 25 179 1 CERTIFICATE2 I HEREBY CERTIFY that the3 proceedings, evidence and objections are4 contained fully and accurately in the5 stenographic notes taken by me upon the6 foregoing matter on February 8, 2011, and that7 this is a true and correct transcript of same.8 9 10 11 12 --------------------13 MICHELE L. MURPHY14 RPR-Notary Public15 16 17 18 (The foregoing certification of this19 transcript does not apply to any reproduction20 of the same by any means, unless under the21 direct control and/or supervision of the22 certifying reporter.)23 24 25