I guess we really didn't even touch it so there wasn't a conscious decision to slow down the rates in this plan, if that's what you're looking --
If you look at the proposed annual tax savings to the average resident in Philadelphia paying the wage tax, I 102 2/13/01 - FY '02 OPERATING BUDGET think it's been reported that it's about ten bucks a year you'd be saving in that particular wage reduction effort. Considering the loss of close to 200,000 residents over that period of time we've been reducing the wage tax, does it make any sense to reevaluate this policy and to perhaps accelerate instead of allow this to continue to slow?
We've actually started a process of looking at our tax rate structure to see whether there's a better approach. So yes, yes, it does.
And that would be projected to be implemented in next year's budget process?
Okay. In Miss Davis's testimony, third paragraph, it says, "Other large elements of the finance budget include legal services and witness fees." Could you explain what the legal services are?
Legal services are the 103 2/13/01 - FY '02 OPERATING BUDGET payments to the Defender Association, Community Services and Support Center for Child Advocates.
Does any member of the Finance Department or Budget Department monitor the expenditures of the Defender Association as it relates to providing legal counsel to indigent defendants?
We get monthly budget reporting from the Defender Association.
One of the reports that I've received from both bail commissioners and from Municipal Court judges is that individuals many times arrested in drug cases will pay cash for their bail. More than a 1,000, 2,000, $3,000 cash bail, and then they show up in front of a Municipal Court judge for preliminary hearing with a public defender. It seems that if you have the or grand to get out of the jail, you might have the 2 or 3 grand to hire a lawyer. And what I'm wondering is, because drug cases and people involved in that activity do make a lot of money before they're arrested from time to time, are we stretching our defender system to 104 2/13/01 - FY '02 OPERATING BUDGET the point where people who could actually afford to pay for their own lawyer, because they don't have a job of record, because they can't show their income because the income gained from illicit means, that we are, in fact, defending people on the public taxpayer back who can afford to buy own lawyer? And what's the process that the Defender Association goes through to determine whether or not the fact that this defendant is in fact indigent? And would you believe, just from an anecdotal that a guy could put up 2,000, $3,000 to get out, why couldn't he use that 2 or 3,000 to hire his own lawyer?
I think the assignments are actually done through the court system I'm not sure the entire process they go through.
Well, I'm going to raise this issue with the Defender, but I would appreciate, since it's our money --
Right, it's probably worth raising with the First Judicial District too, since I think they do the screening.
Well, I don't know 105 2/13/01 - FY '02 OPERATING BUDGET if there's any screening. That's part of the problem.
But if you could have somebody take a look at, you know, who's responsible for the expenditure of this money and where it goes and what process there is or isn't, it would be helpful from our end. I mean --
And we actually looked at this. A couple years ago, we had an outside accounting firm look at the Defender's costs, and one of the things they looked at was that process. And I'm just not remembering what exactly they found, but we can get you information on that.
The Office of Management and Productivity in the last year, could you explain some of the efforts they made in increasing the City's government efficiency and productivity, and what were some of the benefits and some of the accomplishments? 106 2/13/01 - FY '02 OPERATING BUDGET (Witness comes forward.)
I'm Linda Berkowitz, Deputy Secretary of Financial Oversight and Head of the City's Office of Management and Productivity. Subsequent to our move out of the Mayor's Office to the Office of the Director of Finance, my office has been working with Office of Budget and Program Evaluation to come up with a list of initiatives for implementation in FY 2002, to find other ways for the City to reduce this cost and to increase its revenues.
Has there been any significant effort or something you can point to across the last year from January --
No. And I think that's primarily due to the fact that it's a brand-new administration and --
Well, it's not 107 2/13/01 - FY '02 OPERATING BUDGET brand.
Well, it was a new administration. You said "during last year." It was a new administration and --
I understand. And the Administration was organizing itself administratively, organizationally. And we think that we are going to be positioned for FY '02 to once again focus on the kind of management and productivity initiatives that we did beginning eight years ago.
Okay. Two weeks ago, the Budget Director testified that he supported the idea of creating a rainy day fund to store up savings in case the economy sours, and 108 2/13/01 - FY '02 OPERATING BUDGET we're currently working on legislation to at least take a stab at doing this. Does the Finance Director support this idea? And what terms for forced savings and removal of funds will be acceptable to the Administration? How would you guys -- if theoretically we pass something in this year requiring to percent of our budget hypothetically to be put aside, how would we begin to attack that issue, and have you guys been thinking about it?
I support anything that would allow us to put money on the side for a rainy day. It's fiscally responsible. And while I feel that we do it through our target budget process, if a more formal program were established, I think we'd approach it in much the same way we approach the target budget. We'd have to identify cuts within the budget of the 3, 5, or whatever percent and put those in a category, either appropriate those to this new category or in some way segregate it from the rest of the budget. Another option that Rob is mentioning 109 2/13/01 - FY '02 OPERATING BUDGET is that if there were a surplus, we could possibly segregate it from the surplus before we even begin the budgeting.
But you do support the concept of putting it into a fund that is, for want of a better description, "out of the hands of us"?
And I just want to finally just explore an area that's been, I understand, an issue of expense or potential expense but that has been a real problem for many of us in this Council and many City employees as it relates to the City's continual opposition to the 60 or so Workman's Compensation applications of our firefighters for hepatitis C and its related cause that many of us believe is job-related. I mean, part of the issue here is that the cohort of people involved in this is not an expanding group of people. It's most probably a group of people who entered a contact with the disease during the course of the period of time 110 2/13/01 - FY '02 OPERATING BUDGET before we knew about blood borne diseases and appropriate prophylactic measures to keep that from happening. Despite the money, which we've talked about $10 million, isn't there some moral obligation to do what's necessary to allow these people to, number one, try to recover, take the stress and strain of worrying about losing their job and not having enough money to pay for their medicine? Isn't this really likened to having soldiers who went to war and now we have responsibility to deal with it? I mean, don't we have a moral responsibility at some point?
Joe Perrello again, Deputy Finance Director for Risk Management. Thus far, as you did state, Councilman --
I'm sorry, I'm sorry. The stenographer cannot hear you.
Thus far, we have received 62 notices of hepatitis C that were given to Commissioner Hairston. Commissioner Hairston has forwarded those 62 notices to both the Risk Management Division and also the TPA, the third- 111 2/13/01 - FY '02 OPERATING BUDGET party administrator that the City uses to handle its Worker's Compensation claims. We have been in contact with those 62 individuals. We have sent them at least two letters asking them for their medical release form so that we could evaluate those cases. To date, we have received medical release forms on five individuals. Of the five that we have received the medical information on, indications are that as of today, we will probably be picking up two, if not three, of those five as being work-related cases. So we also would encourage anyone who could have any influence with these people, the remaining 57, to please submit us the medical release information so that we can make a proper evaluation.
How about those two employees that now offer patient advocacy based on employee feedback; have any of those individuals been out to the fire stations or to any of these people, contacting them and trying to walk with them and work with them through this process?
We are -- we have made 112 2/13/01 - FY '02 OPERATING BUDGET the offer to the Fire Department, and we're trying to work with the Fire Department to have these people be in contact with these individuals, yes.
Is there any information that you're aware of as to why they're not?
I mean, certainly if someone makes a notice to their employer that they are in fact infected, why would they -- I mean, I'm not asking it rhetorically, why would they just stop the process?
It is a mystery to us too, Councilman. I mean, we have sent out -- the letter that we sent out, the famous denial letter, basically is a letter stating that -- I mean, if you go through the process to evaluate a hepatitis C claim, what you're looking for primarily is a preexisting condition. In order to determine if there is a preexisting condition, we need medical records. It's practically impossible to --
How old are we asking the medical records to be, how far back are we going? 113 2/13/01 - FY '02 OPERATING BUDGET
As far back as we can get them, as far back as they're available. We cannot get that kind of information in days. The State requires us to give 6 notification to the employee within 21 days of 7 acceptance or denial of the claim. So we have to 8 initial -- we have to send in an initial denial 9 letter, and in that letter, we state to the 10 employee that this an initial denial letter based 11 on the State law and if they give us the 12 information, we'll be happy to evaluate the claim, 13 and if it looks like it's work-related, we will 14 pick it up. 15 We've sent that letter to all 62 16 individuals, we've sent a follow-up letter to 17 those same individuals, and we will send yet a 18 third letter out this month. 19
I would appreciate 20 it if you could give us in writing what the 21 outreach process has been and whether or not these two new employees dealing with the patient advocacy are involved in the process.
Thank you. The Chair recognizes Councilman Rizzo.
Thank you, Madam Chair. Madam Chair, I'd like to ask the Sergeant-at-Arms to pass out a document that you received and you were kind of enough to pass on to my office, and it was this morning, and maybe other Councilmembers will need this document to follow this. Could I also ask you to allow Denise Garrett, the Water Bureau Chief, and Nancy Kammerdeiner, the Revenue Commissioner, to come to the witness table, please. Along with the Finance Director. (Witnesses come forward.)
We all were informed last week that the Water Department, Water Revenue, is planning a rate increase for the rate-payers of Philadelphia Water Department. And 115 2/13/01 - FY '02 OPERATING BUDGET I asked a question about delinquencies and just what kind of shape the Water Department is in, Water Revenue. And you were kind of enough to pull together some numbers, a Water Revenue accounts receivable summary by customer class. Could you please, one of you at the available, walk us through this and explain, please, the condition, the best you can describe of the Water Revenue situation here in the City of Philadelphia based on this information?
Yes. My name is Denise Garrett. I'm the Bureau Chief of Water Revenue. And this document that was requested of me last week by Councilman Rizzo is a breakdown of the accounts receivables by current and delinquent receivables for the entire base of the Water Revenue Bureau. This is our active customer base. If you will note, in the first column, we list customer class. Under "residential," we list owner-occupied. And for the owner-occupied category, those are the residents of the City of Philadelphia who live, who own and live in their homes, who receive service from us. Of that balance, 12,784,000 are current receivables, and 116 2/13/01 - FY '02 OPERATING BUDGET we define "current" as those balances under two cycles, according to the Philadelphia Code, which an account is considered -- apparently, we cannot move on that account for collections until after two cycles have passed. Under delinquent receivables, it shows a balance of $40,978,000, and this represents from 3 cycles out to 15 years, according to the accounting standards set by the Revenue Department. We must maintain these balances for a period of years, up to 15 years for a total 13 receivable of $53,762,000. 14 The next category is commercial 15 residential, and these are properties that are classified as tenant-occupied. We have the first category being tenant-occupied, a single unit, and these are individual homes rented by tenants where the landlord may or may not be responsible for payment of the services. In 1988, regulations were passed that permitted tenants to apply for their own individual accounts independent of the landlord, and we have noted these receivables total $32,839,000. The next category of tenant-occupied 117 2/13/01 - FY '02 OPERATING BUDGET are multi-units. This represents two or more units in a building, up to any number -- hundreds in some cases. The receivable balance in this category is $18,347,000. And the next category is combined commercial and residential. This represents properties where you may have a store, a bar, a restaurant, or some other type of business establishment on the ground floor, and there may be apartments above it. And this represents $8,428,000. I segregated this category because this is the category where we were focusing very heavily over the last five years under our Utility Services Tenants Rights Act. Prior to this, we were not able to effect enforcement against this category, and we have been doing so for the last five years. This category has been reduced significantly in that time period. The next category is commercial industrial. And specifically commercial represents all business types where there is no 23 residential living arrangement at the property. This represents $7,811,000. And we have industrial, which includes -- my industrial 118 2/13/01 - FY '02 OPERATING BUDGET category is also including industrial surcharge accounts. This category represents $2,836,000. Then we have others. These are miscoded accounts in the database, which could be any one of the above categories. And this represents approximately $3,336,000. Total receivable for active customer classes is $127,659,000. And this is a reduction of nearly $40 million since 1997. Prior to that, our receivable balances were growing, and since that time, our receivables have been arrested, and we reversed the trend, and they are now declining.
Based on these efforts, could you describe the effort, whether it be turnovers, collection agencies. Would you agree that this is not good?
Looking at the previous balances, I think we've made a tremendous amount of improvement in the environment that we've been working in, and we've implemented several programs to effect that. The one I spoke about earlier, the Utility Services Tenants Rights Act, prior to 1995, our only measure of enforcement against that 119 2/13/01 - FY '02 OPERATING BUDGET category was prosecution, and that really had not been very successful. In bringing forth the Utility Services Tenants Rights Act, we have collected nearly $90 million from this particular category of customers over the five-year period. In the commercial and industrial -- and also in the residential, I need to point out -- we made adjustments and changes to our collections practice to begin to notifying customers earlier to begin our enforcement process of cycle in advance, taking advantage of the fact that if a customer is delinquent for one cycle and we contact them. We try not to let them become two cycles past due, but at the time that they do become two cycles past due, we are ready and moving forward with our enforcement action in order to get that account into collections immediately. We also reduced by policy the threshold for enforcement from $150 to $75. This, again, allowed us to move quickly on the balances when they became due. In addition to that, we moved to enforce against commercial properties after they 120 2/13/01 - FY '02 OPERATING BUDGET became due after one cycle, and we reduced the number of payment agreements that a customer is allowed to have, as well as the amount of money; we increased the amount of money that was required for a down payment and we retrained our staff to be more sensitive to the collection effort.
Miss Garrett, I understand that, you know, you have a real effort here to try to get this under control. But what I think I'm hearing is from a real bad situation, extremely bad, to a bad one. Do you agree with that?
Well, I don't think we've achieved everything we've wanted to achieve, and there is a point where the Bureau has really exhausted its effort and it has to engage outside methodology. One is the collection agencies, which we have been using successfully over the last few years. The other is engaging the Law Department, which we've been having meetings with them on a regular basis to effect different methods to try to shake money from the recalcitrant group that we're focusing on. 121 2/13/01 - FY '02 OPERATING BUDGET In addition to that, we are looking at some legislative or regulatory because one of the things that we have experienced in looking at our statistics is that when we implemented the moratorium in the middle-'80s, we began creating a condition whereby people did not pay us when they knew it was time for the moratorium to start, and then they would thereby accumulate large bills at the end of the moratorium period, and we were forced to enter a payment agreement because they were not able pay the accounts in full. So we haven't made a move to make some of these changes, though we have been having try to stress in our databases to be able to effectively make these changes and to be able to continuously treat people fairly and stay within the framework of the law as we implement some of our enforcement strategy.
You have a line "others," and you indicate that these are miscoded. I would hope -- and to end this conversation, I would hope that before we hear the word "rate increase" that every effort, again, be implemented to recover the significant amount of 122 2/13/01 - FY '02 OPERATING BUDGET money. And for you have to have a line here about miscoded accounts, that we really don't know if they're a commercial or residential and that added up to $3,636,000, the last thing I want to hear is the word "rate increase."
Well, we are making an effort now to correct our database because, as you'll hear in our testimony, we're in the process of implementing a new system, and part of that process is actually a review of all of the information in our existing database and making corrections. So we do have teams that are involved -- actively involved in correcting the information that's reported here. We can't arbitrarily change it. I had to report exactly what was in the existing database.
What's stopping you from turning these customers off. I can't imagine a commercial account or an industrial account, you not having the leverage or the authority to 123 2/13/01 - FY '02 OPERATING BUDGET terminate service.
Some of these properties are off. What's not reflected in the report is that some of these properties are off presently. We have not classified them as out of our active collections effort. Other properties here are in payment agreement. So those numbers are not reflected here. There is a consistent and ongoing effort to reduce these receivable balances by my staff. And even though I didn't give you a very detailed breakdown of what the status is of every receivable in the base, I basically gave you an overview of where we are in terms of current and delinquent. Even though a customer is in a payment agreement, if they're more than two cycles, we consider them delinquent. If a customer is off, even though we know that it's an off account, we don't assume that the customer is discontinued from our system and classify them as inactive; we continue to classify them as active, hoping that they will come back on and continue to make an effort to collect the receivable. 124 2/13/01 - FY '02 OPERATING BUDGET
Is there any way to compare our Water Revenue with another municipally-owned water company? How would you compare -- looking at these numbers, they're -- they're frightful. Not knowing how to really analyze these numbers, like you just said, that a lot of the is detail not here, which are under agreement, which are making an evident to pay, we don't know any of that. But is this -- are you -- are you satisfied? How much better do you think we can do if the legislation changes and the collection process? In other words if somebody asked me, Is this good, is this bad, how would you describe it? And maybe some of your colleagues would care to comment -- the Revenue Commissioner, the Finance Director. To me, this is terrible but maybe it's not all that bad, I don't know.
Well, at one point, it was over 200 million, Councilman, so I think we have made progress. And I think I'm probably a little biased in my response to it. I don't think it's good, I don't think it's good to have any 125 2/13/01 - FY '02 OPERATING BUDGET outstanding receivables. But we're looking at a situation where a high percentage of our customer base is low-income more than normal. In relationship, we look at statistics relative to collections. Our current collections rate, which is the rate by which we measure the payment of these accounts in the first to the fourth cycle, was recently -- it was -- I guess it was as low as 78 percent, and it was lower than that prior, but that's when I really began measuring it. That's over 86 percent now. And the majority of our receivables are collected in the first year, which is, I'd say, roughly 92 percent of them, 93 percent of them are collected in the first year. So this is a very fluid base. What we have is a recalcitrant core of accounts that, for purposes of either classification, for accounting purposes, or for purposes of looking at what the status of the particular property is, and you have to consider that people move out of the City, they leave these balances, we're not able to find them, we have other situations such as the blight and so forth. 126 2/13/01 - FY '02 OPERATING BUDGET So we have quite a bit of a mixed bag here.
How many liens are associated with this debt? How many properties have been liened as a result of nonpayment?
Every one of these properties has a lien associated with it?
Councilman, I'd like to add that because we have years of accounts in 14 delinquencies, that skews this number. Most 15 utilities write off their delinquencies after 5 to 10 years, and so you never see a utility carrying 15 years of delinquencies. That really skews it, and one might question the true collectibility of a 15-year-old delinquency.
Well, when are we going to write some of this stuff off and be realistic so that these numbers are not skewed? I mean, at some point, and I don't know how legally a municipality can write debt off, but to me, if you're telling me that this is not an accurate 127 2/13/01 - FY '02 OPERATING BUDGET picture, then we really need to do something to fix that. COMMISSIONER KAMMERDEINER: Councilman, there is an accounts review panel that meets once a year, and it does have representation from City Council appointed by the President of the Council. And each year, the accounts review panel addresses all of the liabilities of the City tax and other liabilities, including these water and sewer liabilities. We do write off some of the liabilities based on standards that have be agreed upon by the panel. That panel also includes the Controller's Office, and we work with them very closely in identifying what the write-off criteria should be. One of the things we are looking at are those -- in terms of collections are those ancient liabilities that really have a zero chance of collectibility and actually getting them off the books so that they don't skew the anticipation of collection capability. One of the things we're looking forward to with the new system that Denise referred to a few moments ago an ability to better track some of 128 2/13/01 - FY '02 OPERATING BUDGET these revenues and these liabilities and what has happened over time in terms of enforcement efforts. The current system doesn't allow us to electronically categorize and track the enforcement history over a long period of time and to satisfy conditions that the Controller would like to see in terms of declaring something as an appropriate candidate for write-off. And so we're working with them and with the new system design to better categorize and classify liabilities that are simply going to be uncollectible and get them out of the receivables. So that's something that we're looking forward to in the next couple of years, but it will take us a while for us to work it through. And we're taking our time with it very deliberately so that we don't write off something that is collectible.
Thank you. My last question -- I have a letter that I need to respond to, and since I have Denise Garrett here, maybe you can help me with this. During the summer I have, and my constituent, 129 2/13/01 - FY '02 OPERATING BUDGET observed lawn-care companies that are in vegetation control filling their tanker trucks up at fire hydrants throughout the City. And apparently, they have a permit, from what I understand, to do this. The police have stopped a number of these trucks that are in the chemical treatment of lawns, et cetera, and are told that they're given a permit where they can fill their tankers with thousands of gallons of water from a hydrant to conduct their work. Could you describe how that is managed and if there is such a program or if we are being mislead, how these contractors, both construction contractors and others, can fill their vehicles, again, with thousands of gallons of water for construction or for the maintenance that I have described?
First of all, Councilman, I have to apologize, because that program is actually administered through the Water Department proper. I do know that there are permits issued for construction water, and I do know that that is tracked through the Water Department's unaccounted-for water category, and that 130 2/13/01 - FY '02 OPERATING BUDGET information is passed to us for billing purposes. But in terms of the actual procedure that is conducted through L&I and the Water Department, I would have to defer to them to respond to that.
So we have a program where a contractor can go to a hydrant and fill up a truck seven days a week, and we have to take their word for it on how much water they've consumed?
I believe that the permit specifies the required information for what vessel they're intending to fill, the project construction, what their anticipating use is, and that they're charged in the permit for the amount of water anticipated to be used.
And you're telling me that the Water Department bills for this water? Where does it show up? Could somebody tell me how much revenue that they've gotten for this?
It does not come through my department; it actually comes through Licenses and Inspections. But we can provide written 131 2/13/01 - FY '02 OPERATING BUDGET information responding to that.
I'd be curious to see where the money is, where -- are you telling me that somewhere in the L&I budget, there's money received from this source of revenue?
Thank you. I just have one brief question. Miss Davis, I would like to refer to Councilman Rizzo's first question. Can you put this in perspective and tell us what the outstanding delinquencies are to the General Fund?
We'll have to get those numbers for you. Miss Kammerdeiner doesn't have those with her.
I would appreciate it if you would (inaudible), and I'd like to know before we end these Council hearings. Councilman Goode?
Thank you, Madam President. 132 2/13/01 - FY '02 OPERATING BUDGET Good afternoon, Miss Davis.
How do we develop policy on where we deposit the City money?
How do we develop policy on where we deposit City money?
Good afternoon. Folasade Olanipekun, City Treasurer. In order for an institution to become a City depository, they have to go through a Councilmatic process. There's an ordinance that gets passed by Council in which banks are added as a City depository. We have a list of them. We don't use all of them.
Okay, I was wondering whether it was just done by City Council ordinance after that list had been developed, which I'm very familiar with. How do we determine who we use, where we deposit money, which is really where I was getting to. Not just who gets 133 2/13/01 - FY '02 OPERATING BUDGET on the list, but who do we use.
A lot of it based on the technical ability and the infrastructure of the depository. So, by way of example, the bank that manages our payroll is First Union, and they're the ones who basically disburse the funds for payroll for City employees. You wouldn't use a small bank to do that because they couldn't handle the number of checks that get issued every week when we distribute our payroll. So sort of we do analysis. In fact, we're getting ready to issue an RFI, a request for information from all of the banks in the region who have expressed interest in doing business with the City so that we can make an informed decision about their infrastructure and technical ability and marry that to the needs of the City.
Okay. And how many different City depositories do we have money in currently?
PNC, Mellon Bank, 134 2/13/01 - FY '02 OPERATING BUDGET United Bank, Hong Kong, Shanghai.
First Union, obviously First Union. I think that was five.
Yeah, it was five. And is it strictly technical criteria, or is there also some social investment criteria that is employed? Is there social investment criteria that's employed that either would include or would preclude certain banks actually listed from receiving City deposits?
Actually we do use some social criteria. And by way of example, when United Bank was formed, I think, in the early '90s, the City made a concerted effort to invest in them because they believed in the notion of having a minority-owned bank, and we currently invest in United Bank. We have monies in deposit with them.
Thank you. 135 2/13/01 - FY '02 OPERATING BUDGET The Chair recognizes Councilwoman Brown.
Miss Davis, I'd like to go back to the testimony on , Paragraph 3, the discussion around Community College of Philadelphia.
Let's acknowledge first that the Administration continues to support Community College with a $1 million level this year. Is that $1 million at the discretion of CCP, or does the City earmark and dictate how those dollars should be spent?
Does the current level now move the City to the one-third commitment that it strives to get to?
That annual contribution does not equal a third of their annual revenues. 136 2/13/01 - FY '02 OPERATING BUDGET However, they have a fund balance in part built up by the money we gave them in prior years. So when we look at what we give them, we kind of look at the fund balance in doing our analysis.
And that aids you in making a determination on what the City's contribution will be?
So would you or could you anticipate that we might ever be at the one-third commitment that we've made to the Community College?
I think if they got to the point where their fund balance was completely gone, then we'd have to, you know, reexamine that.
Okay. Also in Paragraph 3, it mentions legal service. State again the two legal services that the City supports.
It's the Defender Association, Community Legal Services, and a pretty small contract with the Support Center for Child Advocates.
Speak about that, 137 2/13/01 - FY '02 OPERATING BUDGET discuss that if you will. You say a small --
It's about $45,000, I think, and it's essentially for representation of children.
Thank you. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. First, Miss Davis, good morning.
There's an issue that's been disturbing me for some time, and I would like to ask if you could direct Mr. Dubow,, who, on a number of occasions, has engaged in obfuscation, confusion, sleight of hand, long and confusing answers, and continually hides various pots of money in different agencies and departments, to be much more forthcoming in his testimony before this Council. And I would ask you, as you are Director of Finance and Secretary now of the (indiscernible), I believe?
Okay, all right. Could you direct Mr. Dubow in that regard, please.
Thank you. Now, can you explain this government Accounting Standards Board Statement No. 34? What is that all about?
Some time ago, probably 10 or 15 years ago, the Accounting Standards Board decided that government financial statements were confusing to those who did not have to look at government financial statements. Different funds are presented in different ways. Your enterprise funds are on a full-accrual basis, your governmental funds are on modified accrual, and then you have these categories called "account groups, that were just collections of things accountants didn't know where to put them. It was felt that in order for the financial market to better understand the financial reports that governments provided, that there should be some statement that on a government-wide basis purported to treat the government as a business so that that fund -- that 139 2/13/01 - FY '02 OPERATING BUDGET government-wide statement would be presented on a full-accrual basis; it would be treated as though it were a government. It was further decided that --
As a business, I'm sorry. It was further decided that because we use our assets in much the same way that a business uses its assets, that there should be some charge for depreciation to recognize the fact that government needs to make some investment in its infrastructure and that there needs to be an ongoing investment in the infrastructure. These things will now show up on a balance sheet in much the way they would show up on a balance sheet and income statements of business enterprise. So it changes on the government-wide level, the presentation of our financial statements. Individual funds will maintain their current presentation. But on the government-wide basis, there is a change, and it's to make the government look more like a business.
And this went into 140 2/13/01 - FY '02 OPERATING BUDGET effect when?
It will go into effect for fiscal years, I think, beginning after June 15th of 2001 or 2002.
Our guys have been working on it for quite some time. There may be some difficulties because of our component units; i.e., the School District and PGW. There maybe some compliance issues and everyone has to implement at the same time. So there could be some difficulty surrounding those.
Well, we'd be -- probably be relatively satisfied with anything that made any sense coming out of PGW, whether it was in compliance with this directive or any other directive, if we could read it. Thank you for your response on the gas 34. The increase for Community College. In past years, we have seen or we have had a couple occasions where there was an increase for Community College but not necessarily at the level 141 2/13/01 - FY '02 OPERATING BUDGET that they would have liked. Are we in that situation this year, or is this just kind of a more of an inflation increase -- "we like you, we'll give you an extra million dollars." Where does this match up in terms of what their need is and also our -- I think there's some general and rather somewhat formal agreement on a funding formula I think the City is supposedly -- it's supposed to be about a third of --
We're not at one third. This year, they requested 2 million; we funded them at the $1 million level. So we're continuing the tradition of not giving them what they request.
They are maintaining a fund 142 2/13/01 - FY '02 OPERATING BUDGET balance that's available for their use.
Well, why did they ask for the $2 million, then? (Mr. Dubow approaches mic.)
I'll try to be long and obfuscating and confusing. They asked for 2 million because they have a number of program expansions that they wanted to undertake. We thought that given their fund balance, they didn't really need a $2 million increase, but we acknowledged that they did need some additional funding.
Well, I mean, you know, for some people, a million dollars is not that much; for others, you know, it can be kind of the universe. I mean, where does -- where do these decisions -- what do you factor into your decision-making process as it relates to maybe other efforts or goals that we're trying to pursue? And specifically, on the education front, we'll have a whole other series of hearings with regard to the School District and that level of 143 2/13/01 - FY '02 OPERATING BUDGET education. But to some extent this kind of goes back to a question I raised earlier with the Chief of Staff on the scholarship side. I mean, I think one of the ways the City can demonstrate a much more serious commitment and support for education, whether it's school-aged children or young adults or not-so-young adults is in the way that we support not only Community College but also scholarship funding and getting to the heart of how many very young people who graduate actually go on to some post-12th-grade educational opportunity. And some of it, I'm sure, is maybe some kids are not interested, for whatever reason. But I would have to think that money does play a role and a factor in some of those decisions. And whether it's access to a full four-year college or university at the highest levels or something in between that and the opportunity to go to Community College. I mean, I'm not saying that they should always get what they ask for, but if we're not participating at the level that we allegedly agreed to, I mean, if we made a commitment to 144 2/13/01 - FY '02 OPERATING BUDGET support the college at a certain level, then it seems to me, one, we should do that; and two, if they have an opportunity to expand and grow, I mean, how do we demonstrate that we're really backing up what we say if we're going to -- I mean I hate to kind of throw this back at you, but I mean, continue a tradition of not fulfilling these requests. I'm not saying that we're in the greatest of boom times ourselves, but I mean, it's a million dollars.
Over the last two years, we've taken it from a little over million to a 14 little over 21 million. Getting funded at 15 50 percent of their request, they're batting 16 pretty good, considering what our resources are 17 and the decisions that we have to make about those 18 resources. 19 While we would love to support them to the full extent of their request, it's one of the sad facts of urban budgeting that there's never enough to give everybody what they ask.
And this is just, unfortunately, one of the decisions that had to 145 2/13/01 - FY '02 OPERATING BUDGET make.
I understand. And if the Phillies were batting at 50 percent, they would have been in the World Series last year. The $21 million, what percent of their overall budget does that represent, and how close are we to fulfilling the percentage formula for which --
I'd have to get back to you. I knew at the time we were pitting the budget together; I don't have the numbers with me, but we'll get you that.
Okay. Last question in this area. What is the nature of the agreement, and who was it made with, and how long has that agreement been in place?
Thank you, Madam Chair. 146 2/13/01 - FY '02 OPERATING BUDGET
That amount of money paid to PGW, we spent a lot of time in here debating the fact or the issue of the PGW loan. A lot of us have a lot of thoughts on whether we were ever going to get paid back on it, but it seems funny that those payments and those consultants that we're paying for never came up. We were never told about those hirings that were being paid through operational budget funds. Why was that?
I have no idea why that decision was made. I guess it's because there was appropriation capacity within the department, and there was, you know, no need to actually have additional funds appropriated. I have no idea why that decision was made.
But we asked very specific questions as to how much money we were transferring from the operational budget. And if the money was beyond the 45 million, I think we should have been told. Because these consultants are hired and the money that is being spent is above and beyond the money that we loaned to PGW; 147 2/13/01 - FY '02 OPERATING BUDGET isn't that correct?
My question is, when we were having hearings on PGW, why were we not told about the total expenditures of monies that we were giving to PGW?
I have no idea. These are continuations of relationships that preceded -- that predated my tenure here, and in fact, some date to FY 2000, which predated this administration.
Well, you know, I'd like to find out when these contracts were given and how much money we have been giving to consultants, and if this is the only thing contract that we have to PGW. And again, for the sake of truth, when we have hearings on issues, we would like to be told about an organization, an agency, and how much money it is that is going to that agency from our Operating Budget, and that we don't have to find out in the ways we do. We found out about the water rate hike through the newspapers. And through the whole period that we were discussing 148 2/13/01 - FY '02 OPERATING BUDGET the PGW loan, we never knew that we were having these consultants paid through our Operating Budget.
Thanks. How many employees do you have that are not represented by either 43 or 47?
And how much do you spend? What is the expenditure that your department makes in terms of these employees' medical benefits?
Who makes -- who runs the -- who's in charge of overseeing the medical benefits expenditures in your department?
Everything related to the medical benefits is run through the Personnel Department.
So you report to Linda Seyda all of the things that you need and so 149 2/13/01 - FY '02 OPERATING BUDGET on?
The payments are handled through her department, and they're on a per-employee basis.
But who gives the information to Linda Seyda in your department?
It's generated through our human resources payroll system; no specific person provides it.
You say that we have some funds that go through RDA to run homeless programs; how much money is that?
Why is that money not given to OSHA (sic) since we already have a homeless agency that we're running? What specific services and special services does RDA run that necessitate us giving them $150,000 for that? (Witness comes forward.)
Councilman, could you please repeat that question so I can answer you properly.
One of the answers was that we have monies going through RDA -- 150 2/13/01 - FY '02 OPERATING BUDGET
-- to run a homeless program. And we have OSHA (sic). I'd like to I just want to find out why that money does not go to OSHA instead of the RDA?
This program was set up before we had OSHA. This was a thirty-year agreement.
A lot of stuff was set up before this year. I'd like to find out what it does and why do we keep doing it if we have OSHA?
Okay, we can ask the RDA to provide a report for you as to what they're -- we're just paying their administrative services for this program. We don't pay for the program; we just pay for them to --
We just pay for them to administer the Homeless With Dignity Program. 151 2/13/01 - FY '02 OPERATING BUDGET