Which are going to be multi-million-dollar developments.
No, no, no, I didn't say there wouldn't be no monitoring. As a matter 227 2/13/01 - FY '02 OPERATING BUDGET of fact, I want to thank you. On Pier 30, the MBEC is listed in there for us to receive information and for us to be involved. Unfortunately, I had to call it to their attention because there was a couple disputes on some bids that were coming up, and they're having a meeting on the 15th that I've been invited to participate in, which I will begin participation, and I've asked for all of the pertinent information. We will begin with that process. Now, the tram, I'm not sure what our level of involvement with that is, because I haven't seen the economic development plan, nor have I seen the actual TIF or know who the contractors are.
All right. It's being done through the Delaware River Port Authority, it's being built on Penn's Landing.
So, can you -- (Unintelligible, parties talking over 228 2/13/01 - FY '02 OPERATING BUDGET each other.)
And I think -- I don't think we'll have a problem with that activity. I know that the Delaware River Port Authority has an MBE person, so I can coordinate that activity with them. So that's not a issue.
Okay, thank you. The earlier question with respects to the procurement process, and you indicated that you kind of get things at the end of the process, and it's a finished product when it comes to you as it relates to participation goals.
If it's a TIF, only if it's a TIF. And only recently, the last couple of -- I think someone asked me about hotels, and the only hotel I can re --
Councilman Nutter had asked a question with respects to the ability of your agency to adequately monitor City projects, particularly on the employment side. 229 2/13/01 - FY '02 OPERATING BUDGET
Employment, because our agency was established with the business aspect to monitor and implement the business aspect. It was only recently over the last three to five -- last three to four years that we've been asked to really get involved in monitoring the employment side. And the only two projects that I could cite was under the executive labor agreement, both the One Parkway and the runway, the airport runway. Those are the only programs. And with the airport runway, we were not listed in the executive order as the monitoring group; we were listed as the people who help them establish ranges for their levels of participation and then report back. That's different from the way we were asked to handle the One Parkway scenario.
Okay. In the procurement process itself, and I have asked this before, we RFP or RFQ, and I've asked -- and I 230 2/13/01 - FY '02 OPERATING BUDGET understand that there's a ranking system associated with the ultimate selection process. You get points for this, you get points for that.
No, that's different. That's different from the -- you have to separate the-- excuse me, you have to separate the professional service contracts from the bidding. What the Procurement Commissioner handles is most of the bidding activity. There's some hybrid activity that the Procurement Department is involved with that does RFPs. But primarily, it's bid activity. You don't get to rank the bid activity as -- and Mr. Applebaum is here, so he can speak to that. You don't get the rank. Did you want to address that, Lou?
Yeah, I'm just trying to understand this process. You know, we have, say, for instance, the restoration of City Hall, and, you know, we have to select a contractor to do that. Walk me through that if you can. (Witness comes forward.) COMMISSIONER APPLEBAUM: Good 231 2/13/01 - FY '02 OPERATING BUDGET afternoon. My name is Louis Applebaum, Procurement Commissioner for the City of Philadelphia. And your question, Councilman?
Well, I'm trying to understand the procurement process as it relates to purchase of -- well, actually the selection of a contractor to perform a service on a municipally-owned building. COMMISSIONER APPLEBAUM: Under the City of Philadelphia City Charter, we must award -- make awards to the lowest responsive, responsible bidder. There's no selection, there's no 15 negotiation. If it's a true bid, which I believe you're talking about, a public works bid or a service supply and equipment, we must award the lowest responsive, responsible bidder. Now, part of the responsiveness test is that they have followed the rules and regulations of the game as far as the bid submission, and also have complied with the MBEC rules and regulations. And in response to your earlier question, every bid, if it is issued by the City of Philadelphia Procurement Department, before 232 2/13/01 - FY '02 OPERATING BUDGET they are issued, are delivered to MBEC for their review and their appraisal, and they record in those bid documents the ranges for MBEC M's, W's, and D's that they have established for that particular bid. After the bid is -- they establish the ranges. It is printed on the bid document. It is then sent out, and the bids come back. Now, when they come back, before an award is made, the bid documents -- usually we send to MBEC the lowest three bids. They have the opportunity to review them and to review their MBEC submission solicitation page --
So -- not to interrupt you -- COMMISSIONER APPLEBAUM: And they --
I just want to interrupt 'cause I want to make sure I understand this. So you select the lowest three bids based on the dollar figure. COMMISSIONER APPLEBAUM: Correct.
So potentially, there could have been a submission of a proposal 233 2/13/01 - FY '02 OPERATING BUDGET that may have had a higher -- let me ask the question. COMMISSIONER APPLEBAUM: Okay.
Let me ask the question. It may have been a proposal -- a submission of a proposal for that RFQ or RFP that may have had a higher participation level as it relates to MBE/WBE that never got to MBEC for them to review. COMMISSIONER APPLEBAUM: Let's step back for one minute.
Okay. COMMISSIONER APPLEBAUM: We're talking about bids. We must award to the lowest responsive, responsible bidder. The first test is to look at the net dollars of that bid.
Right. COMMISSIONER APPLEBAUM: We then submit to MBEC the lowest bidder. They look at that. They look at their solicitation and commitment form to make sure they did an honest job, that they did not discriminate. And if they're satisfied, they approve it. Now, there could have been another bid 234 2/13/01 - FY '02 OPERATING BUDGET that maybe was a little bit higher that had twice the amount of participation. We can't award to them. We must award to the lowest responsive, responsible bidder. They have the opportunity, before any award is made, to make sure that the bid document, the bidder, the lowest bidder has been responsive. And that's the key test.
In terms of time, submission of the bid, and responsible -- COMMISSIONER APPLEBAUM: Right that they signed the bid. Responsibility means that the company that we're dealing with has a track record, the financial wherewithal and a history that we're assured that they can do the job under the specifications that we have issued. We are not going to allow a bidder who has never built a building to build a prison for us. So responsibility means experience, financial strength, bonding, insurance, and a successful track record.
Is that written somewhere? COMMISSIONER APPLEBAUM: Excuse me? 235 2/13/01 - FY '02 OPERATING BUDGET
Is that written somewhere? COMMISSIONER APPLEBAUM: Oh, yes. That's the test of responsibility.
No, I mean, where is that written? COMMISSIONER APPLEBAUM: It's in the --
I view a person as being responsible if they take into account that they're entering into a contract with a city that has a minority population of upwards of 45 percent, I view that as being responsible to adequately reflect that population and the diversity of that city as some way of filling the need to be responsible and incorporating that into the (inaudible). COMMISSIONER APPLEBAUM: Well, you're mixing apples and oranges. The responsiveness test is that they have complied with the total City Charter rules, regulations --
I asked you about responsible -- COMMISSIONER APPLEBAUM: Responsibility means that they have -- they are responsible a 236 2/13/01 - FY '02 OPERATING BUDGET bidder who can complete the project under the terms and conditions of that project on time, with -- at the cost that they have submitted, supply us with the adequate insurance, and we know they are a responsible person who we can feel comfortable with in making that award.
And a responsible portion from the MBEC standpoint is that they did not discriminate. Responsive and responsible. Responsive that they have completed all of the documentation and they have met that letter. But responsible is that they do not -- you know, that there is no evidence of discrimination, from our (indiscernible), and I just want the MBEC to ask --
Yeah. COMMISSIONER APPLEBAUM: Let me answer. The test of determining whether -- one specific area I can get into on the test of whether they discriminated or not is if you are a 237 2/13/01 - FY '02 OPERATING BUDGET vendor, a public works vendor, and you're going to a particular job and it requires you to retain and hire subcontractors. Now if you are ABC Corporation and you're now going to search out subcontractors, if you have not made a complete and adequate search of subcontractors, including everyone available -- minorities and non-minorities -- and you have just gone to the non-minority subcontracting community and have not gone to the minority subcontracting community, in our opinion, you have discriminated against those minority subcontractors. So if there is an availability of minority subcontractors in what you're looking for, you must go to them and make sure they're certified and get their price. And if their price competitive, you're expected to use them. If their price is not competitive, then you do not have to use them. But you must give them the opportunity. And if you haven't, you have discriminated.
Mr. Roundtree, could I hear your answer? 'Cause you were getting ready to answer. 238 2/13/01 - FY '02 OPERATING BUDGET
Same answer. COMMISSIONER APPLEBAUM: We're on the same page, believe me. We work very closely together and --
But it's Mr. Roundtree's responsibility as the head of MBEC and, you know, I wanted to get his response 'cause that's, it's my understanding, his job.
And, I mean, I'm trying to understand in the primary -- if you talk about responsiveness and responsibility and nowhere in that equation, you know, do you talk about participation other than nondiscriminatory nor discriminatory type of practices, I mean, that's all relative. I mean, to find out if in fact that happened, you know, I don't have to tell you how difficult it is.
It's really -- we 239 2/13/01 - FY '02 OPERATING BUDGET don't really have the wherewithal to determine that.
Well, the other side of that, Councilman, you were going to touch on is employment. That is never entered into the equation either because -- and, Lou, you can correct me if I'm wrong -- I haven't seen a bid activity that requested goals on employment.
We can't do that by law? COMMISSIONER APPLEBAUM: There is no 13 current legislation or executive order that's in place that requires goals or ranges for employment. Now, I believe in some of the TIF programs --
I'm sorry, for what, Commissioner? I couldn't hear what you said. Do you mind repeating? COMMISSIONER APPLEBAUM: No. 21 Currently, there are no rules or regulations covering employment goals or ranges on City contracts -- except I know on some projects where there are TIFs, in those particular contracts, and we don't deal with those, there are goals or 240 2/13/01 - FY '02 OPERATING BUDGET ranges on employment participation, but not in City contracts.
But there's no 5 prohibitions legally for us to do that. COMMISSIONER APPLEBAUM: No. 7
Okay. Michael Bell (ph.), I guess you know Michael Bell?
Michael Bell is the director of the Redevelopment Authority's minority and women business program.
Kevin Brooks is the Assistant Director of Employment and Training -- UNIDENTIFIED SPEAKER: For training.
Okay. And I understand if the answer to this question is no, but when I talk to other agencies Greater Philadelphia Urban Coalition and Mulligan & Associates, and they talk about the wonderful job that they do as it relates to monitoring and outreach programs, and they essentially get hired by the developer or the company. Their (inaudible) is an example of Greater Philadelphia Coalition that apparently worked on that, and they tell me they did these great numbers. And my question is, if we're now talking about potentially expanding some services to -- since we're expanding the level of jurisdiction, wouldn't it make sense for us to 242 2/13/01 - FY '02 OPERATING BUDGET look at the possibility of us -- and I don't want to use the "P word," because it gets you in trouble as a politician, but would it be possible to consider out-sourcing some of the activities that you will now be asked to do in addition to what you currently do to some of these agencies who claim they have such a great track record as it relates to --
Councilman, I'm sorry, I don't mean to interrupt you, but the stenographer is having difficulty hearing you.
If you could just elevate your voice into the microphone.
Just talk into the mic, please, so she can hear you.
We just need to look at that 'cause we're going to -- we're obviously going to have to increase somebody's budget by providing service -- (Unintelligible, parties talking over each other.)
I believe that we can garnish (sic) the resources that would be necessary to handle anything that City Council or the Administration would prefer, that they would like for us to do. What we would like to do, though, is evaluate what is needed because we might need to change a few things in-house, but I believe that we have available competence in-house that we can handle it.
So the fact that we continually come back with these abysmal numbers, as referenced by Councilman Ortiz and Councilwoman Blondell Reynolds Brown and Councilman Nutter earlier, we should continue to do things the way 244 2/13/01 - FY '02 OPERATING BUDGET we've been doing them.
'Cause I hear you -- you come before us and we talk about these numbers, and I mean, they're like ridiculous. So I mean, at some point, we got to do something differently. And if, you know, the claims of these other agencies are that they can do a much better job -- and, by the way, they have not asked us to do what it is you do, but I'm just thinking in terms of us possibly out-sourcing some of this work.
Okay. And, Councilman, I don't have a problem with what they do, and they do a very good job. I would just have a problem with them doing it for the City. I believe that we could effectively and professionally handle any obligation that the City would have. If you decided you would out-source it, I would have our department compete for it. I think I would compete against any of them. I believe that we have the wherewithal, the level of competence and effectiveness -- I can say the same thing -- on City projects. 245 2/13/01 - FY '02 OPERATING BUDGET Remember, we were never asked to do this as part of our initial mission of our organization. We've kind of evolved into this and we haven't -- on the two projects that we've actually -- on really the one project that we've actually done it on, we did a good job with what we had. Given the proper resources, I will compete against any of them. And I work with them and they are all outstanding organizations, but I would prefer, if it's a City activity, that the City and the City agency responsible for performing that service be given the opportunity to do that and be given all of the necessary resources that they have at their disposal, and we would do a comparable job -- no, no, we would do a better job, we would do a better job.
Thank you very much. Are there any other questions for this witness? 246 2/13/01 - FY '02 OPERATING BUDGET (No further questions.)
Thank you very much. I believe that Board of Pensions and Retirement is next. They've been waiting since 10:30 this morning. (Witnesses come forward.) (Break taken.) - - - (Proceedings resume.)
Please identify yourself for the record and proceed with your testimony.
No problem. Good afternoon and good afternoon to the members of Council. My name is Joe Herkness and I'm the Executive Director Board of Pensions and Retirement, and I am pleased to present testimony on behalf of the Board of Trustees. And as Chairperson is Miss Janice Davis, Director of 247 2/13/01 - FY '02 OPERATING BUDGET Finance. With me is Mark Bonavitacola, who is the Board's Chief Investment Officer. The administrative costs of the fund are borne by the fund, and there are no direct appropriations made from the City's General Fund. The FY 2002 budget request this year is $6,271,000. In FY 2002, we will have 68 budgeted positions for investment, active employee services, health and welfare, and a general support for the Pension Fund. In Fiscal 2002, the City's General Fund contribution to the Pension Fund will be $157.8 million. In addition, the City will pay $47.5 million in debt service on pension obligation bonds that were issued in February of 1999. Combined, these figures represent a full 7 percent of the City FY 2002 General Fund expenditures. Pension obligation bonds issued by the City reduced the unfunded liability by 50 percent. And by the end of FY 2000, the system was more than 75 percent funded with assets of $4.96 billion. However, the unfunded liability projected to be $1.83 billion at the beginning 248 2/13/01 - FY '02 OPERATING BUDGET Fiscal 2002 remains a target for reduction. This year, the Administration will ask the State legislature to amend Pennsylvania Act 205 and permit the Pension Fund to amortize its outstanding unfunded liability on a rolling 15-year basis up from the current 10-year basis. Increasing the amortization period will enable the City's General Fund to benefit in future years by significantly reducing its annual contributions towards this unfunded liability. In FY 2002, that contribution alone will be $112.7 million. It is estimated that the General Fund will be able to reduce this annual obligation by an additional 189 million over a 10-year period, beginning in Fiscal 2009, which would be a full four years before the present 10-year rolling method would begin to generate any relief whatsoever. Another benefit from the pension bond issue was the establishment of a pension adjustment fund program, which allows for a sharing of investment gains above 10 percent with the fund's retirees, beginning this fiscal year. This 10 percent threshold for sharing purposes is calculated annually on an actuarial adjusted 249 2/13/01 - FY '02 OPERATING BUDGET basis, which averages the investment performance over a five-year period. The Board of Trustees approved the distribution of approximately $40 million to retirees with their March 31st benefit payments. Retirees, survivors, and beneficiaries will receive $100 for each full year that they have held that status. This allocation will mark the third consecutive year in which eligible retirees have received a pension benefit in addition to their regular monthly annuity. This March 31st payment will push the 3-year total afforded City pensioners to $110 million. In FY 2002, the pension system will make over $410 million in benefit payments to over 31,000 pensioners and their survivors. Despite this pressure on the fund's assets, the fund continues to experience good investment returns. FY 2000's investment return was 9.47 percent, bringing total assets, as stated previously, to $4.96 billion. The fund's average annual return over the 5-year period ending June 30th, 2000 was 13.7 percent, and that was after all the administrative and managerial fees. 250 2/13/01 - FY '02 OPERATING BUDGET That concludes my testimony. We're certainly available for any and all questions that you may have.
Thank you. I'm very happy to hear that the retirees will be getting some benefit. I recall last year they had to have ten years of service and they received X-amount of dollars every year after the ten years.
Yes, ma'am. The original law required ten. The allocation that the Board made this year has a just one full-year requirement, that as long as you have one year as a retiree, as a survivor of a retiree, or as a beneficiary, you would begin to receive the $100. So there's no large service requirement with this allocation.
That's wonderful. It certainly helped many of them to pay for their medical expenses, since we have not treated them so kindly. Are there any questions? The Chair recognizes Councilwoman Blackwell. 251 2/13/01 - FY '02 OPERATING BUDGET
Thank you. In your testimony, you mentioned that we need to reduce the unfunded liability, which is projected at 1.38 billion at the beginning of Fiscal Year 2002. You also mentioned a strategy of asking the State to amortize the outstanding unfunded liability to years instead of 10. 9 For the sake of clarity, are you 10 referring to amortizing the debt service on the 11 pension obligation bonds issued in February '99? 12 As such, will the money that we save on debt 13 service be added to the General Pension Fund to 14 increase its funding level? 15
Councilwoman, I don't know the exact answer to that, whether or not the debt service on the pension bonds would be included in that, but I think at the -- I think not, but I could get a precise answer for you on that.
I think the projected 15-year rolling basis, the savings is matched compared against the original estimated contribution after the pension bond. So I'd have 252 2/13/01 - FY '02 OPERATING BUDGET to confirm that, so that they did a comparison of what the contribution would be expected after the bond.
And then if you then instituted a 15-year rolling amortization basis, then you would have X-amount of saving. This $189 million additional projection is that comparison, after the pension bond, what we expect to be paying, and if you instituted a 15-year rolling amortization basis, then what additional savings would the fund -- would the General Fund expect to incur in the out-years.
Thank you. You can get it to the Chair, and the President will let us know. Thank you.
Thank you, Madam Chair. Mr. Herkness, similar to the Council President, with all of us having put a lot of time and effort, and the credit still needs to be made 253 2/13/01 - FY '02 OPERATING BUDGET to Councilwoman Blackwell for raising this issue back a couple of years ago, after the issue had been raised for many, many year by the retirees. I'm also pleased to hear about the plan distribution as a result of the creation of the pension adjustment fund through legislative activities by City Council.
Well, fair is fair, Councilwoman, and that credit should be given where due. My recollection of the legislation, though, it had, I guess, many twists and turns, and there were various check points, and if you did X, you had to tell us Y, and if you did Z, you had to tell us A, and different things like that. And you and I have talked on occasion because, obviously, you know that I'm discerned about this. I seem to recall, though, that in the year leading up to any planned distribution, I thought that there was supposed to be certain reports made to Council, I guess, to keep us aware of what was going on with regard to the pension 254 2/13/01 - FY '02 OPERATING BUDGET adjustment fund, if there were going to be any distributions, what were they going to be, and why if there weren't going to be any distributions, why and what were we going to do about it, did we need to -- I think we even included a provision that if you didn't do something, we had the authority to step in and attempt to do something on our own. All that just kind of leading to, I do want to make sure that we follow the dictates and the provisions of the legislation, and if you could get the appropriate documentation related to this proposal to the Chair, I would greatly appreciate it. But overall, obviously, I'm pleased that the retirees will be getting this year, for the third consecutive year, some additional distribution above and beyond what their regular pension allows for.
Yes, sir. We're putting together a report for Council on the Board's latest decision well in advance of what the law calls for, so you'll probably have that in a few days, actually.
Okay, thank you. 255 2/13/01 - FY '02 OPERATING BUDGET
Thank you. The Chair recognizes Councilwoman Brown.
Last year, you may recall, we had a conversation regarding minority and local firm participation, and you were kind enough to send a written reply last February 26th on that question, where you indicated that at that time last year, it was 10 percent of the funds that were managed by minority firms, and; 50 percent were managed by local firms. How are we doing this year, and where are we compared to last year?
Councilwoman Brown, the -- my name is Mark Bonavitacola. I just wanted to comment that it's probably about the same level. There are many different ways -- without being accused of Rob Dubow's accounting practices, there are different ways to measure participation, and it can be done 256 2/13/01 - FY '02 OPERATING BUDGET -- last year, we evaluated it based on the level of assets managed by each firm.
The price that we pay, the fees that we pay range from 2 basis points to 125 basis points, so there's a big disparity in the fees that we pay based on the type of product that the individual manager manages for the fund. So we can look at it based on fees. So as of June 30th for the fiscal year ending 2000, minority firms were paid about 9 percent of the total fees for management, excluding custody. Non-minority firms, 22 percent of the fees, with the balance going to public companies. We also have about 55 percent of the fees being paid to local firms, which would include both minority and non-minority private firms.
And, again, "local" means the Philadelphia and the five-county area? Help me out.
And New Jersey as 257 2/13/01 - FY '02 OPERATING BUDGET well.
New Jersey. What do you do for outreach? For my own knowledge base, what kind of procedures, protocols, activities do you engage in to outreach to that community?
The fund has grown, as Joe Herkness just mentioned, to almost $5 billion in assets. And the difficulty that we have is that most minority firms are relatively small.
So to address that, the Board has, and we funded subsequent to the year end, but August 1st, we funded something known as "The Opportunity Fund."
You discussed that in the correspondence last year. Go ahead, I'm sorry.
The total assets that we set aside were $100 million. We selected two firms to act as fund of funds managers, and 258 2/13/01 - FY '02 OPERATING BUDGET they in turn hired five minority local and small firms apiece to manage the $100 million allocation.
Also -- and you don't have the benefit of this correspondence, so let me just read it. You stated in one of your paragraphs, and I quote: "The Board also invests in alternative investments, namely private equity funds. As of December 31, 1999, the Board had 1.56 million committed to funds, of which 18 23 million were committed to a minority-owned fund of funds. Now, commitment is one thing; action and implementation is another. Did you meet the commitment?
The type of investments that are covered by alternative investments, there are venture capital and other 259 2/13/01 - FY '02 OPERATING BUDGET private equity funds, the structure of the fund is such that they call capital over a protracted period of time. When they find an individual company to make an investment, we are committed to fund the investment. So it's really a timing issue. We're legally obligated to make that commitment. It's just a question of timing.
Gotcha. One last question. You also attached for review a spreadsheet, and it was very helpful, being only two months old at that time. The one thing I would ask for the future is, you list firms, but it doesn't show whether or not they are local or not -- well, that's not true; no, it doesn't. So it would be helpful to know of the firms that you currently do business with, 'cause those of us here are always anxious to know how much business are we doing with those who pay taxes, so it would be helpful to know what percentage or which ones of these very specifically are local firms and which ones are not.
There may be two spreadsheets. One of them breaks it down by 260 2/13/01 - FY '02 OPERATING BUDGET minority, non-minority, and publicly-owned companies.
And I think the second spreadsheet broke it down to local versus non-local, or it may have even broken it down Philadelphia versus suburban Philadelphia versus outside of the area.
Gotcha. And they are the same. Okay, then. Thank you, gentlemen.
Thank you. Are there any other questions from members of the committee? (No further questions.)
Thank you, gentlemen. I appreciate your patience.
Sinking Fund Commission? (Witness comes forward.)
Good 261 2/13/01 - FY '02 OPERATING BUDGET afternoon. Kindly identify yourself for the record and proceed with your testimony.
Good afternoon, Council President. My name is Vince Jannetti. I'm the Secretary of the Sinking Fund Commission. I'm here on behalf of the Commission to testify on the Fiscal 2002 Operating Budget. The Commission's total budget request for Fiscal 2002 is 432 million. Of that, the General Fund request totals 192.6 million and includes 72.8 million for capital lease payments and 119.8 million for debt service and other designated expenditures. The 200 Class request from the General Fund provides for payments on lease facilities such as the Municipal Services Building, the Curran Fromhold Correctional Facility, the Criminal Justice Center, and this year provides funds for the Mayor's Neighborhood Transformation Initiative. The Water Fund request for Fiscal 2002 totals 157.9 million, all Class 700. And in Class 701, for interest payments, there's $93.5 million. This includes 222.9 million for general obligation 262 2/13/01 - FY '02 OPERATING BUDGET debt and 93.3 million for revenue bonded debt. The Water Fund requests for Fiscal 2002 also includes 6.3 million for the payment of a half a year's debt service on new bonds projected to be issued in October of 2001. The Commission's request from the Aviation Fund for Fiscal 2002 is 75.4 million. All Class 700 is provided for the payment of regularly scheduled airport revenue bond and general obligation bond debt service. The increase in the Class 701 line for interest payments on GO debt and revenue debt reflects the end of the capitalized interest period on the Series 1998 PAID airport revenue bonds. The Commission has a request of 6.2 million in the Car Rental Tax Fund to provide for interest payments on loans for new sports stadia. This concludes my written testimony. I'd be happy to answer any questions the Council may have.
Thank you. Any questions from members of the committee? 263 2/13/01 - FY '02 OPERATING BUDGET (No questions.)
Thank you very much. The City Treasurer. (Witnesses come forward.)
We do have a copy of your testimony which we will give to the stenographer, and she would be more than happy to have it transcribed in full. So perhaps you can abbreviate your testimony.
Oh, okay. The Treasurer's Office total budget 264 2/13/01 - FY '02 OPERATING BUDGET request for Fiscal Year 2002 is 936,084, which is a reduction of 21,744 from estimated '01 obligations, and this is as a result of eliminating nonrecurring bonuses that occurred in Fiscal Year '01. In the 100 Class expenditures, we have employees, which is the same as the Fiscal Year 9 '01 Budget. Eighty-four percent of our budget is 10 for salaries and -- salaries and health benefits. 11 Under the Class 200 expenditures, we're 12 requesting 116,938, the same as our Fiscal Year 13 2001 estimated obligations, and these are 14 professional services, rental of computer 15 equipment, postage dominates this component. 16 And under the Class 300/400 17 expenditures, we are requesting 28,233, which is the same as our 2001 budget, and this will cover office supplies, the cost of printing the envelopes that we use to mail the City checks, purchase of computer software, and maintaining our basic office equipment. Okay, and what I will do in the interest of time is talk about what our financings are for the upcoming fiscal year. We're 265 2/13/01 - FY '02 OPERATING BUDGET anticipating in February of 2001, through PAID, to issue about $103 million in commercial paper to fund the cost of certain repairs and improvements to the Vets Stadium and to provide bridge financing to certain City obligations with respect to the building of two new stadiums. In May of 2001, PAID, on behalf of the City will issue about $304 million in bonds to fund the City's obligations of the cost of building two new stadiums. In April, it is anticipated in April of 2001, PGW will issue approximately 75 to about $100 million in revenue bonds to finance the costs of certain capital projects, including acquisition, construction, improvement, or replacement of pipes and pipelines. In 1998, the City issued about $443 million in general airport revenue bonds through PAID to construct two new terminals at the airport, Terminal and Terminal F. We have to issue an additional $150 million in completion bonds to complete the project, and we are anticipating to issue that sometime in late April. And in May of 2001, the RDA, on behalf 266 2/13/01 - FY '02 OPERATING BUDGET of the City, will be issuing its first tranche of an aggregate $250 million bond issue. The proceeds will fund the cost of the Mayor's Neighborhood Transformation Initiative program. And in the fall of 2001, the Water Department anticipates issuing about $250 million of revenue bonds to fund ongoing capital projects and improvements. The Treasurer's Office continues to negotiate aggressively with bond and underwriters counsel to obtain high levels of professional services, while holding a line on fees and compensation. And we intend to continue to monitor these closely in upcoming fiscal years. If there are any questions on my testimony, which I tried to abbreviate, I'm more than happy to answer that.
Thank you, we appreciate that. You did indicate that there will be seven financings.
I believe in Fiscal 2002? 267 2/13/01 - FY '02 OPERATING BUDGET
Well, the first financing we're going to issue in 2002 will be the tran. We do that every year. That is our one-year note, which is to -- we borrow the funds in anticipation of certain revenues that we receive in January, February, and March of the subsequent calendar year.
And that's going to be the first financing. Typically, some of our ancillary agencies and authorities, like the Hospitals Authority or the RDA or the Parking Authority come to us periodically to request for debt issuances. And over the last three fiscal years, it averaged out to about two per agency. So I'm estimating they may have about two financings each. I don't know exactly what they are, but if -- this is just an educated guess based on prior borrowing activities.
Thank you. 268 2/13/01 - FY '02 OPERATING BUDGET The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. And may I ask the Chair if I could have the gentleman from the Sinking Fund Commission back? Some of my questions are relevant to him and the Treasurer. (Witness comes forward.)
On the first of your testimony, you talk about the increase in your 200 Class reflects the elimination of a one-time savings realized in Fiscal 2001 on the Criminal Justice lease revenue bonds and the provision of funds for the Mayor's Neighborhood Transformation Initiative. How much are these funds for the Mayor's Neighborhood Transformation Initiative?
.8. And is that just the debt service on the blight elimination funds?
The Treasurer's testimony seems to indicate that -- I guess I was under the impression last year, when there was some discussion about this, that we needed about $18 million a year in debt service to fully support a total of $250 million in blight elimination bond obligation; is that correct?
Okay. But from the other testimony, I think it's fairly clear that we will not be issuing at one time $250 million in debt for the blight elimination bonds; is that correct?
Okay. So why do you need the full amount of the debt service if you're not going to issue all of the bonds at one 270 2/13/01 - FY '02 OPERATING BUDGET time?
Excuse me, Mr. Dubow. For clarification, if my memory serves me correctly, wasn't the debt service million? 6
Mm-hmm. The reason 7 why it's 18.8, you have to -- the market 8 fluctuates, and so you sort of need a little 9 cushion if you don't know whether rates are high. 10 When rates go high, you have to borrow less, so 11 you're leaving a cushion in there to allow for the 12 adjustment in the market. So at 18.8. The 13 cushion is 200,000 -- I'm sorry, it's 1,200,00. 14
Was that 15 included in the budget? Because I believe in the 16 budget, it said $20 million. 17
No, it's 18.8. The first 18 year, the way it's set up in the plan, the first 19 year -- 20
I'm sorry, Councilman. I just wanted some clarification.
In the first year, it's 18.8, and then it goes up to 20 in the out-years of the plan. And then to your question, Councilman 271 2/13/01 - FY '02 OPERATING BUDGET Nutter --
-- at the time we were putting together the budget, there were still a number of scenarios being discussed for how the bonds would be issued. We wanted to make sure that we had enough appropriation power in the Sinking Fund in case the whole amount was issued. And one of the things that I think we talked about at last week's hearing was that if indeed we wind up issuing in tranches and require less than the 18.8 million in '02, we would propose to come back to Council and to transfer some of that funding over to other Neighborhood Transformation Initiative programs.
Well, let me try to get an understanding of -- so what is -- I mean, as we speak, the May 2001 anticipated borrowing, I'll get into other items related to that in a second. What do you expect the size of that offering to be?
And what will we do 272 2/13/01 - FY '02 OPERATING BUDGET with that money?
Councilman, they're still working on the plan. In terms of how the -- there are different categories in what this financing will fund, including mortgages, encapsulation of buildings, razing of buildings. And in terms of exactly what portion of the first tranche is going fund, there are still -- the Mayor is -- the Department of -- what is the name of the department?
The office of Transformation Initiative is still working on the plan, but the estimate is about $100 million in the first tranche, and they are still determining how it's going to be apportioned over the various sub categories within the plan. They're still working on the plan.