And what do you anticipate to be the rest of the financing schedule with amounts?
It primarily depends on the spend-down rate. As you know, under 273 2/13/01 - FY '02 OPERATING BUDGET municipal debt, you have three-year spend-down requirements, and the second tranche will be, in part, dependent on how quickly the funds are drawn down. So that we don't have any arbitrage exposure, or we have a minimal arbitrage exposure.
Okay, well, I can appreciate that, but, I mean, what's the period of time, I guess, over which you expect a total of $250 million in debt to be issued?
2003 is when the entire issue -- the entire amount will have been issued, Fiscal Year 2003.
Well, let's go back to your previous answer. You issue the 75 to 100 in May '01.
And you said you have to spend that money within three years.
Arguably, you can spend it in six months. I mean, the window is three years. 274 2/13/01 - FY '02 OPERATING BUDGET
AND you're saying that no later than May '03, you expect the other -- what is that -- 75 to 150.
To be issued. And do you expect that all of that will be done at one time, or do you expect to break up the pieces of that as well?
Again, whether there's going to be two or three tranches really depends on -- it's very hard to answer this question definitively since, one, the plan is not complete; two, we haven't issued the debt. So, you know, what you plan to do in terms of spending may in fact not happen, which has been demonstrated in other bond financings. We anticipate it through the second tranche in '03. Now, whether that happens depends primarily on when we issue the first tranche and how quickly we spend those funds down. So I don't want to-- I'm sort of reluctant to frame the financing calendar because 275 2/13/01 - FY '02 OPERATING BUDGET there's so many variables that haven't been tied down yet. And I hope I'm not trying to be evasive on this.
I'm sorry, let me get in position to deal with the Director of Finance. It's a totally different posture I need to deal with her.
There's also another complicating factor in that there is -- there will be among one or both of these tranches potentially private activity bonds and also a taxable component, because there are some items that do not fit the strict definition of the normal municipal bond. So that complicates how quickly these funds will be spent and then what the drawdown schedule needs to be. For that piece that's tax-exempt, there is, as you know, no three-year spend-down limit, so those could potentially be held longer.
Excuse me, 276 2/13/01 - FY '02 OPERATING BUDGET Councilman. May I follow up on your question?
You mentioned three years. Is there also a formula with regard to the outstanding debt that remains for each of these projects, for example, mentioned in the Sinking Fund categories?
Is your question whether or not the proceeds have been spent?
No -- okay, you said there's a three-year maximum. So in terms of how much you borrow or file to borrow each time, does it have to be a certain percentage of what the whole debt is you want or --
No, no, it doesn't. The three-year requirement that I alluded to is a tax requirement, and basically what it says in short is that when you issue debt, you are required to spend the proceeds within three years or you're subject to some tax rebate liabilities, meaning you have to give the IRS back some money. And one of the things you don't do is try to issue 277 2/13/01 - FY '02 OPERATING BUDGET more than you can reasonably expect to spend down. And there are a number of exceptions, like for airport projects and the like, but that's the basic rule.
Thank you. What is the status of the Parking Authority garage funds for the Walnut Street Garage and the DisneyQuest at Eighth and Market project? Aren't we getting very close to three years?
That is correct, Council President Verna. The last information I have with respect to the Walnut Street Garage is that there is some litigation with respect -- litigation by some of the community groups with respect to the design of the garage, particularly the facade and 278 2/13/01 - FY '02 OPERATING BUDGET whether or not the community wants the theater to be a part of the multi-use facility. And to be quite frank, I don't know what the disposition is of the litigation. We can get that information for you. But there has been some -- last time I followed through on this, there was pending litigation by the community developers. And you're correct about the three- year window coming to a close. The Walnut Street bonds for the Parking Authority, they were issued in 1999, if I'm correct. And you're right, 2001, we're coming up on the three year spend-down required, as with Disney.
But the litigation doesn't stop the clock from ticking.
No, it does not. It stops us from really spending the money because we can't continue the project unless these issues are resolved. So there is an arbitrage issue.
Same thing. Those bonds were issued in May of 1999 and we are coming 279 2/13/01 - FY '02 OPERATING BUDGET up on the 3-year window with respect to the spend-down requirement.
Well, there's not any spending litigation on that, is there?
To my knowledge, there isn't any pending litigation on that matter.
All right. Thank you, Madam Chair. I'll have to remember that litigation strategy for the next time I have a problem with a project. Again, back to the bonds. Is it fair to say that what we as a city -- I mean, what the Mayor and the Chief of Staff and the Director of the Office of Neighborhood Transformation and the Planning Commission and possibly the Office of Housing and any other agencies to be involved, some input from City Council. Is it fair to say that what we plan to do with all $250 million and its various pieces is what should drive and help decide how much debt is authorized, in what form, and what our anticipation is as to what we would 280 2/13/01 - FY '02 OPERATING BUDGET actually do with it before we actually go and issue the debt? I mean, don't you need the plan components to understand what's driving the train?
That is absolutely correct, Councilman, and that is why we haven't issued the debt yet. We're still working on the plan of the project.
Well, I understand that, but then let me ask this question. You have in your testimony that you're expected in May of 2001 to issue this first tranche of debt. Is there a scenario in which the debt financing could be done and the details of the plan not finalized?
No, Councilman. And as a former investment banker, you can appreciate this. When you issue debt, there has to be a plan of finance and there has to be a project for which the proceeds will be used for. And you can't just issue debt based on some idea of a plan. It has to be pretty much concrete. You have a story to tell when you're trying to sell the debt. So it is very unlikely, sir, that the 281 2/13/01 - FY '02 OPERATING BUDGET debt will be issued without a concrete plan.
Okay. For any -- for all or any of the $250 million and at least, again, the May '01 anticipated first financing, does that need City Council approval?
Yes. All financings, bond financings, that are done by the City require Councilmatic action.
Okay. And how did you make the decision to do the financing through the Redevelopment Authority as opposed to the City general obligation debt?
One of the challenges, as you know, the City has is a constitutional debt limit, and the Neighborhood Transformation Initiative program is one of the programs of this administration and the Mayor is committed to doing. And as with many other types of financing the City has engaged in, one of the policy decisions that was made was to go through the Redevelopment Authority to preserve the debt limit of the City.
What do you anticipate to be City Council's role in the debt 282 2/13/01 - FY '02 OPERATING BUDGET issuance?
They have to approve the ordinance which authorizes the issuance of the debt.
And will there be a various lease or contractual documents between the City and the Redevelopment Authority about the use of the funds and -- neither.
A service agreement. There will be there will be a service agreement between the City and the Redevelopment Authority. And in the service agreement, among other things was set forth the use of the proceeds, the responsibilities of the City, and the responsibilities of the Redevelopment Authority with respect to the plan.
With any bond proceeds -- any bonds transaction, the trustee holds the fund, serves in trust for the bondholders to make 283 2/13/01 - FY '02 OPERATING BUDGET sure that the funds are spent according to the purpose for which the debt is issued. So the Redevelopment Authority, nor the City will have jurisdiction over the funds. So we would have to follow the service agreement literally to the T in order to expend the monies. And obviously, the service agreement will become a part of the ordinance package that's submitted to City Council.
Suppose I wanted to access some of these funds, who would I talk to, the trustee?
The trustee has a fiduciary responsibility to the bondholders make sure that the funds are spent in accordance with the indenture in the service agreement. So you could not do that, or else I'd be in Fiji right now.
Or else I'd be in Fiji right now. 284 2/13/01 - FY '02 OPERATING BUDGET
Well, I understand that, but we'd probably find you. But I guess, kind of seriously, who will have -- I mean, who decides how the money gets spent and what gets done with what and who gets -- I mean how do you -- how do you apportion it out?
That's going to be one of the many details that have to be worked out as the NTI is fleshed out and the plan fully developed. The method for accessing the funds, who will have signoff, and what signoff then goes onto the trustee, some of the details that we haven't worked too gets in.
Again, your role in that process, depending on whether it's something that's appropriated, the decision is made that the work be appropriated through L&I or however, and we've made a commitment to do it through L&I. There would be some approval process because the appropriations would have to be approved. Again, the service agreement would come to City Council 285 2/13/01 - FY '02 OPERATING BUDGET prior to --
I hate to cut across you, but, I mean, was there an option somewhere that it would not be the Department of Licenses and Inspections?
There had been some discussion that perhaps the work would be contracted through RDA and not through L&I, but we've committed to go through L&I.
Okay. I think that's all my questions in that area. Although for all of these financings, and we have been talking a lot over the past year about the City's debt limit, tell me what if any effect do all of the financings that are mentioned on have on the City's debt limit, if any. I think there are six of them listed.
Yeah, none of the ones listed on have any impact on our constitutional debt limit.
What impact do they have on either the General Fund or the Five-Year Plan? I mean, I'd like to think that we have an unlimited capacity to borrow money either on our 286 2/13/01 - FY '02 OPERATING BUDGET own or through others and just, you know, have a tremendous debt service in the Sinking Fund and keep Mr. Jannetti, you know, very busy, but, I mean, what's the --
Oh. The PAID issues, the stadium issues total 304 million. And that's about, I think, million a year in debt 12 service. That's included in the plan. 13 Now, the PGW debt, obviously, is not 14 General Fund debt. 15
The airport revenue bonds 17 are paid out of the Aviation Fund. 18
The RDA NTI bonds are 20 General Fund payments, and those are included in the plan as we discussed. And then the Water Fund payments come out of the Water Fund (inaudible).
Okay. All right. Thank you very much. 287 2/13/01 - FY '02 OPERATING BUDGET Mr. Jannetti, at the bottom of your testimony, it talks about the Fiscal Year 2002 requests, and this line item, in talking about a previous line item, includes possible payments on the Philadelphia Parking Authority Series 1999 and Series 199-A which provided construction funds for the garages, which you had some discussion about earlier. What do you mean by "possible payments"? I mean, you either you have them or you don't, right?
These two bond issues had a debt service reserve fill-up. The City guarantees the debt service on those bonds. So to the extent that they cannot pay the debt service, we are required to do so. So we're not quite sure exactly how much it's going to cost us.
Okay. And are you also the holder of the car rental tax proceeds?
Okay. Well, you have "car rental tax fund" on your testimony. Now, you know, Mr. Jannetti, you know if you write 288 2/13/01 - FY '02 OPERATING BUDGET it down in your testimony, you know I'm going to ask you about it, you know that. You've been around the block a couple times. Why don't you tell me a little bit little bit about that.
The car rental tax funds are funds, you know, to be used for payment on stadium bonds when they're built. I mean other than that, I. . .
Yes. I would -- yes. Any bond to the City, the Sinking Fund Commission does the payments.
Okay, all right. It is what it is. Okay, thank you. Thank you, Madam President.
Thank you, Madam Chair. Thank you, Councilman Nutter. Not a question but a comment for our City Treasurer, in reaction to Paragraph 3, of your testimony. And you're confident that the 289 2/13/01 - FY '02 OPERATING BUDGET City will maintain its favorable long-term credit raying. We're encouraged by your confidence and hopeful that that will continue under your watch.
Thank you. Any other questions or comments of this witness? (No further questions.)
Thank you very much. Procurement. (Witness comes forward.)
Commissioner, thank you for your patience. COMMISSIONER APPLEBAUM: Good afternoon.
Good afternoon, Commissioner. COMMISSIONER APPLEBAUM: Good afternoon, Madam President and members of City Council. I am Louis Applebaum, Commissioner of the Procurement Department. With me today, and 290 2/13/01 - FY '02 OPERATING BUDGET not sitting here, are Deputy Commissioner Harry Hillock, Administrative Services Director Debbie Beatrice, and MIS Director Alice Dionne. Also in the audience, there were members -- there's a few left -- of the Procurement Department staff who were invited to experience the Department's budget process, and I would like to take this opportunity to acknowledge the hard work and dedication of all of our employees in the Procurement Department. I am presenting for your consideration the Procurement Department's Fiscal Year 2002 budget request. You have my full testimony and I will briefly summarize the highlights. We are requesting a General Fund appropriation level of 5 million. This represents a decrease of $100,000 from last year. The mission of the Department is to obtain quality goods, services, and construction in a timely, cost-effective, and professional manner through a competitive, fair, and socially-responsible process in accordance with the law. Our major accomplishments during the past year, we have implemented a new bid information Web site, which provides notice to 291 2/13/01 - FY '02 OPERATING BUDGET vendors of bidding opportunities. The site has (inaudible, sound system failure).
Great sound system you brought us. Thank you so much. COMMISSIONER APPLEBAUM: Remember, it's the lowest vendor. In addition, necessary forms, instructions, and a vendor's guide on how to do business with the City of Philadelphia are available to view and print. We believe that this site has great potential for reducing bid package preparation, postage costs, and we can increase competition through greater access to bid notices from additional vendors outside of our region. A formal debarment policy was established where the City may suspend the vendor from bidding for up to six months while an investigation is made to determine if there was sufficient cause for disbarment. If the City finds there are sufficient grounds for sanctions, the City may debar a vendor from bidding for a maximum of three years. 292 2/13/01 - FY '02 OPERATING BUDGET As part of the Mayor's 40-day initiative to eliminate abandoned vehicles from City streets, Procurement successfully worked with the Managing Director's Office and the Police Department to procure salvers to remove and dispose of the abandoned vehicles. We continue to administer a program to recapture from the Commonwealth of Pennsylvania sales and use tax paid by public works vendors doing business with the City. 9 million in gross revenue. Procurement has a number of current objectives. The Electronic Voting Machine Procurement Committee is dedicated to completing the procurement of new electronic voting machines in accordance with the November 3, 1998 voter referendum mandating this initiative. The Department released the requests for proposal for the purchase of direct-recording electronic voting machine system, and vendor submissions have been evaluated. Currently, negotiations with the 293 2/13/01 - FY '02 OPERATING BUDGET selected vendor, Danaher Corporation, are ongoing, and it is anticipated -- hopefully anticipated -- that the new voting machines will be used in the November 6, 2001 election. As part of the Mayor's Neighborhood Transformation Initiative, Procurement has the major responsibility to conduct competitive bidding for the program demolitions. The Public Works Division is finalizing the first update to the standard contract requirements that are a part of the City's construction contracts. This document, which has not been revised in over 14 years, is being rewritten in conjunction with the 15 Law Department and various other City agencies. 16 When completed, the document will reflect modern 17 terms and conditions. 18 The Procurement Department is also 19 continuing to explore e-procurement opportunities 20 and the use of the Internet to improve the efficiency of the bid process and increased vendor competition in a number of areas. We are planning to pilot an online dynamic pricing bidding process, using the services of an application service provider, and expect a cost saving on 294 2/13/01 - FY '02 OPERATING BUDGET certain commodities. This is a program that's currently under -- in use by the Commonwealth of Pennsylvania. It's basically a reverse live auction on the Internet. There's a vendor, a company called "Free Markets" that we are dealing with, that hopefully will be the vendor that we will work with to accomplish that. As an expansion of speed, we are planning to automate the initiation and approval of requisitions to improve work-flow tracking and to include automatic tasks alert via e-mails. Other new features will include the availability of online vendor catalogs, contract documents, price lists, and notification to vendors via e-mail. Within the next few months, online ordering from Staples, the City's office supplies vendor, will be implemented. The City will receive an additional 2 percent discount on orders placed via the City's Internet. Madam President, this concludes my testimony, and we will be glad to answer any questions you or the other members of City Council may have regarding this testimony.
Thank you, 295 2/13/01 - FY '02 OPERATING BUDGET Commissioner. The Chair recognizes Councilman Rizzo.
Thank you, Madam Chair. The Administration is requesting a transfer of funds that are needed to cover the shortfall in the amount budgeted for the maintenance expense of existing voting machines resulting from the, as I learned today, the unexpected delay in the contract negotiations for the purchase of electronic voting machines. Could you elaborate on the delays and how much money we're talking about to keep the existing machines operational? COMMISSIONER APPLEBAUM: Well, we have been negotiating with Danaher. It's been quite an --
Could you pull that a little closer to you. COMMISSIONER APPLEBAUM: It's been quite an extensive, long, drawn-out process. The Law Department -- we've worked with the Law Department, and there's been some significant concerns and problems with the legal 296 2/13/01 - FY '02 OPERATING BUDGET documents. The Solicitor's Office is trying to bring it to a close, and hopefully, they be able to do such. We have also had some pricing issues, where the vendor has attempted to, in midstream, sort of change the pricing arrangements that have not been satisfactory to our committee, and we are working on that issue. Also, we are getting feedback from other jurisdictions of some problems that they had with those machines during the past election. So we are studying it, we are concerned, and we are not -- we're not going to allow the City of Philadelphia to make a mistake, similar to many other jurisdictions who have purchased voting machines. We're being very conservative and very cautious. So, therefore, the need to maintain our current inventory of machines, the lever machines, is necessary to ensure that we continue to have the voting availability. We will need to maintain those machines until we have completed the Danaher process, if it's completed.
How much money? 297 2/13/01 - FY '02 OPERATING BUDGET COMMISSIONER APPLEBAUM: I'm not sure of the amount. The City Commissioners probably had that in their budget transfer, and I'm not really sure what that amount is.
Is it realistic to think that we can have these machines -- I mean, if it's not, I think it's good to tell us now. November 6, 2001, to have these machines, that doesn't sound -- if we're not even -- if you don't even have a deal done -- COMMISSIONER APPLEBAUM: Well, the deal is done, the RFP was accepted. The signed contract has not been completed. It has always been our goal to complete the transaction to have them available for the election of November 6th of 2001. As each day passes by, that becomes less and less probable. I would say that if we do not conclude, finalize the agreement by the end of February, we will not make that November 6th election date.
Now you know how we felt with the stadiums. COMMISSIONER APPLEBAUM: I know that. 298 2/13/01 - FY '02 OPERATING BUDGET But realize, we are spending $18.5 million. We are developing a practice that we're going to have for the next or years, so we want to make 5 sure very sure that we don't make a mistake. 6
My next question is 7 -- and I've had a conversation with the Board of 8 Education, and I know that I've had this 9 conversation with you in the past. Could you 10 describe the relationship that you have with the 11 Board of Education in an effort to try to use your 12 buying power. They buy the same flashlight that 13 the Water Department buys, they buy the same 14 rubber boots that the Water Department buys. They 15 buy thousands and thousands and thousands of items 16 that are similar to other operating departments. 17 And I understand that that relationship is far 18 from where it should be, but that there is some 19 minimum contact between you and the School 20 District, but not to the point where it is beneficial to both -- to the School District. Could you describe the relationship -- COMMISSIONER APPLEBAUM: You are absolutely correct. I would have to say that there really is no relationship. 299 2/13/01 - FY '02 OPERATING BUDGET There happens to be one contract that I'm aware of. I think that's a fuel or an oil contract that we have that we do share. I don't believe there are any others. Realize that we both -- and not to make an excuse, but the School District and the City of Philadelphia operate under different rules and regulations. We're governed by the City Charter, and the school districts are governed by some other State laws. That doesn't mean that we shouldn't. And we have had -- in some of the initial transition committee reports, there was suggestions that there should be a better alliance and maybe a combination of those two agencies, the City and the School District when it comes to procurement. That's been discussed, but there hasn't been really a lot of work on it. And I believe that in the future, there definitely should be a close combination of those two departments to buy products for both.
Well, I think it's a shame that we have a school district as big as we have and we have a purchasing department -- from what I understand, your procurement department 300 2/13/01 - FY '02 OPERATING BUDGET does an outstanding in cutting the best deals that are humanly possible, from automotive batteries to you-name-it, the same things that the School District purchases. Who would you suggest -- you know, I hate to always pass it to the second floor, but does it require the Mayor or the City of Philadelphia to demand that these economies be discussed? Because I think it's embarrassing. Nobody's going to complain. You talked about the City Charter. If you start saving the citizens of Philadelphia money, I don't think you're going to hear too many complaints from them about violating the City Charter. And if that does violate the City Charter, we need to fix it. Because we have all of these agencies that could benefit from what you have already accomplished in buying and doing the best deals that are humanly possible. You talked about Staples. Well, the School District doesn't use office supplies? I know the kids don't have pencils and pens, but I hope the administration and the offices do. So my point being that we really need -- if it takes the Mayor to jump up and down, 301 2/13/01 - FY '02 OPERATING BUDGET maybe that's what we need to do. I'm disappointed that it hasn't moved forward. COMMISSIONER APPLEBAUM: Well, let me thank you on the compliment. It's much appreciated. And we do -- the Procurement Department has done an excellent job in bringing our costs down. The School District also has their department, and I'm sure they do good job too. They buy their office supplies from Office Depot and we're familiar with their pricing. We buy from Staples. I believe if they were one large contract, we would -- either Staples or Office Depot, we would certainly earn a better price. Janice Davis, the Finance Director is aware of the problem of how we're trying to put us together.
Is it a fair statement, before the Finance Director speaks, if you're going to be buy 500 of something from one vendor and the School District is going to buy 500 from a different vendor, then if we bought 1,000 from one vendor, we'd most likely get a better price. 302 2/13/01 - FY '02 OPERATING BUDGET COMMISSIONER APPLEBAUM: That's called supply and demand, and we would as long as we would pay for it. You're absolutely correct.
I haven't heard too many complaints. I remember the days when people would be calling here, begging to get paid. I haven't had that happen in a week. (Laughter.)
And the Accounting Department thanks you for the compliment. Councilmember, it's one of the things that the Administration is reviewing, consolidation of services with the School District and with other quasi-City agencies, because we're certain that there are certain efficiencies that can be gained by consolidating our services. So we're looking at those areas where we do something well or perhaps one of the other agencies does something well for opportunities to consolidate and cut costs across government.
So you're telling me that we don't need to do anything, and if next year at this time, we ask the question, we're not going to hear the same answer. 303 2/13/01 - FY '02 OPERATING BUDGET
We will have at least looked at it and decided that it was feasible or not feasible because that is one of the ways we intend to help the School District manage its deficit is by cutting cost, and that would be an opportunity to cut their costs.
Thank you. Thank you, Commissioner. COMMISSIONER APPLEBAUM: Thank you.
Thank you. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. Mr. Applebaum, I want to go back for a few moments to voting machines. As you know, Council passed the necessary legislation to get the question on the ballot, and the voters approved this measure a number of years ago, and I was pleased to be involved in that. And obviously, this was way before any of the unfortunate activities down in Florida last year. Did I understand your testimony that 304 2/13/01 - FY '02 OPERATING BUDGET you've gone through the RFP process, a company responded, or maybe a number of companies responded, and you picked one based on their bid? When was that? COMMISSIONER APPLEBAUM: The -- well, let me step back for a minute. It was not a competitive bid where we had to take the lowest responsible bidder; this was an RFP that would lead to negotiations.
To negotiations, right. COMMISSIONER APPLEBAUM: Also, the other important factor is that the City of Philadelphia must select a vendor that has equipment that is certified by the Commonwealth of Pennsylvania.
Right. COMMISSIONER APPLEBAUM: There was only two vendors who had what call "full-ballot direct-recording electronic machines" that we could choose from. One was Danaher, one was Sequoya (ph.). We selected Danaher because there was a significant difference in price. The bottom line for Danaher was 18.5 million; the price for 305 2/13/01 - FY '02 OPERATING BUDGET Sequoya was in excess of million. So we selected Danaher and we started negotiations with them, I'm going to say, approximately six or seven months ago. And we have had ongoing negotiations. It's been a very difficult, stressful time. It was during the course of negotiations that the Danaher Corporation, which is a major New York Stock Exchange company was considering selling the voting machine division. So that put a stop in the negotiation, and we lost maybe two months during that period. We are now at a point in time where we're getting a lot closer. The legal department -- there was a lot of problems on warranties, acceptances, damages, indemnifications, and we're getting through that. And as of my discussion with the Law Department this morning, they feel confident that the last draft that they issued is going to be the end of that. And the next issue is to make sure there's a -- an understanding of the price 'cause we -- it's my opinion the price that they presented to us is the price of what was in our 306 2/13/01 - FY '02 OPERATING BUDGET RFP. We're having a little difference of opinion on that right now.
Well, in that regard, if that is the case, I mean, I don't know any of these people. I'm aware of the general process that you have to deal with vendors that are on the approved list, and then we decide what kind of machine we want. If in the course of these protracted, difficult, painful negotiations and -- that sounds like it's primarily on the scope of service and warranties and the like. If we've now gotten down to potential change in price, I mean, does that create an environment in which we, if we have the right to do it, do we need to explore what our rights are in terms of other negotiations or in other discussions with any other companies. I mean, we need to wrap this up at some point in time. COMMISSIONER APPLEBAUM: If we come to the conclusion -- that's the committee that's working on it and the City Commissioners who are playing an active role in this, if we come to the conclusion that we don't want to complete this 307 2/13/01 - FY '02 OPERATING BUDGET process with Danaher, we will terminate that total program and go to the next vendor and start working with them. That's our own -- that's our only option. Or the third option, which I don't think would be amenable to anybody, is just start over.
Start over. COMMISSIONER APPLEBAUM: And starting over won't accomplish anything because we're still with the same two companies right at this point in time.
Right. COMMISSIONER APPLEBAUM: Now, of course, there's a lot of discussion that there's new technology being developed in many companies. I know Unisys, IBM, and Dell are working on a new program, but we have to realize before any equipment can be used by the City of Philadelphia, it must be through the Commonwealth's program.
Right. COMMISSIONER APPLEBAUM: And that can take a year or longer.
Sure, right, I 308 2/13/01 - FY '02 OPERATING BUDGET understand. Okay, you'll keep us informed. COMMISSIONER APPLEBAUM: Absolutely.
Thank you. On of your testimony, in the Major Purchasing Projects section, it reads, "Additionally, as part of the Mayor's Neighborhood Transformation Initiative, Procurement has the major responsibility to conduct competitive bidding for program demolitions." Can you tell us a little bit about that. What does that mean and what will you be doing? COMMISSIONER APPLEBAUM: Well, part of that program will consist of demolition of existing properties.
Mm-hmm. COMMISSIONER APPLEBAUM: Demolition bidding is handled through the Procurement Department, and we will be conducting on a periodic basis the issuance of the bid documents and the opening of the bids and making the awards and the prequalifications on the normal process that goes with the competitive bidding program. 309 2/13/01 - FY '02 OPERATING BUDGET We will be an active participant in getting the contracts, getting the bids open, the awards made, and the contracts issued to the various demolition contractors, and also making sure that, as we spoke earlier, that the minority participation is reflected in those bid documents.
The thing I appreciate about you, Commissioner, is that in -- 'cause you have the previous experience that in a very short period of time, you've figured out how to give very complete answers that touch on all the things that you know that we all care, and we don't have to pull it out of you, as with some other folks, and I do deeply appreciate that. COMMISSIONER APPLEBAUM: I thank you very much. And we've been here for, I guess, the eighth or ninth year, and we always enjoy the rapport, and I guess I learn from you and you learn from me, and it's working well.
Thank you. COMMISSIONER APPLEBAUM: Thank you. (Applause.) 310 2/13/01 - FY '02 OPERATING BUDGET COMMISSIONER APPLEBAUM: Wow, that's my group.
Sorry there won't be any applause now. (Laughter.) COMMISSIONER APPLEBAUM: Do you want a hot dog, sir?
That's one of the areas I want to talk about. Let me ask you a general question about RFP, straight-out bid, negotiation for professional services. They seem to be -- are there guidelines for when it can happen and when it can't? Is there a specific policy guidelines that says, This must be bid with a sealed bid, this must be negotiated as a result of an RFP response? COMMISSIONER APPLEBAUM: Yes, there is.
What are they? COMMISSIONER APPLEBAUM: Commodities and products and construction must be a sealed bid awarded to the lowest responsive, responsible 311 2/13/01 - FY '02 OPERATING BUDGET bidder. Generally speaking, professional service agreements, professional service contracts we are permitted to issue through an RFP process and with negotiations. Professional services, the question is, what are truly professional services? Now, there's no question that law firms, accounting firms are really -- you know, are easy to determine. There are other contracts that we have that -- that you'd have to look at it very closely to determine that it is truly a professional service, such as food service at the prisons. Sure, we are serving a commodity, it's food, but it's really the talent and the knowledge of the company in managing that operation. So that is considered professional service.
But isn't that a part of -- COMMISSIONER APPLEBAUM: From time to time, we must go to the City Solicitor's Office to get from them their opinion whether it's an item that should be a true bid or can be a professional service through an RFP.
But as part of the 312 2/13/01 - FY '02 OPERATING BUDGET bid process, it's inherent in that process that not only is pricing a consideration but the most responsible bidder, which I assume includes the ability to perform, the knowledge of the company that's providing the service or providing the commodity. It seems that the professional service contract rubric is one to get around the bidding process. Because when you, for example, look at voting machines, a straight-out bid would be discussed, price, the ability to perform the contract, the track record of the company and other such deals. If you were to bid voting machines or bid legal services or bid accounting services, wouldn't you be considering both price, performance, company's history, and the product that they have provided to other -- it just seems to me -- and it's not your -- it's not your system. I know you're working within that system, but it seems to be very clear that we use professional service and RFP process when it suits us as opposed to just doing straight-out bids with everyone. COMMISSIONER APPLEBAUM: No, no, that's 313 2/13/01 - FY '02 OPERATING BUDGET not the answer, when it suits us. It's the answer what makes sense.
Isn't that the same thing? COMMISSIONER APPLEBAUM: We're not buying a voting machine only. We are buying a whole process that starts with the voting machine and how you develop the ballot for that voting machine, and then you're going in the next step. There's a whole process of education and training and how we're going to train the people how to vote on these new machines. Then you go to the next step of the delivery of the machines to the voting locations. And then at that night, all of the software, hardware systems, the T-1 lines, how the data is going to get from the voting machine into the mainframe. So it's a whole process, it's a whole system. And the two companies that came back, they were somewhat different. So it was to our advantage to sit with them and negotiate and develop the absolute best manner of getting that information transmitted from the vote into the total count. 314 2/13/01 - FY '02 OPERATING BUDGET
But the items you talked about relative to the more subjective or, I guess, more cerebral determination as opposed to price, isn't that all part and parcel of determining whether a company is in fact a responsible bidder? COMMISSIONER APPLEBAUM: No. You may be a very responsible bidder and you may be very responsive, but you might not have the right product that we want to accommodate our needs.
So you're telling me that if we do a bid process, we are stuck with whatever the lowest bidder gives us? COMMISSIONER APPLEBAUM: Generally speaking, it's -- yes. You know that. If we go the bid direction and we determine that your bid is responsive, you did the MBEC stuff right, you signed the document, you gave us the insurance papers, you put the certified checks in, all of those things, and if we found out you have had a track record and you're financially responsible, and if you're the low bidder, you get it. Or -- or what we do, if we're very unhappy with the whole process, from time to time, 315 2/13/01 - FY '02 OPERATING BUDGET we won't award; we'll cancel that bid and we'll start over.
Since the theft of the presidential election this past November, there's been a substantial amount of discussion in Washington about national campaign election process reform -- not necessarily the standardization of voting machines, but the upgrade of all areas of the country that potentially could have this type of problem -- butterfly ballots, paper ballots, those kinds of things, and kind of moving everyone up into the new century. Does it make any sense at this point for us to maybe wait and see whether or not there's going to be some federal contribution to the process of election reform -- election machine reform? I mean, it would be sad, I think, if we were to go head and move forward, pay the 18 million, or whatever we're going to pay, and then have some national bill which would provide a certain percentage to any state that was going to upgrade their voting machines or any municipality that was going to upgrade their voting machines. 316 2/13/01 - FY '02 OPERATING BUDGET Could there possibly be something, considering how bad Florida was, and probably the first -- I guess it was the first time in history that the popular vote exceeded the electoral vote? Or there was, I think, two other instances. But I said in modern elections, it was the first time that it's truly happened. Wouldn't we be missing an opportunity to get some federal help in defraying the cost of this project? COMMISSIONER APPLEBAUM: Well, we have thought of that, we have discussed that. And there are a lot of things that you have to take into consideration. I personally believe that if the City of Philadelphia spent the 18, $19 million and bought machines, and then a year later or two years later, the federal government adopts a policy where they're going to contribute, I really believe that they couldn't exclude us because we did it as a leader and we started off. So I would imagine if that happens, we would get the funds also. The second thing you have to consider is the time factor. We have machines in our 317 2/13/01 - FY '02 OPERATING BUDGET inventory that are 50 or 60 years old that are continually breaking down. God knows how long we'll be able to keep them moving. And also the cost each year of maintaining that inventory of machines, it can get to a point where it's just not cost-effective to wait that maybe we'll get money. So it's a good point and it's a good question. And prior to the signing of this contract, if we ever get to that, the Mayor's Office and the Administration will evaluate the whole process and hopefully make the right decision.
Let me move for a moment to the issue of food concessions at Veterans Stadium. I've written to you in the past and you've been gracious in your response and helpful with providing me the information I've sought at my concern and worry about the -- on two levels: of the award of a potentially 3-year contract, extension of the existing contract to Veterans Stadium for food service on two levels. Number one, that the service, obviously, and the quality of food, for a number of factors, I think 318 2/13/01 - FY '02 OPERATING BUDGET predominantly the City's greed in the initial contract years and years ago created a scenario where you really couldn't provide a quality product at a reasonable price and, therefore, I think the vendor decided to provide a mediocre and a bad product at a high price in an effort to pay the City what they required and then an effort to make their payroll and maybe turn a profit. And as a result of that, we've had stories, some true, some exaggerated, as to the quality of cleanliness, the quality of food, the short pouring of beer. I mean, you name it, that place has gotten a terrible reputation for the delivery of food service at Veterans Stadium. Couple that with the fact that over time, because of the poor service and the poor quality and the high price, people have been kind of allowed, as opposed to other places in the country, to stop at Slacks (ph.) or Pat's Steaks or someplace and bring their food in with them, which even further reduced the amount of revenue that we could realize as a result of having a decent-quality atmosphere down. What's the current strategy of the City 319 2/13/01 - FY '02 OPERATING BUDGET today as we sit here relative to the continued operation of Veterans Stadium? what are we intending to do? And the second problem I was concerned about, in addition to delivery, price and quality, is the appearance to me, as a Councilmember, that somehow, Council was being bypassed in their approval of anything over a year agreed to in any contract with the City of Philadelphia; that anything over a year, we're required to approve. So could you comment or either clear up or enlighten me on what's going on? COMMISSIONER APPLEBAUM: It would be my pleasure to try and bring all members of Council up to (indiscernible).
They're listening. I knew you were coming on and that's why I came down. COMMISSIONER APPLEBAUM: Okay, great. The first issue is that we are entering into only a one-year professional service contract with Aramark. It's a one-year contract with two one-year options, City options only, going forward. It's considered a professional service 320 2/13/01 - FY '02 OPERATING BUDGET contract that's been negotiated, et cetera and et cetera, but it's one year with two one-year renewals.
Could you explain -- just -- not to interrupt you. Explain to me the difference between a one-year with two year-renewals for your contract. I think I know the answer, but (inaudible) what's the difference? COMMISSIONER APPLEBAUM: A one-year contract means at the end of the year, if the City of Philadelphia is dissatisfied with the contract, we can terminate it. The vendor cannot; the City can. And that's in every contract that we issue, that the City of Philadelphia Procurement Department issues can only be a one-year contract. That's law. For it to be longer, we would have to come to City Council. So they're all one-year contracts. This one has two one-year renewals at the City's option only. It's important now to go a little bit farther and indicate that the bad stories that you commented on and the bad food and all of the problems that we've had at Vets Stadium -- and 321 2/13/01 - FY '02 OPERATING BUDGET there's been many, and I go there and I see it myself -- they were all handled by a company called Ogden. And the contract that the City entered into years ago or years ago, I'm not 6 sure, was with the Ogden Corporation. And it 7 wasn't a good contract because, as you indicated, 8 the commission rates that they had to pay to the 9 City of Philadelphia were in excess, I believe, of 10 58 percent. 11
58 percent over 12 (inaudible). 13 COMMISSIONER APPLEBAUM: And a company 14 cannot sell a product at its normal price and pay 15 the landlord 58 percent. So it was a bad deal to 16 start with. And Ogden did a very poor job of 17 managing it. 18 Last year, Ogden decided to get out of 19 the food service business in sports stadiums, and 20 Aramark acquired Ogden last June. It came in cold and took over the operation. They were in the middle of the baseball season and, therefore, could not make any major changes and just tried to hold the program together to get to the end of the baseball season and get through the football 322 2/13/01 - FY '02 OPERATING BUDGET season. Aramark has a tremendous track record. They do the food services at Camden Yards, in Baltimore -- very, very successful. They do all of the food service at First Union -- very successful. And they have many other baseball and football stadiums throughout the United States, where they have rave reviews. And they are probably the top food service company for sporting events in the world. They do the Olympics, and they really -- if you've ever been to Camden Yards, you've witnessed the food service there and how they tailor it to the City and the job that they do.
Aren't there other companies throughout the country that do sports facilities? COMMISSIONER APPLEBAUM: There's one other major company, who might not be at the same level as Aramark but that happens to be a good company. There's only really two that I know of that would earn that rank.
I guess that on the heels of our discussion on voting machines, and 323 2/13/01 - FY '02 OPERATING BUDGET granted that you're not buying a product that's going to last for or 15, years. Based on 4 the same set of circumstances, why would we have 5 not issued an RFP, sat down with the two major 6 companies in the country, looked at what they had 7 to offer, their pricing scheme, and said, on a 8 professional service contract level, this is 9 better or this is better. Why would we not want 10 to at least have the information? 11 COMMISSIONER APPLEBAUM: The response 12 to that question is that we did not have the time 13 to do that. But realize -- 14
How much time does 15 it take? 16 COMMISSIONER APPLEBAUM: It took us -- 17 the time to do the Ogden contract, and it wasn't a 18 good contract, it took over a year. 19
Are you talking 20 about the original (inaudible)? COMMISSIONER APPLEBAUM: Yeah, it was over a year to --
I'm talking about 324 2/13/01 - FY '02 OPERATING BUDGET -- what -- when did Aramark enter the picture? When did Ogden decide they were getting out? COMMISSIONER APPLEBAUM: Ogden sold out in June.
June of -- 7 COMMISSIONER APPLEBAUM: The contract 8 of -- 9 (Unintelligible, parties talking over 10 each other.) 11 COMMISSIONER APPLEBAUM: June of 2000. 12
2000, okay. 13 COMMISSIONER APPLEBAUM: The contract 14 was over in December of 2000. 15
But we knee Ogden 16 was out, right? 17 COMMISSIONER APPLEBAUM: We knew they 18 were out, sure. 19
And we knew that Aramark was coming in to take up the slack of their remaining contract time.. COMMISSIONER APPLEBAUM: That's correct.
So from June, why didn't we start -- 325 2/13/01 - FY '02 OPERATING BUDGET COMMISSIONER APPLEBAUM: 'Cause we couldn't put together an RFP to issue to the community 'cause we did know in June whether Vets Stadium would be there for two years, three years, or twenty years. That decision of -- the final decision of Vets Stadium wasn't made until, you know, very recently. So we could not --
But couldn't -- COMMISSIONER APPLEBAUM: To go out and try and get a long-term contract for food service at Vets Stadium would be not -- it wouldn't be sensible.
We knew it was three. COMMISSIONER APPLEBAUM: Excuse me?
We knew it was three years. We knew, at a minimum, it was three years. Even we were at twenty, even if we totally blew up the new deal and went twenty years in this old facility, wouldn't we be -- would we be letting a twenty-year contract for food? I mean, wouldn't we do it in normal increments? Wouldn't it be a three- to five-year contract? Why would we go longer than five years? 326 2/13/01 - FY '02 OPERATING BUDGET COMMISSIONER APPLEBAUM: Because when you bring in a vendor, if it's under a twenty-year concept, you expect that vendor to put into your facility a lot of money, and Ogden did that when they came in. So we -- what we did -- it was a tie factor to go out and do it. Now, let me continue with the Aramark --
No, I want to get back to this other issue again. What says in stone that we need to do 15-, 20-year contracts with food vendors at sports facilities? I mean, I think our track record with Ogden years ago 15 would indicate that maybe we shouldn't go that long because things sometimes get bad, companies' status change, their desire or ability to perform changes. Why would we ever let -- put ourselves in a position to be 15 years with one -- once you get married, I mean, it's -- COMMISSIONER APPLEBAUM: Because you want the -- (Unintelligible, parties talking over each other.)
. . . fifteen years 327 2/13/01 - FY '02 OPERATING BUDGET or more with. I mean -- COMMISSIONER APPLEBAUM: I guarantee you that with the new stadiums, the food service providers will all end up with or 20-year 6 contracts 'cause they are going to be expected to 7 put in X-number of dollars, and in order to be 8 able to afford that, they have to amortize those 9 millions of dollars over the term of the 10 contract. So in all sports stadiums, in all the 11 sports stadiums, the negotiations to bring in 12 food-service companies are long-term and they 13 bring in millions of dollars. 14
What are they 15 bringing in? COMMISSIONER APPLEBAUM: Excuse me?
What are they bringing in to the facility? Just so I understand what the business is about. COMMISSIONER APPLEBAUM: You want to --
What capital expenditures are they making in the building? COMMISSIONER APPLEBAUM: The arrangement that we have with Aramark --
No, I'm saying in 328 2/13/01 - FY '02 OPERATING BUDGET general in a new sports facility. COMMISSIONER APPLEBAUM: They bring in the funds necessary to build out their kitchens, their serving facilities, the -- all of the equipment that they use to sell the food. That's their investment.
Right. COMMISSIONER APPLEBAUM: We -- when you're ready, I'll be glad to tell you about the arrangement we have with Aramark.
Okay. COMMISSIONER APPLEBAUM: Aramark is investing $1 million.
Over a one-year period? COMMISSIONER APPLEBAUM: It's a one-year period, with two one-year options.
I'm sorry, that's 3 million or million? 23 COMMISSIONER APPLEBAUM: It's 24 1 million. 25
1 million. 329 1 2/13/01 - FY '02 OPERATING BUDGET COMMISSIONER APPLEBAUM: It's a total of $1 million.
Whether they get the options or not. COMMISSIONER APPLEBAUM: Exactly right.
If they get the options, it's still 1 million. COMMISSIONER APPLEBAUM: It's still 1 million. They're going to do it initially -- hopefully start soon so that it will be completed for the date of the opening, April 6th, for the Philadelphia Phillies who will start. They are going to create new food locations in Vets Stadium. They are going to be using temporary carts around the stadium. As you know, part of the problem of the existing agreement with Ogden is that they were -- they built something called a food court in the 200, 300 level in certain areas. And in the food court area, they were paying us, the City of Philadelphia, a lower rate of commission, which forced them to serve only food in that one area, and in most other areas of Vets Stadium, you 330 2/13/01 - FY '02 OPERATING BUDGET couldn't get the extent of the food. The contract that we developed with Aramark, with the money that they're investing, we are now going to have food service throughout the whole Vets Stadium. You don't have to just go to the food court.
But the part I -- COMMISSIONER APPLEBAUM: The commission rate is being changed, is being lowered so they can afford to split the food throughout the whole stadium.
But isn't this a function of -- COMMISSIONER APPLEBAUM: That is a totally enhanced program, with new items, new products. And I am convinced -- and the total committee is convinced -- that the food service, quality of food, cleanliness, and service will be much improved from what it was in past years.
Isn't the location availability of food within the building a function of the tenants? You mean to tell me that Aramark is going to open up a food stand on the 500 level, when the Phillies are drawing 17,000 331 2/13/01 - FY '02 OPERATING BUDGET people a night? I mean, I can't believe that -- I mean, if it's a new building and you're selling out the place every night, like Camden Yards, that's a different story you. But if you have 67,000 seats, and only 17,000 rear-ends are in them, you're not going to open up a stand in left field concourse 'cause nobody's ever going to come there to buy anything. COMMISSIONER APPLEBAUM: Well, if no 12 one's there, of course not, you don't want to be there. But Aramark has the expertise to know where to open up their stands, and that's why these are moveable, flexible, temporary carts that they will use to accommodate the size of the crowds. They are the experts in the industry and they -- they're going to spend the money and show us what they can do. And realize that at the same time they're doing that, they're going to try to impress the Phillies and the Eagles to use them for their new facilities. So it's not just a matter of them coming in and dealing with us for three years. They're looking for a long-term role 332 2/13/01 - FY '02 OPERATING BUDGET in the new sports stadiums.
But wouldn't that idea just there prove that there would be some desire to compete for that opportunity to impress the Phillies and the Eagles? But if we don't ask, how do we know? I mean, my point is that we may have put out an RFP, and only Aramark responded. You know, it's a no-brainer there. COMMISSIONER APPLEBAUM: Well, let me just -- (Unintelligible, parties talking over each other.)
. . . with two other companies that said, Wait, let us -- give us a chance just to show you our program, we could have said we don't like it either. But to me, it flies in the face of what we're supposed to be doing, and that's creating a competitive atmosphere so that we get the best price and the best service. For us to just say simply, Yeah, here's three years, or never mind, here's one- and two-year options, then, you know, I don't know where we're improving. COMMISSIONER APPLEBAUM: Well, you must 333 2/13/01 - FY '02 OPERATING BUDGET realize this is a short-term program. You must realize that --
But I'm talking about -- COMMISSIONER APPLEBAUM: -- Aramark has the experience of being there. There's other considerations and other things that have occurred that we are correcting with this contract that someone who's not the incumbent might not be aware of, such as the liquor problem. Under the present conditions --
The drinking of it or the price of it? COMMISSIONER APPLEBAUM: No, no, no. A very serious problem we have at Vets Stadium is that in the superboxes and in the penthouse suites, we have allowed the tenants of those facilities to bring in their own liquor and dispense it at their facility. That is very dangerous, because these people do not have liquor licenses, they do not have appropriate insurance, and they are bringing in liquor from Jersey that's untaxed, Delaware, God knows where. So we have lost control over the last few years of the liquor 334 2/13/01 - FY '02 OPERATING BUDGET situation at Veterans Stadium. Aramark was very much involved in sourcing that out, and they are, with us, correcting that situation so that -- that's an area that's of much concern to us, and they're going to correct it for us.
This is news to me because you're telling me that now Aramark is going to police the 400 level and the skybox level and require all of the suite-holders to buy their liquor through them? COMMISSIONER APPLEBAUM: Absolutely. In addition to --
Who's taking the complaints? COMMISSIONER APPLEBAUM: Well, realize, the significance of that: A, is the fact that right now, it's a terribly illegal activity to have liquor dispensed by non- --
Only if you're selling. If you're selling under -- as far as I understand the law, if you are selling the alcohol on a per-drink price across the bar of your superbox, you are in violation of the law. If I 335 2/13/01 - FY '02 OPERATING BUDGET go out and buy a case of liquor and have a party in my home or a party in my business suite and give it away, I'm not dispensing alcohol. COMMISSIONER APPLEBAUM: And if you do that and someone is injured seriously, you're responsible for that.
Absolutely. COMMISSIONER APPLEBAUM: Also, it would be a violation if you would go out to Jersey --
Absolutely. COMMISSIONER APPLEBAUM: -- and buy liquor and bring it in your house and the State liquor people come in, you're violating a law. Realize that.
(Inaudible.) COMMISSIONER APPLEBAUM: And the other important thing here is the amount of revenue that the City of Philadelphia has lost by not participating in the sale of the alcoholic beverages to the suite-holders.
There is no doubt about it, and I'm not saying that it's wrong; I'm saying that if I know the lineup on that 400 level of superbox leaseholders and those skybox 336 2/13/01 - FY '02 OPERATING BUDGET leaseholders, and you think this is going to happen without complaint, it's -- it's not only going to be a complaint, it's going to be a fire storm. COMMISSIONER APPLEBAUM: Life is not easy. No, we'll have complaints.
And let me tell you something, it's pretty high-powered complaints that's going to be coming. COMMISSIONER APPLEBAUM: Well, we -- just as they prevent fans from bringing liquor and bottles into Vets Stadium, we are going to prevent the box-holders from bringing in cases of beer and liquor.
Good luck, good luck. COMMISSIONER APPLEBAUM: We're going to try.
Good luck. COMMISSIONER APPLEBAUM: We have to try we. What we want to do -- we, the City of Philadelphia, Vets Stadium, and Aramark want to do the right thing, and that's the right thing.
Well, one of the 337 2/13/01 - FY '02 OPERATING BUDGET reasons we bring in -- we stopped fans from bringing in bottles and cans is so don't throw them at our players, or opposing players, as much as anything else. COMMISSIONER APPLEBAUM: Right.
Let me ask you a question relative to the airport. The airport's retail food situation has been tremendously improved primarily, or partly, because of the involvement of local vendors from the community vending their products that are indigenous to Philadelphia. Is there any consideration with Aramark in this one- year, two-year option deal to be allowing food purveyors from throughout Philadelphia that have developed their own regional sense of fame to be able to come in and be providing food, similar to what they've done at Chicky and Pete's, for example, in the old stadium club, or whatever they call it. COMMISSIONER APPLEBAUM: I haven't heard anything direct on those events happening, but one thing that I failed to indicate in our discussion is that there will be a significant 338 2/13/01 - FY '02 OPERATING BUDGET minority participation within Vets Stadium, within the food service. There's -- a number of the stands are actually owned and operated by minority companies who are certified by MBEC, so there's a total program in place for the minority participation at Veterans Stadium. Whether they're going to be bringing in local, like Pat's Steaks or whatever, I don't know of that right now.
Well, I mean, I think that minority piece is a good idea; I think it gives people in the community an opportunity to become their own entrepreneurs and to run their own shops. Why wouldn't that translate to the rest of the facility to bring that kind of diversity and different flavor and different food opportunities? Why -- I mean, why, on one hand would we have -- which I think is good -- minority participation in stand operation and perhaps even partial ownership, while at the same time, we're going to be having the same old hot dog product in other stands, without the opportunity to do something different? 339 2/13/01 - FY '02 OPERATING BUDGET COMMISSIONER APPLEBAUM: Aramark is very concerned of controlling the food, they're responsible for that, and the menus and the items that they serve will be approved -- priced and approved by the City of Philadelphia and under Aramark's control. So they want to make sure that they have their hand in the selection and the service of the food and the quality of the food. Whether they bring in outsiders or not to serve their own food, I don't think that will happen, but I really don't know. But the significant part is that a good number of those stands will be own and operated by minority companies.
Does Aramark intend to continue its relationship with the food service workers union that's now at the Vet? COMMISSIONER APPLEBAUM: Excuse me, with what?
The food service workers union that's now at the Vet? COMMISSIONER APPLEBAUM: I would imagine. We -- you know, we are not --
Could you find out. 340 2/13/01 - FY '02 OPERATING BUDGET COMMISSIONER APPLEBAUM: We are not permitted --
I know, but you're permitted to ask, though, aren't you? COMMISSIONER APPLEBAUM: We're not permitted to require them to use unions; it's a prevailing page situation. I would-- I mean, I would imagine that they will because they're -- that would -- they would have to that.
Okay, could you find out? COMMISSIONER APPLEBAUM: I mean, I can find out. (Unintelligible, parties talking over each other.) COMMISSIONER APPLEBAUM: I'll find out for you. Who do they have at First Union? It must be the same union.
It's probably the same. I think there's only one food service union in the City. COMMISSIONER APPLEBAUM: Well, I guarantee you they'll have it. They're very 341 2/13/01 - FY '02 OPERATING BUDGET successful at First Union, so they're not going to play a game at Vets Stadium and jeopardize the First Union situation, but I'll find out.
And I'm sorry to belabor this, but I had one other area I wanted to discuss after this. Speaking of First Union and the issue the suites, luxury suites and skyboxes and the like, do you think that Aramark is intending to impose the same price structure that they have at the First Union Center at the Vet for the final three years of its existence? I mean, for example, I think it's -- they charge anywhere from 40 to $50 for a case of beer, they charge up to 75 to $85 for a fifth of liquor. And the food prices in those boxes and the liquor prices in those boxes are extremely expensive. Do you expect a similar rise in the prices at the Vet in the last three years of its (inaudible)? COMMISSIONER APPLEBAUM: Are you talking about the retail prices over the counter, or are you talking about the prices that the box-holders pay for the case of beer? 342 2/13/01 - FY '02 OPERATING BUDGET
The price the box-holders -- COMMISSIONER APPLEBAUM: First of all, all of the prices that will be in effect, the retail level of stores over the counter and also the boxes all have to be approved by the City. They have submitted to us the schedule of the liquor prices for the box-holders, and the prices are competitive and very similar to every other stadium in the East Coast here. We have reviewed all of those prices, and all of the prices will be approved by the City of Philadelphia.
My request to you, as Chairman the Public Property Committee, through the Chair of this Committee of the Whole, would be for your department to provide for us that schedule of prices prior to the approval of this contract. COMMISSIONER APPLEBAUM: No problem.
I appreciate it. Let me move for a moment to a smaller level of vending and food service issue. I'm a volunteer hockey coach at the Rizzo Rink, which is a City recreation facility, and I've been involved 343 2/13/01 - FY '02 OPERATING BUDGET there for a number of years. I recently had a conversation with the staff there, who have indicated to me that they are required to accept vending machines for soda, potato chips, candy, whatever it is that's there, from one provider only. And one of the complaints that I have received is that in the month of December, which is that rink's busiest month, where they came and filled the machines twice a week for four weeks, the check that was presented to the rink for use in their athletic activities was $60. A dollar a soda, two machine, two load-ups a week for four weeks, and the City Recreation Department's facility cut was 65 bucks. In addition, the complaints are that the machines are not well-kept, that sometimes it eats the money, and then the customer or the citizen who's there comes to complain to the rec leader, Where's my money, the machine took my money, that the company itself is virtually unresponsive to the complaints of the Recreation Department officials and the Advisory Council members there. And I understand that this goes on 344 2/13/01 - FY '02 OPERATING BUDGET in a number of ice rinks, a number of recreation centers, a number of other City facilities and buildings. I guess the question I have relative to the Recreation Department specifically would be, why wouldn't we put our own machines in there, why wouldn't we take the money that we're generating from those machines and put them back into our recreation services that we're providing for purchase of equipment, extension of the ice season, a myriad of things that the Advisory Board may choose to do or not to do, as opposed to making what seems to be exorbitant profits for a company that's not even located in Philadelphia? COMMISSIONER APPLEBAUM: For many, many years, the City of Philadelphia's vending situation, ice rinks and police stations and firehouses and the prisons were totally uncontrolled. We had a vending company all over the City, making individual deals with individual agencies. Whether the money ended up in its appropriate place or not, I don't know, but I suspect that in many cases, the money didn't end up where it was supposed to go, which is to -- 345 2/13/01 - FY '02 OPERATING BUDGET
Do we know -- COMMISSIONER APPLEBAUM: -- the Recreation Department reinvesting in equipment. For the Police Department, it goes to the police widowers' pension. For the Fire Department, it's also a pension. And we did four or five years ago --
I'm sorry to interrupt, but was there any proof that there was any scandal, or did somebody get arrested or did somebody -- COMMISSIONER APPLEBAUM: There was no 14 scandal, we're not talking about tremendous amounts of money, but there wasn't appropriate monies being deposited in the City's General Fund or being deposited in these various social agencies. Also, the amounts of commissions varied tremendously. Some companies were paying 10 percent, some companies were paying 20 percent. Some companies weren't pay anything, but they were giving VCRs and TVs to certain people, and we have proof of that.