00227 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING BEFORE THE COMMITTEE OF THE WHOLE (FY '03 BUDGET HEARING) - - - Monday, February 25, 2002 9:55 a.m. Room 400, City Hall Philadelphia, PA - - - BILL 020001 Proposed FY '03 Operating Budget PRESENT: COUNCIL PRESIDENT ANNA C. VERNA, Chair COUNCILWOMAN JANNIE L. BLACKWELL COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DARRELL L. CLARKE COUNCILMAN FRANK J. DICICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN BRIAN J. O'NEILL COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 00228 2/25/02 COMMITTEE OF THE WHOLE - BILL 020000 INDEX WITNESS Janice Davis, Secretary, Financial Oversight... 229 Robert Dubow, Budget Director.................. 234 Debra Lawton, Risk Finance Division............ 239 Nancy Kammerdeiner, Revenue Commissioner....... 244 D. Cermele, Office of Administrative Review.... 247 Joseph R. Perrello, Risk Management............ 290 Nancy Kammerdeiner, Revenue Commissioner....... 304 Denise Garrett, Water Revenue Bureau........... 310 Jim Haley, Deputy Revenue Commissioner......... 325 Vince Jannetti, Sinking Fund Commission........ 380 Joseph Faraldo, Acting City Treasurer.......... 384 Corey Kemp, Deputy City Treasurer.............. 385 William Gamble, Procurement Commissioner....... 403 Janet Hagan, Deputy Procurement Commission..... 408 Harry Hillock, Deputy Procurement Commissioner 431 James Roundtree, MBEC.......................... 451 James Kidwell, Board of Pensions and Retirement 514 Anthony Johnson " " " " " 521 Maxine Griffith, City Planning Commission...... 567 - - - 00229
Good morning, everybody. This is our continued public meeting of the Committee of the Whole regarding Bill No. 5 020001. The first department to testify this morning will be the Finance Department. (Witnesses come forward.)
Good morning, Council President Verna and other members of the City Council. I'm Janice Davis, the Secretary of Financial Oversight and the Director of Finance. On behalf of the employees in the Office of the Director of Finance, I am pleased to provide testimony on the proposed FY '03 Operating budget. With me are finance representatives who are available to answer any questions. As has been the custom, I will focus on the requested finance budget for FY '03. I will also provide the status of those initiatives begun by the finance group over the past year, as well as the initiatives to be undertaken during FY '03. The Office of the Director of Finance's FY '03 budget proposal for all funds totals 00230 $865,476,158. The General Fund Budget request is $664,023,977. The single-largest component of the budget is employee fringe benefits budgeted at $598,160,532. The General Fund funds $528,100,000 of the employee fringe benefits. 4 percent, increase over the Current FY '02 projection. This increase is due to increases in our health benefits and pension costs. Other large elements of the finance budget include: Legal services and witness fees, contributions to educational organizations, and refunds and indemnities. The Administration is proposing to provide the Community College with $272,067,924 in FY '03, an increase of $300,000 over the FY '02 funding level. The Administration has also increased the level of funding for the Defenders Association contract. This additional contract will bring the Association's attorneys' salaries in parity with those of the attorneys in the District Attorney's Office and the Law Department. The Office of the Director of Finance is comprised of seven divisions: Executive Direction, Office of budget 00231 and Program Evaluation, Office of Management and Productivity, Minority Business Enterprise Council, Accounting Bureau, the Office of Administrative Review, and Risk Management. The proposed direct appropriation FY '03 General Fund Budget for the office is $16,938,724, a decrease of $1,680,619 from the current projection for FY '02. This decreases is the result of reductions in appropriations across the division. This budget anticipates 171 full-time General Fund positions, a decrease of 11 positions from the FY '02 budgeted positions. In FY '03, the Risk Management Department will partner directly with medical providers in their ongoing effort to contain costs in the Worker's Compensation program. While the cost of medical services related to Worker's Compensation have risen statewide by percent 20 over the last five years, our case-management efforts have limited the City's average plan cost increases to only 7 percent. In order to create more opportunities for small and disadvantaged contractors to compete for City and private-sector construction work, Risk 00232 Management, working with Procurement, Minority Business Enterprise Council, and the Commerce Department is working to promote the use of a federal Small-Business Administration binding program. The SBA program assists small contractors who are unable to obtain the required performance bond on their own by assuming 90 percent of the associated risk. Bonds of up to $2 million will be guaranteed. The program will fund the training of contractors in business-plan development and financial record-keeping, and will hire a surety agent to assist them in completing bind applications. This initiative is scheduled for implementation in FY '03 and will be funded by Economic Stimulus Funds from the Commerce Department. The Office of Administrative Review continues its successful efforts with the First Judicial District to increase traffic-fine collections. Major accomplishments include cleaning out the outstanding backlog of delinquent fines, some of which date back to the early '80s. OAR's final notice mailed to violators whose fines 00233 have been delinquent from 1992 to present generated more than $1 million in additional revenue.
9 percent in FY '01, approximately 9 25 percent in FY '02, and over 30 percent estimated 10 for FY '03. 11 In January of this year, OAR 12 transferred responsibility for administrative 13 hearings on code violations from its Bureau of 14 Administrative Adjudication to its Master's Unit at 15 the Tax Review Board. This change will allow the 16 BAA hearing examiners to concentrate soley on 17 parking tickets and reduce the long waits for hearings due to the increased issuance of parking tickets by the Parking Authority. Others departments, boards, and commissions, under the direction of the Office of the Director of Finance, Procurement, Revenue, City Treasurer, Sinking Fund Commission, Board of Revision of Taxes, and the Board of Pensions and Retirements will provide separate testimony on 00234 their budgets and initiatives. I am happy to answer any questions you may have at this time.
Thank you very much, Miss Davis. The Five-Year Plan states that the Administration will continue to use target budget reductions which will require departments to spend below appropriation levels. What are the planned target reductions?
Good morning. We developed the targets towards June, so we actually don't know what they'll be yet. We go through a process later with departments later in the year to determine those targets.
When the departments come before us for their budget hearings, how do we know that they will be able to provide the service levels as delineated in their 00235 budgets and testimony?
One of the things we do with departments when we go through their target process is to make sure that they find ways of reducing their costs without impacting service, so we look at the service-level and performance-level reports that they give us and make sure that they are showing that they can maintain those services.
Miss Davis, what are the actions the Administration has undertaken to cut costs in reducing the City's pension payment? Explain what the minimum municipal obligation is.
It's the minimum amount required to fund our current costs, the current costs of pensions provided for employees.
Well, what is the impact of this action to the Pension Fund and to the financial soundness of the fund?
What we're doing -- the cuts that we've made are not to the MMO, or minimum municipal obligation. We fund at a much higher level. What we have done is to reduce our payment somewhere between the minimum municipal obligation 00236 and the amount that we would have done under the original plan. We will reap the benefit of $60 million over the Five-Year Plan, but then we'll begin to amortize that over 10, with percent interest, 7 which is the assumed interest rate that the 8 earnings in the plan now identify. The plan will 9 remain physically sound and above the 70 percent funding level.
Okay. Can you tell us how much the City -- how much does the City pay for financial advisory services? I see that we have two that are mentioned on Pages 8-19 and 8-20.
This year, in FY '02, the City identified contracts of $300,000, which is the level that we've been funding. Instead of doing it all with one provider, however, we've identified three providers.
They are PFM, Fairmount 00237 Capital, and PG Corbin. We have not incurred any expenditures under the Fairmount Capital contract yet.
Thank you. Can you break that down? Can you tell us --
But as we calculate, it would show 600,000. On , line 250, it's 200,000. And then on , line 250, it's 400,000. And I don't know that there's been any determination as to who the financial adviser would be.
That budgeted piece is for any incidental financial advisory work that may be used during the coming year. No provider has been identified.
So what is the figure; is it 400, is it 300? I mean, according to what our calculation is, it would come to 600,000.
On , would you please explain what the 350,000 for the 00238 management information consultants will be used for as well as the 200,000 for legal services.
Those are just to be provided -- those amounts are there if there is a need for consulting services in the management information systems area. Should the CIO have a need for additional funding, that would be available.
How much money has been appropriated in past years for this the management information consultants?
We'll have to get a definite number for you. There have been a number of contracts under different providers, so we'll get a number back to you.
I would appreciate that. And for legal services, why wouldn't that be handled by the Law Department?
There are some times when there is a need to hire legal services and there is insufficient funds in the Legal Department to cover it, and we'll pick it up. We will get information on the number 00239 of times we've done that.
Would you please explain the program that you are putting in place to help small contractors in getting performance bonds. You state that this initiative will be funded out of the Economic Stimulus Funds. What is the amount of the Stimulus Funds to be used, and how will they be spent? Also, will they be recurring expenses?
The amount is $300,000, and I will get someone from Risk Management who has worked on this to come up and testify to the specifics of the program. (Witness comes forward.)
I'm Debra Lawton from the Risk Finance Division, and I've been working with MBEC and the Small-Business Administration.
Excuse me, would you pull the microphone closer to you, please. Thank you.
I've been working With the Small-Business Administration and with MBEC to 00240 promote the use of an existing program that the federal government has to provide bonding to small contractors. Do you have any specific questions about it? I mean historically, small contractors have been unable to get public workshops because they weren't able to secure bonding. So we were looking for ways to help them without recreating the wheel. So we found out about the SBA Program through MBEC and so we've been working to promote that program.
Oh, the monies will be used for the marketing and advertising actually for assisting the contractors on completing bond applications, education, business-development information, accounting services, credit services.
And this money will come out of Economic Stimulus Funds?
Okay, thank you. The Chair recognizes Councilman Goode. 00241
I think you can anticipate a couple of my questions. I want to talk about the implementation of a few of my bills that are close to my heart, starting with Bill 165 that was signed by the Mayor on May 16, 2000, authorizing the City to invest in promissory notes issued by the U.S. Treasury certified community-development financial institutions. I want to know the status of CDFI investments since that bill was signed in May of 2000.
I don't know the exact date, but I believe it was in the second quarter of 00242 FY '02.
Thank you. The second bill, Bill 546, was signed by the Mayor on December 7, 2000, and that was creating the Philadelphia Community Investment Commission and charged that commission with creating a Philadelphia community-development financial fund, the first municipal fund of its kind. Can you tell me, what is the progress of the Reinvestment Commission and the what's the status of the CDFI Fund?
The Reinvestment Committee has met a number of times. We had a slight problem when there was a change at OHCD and Mr. Kromer left -- he had been the chair of the Reinvestment Committee. The Commission hasn't met since, but we should be meeting in the near future. We had a problem with the department that it was cited with, and since it was more of economic development instead of finance, we felt it would be of greater service to that community if it were housed in Commerce, so we've had some difficulties in getting everybody in their proper place, but we should be meeting again in the very 00243 near future.
For the record, I think that Mr. Kromer did a great job, although I never thought that he was the person because of his position. I thought he definitely should not have been a Housing Director, maybe he should or should not be a Commerce Director, but the executive order called for the chair being elected from the Commission, but the bill that I wrote called for it being co-chaired by the Finance Director and by a member of the banking community. In rethinking the executive order based upon what the bill originally called for. Aside from who in the Administration should serve in that capacity or not serve in that capacity, do you think it should be a private-sector member that actually co-chairs that commission?
Okay, thank you. The third bill, Bill 010541, created a tax-credit program for investments made in community development corporations over a ten-year period. Can you tell me the status of the 00244 tax-credit program in the development of regulations?
Nancy Kammerdeiner has been working on it, so I'll ask Nancy to come up. (Witness comes forward.).
Good morning. Nancy Kammerdeiner, Revenue Commissioner. We've been working on those regulations. Have conferred with the Department of Commerce and also the Law Department. We have a draft of the regulations that's going back to Law, I hope and expect, this week in order to get their concurrence that they're in proper form to be filed with Records, and we'll be happy to share that with you as soon as we get a little bit more input from the Law Department to make sure we are legally based on the what we've written to implement the legislation.
Okay. In terms of turnaround time, at what point will applications be available?
The regulations have to sit in Records for 30 days. If there are no 25 protests to those regulations, they become 00245 effective as soon as that 30-day period elapses. Should there be any issues filed during that waiting period, we'll have to hold a hearing and hear from the public about their concerns on that, resubmit regulations, and I believe the resubmitted regulations need to reside in Records for ten days before they're implementable.
Is a tax credit usually based on a fiscal year calendar year?
The business-privilege tax is a calendar-year tax and so it would be calendar year.
So this tax-credit program will be available for this year or will it have to wait until next year?
I expect it should be available for this year. The 2002 returns are filed on April 15th of this year, but we could deal with a credit for any business that would apply during that time period in terms of a credit on this year's return or a credit that would roll into next.
Thank you. No 25 further questions 00246 Thank you, Madam President.
Thank you. The Chair recognizes Councilman Nutter.
I made a note to myself. I wanted to get some information that I didn't see clearly in the testimony. what was what was the percentage of participation through all of the various contracting levels? I think there's professional services as a category; there's, I think, service, supplies and equipment or something like that as another category; and there might be a third one that is measured for participation by a variety of firms, whether they're disadvantaged businesses or minority businesses, female businesses. Do you know what the rate was in the last fiscal year?
No, I don't, but 00247 Mr. Roundtree will be available when the Procurement Commissioner testifies, and he will have those numbers or we can get them for you later.
Okay. On and going into of the testimony, there's mention made of the Office of Administrative Review. I think that used to be the Bureau of Administrative Adjudication?
It's the same thing, okay. And it looks like we're talking, apparently about, generally, I guess, delinquent funds. Does that also include tickets and everything, traffic tickets?
I'm Dominic Cermele, Executive Director of the Office of Administrative Review. The number that you wanted, Councilman, 00248 was that parking finance or moving fines or code-violations fines or all of them?
Okay, all right. If I just asked for one, would you -- (Laughter.)
I could give you a round number. What you want is outstanding numbers?
Thank you, Madam Chair. You would have the number on Traffic 00249 Court, though, wouldn't you?
Could you tell us what that is? I mean generally what --
Judge Cermele, in terms of your qualifier that it depends on what we consider to be outstanding, are you talking about a timeframe or up to a certain date or --
Yes. We in the past have terminated, you know, with the assistance of the Traffic Court, terminated some rather old records that were counted as accounts receivable, even though these were non-adjudicated records that go back to the early '80s and are no longer count as part of the -- see, at some point, we say this is what's active.
Right, you have to 00250 write it off. Why don't we just deal with whatever is outstanding ten years or less.
I mean, that's, I guess, still a fairly reasonable number. Okay, thank you. Miss Davis or Mr. Dubow, I think I heard this question either asked in part or in full earlier, but I did want to go back to it maybe in a slightly different fashion. Who has responsibility either to seek revenue enhancements or cost-savings in the government?
That's the responsibility of everyone in the government. (Laughter.)
All right, but is it one particular person's responsibility?
We encourage, and I would say Mr. Dubow is the head encourager of those in search of revenue and expenditure reductions.
Okay. And what was your answer earlier to the -- I think it's on 00251 Appendix 3, , line 20, "Future Target Reductions," do I read that for Fiscal Year 2004, the number is $12 million; is that correct?
It was a slightly different question before. The question was about target reductions in the '03 budget.
And the question was, do we have a number for that yet? and we don't, we develop that later in the year. And then the second question was, how do we ensure that the level of services that departments are promising as they come before you now, the global services they actually develop after taken target cut, and what we do when we go through their targets with them is have them submit to us performance-measurement reports that tell us what level of service they're going to provide so we can check to make sure that they'll be able to provide that level of service at the lower-budget level.
Well, what are you anticipating for FY '03 in terms of reductions in the cost of government? 00252
We haven't developed targets yet, but it's typically 1.5 percent below the budget level.
All right, but some of the departments didn't take the 1.5, right?
Well, I think we're talking about different 1.5 percents, but you meant the 1.5 percent Class 100 reduction? I was talking about the target reduction (indiscernible) later in the year. But I think what your question was about was the 1.5 personnel reduction that we asked departments to take as part of the budget process?
Recreation did not take the cut, the Free Library did not take the cut, Fire did not, Police did not, and the Park and L&I had portions of the 1.5 percent restored. 00253
All right. Well, maybe the easier way to ask it is, who did take it? since so many people are affected by this.
Well there are -- I mean, there are probably over 50 agencies, and I've just named 5 or 6 that didn't take the cut.
Okay, let's go back to the original question. Whose individual job or responsibility is it to seek revenue enhancements and cost reductions throughout the government?
How do you ever know you're going to do it? I mean, we all have a responsibility to try to make sure that the City is safe.
But we do have a Police Commissioner; that is that person's job.
We have an Office of Management and Productivity that looks at specific items that we may come up with, and there are --
I mean, we also put specific things in our budget and then we monitor whether make their budgets. I mean, that's really the global way in which we see whether people hit their targets.
Okay. In response to this question from a couple weeks ago at -- during the Capital Budget, I asked about a schedule of projected savings through efficiencies. The answer that came back was an example of the Free Library reduced costs by $210,000 by reorganizing some personnel. The biggest component of this response is anticipated savings through people participating in the DROP Program. I mean, is your testimony today and going forward that in addition, you're going to spend $300,000 to contract with Parente Randolph. Is that a firm or a person?
It's a firm. To do a thorough review of departments impacted by the DROP and to determine how to best redesign their business processes to allow the City to provide the same or improved services with fewer employees. I'm left with the impression that, at least for the short-term, the largest anticipation in terms of saving any money in the government is going to be from people leaving, not through management efficiencies or use of technology or figuring out different ways for us to do business, and then you're going to come back in a more medium term, but apparently during the course of this fiscal year, you're going to have a consultant give us some ideas as what we should do through the departments.
Well, the only way we can take advantage of people leaving is if use all of the things that you were talking about: If we use technology, if we use business process re-engineering, because we've committed that we'll make those reductions without impacting service.
Have we asked the departments for an individual plan of what they 00256 would do or how they would do it or not decide whether you have the bodies or not, just ask them, are there better ways for the government to function and operate?
We did that back in August. We met with all of our largest departments and had those discussions. That's where some of the stuff we listed in their, like the Library doing it through organization, Fleet Management saving positions; it came out of that. But we are also asking the consultant to work with our large departments to do the same kind of thing: To go through their processes to see where they can be done better. So the departments will all be engaged in that process.
Okay. So as we close out this particular piece, your expectation is that throughout the course of the year, you will figure out both some ways to reduce the costs of government or become more efficient, and we're going to experience the DROP Program and employees are going to leave, we're going to have a consultant work with the departments to figure out do what they do. 00257 But in the short term here, we do not how much we might be able to save dollar-wise in reducing the cost of the government
Beyond the amounts that are already in the plan, that's right, but we have specific amounts that are in the plan. I mean, the first question was, What are you going to do in the target this year? The answer is, we don't have that set yet.
But the question -- I mean, there are things like the DROP that are included in the plan, like reducing the size of the fleet. So there are things in the plan, but the things that aren't in the plan, we don't know yet.
Right. Well, why don't we do this: Maybe the answer to the question from a couple weeks ago was an attempt to kind of generally answer it and be more immediately responsive. For the things that you're saying that are in the plan that maybe are not in this answer, why don't you provide, through the Chair, the more extensive answer, and if you can tell me in the 00258 plan where those savings are and what the implementation of those proposals will result in, that would be helpful.
Miss Davis, let's go to -- I heard the tail-end of a response, I believe, to the question by the Chair. On 8-16 of the budget book, line items 250, 251, 252, and 253, am I reading correctly that in the budget here is $3,055,336 for professional services; is that correct?
Okay. And what's the breakout of that? Is that over on 8-19?
Okay. Although the number on 8-20, the total seems to be 4,828,000. Does that include some of the other --
Okay. And on 8-20, "Regional Economic Models," is that the name of a firm?
It's the REMI models that we use to predict how certain activities will affect our revenue base.
Mm-hmm. And on that same page, the 250, the 250, and the 253, those 3 in a row, 400,350 and 200, who -- I can read that it says "to be selected." Is that because we don't know at the moment who those people are going to be?
Does Finance usually need outside legal service? You don't use the Law Department?
Those tend to service contingencies for across the government, not 00260 necessarily for Finance.
No. We have on occasions required management information systems consultants outside of MOIS.
We're going to provide that information later because there have been a number of different vendors.
Now, Miss Davis, you wouldn't be following subject to a tendency by Mr. Dubow to try to hide money in various places in your budget, would you?
Are you being influenced by Mr. Dubow in that regard? 00261
Especially since it usually ends up being somebody else's needs that are satisfied through that line item.
Councilman, do you mind if we have a second go-around? We have other Councilmembers that would like to be recognized.
Thank you. The Chair recognizes Councilman Rizzo. 00262
Thank you, Madam Chair. I'd like to go back to the process that we use when we actually decide on what we're going to spend our money on in various departments. I recall a few years ago in a budget that there was a number of thousands of dollars for global positioning for the sanitation for the Streets Department so we could keep track of the trucks. I use that as an analogy to ask a question: Since we don't have a particular person that's responsible for -- well, let me rephrase that. I'll ask the question. When you sit down with a department like the Streets Department, Fleet Management, Police, Fire, you see these lists of things that we're spending our money on. How -- who makes the decision, since we don't have an overall person, one person we can identify that's responsible for -- for the -- and again, I'm having -- struggling with the word that Councilman Nutter was referring to. But when you sit down with those various departments, how do you decide what's in, 00263 what's out? Obviously, if you're going to give a pot of money to a particular department if they want to buy global positioning systems or other things that they claim they need, who sits down with a pen or questions each item that's in the budget with a commissioner of a various department?
During the budget process, we meet with departments, and when I say "we," it's a group of people from Finance, from the Managing Director's Office, from the Mayor's Office, from the office of Labor Relations, from Personnel, and we go through their budgets, you know, line item by line item, asking them why they think they need each contract. And based on those discussions, we decide what should be in and what should be out.
I'm not necessarily talking about contracts or legal --
No, it's -- we do it through Personnel, we do it through contracts, we do it through material supplies and equipment
In that whole group that you just mentioned, who has the expertise to request whether or not we need a global positioning 00264 system for sanitation vehicles? My point being is, how do we know that if we spend a half a million a million dollars a year with Verizon -- the Finance Director just said something that is a problem in our government -- That's the way we've done it, that's the way we do it. Well, again, if we're just going to spend money when there's a better way to do it, my question is, where's the expertise when a budget's presented to you? Who on that panel knows what a global positioning is and whether we need it or not?
The most likely expertise in that case would be people in the Managing Director's Office. I mean, that's why we try to have people at those meetings with a wide variety of expertise. But, I mean, our real excerpts in those items are the departments. You know, I mean, to some extent, we have to rely on them. You know, the Mayor hires people that he thinks can do the job, and we have to have some trust in them. But we also question them; we ask 00265 questions about each item. But we're not going to know more than the departments do about a number of things.
I'm familiar with corporate budgets and I think they're scrutinized a little more carefully. When the vice president or the overall executive sat down with the people and actually said, you know, what do you need this for? or why are you spending a half a million dollars for data transmissions when we have the capabilities for doing that within our own company? I just don't see --
I've talked to people that have gone through the process, that there were no questions, in many cases, asked.
You tell me someone who 00266 says that they went through our budget process and we didn't ask one question.
A question -- when you say "question," it's, "Do you need this, yes or no?" and the question is answered "yes," and then we move on to the next item. That may be questioning it, but that is not really getting in there to decide. DUBOW: I --
Well, it's already been stated, "That's the way we do it" and --
We're not going to have a debate. I think the Councilman will ask a question and the witnesses will simply answer. Thank you.
Thank you, Madam Chair. Again, the question is, and you've 00267 answered basically the question that you do scrutinize, and then I will be prepared to ask you to give me a written report on what scrutiny and what evaluation and what research was conducted on each item in many of the budgets, rather than just, "Okay, you need it? You got it. As long as you can stay within these numbers," and you just mentioned that it's up to the operating departments, that we have to have the confidence and trust in them, and I'd like to hope that we have the confidence and trust. But if a project -- a pet project is more important than something else, that's going to stay in, and something more important to the benefit of the City might be kicked out of the budget because it can't fit into the numbers that you've come up with. So, again, I think I know a little bit how things get in and how things get out, so I'm going to send to you a list of items, and I would be appreciative -- I'll send it through the Chair -- of you explaining how certain things got in the budget. Thank you. 00268
Thank you. The Chair recognizes Councilwoman Tasco.
I just have a couple of questions. In looking at the impact of the DROP Program on the various departments, have you calculated the impact of overtime, particularly in those departments where you don't have staff to probably take up the slack from the loss of personnel? In years past, we have had a hard time in the City managing overtime. Has that been taken into consideration?
We didn't explicitly build in an overtime number, but when we looked at savings, we didn't include full-year savings, so we built in a little slack. So, for instance, if people were leaving -- if a department had five people who they were going to lose during the year, we didn't count any savings from those five people until the following year. So there would be some savings 00269 during that year; we didn't count those savings. So that should cover things like if there's a little spike in overtime.
In looking at the number of people leaving through the DROP Program, is there a consideration given to fill those much-needed spots right away, or are you going to leave them there to see what the impact will be?
Yes, there is. In fact, in my department in the payroll area, we already have a person on board who is preparing and being trained at this time so that there will be a smooth transition, and other departments are doing similar things.
I have one last question. On -21, you list a number of programs that we fund. Could you tell me what -- why you gave the It's Your Turn Program $150,000, when I understand that it's a part of the NTI program? 00270
This was actually done in FY '01; it is now part of the NTI program. This is the actual from FY '01, 2001.
It was funding during that year for that program. Subsequently, it's been moved into NTI.
Thank you. The Chair recognizes Councilman Ortiz.
Thank you, Madam Chair. Director, in Paragraph 5, you have, "In order to create more opportunity for small and disadvantaged contractors to compete for City and private-sector construction work, working with Procurement and the Minority Business Council and the Commerce Department," can you tell me what is going on with that? and how many contractors we have in the pipeline? and what is going on? and how much money in contracts have been allotted, if any? 00271
This program is to be implemented in FY '03, so it's not begun yet. We've done all of the groundwork, we've identified a partner to work with us in providing the training, but it has not begun yet.
And when you say, "providing the training," what does that training consist of?
The training will be on filling out binding applications, on financial bookkeeping, on credit worthiness, on a number of things. And I can get someone from the Risk Management Department up to give you the particulars. But it's on generally running a business and estimating and all of the things that small businesses and small contractors usually have difficulty with and those things that make it difficult for them to be successful.
You know what concerns me about that? and it sounds very good: That for the last -- ever since MBEC was created, we have had that sort of thing going on, training minority contractors. A lot of them are already 00272 trained, a lot of them have gone through the process and have those skills that you are speaking about. So I think we have a pool of contractors there. And what has happened is that that pool has not been getting a consistent amount of the work that is put forward by this Council, by this city, and that we promote good government and people's taxes. So do you have a listing of minority contractors that are already doing the work in these areas and that we are MBEC providing them with these contracts? Because they are there; I can tell you that they are there because I meet with them.
We will get you a list of those contracts. What this program aims to do is to provide also binding 90 percent guarantee of the bonds, because where some of our contractors have difficulty in is in the bonds.
In the bonds, exactly. That's one of the excuses that is constantly put forward. 00273
So we're trying to eliminate one of the excuses by actually providing and guaranteeing 90 percent of the bond.
You're welcome. I believe Councilman Nutter has a few more questions. The Chair recognizes Councilman Nutter
Miss Davis or Mr. Dubow, how do you make the determination as to what the revenue estimates are? and who all is involved in that process?
We do a few things in putting together our revenue estimates: We consult with economists; we look at trends over the prior two years; we use our REMI model; we work with people from the Revenue Department and people from our office; and, as I said, we usually talk to economists.
Who are some of the economists that you work with? 00274
We work with the people on the Mayor's Office Council of Economic Advisers.
There is Anthony Santomero, who's the President of the Local Fed. There's Bob Inman and William Stull who are --
Stull, S-T-U-L-L, who are professors. And there's David L. Cohen
Yes. And there's David Cohen and Steven Saunders, who's a businessman.
Okay. And do they -- in the work they do or provide or the advice they provide, do they gather information on their own or do you present them with a wide variety of documents and information and ask them to work on it and look it over and put it together 00275 in some way, shape, or form? Or do you present options or scenarios based on your own research and information and ask them to --
Yes. Does this make sense, is this something we should do, and that kind of thing?
The latter, okay. So when we say that that group of people have either recommended something or advised something, it's not necessarily from their own work product; it's a product to some extent or some research or some documentation that has been given to them with, I'm assuming -- I don't mean to use the same word twice in a sentence -- but with some assumptions built into it, and you're then asking for a review or a look-see, a "does this make sense?"
Right. We're asking them to look it over and see whether they think the assumptions are reasonable and whether they think the projections are reasonable.
Now, how would they 00276 know that? How would they know what was reasonable?
If I might interject. In some instances, they make their determination of whether our assumptions are reasonable based on work that they've done and on their analysis on where the economy is going to be in, and in the case of Dr. Inman on some of his work. So they are not taking our assumptions and just sort of pulling something from the top of their head. In their areas of expertise, they have reason to do studies, and their assessment of our assumptions would be based on that body of knowledge
And this is for the professors in the group: Is this based on recent and current work, or is this based on slightly -- I don't want to say "older" -- but less recent work? I mean, do they take what you give them and then put it in there kind of magic machine and figure it all out? Or do they take a look at it, they know what they've written or said in the past, and see whether it matches up with the previous writeups?
I think it's actually -- 00277 it's kind of combination. I think they look at what we've given them, they probably do some testing by throwing it in, you know, whatever models they've developed. So I think it's a combination of those. And then they, you know, ask us questions about it, they make us prove that what we have in there makes sense.
Okay. What's the current position of either Finance or the Budget Bureau as to where we are currently regarding the recession?
I guess most of the reports that we've seen are that the recessional -- actually, it's been a wide variety -- ranging from that the recession's over or to that it will end sometime in the second quarter of '02. More of what we've seen and what the plan is really based on is that it's the second quarter of '02. And I should add, in terms of looking at the wage tax, that employment gains have lagged in the recession, I think, by up to a year in most prior recessions.
In other words, a return to growth in employment lags the end of the recession. So if the recession ended today, you wouldn't start to see job growth; it would take maybe a year.
Mm-hmm. So, I mean, do you agree or disagree with the Conference Board's determination that the recession has ended?
I don't think we've seen the recessions of growth that they usually build theirs on. We're seeing just moderate improvement. So we think that, you know, it will end -- we're hoping that it will end, and our plan is predicated on it ending by the second quarter of the calendar. And our numbers just don't say that it's over yet.
And what we've seen in particular is that the job loss has actually gotten a little worst in the last couple of months that weave seen.
Job loss in Philadelphia 00279 has gotten a little worse, so even if the recession is over, for us, the job loss is continuing.
Sometimes there's a lag between when a recession ends and when jobs start coming back.
No, I'm sorry, that wasn't my question. Why do we continue to lose jobs? Seemingly no matter what happens in the economy nationally?
We actually had a stretch of -- I'm sorry, you didn't finish your question.
We had a stretch of, I guess, three years where we were gaining jobs every quarter from, I think, October '97 until December 2000, when we actually were gaining jobs month after month. It wasn't until the impact of this recession started being felt that we started to lose jobs again.
Okay. And is it still your position today that we should maintain the projected ending in the wage tax cuts and the 00280 acceleration of the gross-receipts tax as outlined in the plan?
I guess the complete answer to that question is, we're studying the ordinance 6 that was introduced last week.
Well, until we've studied it, I mean, that has some interesting ideas.
If that's in another source for $50 million in the plan, then we would have to say yes.
Notwithstanding your own expectation and, as you testified earlier, that the recession has either ended or going to end in the second quarter based on all of the information you have now.
All right. Let me lastly go to an issue that was raised a couple weeks ago with regard to the proposed shift in real-estate tax millage. We had some conversation, I think, in Fiscal Stability about the proposal to, in essence, lower the City rate, increase the School District rate in the anticipation of shifting over, I think, what amounts to $25 million, and we had some back-and-forth about the timing of that, the impact of when certain things happen, you get relief from the State, if you don't get relief from the State, we were kind of left at a standstill at that moment and we were going to seek legal advice about that. 00282 That has come in, or came in, as a part of last week's answer package. I think the answer from the Solicitor is, Yes, it's illegal to do it, but we don't anticipate that scenario happening because of this June 28, 2002 certification scenario, which, I guess, we didn't know a couple weeks ago at the time of the question. Let me ask this question: If we pass the tax bills as outlined, including the back-stop provision about June 28th, we have certain revenue estimates associated with that particular decision on the shift in revenues; is that correct?
Shifting the millage. And let's say that the Solicitor does not make the certification because relief does not happen from Harrisburg. On July 1, 2002, is the budget then in balance or out of balance?
At that point -- the Councilman's answering (referring to another Councilmember speaking off-mic.) 00283
We would be projecting revenues that were in excess of the revenues that were included in the plan.
I understand that. Would you like to translate that answer into English?
If everything else were equal, there would be a $25 million surplus.
And if I had a million dollars, I'd be a millionaire. So what?
Well, I have to say yes because by July 1st, a number of things, I'm sure, will have changed. I mean, the budget is what our projections are at the time that it was passed, but by the time the fiscal year starts, you know, things change.
I understand that. Let me go back to the original question: Is the budget in balance out of balance based on --
You would have passed a 00284 balanced budget, but it would be out of balance at that point, with a surplus of $25 million.
You would have passed a balanced budget, and that's what's required.
It would have been balanced at that point because it would have been based on the estimates that --
No, I think actually on June 29th, the budget is out of balance, isn't it?
The requirement is that the 00285 balance budget be balanced when it's passed.
I'm just concerned about our actions here, whether we'd be doing a legal or an illegal action in passing an unbalanced budget.
At the point you vote on it, it would be balanced. Again, we'd have to ask the Law Department
And at a subsequent point in the same fiscal year, it would go out of balance, and it would definitely be out of balance on July 1. So then my next question is: Then what happens?
Don't underestimate your own skills; I know you better than that.
Wouldn't we then be required to legislate on a tax afterwards, after we have passed the budget?
No. I think the first part of that question has now been answered. There's a provision in the bill that says if we don't get the relief that we're seeking based on maintenance of effort caused by Act 46 --
-- the original rates would go back into place. The problem is that --
No, because on June 29th, they would shift back to what they were, and those rates would not go into effect on July 1. So you actually would not have experienced the shift. The problem is, the budget is based on certain revenue assumptions, including the shift in the millage. If that does not happen, on June 29th, the budget is then out of balance. The question is, can you have a budget that we already passed on one date and then assume 00287 sometime in the March-April time period, the Finance Director says, Yes, you passed a balanced budget. By a subsequent act, the budget goes out of balance and we go into the next fiscal year. My question was: Then what happens? Do we have to come back in an emergency session and rebalance?
Okay. Thank you very much. Thank you, Madam President.
Thank you. The Chair recognizes Councilman DiCicco.
Thank you, Madam President. I just had a question. I was sitting here thinking about attack on 9/11 and the impact it has had on airports throughout the country, and obviously in Philadelphia International, and one of 00288 the revenue sources that we were looking to fund stadiums with was the automobile rental tax. What, if any, effect has that had on us to date?
The car-rental tax revenues were lower a couple of months after the attack. They had actually been higher -- they had been up earlier in the year and then they were down after those two months, and we'll probably have to wait and see what that does in the long term and see whether it straightens itself out.
But if it's down below whatever our projections were, I don't recall -- I mean, did we have a specific number we were looking at when we spoke about stadium financing and that portion of it?
We did. There was a successful of projections for what we get out of the car-rental tax.
And if for some reason -- and I'm hoping it doesn't happen -- that just don't make those revenues, at least as it relates to the -- pertains to the automobile rental, do we have to make that up out of the 00289 General Fund?
Do we know of any -- I supported stadiums, I think, from day one, but I know there was a concern that some of the rental companies might consider moving out of Philadelphia because they would save money. I never believed that to happen, but also, I was not anticipating 9/11. Because of the close proximity of some of these rental agencies as they relate to airport facilities, has there been any discussion about relocating them, at least for security purposes?
All right, thank you. I don't have any further questions right now. Thank you, Madam Chair.
Thank you. Councilman Ortiz, did you want to be recognized?
Yes. Thank you, Madam Chair. In your testimony when you list the seven divisions that are under the command and the 00290 direction of the Finance Director, and you have the Office of Management and Productivity, I asked a question the other day of Mr. Dubow in terms of City staffing over the last ten years and the aberrant impression that it has not gone down but it has actually gone up. And I'd like for you to perhaps give us in terms of the Office of Management and Productivity how we're doing by departments, what is the level of staffing, why -- again, the reasons why the level of staffing has not gone down, and an explanation sustaining why that has happened, and clarification along why is that with 500,000 less individuals residing in the City of Philadelphia, we have increased the staffing of City employees.
And we will give you that. As has been promised, we will give you that detailed response. I mean, in general, where we're seeing the increases are in social-service areas, in county areas, and it has to do with the population that's still here and the needs of that population. And to a large extent, those employment levels are, you know, dictated by things like mandated case 00291 ratios in the Department of Human Services or, you know, in the posting at the prisons. So we'll get you that detail, but that's where the bulk of the increases are. And if you look at the other departments in the City government, their employment levels have actually gone down over time.
I would like to see that in terms and how the personnel has been distributed across the board. You also state in terms of Worker's Compensation -- how much money have we spent in terms of Worker's Compensation during the last fiscal year, and what is the projected increase in that and why?
Good morning. My name is Joseph R. Perrello, Deputy Finance Director for Risk Management. At Fiscal 2001, the amount spent for Worker's Compensation was a total of approximately 00292 $29 million for both indemnity payments to employees with total disability and medical payments for their care, as well as expenses to handle the cases.
Okay. So what is going to be the increased -- projected increase this year in terms of millions of dollars?
We hope to hold the costs at a level basis. We're not looking for much of an increase in the cost of Worker's Compensation.
We believe it is. We believe that we have proactive medical case management, and that if we do the RFP to do a direct relationship for medical care, that we can actually have a positive impact on the quality of medical care, which will actually reduce the cost of Worker's Compensation.
Historically, have 00293 you been able to hold the costs from year to year?
Yes, we have. Yes, we have. I mean, as Miss Davis stated earlier, where the statewide costs have been going up an average of percent, we've been able to keep ours 8 down to only about a 7 percent increase. 9
Mr. Dubow, you 12 stated that we have experienced job loss since the 13 year 2000. How many jobs have we lost during those 14 two years? 15
I can get you detail, I 19 mean, exactly on what industries have seen the 20 loss. 21
And you said we 22 gained from '97 to 2000, we gained some. 23
How many jobs did we gain, and what were the areas of jobs that we have 00294 gained? Were they all in the hospital industry?
I'll have to get you details, but I think we've also had strength in the health-care industry, but I'll get you the details. I don't want to give you bad information here.
No, we don't want bad information. I was reading Andrew Cassel, I think, this weekend, who stated that most of the leases of office buildings, in Center City specifically, were coming up for renewal. This is -- these are the businesses that we would hate to lose to the suburban counties in terms of -- and that in essence, what is our policy in terms of addressing this, because if we don't have a policy, a lot of those offices and corporations will be moving to Montgomery County. And what is our intelligence, what is it -- what are we hearing?
Our Commerce Director is, in fact, actively engaged in meeting with all of those whose leases are coming up for renewal within the next year, two years, three years, and has a program designed to hold these people in Philadelphia. 00295
I don't have it. We'll get the information for you. The Commerce Department is handling that.
Do we have a list of those individuals, corporations, and the total number of jobs that are involved?
And with the wage tax and the freezing of the wage tax and impact on whether a corporation decides to stay or not stay, I mean, how do we gauge that? Mr. Dubow? In conversations that I've had with corporate sectors, they say that that is one of the big reasons why they would consider moving outside of Center City.
I think probably the overall tax burden is part of what they're looking at, and our plan to address that was going after the gross-receipts tax, which also is a tax that businesses have said drags them out of the City. 00296
Okay, thank you. The Chair recognizes Councilman Clarke.
Thank you, Madam Chair. I just have a brief question. It's my understanding that in the last several years as a result of the substantial construction that's been taking place in the City of Philadelphia, that we've been able to sustain a high rate of revenue associated with wage taxes, stadiums, the hotel industry, the Visitors Center. At some point, they obviously will come to an end. Do you anticipate us being able to sustain that level of construction, or do you see that on the horizon? Because it's clear that if that stops, based on the information I've got, we're going to have a serious dip in our revenue and wage taxes as it relates to relatively high-paying jobs. Have we done analysis on, one, if in fact that's going to continue; and, B, if that doesn't continue, what impact will that have on the 00297 City?
No, we haven't done that analysis, but it's a good point. I mean, there are a number of big projects going on, including the stadiums, and the construction industry's been really strong, so we can look at that and get back to you.
Can we -- when you say you haven't look at, meaning that you haven't done the analysis on the impact if that stops?
Have you had discussions about making sure that it continues, wherever it be -- under NTI or be it on the waterfront development? Or is it just, Well, this it happens if it happens? I mean, is that an argument for a Convention Center expansion and --
There are a number of public-work projects that would contribute significantly to ensuring that the wage tax stays at the level that we are seeing now. Those that you mentioned -- the Convention Center expansion, the Penn's Landing 00298 project, NTI -- just to name the three primary.
And that will allow us to sustain our level to some degree?
Okay. See, I had to ask that question and the answer is, That's not right.
Thank you, Madam Chair. I have a question for Risk Management -- maybe you can answer the question or they can come up and speak for themselves. Where can we get the information on the annual budget for Risk Management, what they spend on hotels and relocation expenses? Where can we get a detail of in the calendar year 2001 of all of the money that was spent by Risk Management in the 00299 area of dealing with claims, payoff for suits against the City of Philadelphia? Is there one document available to the Council detailing how much money we spent?
But short from asking, wouldn't normally you think that an organization like Risk Management, we would have a document we could point to? Is there a document already prepared showing how much we spent here and how much we spent there?
Councilman Rizzo, Joe Perrello again from Risk Management. We do have documents like that, and we can forward them to you, yes.
But isn't that a public document? Shouldn't that be something that would be relatively available without needing to pull something like that together? Or are you telling me, It's just there and it's not here? 00300
It's part of our indemnities budget, which we share with the Law Department.
Don't you think that would be an interesting document to give to the Council for the budget process each year?
Well, I'm not speaking for the Council, but I'm just saying that I think I'd be interested to see it. Could you just tell me how much money you spent last year in Risk Management excluding salaries?
On settlements, relocation expenses, you name it, all of the things that you do. And by the way, I think your crew does a good job. The few things that I've been involved 00301 with, the problems with the sinking homes and -- what's the name of that street?
Daggett Street, that things work well. But I'd just be curious to see how much money we spend, and are we getting good deals when we relocate people? are we using this money as effectively as possible?
So I'd like to see exactly how we're spending some of that money.
Well, thank you very much, first of all, for your positive comments, and we will break down by area of the City where we spent the money on relocation and on --
That leads me to -- I would like to make a recommendation to the Finance Director that Risk Management and Fleet Management start working a bit closer in the area of driver management to making sure that people don't have suspended licenses, making sure that people know how to drive a City vehicle. I mean, again, hearing about -- hearing 00302 stories where people come to the employ of the City, that they've never had a driver's license, have never driven a driven a vehicle, but the prerequisite for getting a job here is to get a quick course, get up to the testing center, get a driver's license. Again, coming from the corporate world, and I think that's given me good experience -- I've not been involved in government my entire life, but most major corporations have a driver testing program, they have a computer-aided -- they have computer support, where if a person loses their driver's license or gets points associated, that their employer can detect that information; that after a vehicle accident, that they sit down as a group and review the vehicle accident: Was it responsible, was it not responsible; recognition programs where people that drive vehicles for 10, 15, 20 years without a responsible accident are recognized for that; that if a person has had 20 fender-benders in five years, that they also be dealt with, retrained, see if there's special equipment. I see very little interaction -- I know 00303 the Streets Department for some of the big equipment have their own in-house training, but I would like to see Risk Management and Fleet Management become more involved and more responsible for who drives, how they're driven City-owned vehicles. As you know, it's a big exposure, and we probably spend a lot of money -- I think I'm going to be surprised on the dollar amount on settlements that we make, and that will be included in there, the settlements we make for being self-insured. We have a tendency, because we're self-insured that even a minor fender-bender -- I get reports from the National Transportation Association where they point towards certain vehicles that if involved in a vehicle accidents, are very, very expense to repair. We're self-insured; every time we have a minor accident, we have to pay for the repair of that vehicle. Fleet Management and Risk Management should be working to make sure if we have a vehicle that you hit going 5 miles an hour, that it requires $5,000 worth of damages, we shouldn't be buying that vehicle; we should be looking at 00304 something else. So, again, I'd like to make a recommendation that Risk Management, Fleet Management -- and if it's a matter of money to make that work, that this is the time that we should be talking about that to make sure that the people that drive City vehicles -- we just had a situation where a person was involved in an accident that didn't have a driver's license. As the employer, we should know who has driver's licenses and who doesn't have driver's licenses.
Councilman, thank you for your support on this. One of our initiatives for FY '03 is to work with the Fleet Department; in fact, we're working with them now on a safe-driver program, and we're working on a manual right now for that.
And we also do have a 00305 driver license recognition program, and we're working to enhance that as well.
I know I've talked to -- since this one accident that just recently occurred, people tell me that operate large fleets that they have a service that if any of your employees get points, that information is forwarded to them, and the employee signs off and says, you know, that's appropriate for you to have. If an employee off-hours is arrested for DUI, that information eventually gets to the employer so that an employee can't continue to drive a vehicle that isn't licensed to do so.
Thank you. Are there any other questions from members of the committee? (No further questions.)
The next 00306 department to testify is the Revenue Department. (Witnesses come forward.)
Good morning. Please identify yourself for the record and proceed with your testimony.
Good morning, President Verna and members of City Council. I'm Nancy Kammerdeiner, Revenue Commissioner. With me this morning is Denise Garrett, Chief of the Water Revenue Bureau. We are pleased to be with you today to discuss the proposed FY '03 budgets for the Department of Revenue and the Water Revenue Bureau. I will first highlight some of the key features of the Operating Budget request for the tax side of the operation and some of the recent accomplishments of the Department. Denise Garrett will follow with testimony about the Water Revenue Bureau. I believe you have our written testimony, so we'll keep our remarks brief and then be available for questions. The Department of Revenue requests appropriations from both the General Fund and the Water Fund. 00307 The FY '03 General Fund appropriation request totals $17,471,986, with $13,039,112 of this in Class 100. This is an increase of $249,872 from FY '02 estimated obligations, and this increase will cover negotiated wage increases. These funds will support 316 full-time and 5 part-time positions. In addition, the Department's requesting $4,056,387 in Class 200 and $846,487 in Classes 3 and 400. These amounts are unchanged from FY '02 estimated obligations. In the Water Fund, the FY '03 appropriation request totals $1,773,503. Of this amount, $1,547,848 is in Class 100 to support 44 full-time positions in Payment Processing and in the outgoing-mail center. This is an increase of $49,757 from FY '02 estimated obligations. And, as in the General Fund, these increases go to support negotiated wage increases. We're also requesting $177,255 for Class 200 and $48,400 for Classes 3 and 400 for the Water Fund. The Department of Revenue is committed to supporting the Mayor Street's objective to 00308 maintain the City's fiscal health during difficult economic times. We continue to seek ways to increase collections while reducing the internal costs of collection. Computer matching remains an important tool to identify those who should be filing and paying City taxes but are not. Several discovery projects have been underway during FY '02, including the use of Internal Revenue Service data in order to identify those who should be paying school income tax and/or should be paying business-privilege and net-profits taxes. We've also been attempting to identify Philadelphia residents whose non-Pennsylvania employers do not withhold wage tax. 5 million so far this fiscal year. We also continue to enhance our consolidated Taxpayer Information Processing System (TIPS). This year, a new settlement module replaced the old process, and a new refund module will be implemented this spring. This new refund module will support the implementation of an 00309 interactive voice response, or IVR, application that's planned for FY '03 that will taxpayers to obtain information on the status of their refund applications by phone, without having to talk to a representative. The upcoming merger of the real-estate tax into TIPS will complete the integration of the major taxes into this one system. We've also focused our attention on increasing the use of the Internet and electronic funds transfers. All the forms that are now mailed out can be downloaded from the Web. We also have the business-privilege tax regulations, and we're about to add some other regulations to the Web. Our Plain Talk Tax Guide, which many of you have seen -- we distributed some copies to members of Council a week or so ago -- is also available on the Web. We look forward to the day, which, hopefully, will be in the very near future, of being able to have people file on line. We're working with the Mayor's Office of Information Services to make this happen as soon as possible. In addition to improving services 00310 through technological changes, we've been working in other ways to reduce telephone and walk-in waiting times, to increase telephone-answer rates, and reduce the time it takes to answer correspondence.
We also endeavor to improve the maintenance of correct addresses for taxpayers and to update and improve the information that's available on the system about our taxpayers. Among other things, we've been updating business location information and replacing the standard industry classification codes with the new more comprehensive North American industry classification system codes that have been referenced in some pieces of legislation from this body in recent years. These improvements to the tax base will enhance our ability to analyze and forecast tax revenues by location and by industry, and will help us to improve enforcement capabilities. Our department's technical staff is regularly engaged in outreach efforts that are designed to increase the knowledge of City taxes and to provide direct assistance to taxpayers. 00311 This is just a highlight of a few of the activities that are going on in the Department of Revenue, and we hope that this will give you some idea of the activities we're engaged in. Denise Garrett will now review some of the activities of the Water Revenue Bureau and the remainder of the Water Fund budget. And then, of course, we'll both be available for questions.
Thank you. Good morning, Council President Verna and members of City Council. I am Denise Garrett, Chief of the Water Revenue Bureau, and I thank you for the opportunity to present testimony on the Water Revenue Bureau's Operating Budget request for Fiscal Year '03. The Bureau's request for a Water Fund allocation $16,791,651 in its Fiscal Year Operating Budget request, with $9,402,619 for Class 100; $6,574,858 for Class 200; an $804,674 for Classes 300 and 400. This request is a decrease of $347,526 below our Fiscal Year '02 estimated obligations. The Water Revenue Bureau's responsible 00312 for providing accurate billing and timely collections of water and sewer charges to customers of the Philadelphia Water Department. The Bureau has undertaken many initiatives over the years aimed toward enhancing services and increasing revenues. To highlight some of those initiatives, the successful automatic meter-reading project, completed in 1999, has facilitated a reduction in theft services and improvements in collections. The incidence of theft of service after termination for non-payment has been drastically reduced. In Fiscal Year '97, 55 percent of customers restored their own service, compared to percent in Fiscal Year '01. The current trend 17 indicates a continuous reduction of 14 percent. 25 percent of monthly bills were based on actual readings. In Fiscal Year '01, more than 80 percent of our bills were based on actual readings with AMR. The accuracy of bills inspires public confidence in charges for service and increases the likelihood of timely payment. The current collections rate is the 00313 measure that determines the extent of customers who pay within 30 to 120 days. 6 percent of customers paid within that time period. 5 percent. After many years of growth, in Fiscal Year '98, the receivables balance in the Water Fund began to decline. By Fiscal Year '02, balances were down from $150,480,413 to $121,579,138, a reduction of approximately percent by Fiscal 12 Year '00. 13 Fiscal Year '02 accounts receivable are 14 projected to be $124 million approximately, and 15 $126 million is projected for Fiscal Year '02. 5 percent. 18 The Water Revenue Bureau has introduced 19 several bill payment programs over the years to 20 facilitate easy payment and reduce delinquencies. Our plan in Fiscal Year '02 is to introduce bill 22 payment via the web as well as Internet and telephone access to customer billing information. In Fiscal Year '02, we anticipate declines in overall collections due primarily to 00314 declining consumption, as well as a decrease in the number of all but the hard-core delinquent accounts. 9 million. 3 million. Since the inception of our collection agency programs in Fiscal Year '92, we have expanded to include many types of delinquent accounts in our general collection programs. In Fiscal Year '95, we instituted a collection enforcement program targeting owners of multiple-unit apart buildings, single-unit tenant-occupied properties, and subsequently combined commercial/residential tenant-occupied properties. The programs have been very successful, but after so many years of working the accounts, we are now down to the most recalcitrant delinquent customers that require more stringent measures to generate revenue. 9 million. 5 million for the same period. However, because the remaining accounts are so hard to collect, we do not expect to maintain this level of collection beyond Fiscal Year '02. Our strategy to match the FY '03 projected shortfall is to increase referrals to the Law Department and outside counsel for prosecution, since indications are that collections continue to be strong in this area. In the last four years. The Water Revenue Bureau has put tremendous effort into cleansing customer information in our database and enhancing the billing application platform to prepare for more advanced software and hardware products available in the industry.
" The multi-year project will give customers the expanded self-help services via the Web and telephone systems while providing extensive online access to 00316 information and data tools for employees. In Fiscal Year '00, the Water Revenue and Water Department consolidated its call-center operations to create a seamless and efficient interface with customers. The project is geared to cross-training employees to handle call volume overflows, but it still does not fully meet the customers' needs. Cross-training has allowed for overflow during busy periods, but work-flow management tools are needed to direct calls to personnel with appropriate skill levels to assist customers effectively. In addition, self-help systems are needed to offload activity that does not require representative contact. Finally, tracking information and consolidating duplicate requests is critical to effectively manager citizen customer interaction and control cost of operations. The Customer Information Work Management System will provide tools necessary to achieve these objectives. Water Revenue continues to support low-income and senior citizen assistance programs. The Water Department Grant Credit Program provides 00317 up to $200 in direct credit to assist customers with water bills. Seniors who qualify financially can receive credit of percent of their total 5 water and sewer bill. 6 Last year, we piloted a program to 7 extend the assistance to customers who are at or 8 above 175 percent of the poverty level in order to 9 accommodate welfare-to-work recipients who may be 10 just over the line of eligibility. 11 During Fiscal Year '00, we provided 12 assistance of $496,042 to 6,959 low-income 13 households and 41,198 senior citizens. 8 million to 15 10,000 low-income customers and 37,000 senior 16 citizens by the end of Fiscal Year '02. Our 17 projection for Fiscal Year '03 is to provide 18 2 million in grant credits to approximately 10,000 19 low-income customers and 35,000 senior citizens. 20 As in prior years, our goal is to be a 21 customer-focussed organization that is efficient 22 and effective in providing accurate billing, 23 customer services, and collections for water and 24 sewer customers of the Philadelphia Water 25 Department. 00318 I thank you for this opportunity to provide testimony on the Water Revenue Bureau Fiscal '03 Operating Budget, and would be very pleased to answer your questions.
Thank you very much. I want to publicly thank both of you for responding to the many inquiries that my office receives. I want you to know I'm really appreciative.
Councilwoman Tasco had to leave for a meeting in her office; however, she did ask that I inquire, when you want to contact a property owner and it is a property that is not owner-occupied, how do you contact the owner?
I'll respond to that first for water and sewer. We have a program called "Utility Services Tenants Rights Act," and if the property is delinquent, we contact the owner through certified mail to make an attempt to have him contact us to negotiate some sort of settlement 00319 on the property prior to any sort of enforcement action.
If I'm understanding correctly, though, the part of the question here is in terms of our sharing information with someone other than those who are collecting for water and sewer or collecting for taxes, and that gets us into a very gray area, and we've asked for advice from the Law Department in terms of whether any off-site mailing addresses that we may have can be shared in a forum other than the collection of taxes. We've gotten conflicting information from them in the past, and I'll renew our request to get some clarification there. I will hasten to add, however, that quite often, we do not have a mailing address other than the address of the property, and so we don't always have the information that someone might be seeking. The tax bills may actually go to the property, and the resident of the property, for example, may have the obligation under the lease agreement with the owner, to pay those bills.
What is your department doing in the area of collecting 00320 delinquent taxes? How many employees are engaged in this activity?
I would have to get the employee-number count for you, but in addition to sending out bills for the delinquent amounts, that's something that we engage in regularly. We have a case-management process that is a part of, at this point, all but the real-estate tax. And in our case-management system, we stage delinquencies to collection agencies for outside collection support and/or to the Law Department. I use "and/or" there because we have set up parameters on dollar amounts with the Law Department. Some things go to collection agencies first and then to the Law Department --
If you had additional employees, would your collection 00321 increase?
That's a good question because sometimes we could benefit from having additional employees who would deal with the public on discoveries and do some other discovery projects. As I indicated in my basic testimony, discovery work can be beneficial in identifying new taxpayers. But in terms of delinquencies, we probably are doing the things internally that we can do in terms of collecting --
I want to know, though, how many employees you presently have, and how does that compare to maybe five or six years ago?
What is the amount of the delinquency that we presently have?
I will have to give you an updated amount on that; I don't have the papers with me with the total dollars, but I can give you an update on the accounts receivables.
How long does 00322 it take before we can put a property up for sheriff's sale?
The Law Department actually manages the sheriff's sale process, but Revenue does identify properties that have high-dollar delinquencies. We usually, in Revenue, are looking at those that have the highest opportunity for sale for satisfaction of the full amount of the delinquency, and so we review the highest dollar delinquency amounts in real estate and certify those to the Law Department. The Law Department, in turn, goes through a process at their end that they could elaborate on, but basically, they determine whether there are any other legal actions that are currently underway through bankruptcies or some cloud on the title that may impede the process for sheriff's sale. Then they identify the ones that can, and should, go on through the process for title search. And notification procedures take place after that. There are set things within the law in terms of the number of notices. That, again, can be detailed for you. I know, as part of the NTI 00323 process, we've just gone through a detailed review of all of the steps in the acquisition process through sheriff's sale and put timelines on them. And I'm sure we can supply that. On average, it's now taking about to 7 12 months to get them to sheriff's sale from the 8 time that the title search process starts. 9
You know, I 10 feel very strongly that the City in some way contributes to the blight. We -- I know of -- I go through the computer many times, and I notice that we have one owner that may have 6, 10, 12 properties, and they're all delinquent in taxes; they owe taxes, they owe water bills. I don't know why we can't expedite those properties for sheriff's sale.
We do attempt to do that. Unfortunately, a lot of the individual properties have liabilities that exceed the market value of the property, and that makes them unlikely candidates for sale at a sheriff's sale where all of those obligations need to be satisfied for completion of the sale. And so they --
So we just 00324 let them sit there, they're abandoned to a degree, they become unsafe, and then it's our responsibility to have them demolished, and we still don't get a dime from it.
Those are some of the issues that I think we are addressing now through NTI.
Well, I would be very anxious to see how that works out. I'm very, very curious. What is the status of the tax lien sale, and can you tell me, when do you project that the bonds will be retired?
The ending date on the bonds is June 15, 2004. The bond payments so far have been made on time, and basically the payments that are made each quarter are for the interest due to the bondholders and for the expenses incurred by the servicers and the trustee. That process is being managed by First Union as the trustee, and at this point, there's one servicer. There had, as you know, initially been three servicers, and two of them have ended their relationship with the bond issue and Herb 00325 Goggin {ph) is the remaining servicer.
Aren't we paying any principal? You said we're only paying interest --
Those are the required expenses each quarter. Payments are being made against principal each quarter as well, depending upon the funds available at the time of the payments. Those payments are made once a quarter, and the amounts on principal will vary, depending upon the funds available.
Okay, Commissioner, do you know why the General Fund budget, with the exception of the payroll, is the same for FY '03 as it is for FY '02? In your opinion, does this budget allow your department to optimize the City's collection effort?
Yes, it does. We have some things that we've been doing things in terms of saving, in terms of our cost, doing things more efficiently. And those savings go toward covering things that are not part of the past, but we're doing as new initiatives going forward. So, yes, I think that those costs 00326 are --
Well, the opportunities that we have with our consolidated system of sending notices to taxpayers earlier increase the number of notices that are mailed. These are not bills, but notices of non-filers, information about returns that have been incomplete or have errors in them. We're doing more in terms of contact at an earlier point with taxpayers instead of going into collection activities. We're trying to avoid lawsuits and/or more stringent enforcement actions and get the collections in early.
What is the collection fee that these collectors get?
I was just checking to see if we have that off the top. There are three different rates, one for each of the collection agencies, and let me see the if my staff has it here or we'll have to supply it. (Ms. Kammerdeiner confers off the record with colleagues.) 00327 (Witness comes forward.)
Deputy Revenue Commissioner Jim Haley. The rate average rate of three collections agencies is percent. 7
Thank you, Madam 12 President. 13 You said "the average." Could you give 14 us a breakout as to what each -- I think that's 15 what the Chair was asking. 16
By company, I could not. I 17 could get that information for you. 18
I couldn't tell you that by company right now, but I can get you that information.
Would you provide that information to us, please.
Just a follow-up. 00328 Is one company performing a different service than the other? Is that why the rates may be different?
We selected the three through an RFP process and got them to their lowest available amounts. These firms also provide collection services for water and sewer collections as well as taxes, and the rates that we are paying on these contracts are lower than the rates that we paid with the last contracts that were in place.
I guess my question still is that if you have three contractors, are they all performing the same service? And if they are, why would the rates be different for one servicer as opposed to the other, assuming they're all performing the same service? Wouldn't we have gone with the lowest or the lowest two or the lowest one if the services are exact?
The differential between them, as I recall, is not great, first off, but we did not force them to go to the lowest amount, and we wanted to retain some competition between agencies and ensure that we had coverage in all areas of the City in terms of people being able to do some walk-in if that's something that they 00329 wanted to do. There are also --
Some of them do onsite counseling and work with people when they've been trying to get the payments from them. It's not a formal onsite --
Yes. Most of it is by telephone, some of it's by mail, but there are people, who, when they get those notices, want to meet with someone, and they look for a place to go in order to do that.
But you don't know off the top of your head if any of these companies are doing a different service than, say, is Penn Credit doing something different than St. Hill or --
We divide the portfolio among them, and so basically, they can get -- or will be getting the same types of cases to collect on.
I don't want to take up all of the Chair's time, but I just want to ask one more question.
Do you divide the cases up evenly among the three? Or there is there a formula that you use for dividing the cases?
Yes. We usually do it -- random digits, the account number. 00331
I have other questions for later. Thank you, Madam Chair.
Thank you. The Chair recognizes Councilman Rizzo.
Thank you, Madam Chair. I'd also like to, Commissioner Kammerdeiner, thank Denise Garrett for the services that she personally involves herself in.
For the cases that we send over, like in the President's office, are normally very complicated and are very involved, and it's greatly appreciated when some of these complicated cases do get resolved, and I'm sure it makes you happy to get a problem cleared up that's on your desk and also that our constituents come to closure on their dealings with the Water Revenue Department. I'd just like to follow up on the 00332 recent conversation. It seems strange that you'd have three vendors providing the same service and one being compensated at a higher level than the other, and I think that our Procurement Department could eventually come up with a scenario, a formula, that would get that to the best benefit of the City down. I mean, I've never heard of -- this is an all new one for me today -- competitive bidding that are three different numbers.
These are done by an RFP; it's not a competitive bid and --
Well, then maybe that's the problem. And I've heard honestly that it is not just in the Revenue Department, but I hear it is very difficult. I have had companies very, very frustrated that they can't even get an appointment with some of the departments to come in and talk about the services that they can provide. Now, I'm not suggesting that that's the problem in Revenue, but I know that it is very difficult to come in and suppress your interests and want to do business with the City of 00333 Philadelphia, so I don't know what -- how you get on that list, how you become a vendor, get an RFP to provide that service, but I think that there's probably a better way to do that because it just doesn't sound sensible to me to have three different RFPs. A question that I'd like you to -- some information that I'd like you to provide to the Chair, and I'll direct this question now for verbal response, if possible, to the Chief of Water Revenue. How many accounts do we have presently for water service that are unmetered, that we estimate bills? I also have a concern about something that I'm finding out is becoming even more so a problem, that we issue permits that we allow contractors to go to a fire hydrant, fill up a water truck, take the water, and use it for what I thought was supposed to be the appropriate use for mixing and cleaning up and things like that at construction sites. Now I find that we have lawn services that pull up to a hydrant, fill up the truck, because they have a permit and they're able to go spray for crab grass and to fertilize lawns 00334 and things like that. And I also find that there are companies that don't even reside in the City of Philadelphia, but it's a pretty good deal to come from Montgomery County to the first fire hydrant in the City of Philadelphia and fill up a 2,000-gallon tank truck and take it back and wash their equipment. I don't know how well that permit system is managed, whether even Water Revenue is involved; if not, you should be, whether that permit is issued from the Water Department, but I think that this is something that we should really be looking at. Especially with the water shortage that's coming up, it might get fashionable to get a permit and come to Philadelphia to fill up your truck and go wherever and use our valuable water. Do you know about this permit system that contractors use to tap a hydrant to supposedly use water for construction sites?
I am aware of the permit system; however, I am not involved in that process in the front end, which is the authorization in issuance. That is the Water Department and 00335 Licenses and Inspections. From time to time, we will get those bills to collect, and that's after the fact. But because it is a revenue-impacting process, we do try to insinuate ourselves into it when we discover situations that you described.
I think that that whole system -- and I'm speaking to the Finance Director also, who's not at the table -- should -- for a few hundred dollars to be able to get a permit where a resident or a businessperson would pay thousands of dollars for a similar number of gallons of water consumed, and no management, no 15 oversight, from what I understand. I think that that whole process, because I think it could lead to abuse, where the contractors that have those permits are not necessarily using that water at the site of the construction, but in many cases, since it's cheaper to pull a permit, fill up the truck every day, every other day, and basically fill out a form saying how many gallons they used -- it could be 200, it could be 2000 -- to go back and use that water to construct -- to clean their equipment. 00336 I think -- not to belabor this, but I think that that is something that really needs to be looked at -- how we do it, is it an annual permit, who gets it, who doesn't get it. There should be, in my opinion, more than just filling out a form to be able to pull up to a hydrant. And if the lawn treatment company wants to use City water for a profit, then we should be receiving the correct amount of revenue, not just an estimated revenue that they give us.
Well, I agree with you, Councilman, an there is an initiative underway to consolidate information across multiple departments that affect situations such as that. We're working with Licenses and Inspections and the Water Department and the Mayor's Office of Information Systems to put data into a centralized database that we can use to intelligently make decisions about how we plan going forward. Right now, the way the process is, it's very manual and very intensive to monitor, but when we sell water, we don't charge an overhead for what you do with it; we just sell it for the rate that we have. 00337 But we certainly can look at that system itself to determine if, in fact, it is being abused beyond what we're actually anticipating it's used for.
Beyond the permit system, do we have any unmetered accounts that are strictly contractual? I know we sell water to Bucks County. Many of my friends left Philadelphia, and I went and visited one, and he started to tell me how nice it is in Bucks County, how great the water is, and when I reminded him that it was Philadelphia water, he, uh -- So how many unmetered scenarios do you know of that we have that may strictly pay a fixed amount for -- and, again, not these big bulk deals, but how many unmetered accounts would you say we have, if any?
I'm not aware of the number at this point. I can find that information out for you. But generally most of our base is metered. If there is a situation where we have unmetered conditions like you say, it's by contract, such as the Bucks County situation, or 00338 it's unmetered and then we measure or monitor it on a regular basis. So I can find out exactly how many unmetered conditions we have on a non-compliant basis and how many unmetered conditions we have as a result of some sort of contractual agreement.
Who negotiates the Bucks County deal, and do we have any other deals like Bucks County?
We collect Bucks County; we don't collect all of the contracts, the major contracts, just the Bucks County. 00339
I'm not aware of the exact number. Think it's somewhere in the area of around 12.
Could you give me a -- do you have a feel for who they may be?
I know we just recently contracted with Philadelphia Suburban Water. And I'm not absolutely certain -- I don't think we have a New Jersey contract.
I'm not certain. I know 00340 we were negotiating with New Jersey, but I'm not sure if we actually closed that transaction.
Are they interruptible? If we have a problem, crisis here in the City, especially with the water shortage --
You would need to ask the Water Department that question. I would not know that.
Okay, all right. I think it's an interesting area we need to go and look at. Thank you very much, Madam Chair.
You're welcome. The Chair recognizes Councilman DiCicco.
Thank you, Madam Chair. I think this is my last question. When the fees are implemented or collected by the agencies, do they collect only -- do we give them a fee only if there's a collection made, or is there a servicing fee as well?
So they don't get reimbursed for any costs until that collection has been made.
They the collect funds, turn them over to us, and then they get paid a percentage of that.
And then that's the number you'll get back to us with what percentage the particular companies make?
I think that's all I have for the moment. Thank you, Madam Chair.
Thank you. The Chair recognizes Councilman Ortiz.
Thank you, Madam Chair. Madam Commissioner, over the last 15, 20 years, we've given tax breaks, tax abatements to a lot of corporations and businesses across the City, and in particular Center City, a lot of that. Many of those should be coming into line during the next year or so. Can we have a list of abatements that are terminating? 00342
That information is maintained by the Board of Revision of Taxes, and they certify to us the assessed values and then identify whether those are taxable or they're tax-exempt. So we get that information from them on an annual basis.
But who sends the notices to these individuals, you know, for collection of taxes?
We actually send the tax bills to them and collect what's due, but we get the assessment information and the indication of whether it's taxable or not taxable from the Board of Revision of Taxes. They certify to us annually and --
You do not have a list of buildings and properties that are coming into line in the current year?
They maintain that at the Board of Revision of Taxes. We could request it for you. 00343
All right. I'd like to find out what is the amount that we currently have in terms of properties that are being abated or have began tax relief through TIFs and so on.
TIFs is a different subject; that's why I asked you what you were referring to.
But it's the same concept; they're not paying property taxes.
In the TIF, they pay us, and then we process a payment to the TIF, so the taxes are actually pid on that, that's on the an abatement.
Okay, but those taxes, though, there's some way in which we devolve those taxes back.
And so we're the 00344 collection agencies, plus we devolve it back.
And that's an extra cost to us. I'd rather they get abated than us do the collecting from them and then have to give it back to them.
With the TIF, we collect the whole amount, but a portion of that tax is ours to keep. It's part of the base that was considered a tax at the time the TIF was in place, so --
I would rather that we give it to them instead of collecting that portion and then have to return it back them, but I'd like to see what is the information in terms of numbers, dollars, and so on in both areas.
Okay. And how many of the abated properties are coming into line during the next two years or so? And how much money will that mean to the General Fund?
When you're speaking about what properties are coming due --
I mean the ones that we gave abatements over years ago and so on. 11
The abatements for 12 three- or ten-year, depending upon -- 13
But we also did a 14 ten-year exemption on the improvements back in 15 1997.
And if I'm not mistaken, I think that legislation is coming due. I think we did it for a five-year period, and that we may have to, assuming this Council will approve to reenact that.
Well, we may have to reenact and that's for a ten-year period, so those properties will become due in 2007.
But the exemption 00346 was on a sliding scale, so the first year, we didn't collect any tax on the improvement, but the second year, we're collecting percent of the 5 value. 6 So am I correct that that's ongoing? 7
That's really 8 something that the Board of Revision of Taxes 9 manages and so it would have to be a report from 10 them.
I'd just like to get a clear picture of what our collection basis is in terms of -- now that we're under discussion of the land-tax question in the City, I think this is somewhat relevant to that discussion.
I'll ask David Glancy to put a together as much of a report as he can for you on how many properties are at what point in the abatement process. In terms of the assessment, I suspect that he will have a problem telling you what it will look like two to three years out, because the assessed values may be very different at that point in time, depending upon the nature of the improvements and what they're doing with the 00347 property.
Because we need to project in terms of a lot of stuff that we may be entering into discussion.
And on the TIFs, as you know or will remember, the TIF agreements have a 20-year life, so we have a longer period of time until any of those would be --
But I'd just like to find out how much money we've taken off of the tax rolls and so on.
Some of those TIFs are not active yet, but that's what we'll have to put together for you.
Just so we can get a clear picture if we're going to discuss land tax versus property taxes and so on down the line. Thank you, Madam Chair.
Thank you. I had one quick follow-up. I was struck by the mention that several departments are now trying to work smarter 00348 with regards to the use of technology and the initiative that is underway. When did it start and when did you see whatever is on paper actually becoming real?
Well, I got involved in the initiative -- I guess it had to be about two or three months ago. And it's an initiative out of the Mayor's Office of Information System, and I believe the CIO, Diana Neff, testified somewhat on that effort.
Right now, we're in the process -- the process involved defining departmental requirements and looking at those across the departments to determine where we had similarities and where we had differences and being able to come up with what was called general requirements that we would use to then construct the request for proposals, which is on the street at this moment. And the objective is to consolidate information in a centralized database so that we can begin planning initiatives such as the one that Councilman Rizzo described where if a permit is 00349 issued for a particular department, that information can be tracked through the various departments, and not only by the employees, but also by the citizens, and also tied to our cost-accounting system to ensure that people aren't getting paid for services where they owe us delinquencies and that they aren't -- that we can consolidate their accounts, for example, that the, president gave where she said five or six people may be delinquent. Well, we can pursue them as a group in different situations like that.
Sure, sure. So following that through, the RFP is currently on the street and the deadline for that is about when?
Yes. The departments are all participating in the selection of a vendor, as well as something called a "conference room pilot," which is the successful vendor's thorough analysis of the software that we are being provided. 00350
Thank you. Councilman Nutter, do you have questions?
Yes, Madam Chair. Good morning, Miss Kammerdeiner and Miss Garrett.
Yes, I know him from the phone. Yes, pleasure to meet you Let me ask you a question about of your testimony. It talks about notwithstanding gradual decreases in the rates for the wage tax and the gross-receipts portion of the 00351 business-privilege tax, the City has realized net annual increases in tax collections in recent years as it has benefitted from the longest economic expansion in U.S. history. I think I heard President Clinton say that at the Democratic National Convention. How does that happen? The rate goes down but the revenues go up; how does that work?
In part, it works because people have higher salaries, there are maybe more people who are employed who are working in Philadelphia. It's a combination of things. People may be working longer hours, getting more overtime pay. All of the things that go into earning an income within Philadelphia would be affected by that. And in the earlier testimony from Finance, there was reference to an increase in jobs in Philadelphia over the last three years. Certainly that plays into an increase in the amount of wage tax that we collect as well.
Do you believe generally that some of these taxes, given the 00352 nature of them, that to the extent that they decrease, you can still get increased collections?
I think you can see that happening in some places if there's more activity, but there are other factors that affect the activity than just the taxes. The economic conditions in general probably have a higher impact on the amount that we collect than the reduction in the tax rate. As you know, the tax-rate reduction on wage tax was a very small one in each year, and so other factors had to be at play there than just that in order to see the increases in collection we had.
What factors do you think were at play during the time prior to the longest economic expansion when we were not cutting the taxes? And, I guess, some years ago, we actually started increasing them, and then the City lost more jobs and population than any other county in the United States of America. What do you think was contributing to that?
A combination of factors: The tax rates themselves that made people 00353 make a decision to go somewhere else. The level of economic activity in general would have that impact. During that same time period, we had some very large increases in costs of goods and some reductions in -- or holding the line on salaries that were evident.
Given where we are today -- and you heard some of the discussion with myself and Mr. Dubow -- we are either coming out of the recession, the recession is over, or it's soon to be over. Do you think there's any other factor greater than taxes that will affect the immediate and longer-term future of the City?
That's a very broad question. There are lots of factors that affect the City's future: The economy in general, nationally and state. There are other things in the environment that -- all of the things that we talk about in here in terms of schools, safety, blight. All of those things play together in terms of the decisions people make about where they live and where they work. 00354 And so I think it's an interplay of all of those things together; it's not one of them in isolation
I think the economy in general has the bigger impact in terms of what's going to happen.
And do you generally agree that we are either about to come out of the recession, we've come out of the recession, or it's soon to happen in the second quarter of this year?
Every report I've heard has had a different conclusion on that, and I haven't studied them closely enough to have my own conclusion on that. I would stay with what Mr. Dubow testified on earlier, because he spent some time with the economists looking at that.
Okay. Well, I think his testimony was the expectation is sometime in the second quarter
Okay. So as the economy gets better, what do you think we should be doing with our tax rates; leaving them the same or decreasing them?
I guess really at this point, I would say that we need to study the issues more closely, and I will be prepared, and my department will be prepared, to collect whatever is determined as being the appropriate way to go. I would not want to try to influence that at this point in time.
Okay. Let me ask you about a couple other things. Where are we on the issue of -- I don't know what you guys call it, but it's generally referred for the businesspeople as this issue of the double filing in the second year of the business --
Yeah, you're referring to the new-start situation as created by --
New start. As a 00356 result of the business-privilege tax --
As a result of the business-privilege tax being a prospective tax, and to highlight that, the tax that will be paid on April 15th of this year is for 2002. And so a new business coming into business in 2002 doesn't have a business record on which to base the computation of the tax.
And so in that first year in business, they don't pay, and then by the second year in business, they can pay for that year based on their activity in the prior year. It's a very complicated process made even more complicated by the timing on this for business. We have suggested that we go back to the State and the State enabling legislation be changed to let this be a retrospective tax like virtually every other tax is, and --
The State has to 00357 identify those areas that we can tax. We are restricted in what we as a city can tax.
And go to the State for enabling legislation in order to levy taxes.
The business-privilege tax enabling legislation specifies that it is a prospective tax.
And, therefore, in order to change that, we would have to go back to the State and have the State legislature approve a change in the language that would let us then consider this to be a retrospective tax.
Only with that happening can we change the provisions for someone who's in a new business.
Right, right, I understand that part. Take me back through the beginning part. You're saying that when you pay your tax on, 00358 what, April 15th as a business person?
If you're paying your business-privilege tax on April 15th of this year, you'll be paying for the year 2002. Should you go out of business during 2002, you may in fact be eligible for --
At that point in 2002, it's only three and a half months old.
You're paying tax for the privilege of doing business in 2002. So if you go out of business during 2002, you may in fact be owed a refund for a portion of the year.
Although I guess, as you said, most other taxes are for the year that you actually did business, I mean --
Your taxes to the State or the federal government on April 15th, you're paying for the activity that took place in 2001.
And paying your taxes for 2001. That's not the case with the business-privilege tax. It's one reason that that tax is so confusing and has been so misunderstood by taxpayers and by tax practitioners who assist in the preparation of those returns.
That is one of the proposals for tax reform that is being considered.
Which administration, the Street Administration or the --
That's correct, the Street Administration or the Schweiker Administration?
Okay. Hasn't this been under consideration for a long time? I mean, we've known about this problem for a long time, right?
Is this an initiative that you're directly working on, or are there other parties involved in this?
I've worked on it in the past in the sense of being able to put together some information about the impact of it.
It's being considered by the legislative process. And when I say "the legislative process," that's incorrectly stated. It's being considered by the Mayor's Office and others who make determinations about the legislation that the Administration might put forth.
Well, let me ask this question: How long have you been working on this issue? 00361
It's one that's been around for several years, and there are many people who are interested in seeing --
Give me a quantification of "several." Is it more than three, less than five, more than ten?
I believe there are some people who felt that it should have been changed at the outset, but in terms of seriously looking at it, I would say it's been three or four years.
Okay. And to your knowledge, has there ever been a bill proposed in Harrisburg from either the last administration or the current administration to make this change?
Okay. Do you know who in the legislative unit is working on this?
Janice Davis, Finance Director. It's been forwarded to the group that looks at what legislation we will propose in Harrisburg for the spring legislative session. 00362 It's going forward to the Mayor's Office.
We do know what would need to go into that bill, but it hasn't been officially drafted.
It's a very minor wording change, and the Law Department has looked at it in terms of identifying what would have to go into it, but it hasn't been put into final form.
Concurrence that we want it to go forward as an administration.
There are potential cost implications in terms of the timing, and that's one of the things that we have looked and have shared in terms of the way this works. We're 00363 trying to keep it as a revenue-neutral situation in any budget year. It could be neutral in a tax year, but not necessarily in a budget year because the tax year's calendar and the budget year's fiscal. And so one of the issues that we have looked at over this several-year period is how we can stage the implementation of this so that we don't adversely affect any budget year.
Okay, and how do we deal with the fairness issue? Isn't there a fairness issue, especially for the startup businesses and the general impact on public policy as well as your own testimony is that the tax is tremendously confusing? I mean, it seems like the right thing to do, right?
Okay. And I'm sorry, take me -- just the short version. Tell me again what happens to the new business. Let's say I started a business today, got my business-privilege license, and I'm doing whatever I'm doing -- not that anybody would buy 00364 anything from me, but I'm in business. Tell me what happens.
Okay. You would not yet have any data in this year in order to pay a 2002 business-privilege tax, and so your first time to pay would be in April of 2003 based on your activity in 2002.
We could at that point in time basically ask you to do catchup and ask you to pay for 2002 as well as 2003, but when the regulations were developed back in the '80s to implement this, everyone thought that that would be extremely onerous on a business that was just getting underway.
And, therefore, instead of requiring the catchup to take place in that year --
The second year in business is the first year you're actually paying.
The decision was made that you would file a new-start return in that year.
Then in 2004, you would file a new-start return that would, in essence, cover your activity in 2003, but you would also be responsible for paying your 2004 business-privilege tax. So in 2004, in that hypothetical, you would be paying for 2003 and 2004.
Well, what happens when I file on April 15, 2003; what am I paying then?
You're filing a new-start return for 2003, but it really is as though you were paying your 2002. That's why it gets very confusing, and I -- in trying to do it in a summary way, am probably overstating something here.
It's very confusing, and it's particularly confusing in recent years when we've been reducing the rate at which you pay, because you find yourself in that third year in which you're paying making two payments -- actually, it's the second year you're paying and the third year you're in business -- you're making two payments against the same base revenue and expense information, but with two different rates. That only heightens the confusion that's there.
Well, I'll come back to that issue. Madam Chair, do you need me to relinquish?
Thank you, Madam Chair. 00367 Commissioner Kammerdeiner, can you please bring us current on the personal-property tax, and could you tell us about some taxpayers that paid their personal-property tax in protest. They paid it and sent a letter saying that they were paying it under protest. Bring us current on that and how we're going to deal with people that paid the tax.
As you probably know, there was a second lawsuit in Montgomery County filed by Walter Annenberg after the Montgomery County solution, which was somewhat different from Philadelphia's solution on how to handle the tax was implemented. That case went to, or was going to, the Pennsylvania Supreme Court, and so we put on hold what we were doing with our solution to see what the court's decision was. As you may know, Walter Annenberg reached a settlement with Montgomery County in December, and the Supreme Court case, I believe, has been withdrawn, or at least is not going forward. And so our Law Department, since then, 00368 has been looking at the Montgomery County solution and how that could affect the way we proposed to handle the solution in Philadelphia. And we're waiting for some legal advice on how to move forward. So we're basically, at this point in time, on hold.
So the normal, I believe -- correct me if I'm wrong. The normal February 28th deadline to file personal-property tax is not required this year?
Personal-property tax is not active in Philadelphia and hasn't been since 1996. In 1997, we did collect the tax, and then as a result of a decision of this Council, the tax for that year was refunded. So 1996 is the last year that we actually collected. And all of the things that we've been doing with regard to the personal-property tax are in terms of a reassessment for 1996 and possibly earlier years as a result of the Supreme Court decision in June of 2000.
There were no tax 00369 bills for personal property sent out since 1996?
In 1997, taxpayers filed a return, and many of them paid, but everything that was paid in 1997 was refunded to them in early 1998. What we did in -- I have to get my years straight -- in November of 2000 and during the course of 2001 was ask people to refile for 1996, and we sent out bills based on those reassessments for 1996. And we had a number of payments that came in during the course of 2001, but those were payments for 1996 tax.
Well, are those folks going to be reimbursed that payment?
No final determination has been made. As of now, we have reassessed and asked people to pay for 1996 based on their entire holding, without any tax exemption for any portion of those holdings. You may recall that the personal-property tax originally had exemptions for the holdings of companies that did business in Pennsylvania, were registered as paying certain taxes in Pennsylvania. As a result, the Supreme 00370 Court case that I referenced earlier concluded that that tax itself was not unconstitutional, but the provision for those exemptions was, and they remanded it back to the counties to determine whether they would tax in full without any exemptions or refunds anything that had been paid. Philadelphia determined that we would tax for '96 but would refund for the earlier years that may have been protected with refund petitions; in other words, '93, '94, and '95. We're on hold for the implementation of that until we see whether the solution that was crafted in Montgomery County and was upheld by the lower court in Montgomery County should, instead, be implemented here. We're studying that, it's not been finally determined. Under that solution, we would tax for all four years -- '93, 4, 5, and 6. But then if you said you wouldn't pursue a refund for any of those years, we would basically consider it a wash, and we wouldn't collect and they wouldn't get a refund.
Well, let's talk about fairness now. Many people, because of the 00371 pending Montgomery County decision, didn't file the tax, many people. What have you done with the people that haven't versus the citizens that paid but paid under protest and may have even sent a letter along? I think that people that ignored shouldn't, you know, they're off the hook and --
When we went back out and reassessed for 1996, we contacted, or attempted to contact, everyone who was on the Board of Revision of Taxes' mailing list, whether they filed in 1996 or not. And we did get filings from a number of people who had not filed originally in 1996 and --
What's the ramification of the people -- again, some paid and some didn't. What happens to the ones that did not; are they being pursued, are liens going to be placed against them? Because, again, you have people that were cooperative, that wrote their check to pay a tax that they weren't sure that they should pay, but in their decision, they did, and they indicated that they were paying a tax but paying it under 00372 protest rather than just ignoring the request. What are we doing to the folks that ignored it?
We attempted in 2001 to get filings from them and to assess them. We've not taken active enforcement measures at this juncture. For one thing, we don't know what they might have held or what they might have owed; this is a self-assessed tax from the standpoint of being able to identify what their holdings were. We don't know what their holdings were.
So there is no 14 reward for paying your tax and there's no problem in not paying it. So all of these folks that paid it, they're just out money, and the people that didn't pay it are just off the hook totally.
I wouldn't want to characterize it that way, at least not until we see what the final resolution is going to be on how that tax is going to be handled. There may still be some enforcement action that will take place; I can't tell you that right now.
All right, here's 00373 what I'd like: Based on history, just how many people filed in previous years, could you provide to the Chair how many people filed and paid the tax versus the people that ignored that -- just based on history, not -- you know, no crystal ball here. You don't know if they're dead or alive or they sold their portfolio, but I'd be curious to see how many people just ignored based on the pending Annenberg decision.
We'll go back and look at how many people paid over several years and give you that.
You're welcome. Councilman Nutter, do you still want to be recognized?
Yes, Madam Chair. Thank you. Miss Kammerdeiner, the other two items have to do with the single-factor apportionment formula and generally business tax forms and 00374 licensing and the like, and I'll explain more about that. We've had some conversations and some correspondence back and forth, and also some of the folks from the Pennsylvania Public Accountants Association. I know the Pennsylvania Institute of Public Accountants has had interest in this particular issue for sometime, which has to do with the single-factor apportionment. Can you tell us also what's going on with that? And can we anticipate any change in that formula or calculation?
Are you referring to the business-privilege tax in this case or the net profits? The business privilege?
That is one of the recommendations that I know was also included in the City Controller's report, and I believe they acknowledged in there, and this is part of what you're referring to with earlier correspondence, that we estimated -- I believe it was $11 million that it would cost if the single-factor formula had been in effect in, I believe it was, fiscal year -- 00375 or Tax Year 2000. I don't have that in front of me to remember which year we used at the time to determine that if a single-factor formula had been in place instead of our three-factor formula, with double waiting for sales, that our tax collections would have been lower by about million. 8 So that's part of what has been -- 9
Well, is there a 10 benefit to the business community to calculate it 11 that way? I mean, who ultimately benefits and who doesn't benefit?
I'm trying to remember on that particular one. I'm not sure -- I don't recall off the top, and I'll have to get for you which business sectors we thought would be affected most directly by a change from three-factor to single-factor.
Well, why don't I then make this request: If you can get the information to us through the Chair, why don't you do a comparative analysis between single-factor and three-factor impact on business community by the change either way or maintenance of the same versus switching to single-factor, the impact on the City 00376 both by maintaining the same as well as the switch, and why don't we just get a full detailed analysis of that.
Let me ask this question: Is it within the realm of your department to seek to the greatest extent possible both tax-form simplicity as well as the education of the various taxpayers as to which taxes they owe? And does Revenue get involved with the -- kind of the 8 million different licenses that you may need to run a business in Philadelphia and which ones certain businesses need?
We do get involved very definitely in terms of the design of the forms and education of the public. We don't get involved in the licensing side of things -- with one exception, and that's the business-privilege license. With that one, we do have a combined form that's used by both Revenue and L&I for the issuance the business-privilege license and the initiation of a business-tax account. So we work cooperatively with L&I on that one. 00377 We're not involved in any of the other licensing or permit requirements for a business.
With regard to the forms and the various taxes that people pay, is there any effort presently being conducted to simplify to the greatest extent possible either the forms themselves or the various explanations of what different people owe and how they owe it and how they file their taxes? What are we doing to make it easier for people to operate a business? Some may not buy into the notion that it's a privilege; if anything, the privilege is ours that they're here, so you might want to think about changing the name of that. But for the moment, I mean, whose responsibility is it to try to make doing business in Philadelphia as easy as possible?
With regard to the tax forms, that's our responsibility and the Department of Revenue. On an annual basis, we review all of the forms, we take information that we've gotten from individual taxpayers and from tax practitioners who prepare forms and identify areas 00378 where there has been confusion or where there are problems in an effort to update and change those forms, to change the explanations that go with those forms. I think with the exception of the business-privilege tax, which is so complicated in the way the tax itself is crafted, and that comes back in large measure to the enabling legislation and the exceptions and issues that are established under the law. We have streamlined those forms as much as we can. I have put them into formats that allow us to scan those forms so that -- and we take images of those forms so that we can provide and prove taxpayer service. Our feedback from the practitioners who we work with -- and they are both lawyers and accountants representing large and small firms as well as those who attend sessions that we hold on an annual basis to provide education on the taxes -- is that we've come a long way. There is still a way we can go and we can always improve on the forms, but we've done an awful lot in the last years to streamline and make 00379 them more efficient.
You can get copies of those returns on line. One of the things that we're working with the Mayor's Office of Information Services on right now is to improve the e-government capabilities, and one of the earlier places that they want to work is on the filing on line.
That's correct. But the federal taxes that you can file on line are the personal income taxes. I don't believe you can file your corporate taxes online yet, and most of our taxes are corporate taxes that have those levels of complication for taking the information from the form and putting it into the system, the 00380 legacy system that you use. So I don't think we're that far behind them in that regard.
I don't have an exact time on it yet. The very first thing that we'll be getting people to file online will be their business-tax accountant application and that business-privilege license form. That one should be available sometime within the next several months. The others, I don't have a timeline yet, but we do have some people who are looking at that to see exactly how long it will take. We hope to have a timeline in terms of the order that they would be produced sometime in the next few months.
With regard to the business-privilege tax, you've made reference on a number of occasions to the enabling legislation. What happens in the other counties or cities or townships in the Commonwealth of Pennsylvania? Do they have a similar prospective payment of taxes?
I don't believe they 00381 have anything that's prospective. For one thing, we're a city and county of the first class, so what we're entitled to tax is different from what they're allowed to tax, and so they're bound by a whole series of rules and regulations.
Well, I understand the who-can-tax-what issue, but if you're in business in Montgomery County, do you pay on the activity that you actually did last year, or do you pay for activity that you have not done in the current year?
I don't know. We can check and see, I don't know. My staff might know but I don't.
Okay. Thank you. I have one question for -- unless there are other questions for Miss Kammerdeiner -- I'm not going to try to figure out between the two of them who the ranking officials are from the Administration, so if I could have Miss Davis and Mr. Dubow back for a second, I'd appreciate it. (Ms.Davis and Mr. Dubow return to the witness table.)
And all things universal? Can you get us a complete detailed answer with regard to the legislative effort to change how the business-privilege tax is collected from the prospective current to the past either calendar year or tax year, however Miss Kammerdeiner figures it out; and can you tell us in that response who is working on what legislation, when do we expect that legislation to go to the legislature, and what is our goal in terms of getting such legislation passed so we can end this particular issue that's been around for a long time?
Are there any other questions from members of the committee? (No further questions.) 00383
The Sinking Fund Commission is next. (Witnesses come forward.)
Good afternoon, Madam President and members of Council. I'm Vince Jannetti, Executive Director of the Sinking Fund Commission, and I'm here to testify on behalf of the Commission on the Fiscal Year 2003 Operating Budget request. The Sinking Fund Commission's 2003 budget request, also funds total $464.5 million. The General Fund portion of this request is $202.7 million, and it includes $91.2 million for capital lease payments and $111.5 million for debt service and other debt-related expenditures. The Sinking Fund Commission's request for the Water Fund for Fiscal Year 2003 totals $163.6 million, and a request in the Aviation Fund totals $93.1 million, all of Class 700 for debt service on Revenue and General Obligation Bonds. 00384 In both the Water and Aviation Funds, the requests for Fiscal 2003 do not provide for any new borrowings. The Commission's 2003 request of $6.4 million in the (unintelligible) Tax Fund is provided for payments on leases for new stadiums. I'd be happy to answer any questions Council may have relative to the 2003 Operating Budget of the Sinking Fund Commission.
Thank you. Mr. Jannetti, on of the detail, could you give us the detailed breakdown of Class 281 and 285 expenditures?
Also, does your budget include any for Parking Authority bond payment guarantees? How much is included for these guarantees, and can you tell us the status of these properties?
I can tell that you that 00385 the 2003 budget provides for $4.7 million for the Parking Authority bonds. The status of those projects I do not know.
Is there anybody from the Administration here that would know the status of these projects? (Miss Davis returns to witness table.)
Currently neither project is active. We'll be happy to get the exact status of the --
Currently neither project is active. We'll be happy to get the information from the Parking Authority and forwarded to you.
Mr. Jannetti, 00386 besides the trends, what other borrowings or refundings are included in your General Fund budget?
There's also a provision for a new borrowing a new General Obligation borrowing in 2003.
I'm sorry, would you mind repeating that? I'm sorry.
There's a provision in the budget for a new -- a $94 million General Obligation borrowing to be issued early in 2003.
Okay, thank you. Are there any questions from members of the committee? (No questions.)
The City Treasurer is next. (Witnesses come forward.)
Good afternoon. Thank you for your patience. 00387
Good afternoon, Madam President and members of City Council. I am Joseph Faraldo, Acting City Treasurer, and with me today is Corey Kemp, Deputy City Treasurer. I appreciate this opportunity to testify before you about the Fiscal Year 2003 budget request for the City Treasurer's office in the total amount $969,096. This is an increase of $11,981 from estimated Fiscal Year 2002 obligations in order to fund negotiated salary increases. The Treasurer's Office proposed Fiscal 2003 budget include employees, which is the same 14 as the Fiscal Year 2002 staffing level. 15 Eighty-five percent of the Treasurer's Office 16 proposed budgets is appropriated towards Class 100 17 personnel expenditures. The Class 200 component of the Treasurer's Office's proposed budget totals, $118,125, the same as the Fiscal Year 2002 estimated obligation. The purchase of professional services, postage, the maintenance and support of computers and office equipment dominates this class of expenditure. The Class 3 and 400 components of the 00388 Treasurer's Office proposed budget totals $28,223, the same as the Fiscal Year 2002 estimated obligations. Office supplies, the cost of purchasing and printing the envelopes used to mail City checks as well as the purchase of computer equipment are included in these classes of expenditures. This concludes my verbal testimony of today. We've provided written testimony before today's hearing, and I'd be glad to answer any questions you may have at this time.
Thank you. Tell us what the City's position is regarding -- with regard to as to when we should refinance outstanding debt.
I'll let Corey Kemp, Deputy City Treasurer for Public Financing, answer that question.
How you doing? My name is Corey Kemp, Deputy City Treasurer. In regards to refinancing debt, we take, I want to say, an aggressive approach of looking at the market conditions, seeing what the interest rates are as compared to what our current 00389 debt is. We also depend on information from our contracted financial advisors, and if we find the opportunity that meets our savings threshold, which is internally approximately 3 percent, we take the necessary steps to look further into that. And if, like I said, if we reach that savings threshold, we make a determination whether we should go forward with doing refinances.
Miss Davis? I noticed you walked up to the witness table, and I wondered whether you wanted to --
I just wanted to be available if Mr. Kemp needed some assistance. He's filling in since we lost our treasurer, and I wanted just to be available if he wanted help, but he handled it perfectly.
Thank you. Mr. Faraldo, on of your testimony, you indicate that the Redevelopment Authority, on behalf of the City will issue roughly $62 million in TIF bonds as the City's contribution to the new entertainment complex at Penn's Landing. How will this transaction work? How do the bonds get paid? Is the City guaranteeing the bonds, and 00390 will this bond issue require any additional approvals from City Council?
Again, the $62 million bond issue referenced in the testimony is the City's -- that's the City's portion. It's a bigger deal, it's approximately 170, 180 million total bond deal. I'll let Mr. Kemp answer that question.
All right, just tell us how the bonds will get paid. Is the City guaranteeing these bonds?
I don't know the answer to that at this point. The ordinance was passed, I think, in the calendar year 2000, and we have yet to go further in terms of putting a working group team together. It's just my understanding in talking to members of the RDA that there was some financial concerns in regards to the -- excuse me, for a second. In regards to the Simon Group, the project leader -- and that's just been ratified or taken care of. So to make a long story short, I'm going to have to get back to you with the answer to 00391 that question. I apologize.
I would like to know, will this bond issue require any additional approvals from City Council? So maybe you could answer all of those questions when you respond to us.
And I know that this is Councilman DiCicco's baby, so to speak, and I notice your light went on. Is there something that you wanted to piggyback on?
Thank you. I think the one thing that will be required is -- because the TIF date will be changing again, it would have to come back to Council for approval. But I'm a little concerned. Initially when we did the $62 million TIF, did I hear someone say when I was having a little bite to eat, that it's 170 million?
The total is project is 172 million, the TIF portion is the 62 million.
All right, so I think the total project has exceeded that; now year 00392 we're in the 200-and-something million dollar range now. The Redevelopment Authority's involvement in this TIF, is that typical or is that something unique? I mean, we've done other TIFs and I'm not sure if the Redevelopment Authority --
They're being used as the issuing entity in this instance. And that's right, they're involved. It's not because of the TIF but because of the debt related to it. And there is no 12 anticipated additional contribution by the City. The tax increment is expected to pay the debt service on the bonds.
Yeah, I think that was made clear at some of many hearings we had, that it would be no more than the 62 million, although the Simon Group has been successful in convincing other non-governmental entities and authorities to put money into the deal. Do you have any idea when that legislation will be coming over on the date change? Do we have any --
I have to see how that bond deal is structured. A lot will be dependent on the structure and how successful -- in other deals that I've done in other cities where tax-increment financing was used, that was the sole pledge for the bonds, and if the bonds were unable to be paid, they weren't paid. A lot is dependent on how we structure the bond and whether there is the ability of the City to stand behind that debt service. So as anticipated currently, it would be from the tax increment solely.
And that's why I said it depends on how it's structured, but my understanding is that it would be only the tax increment which would pay for the debt service. And in every one that I've been involved with, that was the sole-stream pledge to the repayment of the bonds. 00394 And so if it's insufficient, then the bonds are in default, but there are usually several reserve funds and sinking funds set aside in the structure of the bonds so that they hit several bogeys before they actually have to draw an increment.
So Council should be anticipating a TIF coming before us again?
Okay. Mr. Faraldo, based upon your testimony, your office is only contemplating two financings in FY '03; is that correct?
We have two that we listed, which is the yearly tran. Also, the Airport is contemplating doing a $100 million financing. There's also -- we normally have at least two other deals that even come from the hospital authorities, like a hospital deal or a Community College deal, that we haven't listed, but 00395 we expect to have the same level of deals from that this year also.
I think you heard the Sinking Fund testify. Were you here when they testified?
Yeah, he has money in the budget to do a $94 million GO deal. At the time we wrote that testimony, we was not aware of that.
Okay, Councilman Nutter. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. With regards to of the testimony under the debt financings, either Mr. Faraldo or Mr. Kemp, what do you anticipate to be the size of the offering with regard to the NTI program?
We're going to do the -- 00396 this was in two tranches. The first tranche will be roughly 140 million.
Okay. The testimony some time ago seemed to indicate that there might be as many as three or four; do you recall that?
Yeah, I recall that, but the current numbers shows that we can do it in two.
So we're talking about spring of '04, spring of '05? 00397
Somewhere between spring of '04 and spring of '05, you're correct.
I mean, you still have to take a look at the market conditions. You know, if conditions aren't right, we can go earlier and still have enough to finish the project, 'cause as you're aware, we have a three-year spend-down on the non-taxable piece.
So at that point, if the market rates are favorable, we'll go out earlier than later.
Okay. And do you have a schedule or kind of a -- on $140 million, what's the breakout between -- I think there are three elements usually to these. You've got some General Obligation debt, you've got some taxable, and I think you've got some private activity; is that right?
Correct. The breakdown of 00398 the 140 that I stated, the 120 will be the non-taxable piece, and then million will be the 4 taxable piece. I do not have the breakdown of the 5 private-active bonds; that would be a separate 6 issue. 7
I'm saying that it's 10 separate -- it's not included in the 295 is what 11 I'm saying. 12
Uh, you just -- you 13 were doing pretty well. I think your private 14 activity -- 15
He says it doesn't have a 19 scheduled date in what he's been provided. It's 20 likely that that will be either a separate issuance or a part of the second tranche of --
That's all right, I won't hold it again you. The 120 million, that's going to be general obligation?
He's going to have to get that breakdown. The information that he's been provided does not provide it in that format, not for the first tranche.
All right, let me ask this question: For that 120, what are you allowed to do with that or what are not allowed to do with that that you would be able to do with the other 20 or vice versa?
With the information that I 00400 have, I can make sure I get you a copy of what I have, but that question is probably more geared towards Pat Smith from NTI in terms of the use of the funds.
I understand that, but you're going to have to sell this, right?
One of the investors might want to know what you're doing with the money, right? Or a rating agency?
All right, let me ask this question: The 20 that's on the taxable side, and I thought that there was some special provisions with regard to the private activity that allowed for certain activities to take place. 00401 You're saying that, first, there's no private activity anticipated in the spring's offering; second, private activity is either going to be a separate offering on its own, or it's going to be a part of the 155, which, you're saying, is not going to happen until either somewhere between spring of '04, spring of '05; is that correct?
Miss Davis, what's your recollection about the use of the private-activity bonds? I think that was a total of 50; is that correct?
Yes. And it's certain activities that aren't suitable for use with the tax-exempt General Obligation Bonds, certain redevelopment-type activities. We'll have to get you a breakdown of how these funds are going to be issued and how the charges are divided. Based on what Mr. Kemp has before him, it's not clear when the taxables are going to be issued, and those would be your private activities.
All right, okay. My concern actually is, depending on what type of 00402 bonds are in the offering obviously dictates the activities that come out of the offering and the timing of when you'd be able to conduct certain activities. So, I mean, at the moment, I am a little concerned that there's no private-activity bond offering anticipated this spring, and I think my recollection is that the bulk of the dollars that you're talking about for the spring seem to be -- I think their anticipated use is primarily demolition. The housing and preservation activity, I think, is anticipated to come out of the private-activity bonds.
Of the total that's listed here, you have demolition-related activities, blight-elimination activities, certain preservation activities, MIS and IT activities are the 121 million. Then additionally, you have certain redevelopment activities and certain preservation activities that would not be suitable for government-purpose financing coming out of the 20 million of taxables. And this 141 million is scheduled to be 00403 spent -- of the tax-exempt, 121 million in the '03 to '05 period, and roughly million of the 4 taxables in '03 to '05. 5
Okay, but you'll 6 lay all that out in a larger schedule? 7
Councilman, did you 10 ask a question whether all of these will be a 11 competitive-bidding process? 12
I didn't get to that question yet, Councilman. But it's a question.
You select your underwriters, and then they go out and market the bonds for you as compared to receiving bids for the 00404 bonds, which would be a competitive. The City traditionally uses negotiated deals.
All right. And that actually was -- even though we were talking about NTI, actually for -- you have four financings that you're anticipating, at least four, and I think I heard you talk about another two that have not been listed because -- I think the Hospital Authority was one and --
-- something from the Airport I think you were anticipating. At least for the four that you have listed, if you could, as a part of this larger response, lay out who all of the various team members are for these offerings, I would appreciate it. 00405
Okay, thank you. Where does -- where does MIG 1 stand in the general ranking orders of bond layers?
Right, it's the highest you can get from Standard & Poor's; the MIG 1 is from Moody's.
What is our overall -- or maybe that's in the previous paragraph. We've recently been upgraded from BAA 2 to BAA 1?
Okay, we're going in the right direction. Okay, thank you. When can we anticipate the response to 00406 all of the team stuff, the NTI bond offering --
Thank you. The Chair recognizes Councilman Rizzo.
Madam President, I apologize. My light was on but I don't have a question.
Are there any other questions from members of the committee? (No further questions.)
The Procurement Department is next. (Witnesses come forward.)
Good afternoon, Council President Verna and members of City Council. I am William Gamble, Commissioner of the Procurement Department. With me today are Deputy Commissioners Harry Hillock and Janet Hagan. And I'm presenting for your consideration the Procurement's Fiscal Year 2003 budget request. 00407 Before I start my testimony, I would like to briefly give you some background on my experience which has brought me to the position of Procurement Commissioner. I have over years of experience in 7 government procurement, finance, and management. 8 Most recently, in Los Angeles, California, I served 9 as the Director of Supplies for nine years, and 10 prior to that, the Director of Purchasing for the 11 Cleveland City School District for eight years. 12 I'm a graduate of Florida A&M 13 University with a bachelor of science an history, 14 and I have earned a master's degree in public 15 administration from the State University in New 16 York in Albany. 17 As Procurement Commissioner, I'm 18 looking forward to leading the Procurement 19 Department in advancing the use of e-procurement. 20 My staff and I will work hard to continue to improve the procurement process and to effect changes where changes are necessary. We will work in partnership and in cooperation with all departments and offices to move the Procurement Office into the 21st century. It is my goal to 00408 continue to develop the Procurement Department to a top-notch, modern, professionally efficient and effect government organization. 16 million is in the General Fund. The budget for Fiscal Year '03 provides for 77 General Fund employees and Water Fund employees. million. This increase is due to the negotiated 3 percent wage increase effective December 15, 2001 and December 15, 2002. In partnership with the Minority Business Enterprise Council, Procurement will continue to work diligently and proactively to increase the amount of awards going to minority vendors. At pre-bid meetings, vendors are encouraged to seek minority participation and are introduced to minority businesses. Procurement will continue to partner with MBEC in training programs designed to educate minority vendors about the vending process and business opportunities with the City. 00409 Procurement has a number of major accomplishments in the area of e-procurement. Since March 2001, Procurement does not send bid packages through the mail. Bid information on line became available to all vendors, both nationally and internationally, on the Internet on July 14, 2000. This Website enables vendors to see a list of all current bids and can view, print, or download the bid documents. By eliminating the reproduction of the bid documents, Procurement's annual printing expense has been reduced by $75,000. This reduction is reflected in the Fiscal Year '02 estimated obligation and the Fiscal Year '03 Class 300 budget. Procurement coordinated with Staples, the City's office supplies vendor, to implement online ordering against a citywide contract. Via citynet, departments now place orders directly through the Staples Website. By placing orders on line, users now know the cost of the purchase at that time they place the order. Furthermore, the City receives an additional 2 percent discount on orders placed online. 00410 During this next year, Procurement will be involved in many purchasing initiatives and projects. As part of the Mayor's Neighborhood Transformation Initiative, Procurement will have the major responsibility to conduct competitive bidding for the demolition and the Vacant Lot Program.
Procurement will work with the Finance Department and the Controller's Office in exploring the possibility of implementing a procurement card program that will be used to purchase certain goods and services that are required immediately procurement continues to explore e-procurement opportunities and the use of the Internet to improve the efficiency of the bidding process and increase vendor competition in a number of areas. We are working with the Capital Program Office and other operating departments to make Public Works bid documents available for downloading from the Internet. In addition to Public Works bids results, we will place on the Internet any information we have available to the public on the Procurement Department's Website. 00411 The first step is to publish Public Works bid results, but it is our future goal to also publish services, supplies and equipment bid results. A pilot project is being planned to conduct electronic bidding of the small-order purchases, which are less than $13,000. This project will be the first of future electronic and bidding initiatives. Madam President, this concludes my testimony. I will be glad to answer any questions you or other members of the City Council may have regarding my testimony.
Thank you. I'd like to welcome you to the City of Brotherly Love and Sisterly Affection. It would nice if at the conclusion, you would simply go around and introduce yourself to the Councilmembers, because I know I haven't had the opportunity to meet with you, and I doubt that any of my colleagues have.
So I think it would be nice if you did go around and introduce yourself. Mr. Gamble, you mentioned that 00412 Procurement will have a major responsibility for the NTI Program in the areas of competitive bidding for the demolition and the Vacant Lot Program. Explain exactly what it is Procurement will be doing in those two areas.
This is Janet Hagan, Deputy Procurement Commission for Services, Supplies and Equipment. We have met with the Capital Programs and NTI Office and L&I, and we'll be responsible for issuing the demolition bids for the NTI Program when they get started.
I assume that this will increase Procurement's workload; is that correct?
And can you tell us how you will be able to absorb this in your FY '02 budget?
Yes, Madam President. What we're currently doing is making 00413 sure that the work has been distributed in one location. And as far as bidding is concerned, it will be -- basically, we will be prequalifying vendors to try to minimize the increase in production of workloads, I should say.
Are we going to put out bids for the Vacant Lot Program?
Well, I just read your testimony -- Yes, Councilman Nutter?
Thank you, Madam President. I didn't really understand. I thought I understood the question; I definitely didn't understand the answer. What do you mean "a bid process for vacant lots"?
That if the Neighborhood Transformation Initiative puts out a bid for the periodic cleaning, that it will come through the Procurement Department. That's anticipating if they do. 00414
Okay, well, anticipated that they may, who would be responding to such -- I mean, who's going to be cleaning these lots? Are you talking about somebody would have a contract to clean the lots?
If the Neighborhood Transformation Initiative goes through with a bidding process for the periodic cleaning, once they've initially cleaned them, then we would be responsible for putting out a competitive bid.
Okay. Have they indicated that that's something that they might want to pursue?
I thought the vacant-lot cleaning was to be done with City funds, not bond funds.
Initially they are doing that, and I don't know for sure whether they're going through with the periodic cleaning after that. It is currently on hold.
Clarification, actually. This issue just came up of lot-cleaning, but I thought, through testimony, once we clean up the lots that that was not going to be a responsibility either of the City or that we were going to hire a grouping to clean them up. I thought community-based organizations were going to be brought in to do that and that the community would then become responsible, which I would believe that that would be the way to go so that we do not -- I don't know where the money's going to come from for all of this.
Excuse me, Councilman. It is my understanding that a decision has really has not been made. This was something that we were anticipating that may come up that was discussed.
Well, but obviously, somebody put it on the table; she just said it's been put on hold all. All I was asking is for clarification of it, that's all.
Well, a decision really has not been made. We were -- it has been 00416 discussed and a decision hasn't been of it happening, but we were preparing ourselves in case something --
Well, my thought would be that community-based organizations be given the authority to maintain and clean those lots.
My understanding from some of the discussions is that the discussion about hiring entities -- be it community organizations or for-profit entities -- centered around the land-banking decision. Part of the discussions, it was possibilities of the City going out and acquiring and land-banking large parcels of land for either development for either retail, commercial or residential, and in those instances, there would not be a community group or individuals who would not be caretakers for smaller parcels of 00417 land. And that was a discussion that had to do with the possibility of hiring some entity to maintain the land that would be in the land bank. That's my understanding. And there could be some potential for some procurement process that would put out solicitations for that type of work, but not for the smaller lots that is currently being done by the vacant lot crew that we have in the Managing Director's Office.
Councilman Nutter, I don't believe you were finished.
Thanks. Mr. Gamble, explain how the Procurement Cards Program will work and what type of products could be pumped through this program.
The e-procurement right now -- actually, we're in the in talking stages at this point. But the e-procurement card can be used 00418 in situations such as -- well, first of all, it will not be a card that's used for any type of entertainment or any type of -- anything that does not relate to goods and services that a person needs immediately. For instance, let's say that a worker may be out in the community and they're working, say, for the Water Department and they're in need of --
Yes. A City employee is in need of a part, let's say, and the part is not on the contract, so that individual will use the procurement card to get the required goods, and then at the end of the month, he will receive a statement from the bank making sure that this person is aware of the purchase, and then the City would then pay it at the end of the 30 days. (Councilmembers have discussion among themselves off the record.)
A procurement card is intended to serve in those emergency situations 00419 where an employee of the City is in the field, providing a service, they do not have a part on their truck, they have the card, they can use the card in that instance. It is also useful in situations where a department may be making a small purchase -- supplies that are needed immediately and not available in stock or anywhere. They would pick up the phone, order it, using their card. It saves time and effort in processing, and it would be used as a part of our working smarter, working harder with fewer employees in that it allows us to process one invoice to a bank, as compared to multiple invoices to, say, a Staples. Our employees could use the card at a Staples. It need not be only in an emergency situation. When I used the card in Dallas, we used it with regular vendors to allow, again, for the ease of processing, in that we had one bill to a bank, as compared to maybe 15 or 20 invoices from Staples or any other vendor that we'd use on a regular basis.
How many 00420 employees would be entitled to have this?
We would have to do a study and look the need across the government. Normally -- and, again, going back to my experience in Dallas, we allotted one or two cards to each site, and in this case, it would be a department; the department head would then determine who would get that card. The card is not to be used for entertainment, it's not a travel card; it is strictly for small purchases. Under our capitalization limit, that would, for the most part, aid in ease of processing.
I would say $500 or less. In Dallas, we went up eventually to $3,000 because we were trying to stay under the capitalization policy. But it's purely something that we have to work into detail to determine how it will be used and most useful in the City of Philadelphia.
Well, why don't we just say it's a credit card. You know, a procurement card sounds like somehow, the City's going to issue a card that some retail outlet is going to accept, like Home Depot or Staples. I mean, if we're going to issue a credit from a bank, it's a credit card.
The reason that it's called a "procurement card," is that we very closely structure what can be purchased, and it's through a different process with a bank that we'd set the card up. It is not a general-purpose credit card.
If I've got to buy roofing tar at Home Depot, I can go in and get a couple containers and --
If that was one of the things that was permitted for use. 00422
I'm sorry. I can't see some of the Councilmembers, so you're going to have to elevate your voice when you want to be recognized. The Chair recognizes Councilman Rizzo for a point of information.
I've had an experience with a card, and it can be correctly -- it can be structured where if you're an auto mechanic, you can -- it's limited to the purchase of automotive supplies. If you want to go buy a beach umbrella, it's going to deny you.
In fact, what we found in Dallas when we used it was that it was much more efficient in controlling those non-permitted purchases than your regular purchasing methods.
My point is, and you 00423 hear me constantly talking about trying to move into the corporate world and do things the way the rest of the world does business. But my concern is that when I was a supervisor, I had absolute knowledge of what was being purchased. If it's not well-managed, there are going to be indictments.
I agree and, again, going back to my experience in Dallas, the way we controlled it was that it was centrally controlled. All of the procurement cards went in, their invoices went into one location with a person who was tasked just with ensuring that there were no 15 violations.
Just out of curiosity, I'd appreciate being able to review some of the Staples online ordering. Who has the ability in your Finance Department to order office supplies from Staples? And is there an approval process where if a person wants an elaborate -- boy, I'd love to be able just to go shopping, looking through that Staples catalog. Who in Procurement, who in Finance has the ability to open up the Staples catalog and have 00424 a shopping spree?
Well, Councilman, first of all, a person cannot do that. What we have done is that we limit the items that you can purchase on the catalog, and those items that's not on the catalog have been blacked out or been red-flagged. Andso they would not be selling us anything that's not on the contract.
But my point is, who does a department like Water Revenue have a Staples person -- you know, you have a --
It would be a designation. Each department would designate -- the Director designates someone within the department.
When I travel through the government, I see some really fancy things, the highly-colored notepads and the clips and distinctive coloring of paper clips and, you know, the good old-fashioned paper clip that costs -- you know, you get a zillion of these for, what, 99 cents? But Staples gives you red, white and blue, which are okay, but it seems to me that that very limited catalog isn't very limited. And I'd love to go through some of the 00425 orders, which I hope the -- is it the Procurement Department that manages -- who manages the Staples process so you can see what's going on in the Water Department, the Recreation Department and about how the money's being spent and what we're buying there? This is -- I see Janice Davis, like, upset with this question, but you're here --
If they're going to squander on red, white and blue and pink and yellow paper clips and stick-ons that the average business doesn't use, then the taxpayers' money isn't being (indiscernible). Before there's more indictments, I think you'd better --
-- make sure that it is as tight a system as can be. And if you're annoyed by the fact, with your expression, and I'm just reading your expression, remember why you're 00426 here. This isn't a day that we're just coming in to say hello to each other.
No, I agree wholeheartedly with you. And, in fact, the expression was because I, too, have seen those different-colored paper clips. I'm from the old school that recycles everything, so I have a drawer of the old ones that are used over. But I recognize what you're saying. I'm just giving Procurement an opportunity to answer.
And, again, to finish, I would like to -- I haven't met the Procurement Commissioner yet, but I would like to sit down -- and just out of curiosity, just get a sampling of what we're buying through this Staples catalog. Again, many times, it's good for the corporate world, because in the corporate world in many cases, it's well-managed. But, unfortunately, we try to adopt systems that the rest of the world uses, and guess what, we don't properly manage them and we have indictments.
Well, Councilman, let me 00427 say that I will -- I'm looking forward to sitting down and meeting with each and every Councilmember, and I will bring with you items that we have put on the contract that says that these items are the only ones that can be purchased. Now, if the item is not on the contract, they cannot buy them, and we do not monitor, per se; each department does their own monitoring as far as making sure that the person who orders them has the authorization to do so. But we will bring to the meeting any information we have regarding that.
Again, I'm not concerned about items that are blacked out; I'm just curious as to who sat down and decided whether you can buy a 14-karat gold staple machine. In other words, I would just like to see a sampling of what is being purchased. I have no problems with people having good tools to work with, but when you develop a system that could get people into trouble, I have a problem with that.
Well, what we have is a specification writer who is responsible for putting 00428 together the specifications, and the specifications are very, very tight as far as making sure that it's not extravagant.
Just out of curiosity, since I'm on the Public Property Committee, I'd like to see a sample of maybe a couple dozen orders that I get to pick to look at, or just a big stack of them, just to see, as an example throughout this government -- how much money are we spending with Staples a year? You're a new guy, so I'm not going to --
Do you have a figure of how much we spent on this contract? (Mr. Gamble confers with colleagues off the record.)
Yeah, what color? 00429 And the management of that. Who pays if Recreation orders two zillion yellow legal pads and staplers and Rolodexes and Palm Pilots and things like that? Where does the money come from; their budget, or does it come from the Procurement Department? Who pays the bill?
Okay, I'm going to really be interested in taking a good look at that. Thanks.
Councilman Rizzo, I'm assuming if that if this were to be implemented --
He's talking about the online for Staples contract, not e-procurement.
And, again, in all fairness, it's implemented all over the world where Janice Davis came from and corporations throughout Philadelphia, but, but if it's not managed, I really need to know more about how an -- if an employee wants to supply the Boy Scouts and Girl Scouts pens, papers and other gadgets, can they just go to the computer and order all of that? And that's in place right now, that process that I just described.
No, as far as the e-procurement card is concerned, we are actually at the beginning of the talking stage. We're not at a point now where we have a program in place. So that does not exist as of now. But before that is implemented, we will have a system that is very tight to make sure that we do not have people buying things that they're not authorized to buy. 00431
I am assuming, Councilman, that if in fact this program were ever implemented, for instance, in City Council, either Bob Johnson or Martha Angell would have a card only to be able to purchase something from Staples so that we wouldn't have to wait for another company to deliver it like six months hence.
Madam President, we're confusing two issues. The Staple ordering is already available to City employees. There's two -- if you look at , you'll see Staple online ordering; that has nothing to do with the other card that is mentioned.
They have a contract for office supplies, is basically what they have a contract for.
The same person you identified as being the person you would entrust the procurement card to, whoever is in charge of ordering supplies within your office is the person who would have access to Staples. And they are purchasing, in fact, against a purchaser order; it's not just sort of a random go-ahead and purchase. There are purchase orders that have been bid and are out there for certain items. So it is whoever the director or head of the department or office identifies as the person responsible for purchasing; that is the one who can place an order against the Staples online system.
And, again, it works, it works well, but I'm questioning the oversight, the audit of that. Who -- if you gut a person in a particular department that's entrusted with this 00433 online ordering through Staples and they start to abuse that, where's the checks and balance? Who gets the report; does the commissioner of that department get a report to see that in that particular month that 900 widgets were ordered and ask the question why?
It depends on how that department handles the processing of their invoices.
Every department should have someone other than the person who is placing the order looking at those invoices as they are coming in.
It should be mandated. This is the kind of a -- this is the kind of a process that should have a specific directive on how it's handled. Not, again, Recreation does it one way, the Police Department another, the Fire Department another. There should be an administrative procedure that requires that these orders on a monthly basis, or however they're billed, that the 00434 commissioner of that department should be responsible to say, Yes, everything that was purchased during this particular month was appropriate. And they're the ones that are going have their feet held to the fire if there's abuse. Again, this works and it works well, but I don't want to see a blank check with an employee of the Water Department having a card that gives them the ability to go to Home Depot or to one of the other convenience stores to buy, like Councilman Kenney said, a bucket of tar or a valve when they're out on a job and it breaks and they need a 2-inch water valve and it's better to go 5 blocks than 20. I understand the concept. But let me tell you, if we don't have checks and audit of these various privileges -- and I say "privilege" -- that we're going to wind up two years from now reading about it in the newspaper or hearing about it on KYW.
If we do implement the procurement card, we will have very stringent guidelines for their use and a process not only for ensuring that they're used, but penalties if they're abused. 00435
You're welcome. Mr. Gamble, please elaborate on what the Strategic Marketing Plan Initiative is. One of the items you mentioned is naming rights.
Harry Hillock. We have a request for proposal that we're trying to hire a consult and --
They're exploring the possibility of hiring a consultant to see if there's any opportunities to, how should I say, sell the City's name -- (indiscernible) rights, vending, that type of situation.
I'm sorry. You're going to have to repeat that because I did not understand a word you said. There's noise in the background and your voice was not coming over very clearly. 00436
There's a request for proposal that's out basically for the City to sell its name for items that has City logos or City emblems that the City can use to receive resources of revenue from. That right now is in the process of -- the proposals came in already.
Can we see a copy of that proposal, Mr. Gamble, please/
What does it mean? Really, I'd like a fuller explanation of this. What are we selling and to whom are we directing this marketing plan?
Well, let me explain what other cities do because I'm really coming in on the tail-end of what -- in a lot of cities, what they do is that, for instance, they sell items like the city's emblem or if a (indiscernible) has a city 00437 emblem on it, for instance, maybe a person's interested in having a sign that says "The City of Philadelphia," and they're willing to buy it, and the City sells it and uses that revenue to make money.
I know a little bit about this because of my role as a member of the Visitors and Tourism Bureau. I think what we're talking about is, there has been some discussion that items that Identify Philadelphia -- be it -- whether they're pins, pendants, cups, souvenirs that you would buy, that the City believes that we can, and should, have a trademark or a patent, if you will, for lack of a better explanation, to receive some of the revenues from marketing the name "Philadelphia" on various items. As would, I guess, the NBA would receive certain royalties -- Jim Kenny's laughing, "Philadelphia sneakers." But the MBA and sports affiliations and leagues get certain revenues for 00438 items that have their name attached to it or their logo. I think that's what's being considered. And the consultant piece I'm not absolutely sure of, but I think they're looking for a company that does marketing.
Yes. Even though it's not made here, but that's okay. But I think that's what they're talking about. Is that a fair assumption?
Thank you, Councilman. Okay, Mr. Gamble, you state that the City is interested in exploring potential marketing opportunities for City assets as a vehicle to increase revenues, invest in its infrastructure, and create community-based programs to improve the quality of life in the City neighborhoods. Does the Administration believe that they can market City assets without the approval of City Council?
No, we would not be -- in 00439 the marketing of the City assets, as anticipated in this, would be the use of City structures, City benches, City vehicles, and identify a particular vendor with that field, someone who would be willing to pay the City a licensing fee for having their name displayed. We recognize fully that if we are to sell any piece of City equipment or infrastructure or real estate or any other assets, that it has to be approved by City Council. In essence, it's marketing the use of the asset as part of a plan to identify that with particular vendor. It's naming rights. The way naming rights for a stadium are sold, this RFP anticipates naming rights for other City assets.
I think we all need a copy of that. You mentioned about vehicles. Did you mention something about vehicles? What does that mean, that if the City emblem were put on a vehicle?
No, you would not put a City emblem on a vehicle; instead, you put a vendor's emblem on a City vehicle, such as SEPTA 00440 does when it shrink-wraps some of its buses. That's what's contemplated by this RFP. It's not so much selling our emblem to put on something else, but allowing our assets to be used as vehicles for identification with certain vendors.
This is the same administration that vetoed a bill that would have allowed wall wraps but now want to put logos of companies on City property. I mean, it seems to be, like, totally unbelievable. I mean, what property; buildings, benches?
We're not involved in this RFP, but we'll get more detailed information on this RFP to you.
This is exactly the reason why -- I mean, this bill was vetoed for that reason, and now we're going back and we're pursuing it? 00441
We could have a big neon sign on top of Billy Penn's hat that says "Drink Coke" or "Drink Pepsi"?
Miss Davis, would you mind forwarding to our attention a copy of the proposal.
Thank you. Mr. Gamble, your department seems to be working on quite a number of projects. How are you able to cover the cost of the studies and consultants with the same budget you had in FY '02? And it's quite apparent that you're certainly going to have, as far as I can see, an increase in your workload.
And then you have the cost of studies and consultants. How are we going to be able to do that with the same budget?
Well, first of all, we have -- the items that we have identified we have within our budget allocations for that. As far as consultants are concerned, we 00442 really are not using any outside consultants; we're using our MIS Director, who will be responsible for putting together initiatives and working with MOIS and also with the Mayor's Office to make sure that everything is coordinated through them. So we won't be using outside consultants on these small projects, but now we are working with MOIS and the CIO to make sure that we become a part of the RFP that's out there now for this, and this will not -- actually, we're looking at how much it's going to cost us if we're going to implement it, but we're not a point now of implementing any major changes that's going to result in our large amounts of money.
I know that Councilman Clarke was next, but he apparently had to leave. Councilman Nutter.
Thank you, Madam President. First, good afternoon. 00443
Welcome to Philadelphia. We had an occasion to speak before I had actually met you; I only knew you over the phone, but I have figured out fairly early on that you must be you --
-- up at the table. And so I do want to welcome you and I look forward to working with you. And your predecessor, we never liked him anyway -- I don't remember his name. (Laughter.)
No, we enjoyed Mr. Applebaum. Lou is a very good guy Let me say in the area, I've heard all of the points of order, information and clarification going back and forth. In the 00444 strategic-marketing plan, now, first this RFP has been issued; is that correct?
Okay. And I think I heard the Chair request a copy of it?
Is that also available possible online or through e-government.
Excuse me, Councilman. Please forward to my attention 14 copies, if you will, so that we don't have to copy 15 and everybody could get one in a timely fashion. 16
Yeah, I was going to say you'll probably have Staples do it? (Laughter.)
So at the time, it was Joe Martz, okay. And so it's just kind of continued on its merry way of --
It's probably on hold point. I don't think there's been much activity on it.
Okay. Tell me a little bit -- I mean, has this taken place in other cities? Are any of you familiar with similar proposals in other cities?
There are other cities, Councilman, that have done something like this. I'm not sure exactly the names of them, to be honest with you, but I've heard where the City of San Diego, I think, was doing something similar to this but not maybe along the same line, but they 00446 had utilized -- or they're utilizing basically a store that the city operates, that it passes out or it sells items to the public.
But now, as far as advertising for anyone, I don't know about that.
If I might add, it's most often used in school districts where they will be particularly --
Yeah, I know I saw, I think, one of these -- Mr. Gamble talks about these stores. I think I saw one of these stores in San Antonio near the Riverwalk.
You can buy parking meters, street-name signs with your name on it or other names on it; I mean, just about anything that the government might have.
You know, fire 00447 plugs, all that stuff, which -- I don't know why you would want one of those, but --
Mannequins. Yes, I saw a couple burned in effigy while I was out there. It was probably over some redistricting issue or something. (Laughter.)
Now, I mean, on a city facility or if you talk about vehicles, I mean, would this be like "Philadelphia Water Department brought to you by Poland Springs" or something? I mean, this becomes -- in essence, it is a moving advertisement of a variety of City vehicles with someone's name on it; I mean, is that what it comes down to?
We'd have to determine how it would be used. I don't think they are yet in a process of developing when and where it would be used. This is the very early stage of the review of these RFPs, and so I wouldn't want to make a statement about when and how they will be used; I think 00448 that's yet to be determined, as is whether or not we will actually go forward with something. It was just something that was being explored. It is being considered, and no determination has been made.
Okay. Last question in this area. Just for the record, I mean, would this be considered in the realm of a concession?
It could be of a concession nature but, again, we've not done enough work on this to make any determinations at all.
Okay, gotcha, all right. Mr. Gamble, let's go back to the item that we actually met over the phone regarding, which was voting machines
Can you give us an update on what's going with the voting machine transportation contract?
Well, we're in the process of awarding the contract to the lowest bidder. We 00449 have sent them a letter of award, and there's some things that they have to do in order for to us finalize the contract.
Okay. Do you believe that you have found and -- I mean, these words generally go together, "lowest responsible bidder?" Because I think those two components ultimately serve as the deciding factor as to whether someone wins the bid. You need both elements; is that correct?
Okay. And do you believe, based on the information that you have today, that you have found the lowest responsible bidder that can actually do this job?
Okay, thank you. I asked this question earlier, but it was somewhat out of turn or with the wrong department. What are the numbers in the last fiscal year, or for any year recently, that have you might have numbers on with regard to participation by either minority, female, or 00450 disadvantaged businesses for, I think, the three levels of City work, which I -- or maybe there are two. I know there's services, supplies and equipment, professional services, and maybe there is Public Works. And I'd like to understand that. First I'd like to know what the answer is, and then I'd like to understand it specifically on the Public Works side in the context of two major projects that are going on right now in the City generally referred to as "The Eagles Stadium" and "The Phillies ballpark." Give me the first answer first. - - - 00451 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 - - - - - - (Council proceedings now being stenographically recorded by Meghan Martella.) - - - - - -
Good afternoon, my name is James Roundtree. I'm the Director of the Minority Business Enterprise Council. For last Fiscal Year the disadvantage business contracts for bid were 33 --
You've been here a million times. I know you're not nervous.
33 million -- $33.5 million for all bid. And those are the three categories. The Public Works, service, supply and equipment. If you would like a further 00452 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 breakdown, for minority --
Public Works service, supply and equipment and professional services?
Minority, women and disabled business participation in those four categories.
Okay, I'm sorry. I'm putting service supply and equipment generally together. And $33.5 million out of how much?
And that sounds like about 15 percent? 00453 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
For minority business, it was $18,798,974; for women business it was $7,906,079; and for disabled businesses it was $98,466. Do you want supplies too?
That was Public Works. For supplies it was $2,079,570; for women business --
$79,570. And then that was 3.9 percent of the total amount for supplies of $53.9 million.
And you are saying that the number for service, supply and equipment for minority firms was $2 million?
The number for minority on supply, not service supply. I'm 00454 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 just giving you one category -- each category at a time. If you would like, I can provide this information for you in written versus reading it into the public record.
That would be very helpful, but what I was trying to understand was, I thought you said that the total for Public Works and service, supply and equipment was $33.5 million?
What I want to know is out of the four categories what was the total just for Public Works?
So out of the $33.5 million, it looks like about $26, $27 million is on the public work's side?
And out of the $278.3 million, how much of that is Public Works?
I guess maybe, therein, lies part of the problem. You are saying that we had $186 million worth of Public Works projects last year?
And $27 million of that went to minority, female or disadvantage businesses? 00456 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
I don't have that 9 for you today, but I will get that for you and 10 forward it to you through our channels. 11
Okay. Have you 12 been getting some of the reports that we've been 13 getting? 14
They're basically 00457 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 different kinds of projects. Where the public work's activity for the City we bought a category of things. We've only had a certain number of items on the stadiums.
Well, let me ask the question a different way; are you saying that you think that the percent number on the 9 Public Works for City work is a good number? 10
Explain for me, in 11 what context? Can I verify the numbers? 12
No, I believe 13 your accounting. I guess, could the number be 14 higher? 15
And why is the number at 15, and what could it be? I mean, are we maximizing the potential of what's out and available in the community?
Well, a lot of it has to do with who's bidding City projects. The bulk of -- well, all of the 15 percent on City works is subcontracts. The work that's been done on the stadiums you will see have some prime contract opportunities. We are not 00458 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 getting a number or satisfactory number of bidders as prime on City work.
Well, when you talk to the market it's due to a number of factors. And the most prominent one is the bonding process that we have. We require bonds on all of our large projects on anything over, I think, $25,000.
Yes, but it's on a larger degree. It's not 25, it's usually several million and a number of the projects just on the Stadium, a number of the contracts that are on the Stadium are joint of interest.
Is that a route that might be pursued on the City work side?
I'm sure we'll 00459 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 have some continued discussion about this and you're going to get a full chart --
Madam President, I've asked Councilman Ortiz if I can do a follow-up?
Mr. Roundtree, you mentioned in your testimony that one hurdle that is apparent is the bonding, 00460 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 the issue of bonding with regards to primes?
How long has that been a problem? How long has that been determined or acknowledged to be a problem?
I think since Pennsylvania was a farm or Philadelphia was a farm. Every opportunity that we've had we try to identify areas where we could be of assistance. And the bulk of the problems that the minority women and disabled disadvantage business community has been in the bonding in the capital areas and they pretty much go hand-in-hand. There's three areas really. The three areas really, that most of the small businesses and more specifically, minority businesses point out are the bonding areas and insurance. As you heard earlier, the City is embarking upon the bonding program that will assist many of our small and disadvantage businesses if it comes to fruition in identifying bonding opportunities for them.
What 00461 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 will be the hurdle for that not becoming real if we know for sure that that is a major hurdle for African-American and women on businesses?
Just the peer financing of it and finding some credit, or the contractors that will be interested in participating in the process.
Councilman Nutter, my concern was what has the City done to alleviate the problem? If we know that's a problem, then what are we doing in a pro-active way to eliminate this hurdle? So now I hear that the City is at tempting to put something tangible in place so that we do not have to discuss -- have this discussion on this particular issue next year.
Well, Councilwoman, remember too that the bulk of our participation in the past has been in the subcontracting market. Where this will be a great assistance to is those individuals who are interested in pursuing -- contracted the City as primes.
Okay, 00462 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 thank you, very much. Thank you, Councilman Nutter. Councilman Ortiz?
Thank you, Councilman Ortiz. I caught you while you were reading a document, but what is this program? Don't give me the long version of it. If it was mentioned earlier, and I missed it, I apologize. If you can just send us the details about this, and then my question is: who has to do what to make a program happen?
The program is being put together between Procurement, MBEC, Risk Management and the Commerce Department. We're using $300,000 of Economic Stimulus money to provide the seed for this program. It will guarantee 90 percent of bonds up to $2 million. There is nothing in the way. We are going full speed ahead and at this point there are no obstacles to getting it done. This is a program which will be in place by the beginning of FYO3, if not, sooner. Our anticipation is 00463 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 that it will be done sometime this year, in fact, FYO2.
I'm usually very brief. Just for the record, I don't know who's here, if the type of institutional memory is necessary, but PCDC has had two contract's assistance programs over the years that date back, maybe a couple of decades. Housing Contractor's Program, The Philadelphia Contract Assistance Program, both of which provide a contract to financing for housing-related activities. Those programs could have been replicated over the last decade or two, particularly with the tens and millions of dollars we spend in Economic Stimulus funds. So this is not a matter of designing programs, it's not a matter of having an entium place that can run the program, it is actually a matter of deciding whether we're going to somehow, put up the money to bond these 00464 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 contractors, is that not correct?
Well, we won't be putting up any money to bond them. We think we have a fairly aggressive approach around it, but we're inviting surety companies as well as the SBA Bond and Guarantee Program as far as participants. And that will be outlined in the literature that we will provide to you.
It was my understanding that we were going to bond contractors in the NTI Program?
It's my understanding that the City won't be bonding them, but they will have a surety company. We will probably get a wraparound bond program similar to the type of wraparound insurance programs that we've had in the past, but the City itself, to my knowledge, in the discussions I've been participating in will not be bonding --
The program you're talking about right now that was referenced first, I heard about today, and I'll be very brief, Councilman Ortiz. It's $350,000, 00465 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 I think you said, I forget how much money you said in Economics Stimulus funds. We actually -- actually, I wasn't here so I won't take credit or blame for it -- sold tax liens on people's homes, poor people's homes, to raise money to give away to big businesses as a matter of economic development strategy. There were already, programs within the City quasi-governmental structure contractor's assistance programs, that could have been replicated for small business purposes or for other purposes. It is a matter of whether we decide we want to do it or not with Economic Stimulus funds, or with community government block grant funds, or with any other source of money. So what I'm asking is what really needs to be done? If we were to find a political will within council to say we want to move on this bonding issue? I'm talking about minority business development issues. Jim, what needs to be done?
Other than formalize the process, then identify some firms that could 00466 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 participate, as well as some actual City contracts that they could bid on those would be three issues.
And where would that program be housed, who would oversee the process of the program?
Commissioner, since they brought Mr. Roundtree up here and they began this line of questioning, I had a lot of questions for you, but obviously, let's finish with this. Mr. Roundtree, what is the Philadelphia Consortium?
Oh, right, right. The Philadelphia consortium -- the City of Philadelphia Parking Authority, School District, 00467 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 the Redevelopment Authority, the Managing Director's Office, the Law Department. SEPTA was an ex facie member, they weren't really a member. They didn't pay into the fund. I'm just naming people that actually paid into the fund. It was ten altogether.
But I think, was it through your office or through this consortium that a study was commenced?
It was really through the managing director's office. The managing director was the chairperson of the committee.
The managing director was a chairperson of the committee. Because this was dealing with the questions Mr. Nutter asked, the follow-up of Blondell Reynolds, and this study dealt with that, did it?
It did not deal with how contracts were awarded in the City of Philadelphia?
And it was participation of minorities or non-participation of minorities?
No, I thought her question was specifically around bonding and who would they benefit.
Well, yes, but it has to do with the problems minority has in acquiring contracts. Bonding is one of the problems that comes up?
But didn't the disparity study really go -- and this is not -- this is a study that was finished, I think, in '98 or '99?
And it goes 00469 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 towards the aspect of how minorities, women are excluded from the process of contracting either through the Procurement process, through the contracting, through the building of edifices that we have in the City of Philadelphia?
Can you get us a copy for every Councilperson of that disparity study?
I have a copy, I don't want to make copies of this. I have a copy.
Then I'm not sure what you have because if you have a copy, you couldn't be sitting at your desk because a copy of it --
I would love to have the two volumes that are available.
That's something that we need to work out with the new finance 00470 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 director and the administration because we --
We've been asking for a copy of that stuff and never received it.
-- in all due respect, when I gave that document to your staff to review it, for them to come back and to give us -- from Council version --
Excuse me, Councilman. It's a shame that Mr. McPherson just left here, but I know that he indicated to me --
I did not get it from staff, but however, all of this discussion --
-- that they had been asking -- Councilman, can I just finish, please. 00471 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
That we have been asking for a copy of it, but one was never made available. Now, I don't know who you gave that copy to, but if you let me know, I will certainly track it down.
Well, John Macklin had it to review to come back with some comments on behalf of City Council so that we could forward that information to a consultant to finalize it. Since --
We've been asking -- I've been asking for a long time, for the last few years for this data. I think the President has been asking for this data. It has never been forthcoming and it seems that there -- it says is available since 1999. Because all of the discussions that we've had this study goes to the heart of it. And we would like to see it because I think if we see it unvarnished -- that's a word that George Bush uses, "unvarnished" as such I think we will begin to finally get some 00472 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 of the reasons why every time we put MWE, minority participation, why it does not happen. We would begin to find the reasons. And it goes beyond the bonding issue. I asked that of Ms. Janice Davis. It goes beyond, because I've been asking about the bonding and they've been telling me about bonding issues since 1984. And many companies since then have gotten bonding and have not been able to participate. So in essence, I didn't get this from the staff of City Council. But however, I would like to get the two volume report unvarnished as it is without our participation because we would like to read what these consultants found. And you just said that this is very relevant today. And since it is relevant today, it was finished by 1999, I believe this Council is due the respect of at least looking at that, and let us make up our minds, because then we would have some real questions to ask as to why discrimination and exclusion takes place.
I think that study cost somewhere in the vicinity of 00473 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 $2 million.
I mean, I'd like to find out because one of the title's "Historical Conditions Affecting MWBE Utilization". I'd like to find out why Latinos don't participate, why black contractors in the City don't participate. I think we should begin the discussion the next time you come. I would like to have those two reports, Volume I and Volume II. I'm not going to ask you any other questions, because until we get those reports, I will -- because talking about bonding issues and all of that that's all -- that is not substantial. That's really questions that we need to ask. And that does not go to the route of the problem. That's one of the excuses used. Thank you, Madam Chair. I would like to ask questions of the Procurement Commissioner. Fine, I'll come back in the second 00474 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 run, go ahead.
Thank you. Councilman Ortiz, I would submit to you that all you have to do in this city is attend enough political fund-raisers and buy a luxury suite at the new Stadium, maybe you'll get business. Seems to be the way it works. Commissioner Gamble, welcome. Thank you very much for, in your testimony, your discussion of your government experience and your education. I think we've gotten a very good catch with you and we wish you well, and hopefully, you will have a successful term here. COMMISSIONER GAMBLE: Thank you.
Where did you come from before you were here, where were you? COMMISSIONER GAMBLE: (Laughing), that would be my normal response.
What community were you living in prior to coming here? COMMISSIONER GAMBLE: I came from Los Angeles, California. 00475 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
Directly from Los Angeles? COMMISSIONER GAMBLE: That's correct.
How were you recruited by the City, how did you learn about this position, who approached you and asked you to come and interview? COMMISSIONER GAMBLE: Well, there was an article -- well, an announcement that was placed in the National Institute of Governmental Purchasing, which is the National Governmental Organization, and it listed that this position was open, and they were inquiring or asking individuals who were interested to submit resumes.
Did you live in the City prior to your -- COMMISSIONER GAMBLE: No, I have not.
So you didn't establish residency for a year in Philadelphia and wait for a job offer? COMMISSIONER GAMBLE: No, I did not. 00476 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
Tongue in cheek, would you have established residency here in Philadelphia for a year prior to being offered a job? COMMISSIONER GAMBLE: Yes, I would.
You would have? You would have moved here and waited? COMMISSIONER GAMBLE: Yes, I would have come here and waited, but that was not the case.
But you would have done that prior to knowing you were going to be hired? COMMISSIONER GAMBLE: Prior to knowing?
Yes. COMMISSIONER GAMBLE: Well, I'm not going to leave a job without having a job.
Okay, but the obvious answer is that without the job offer, you wouldn't have come. COMMISSIONER GAMBLE: Well --
And you wouldn't have moved yourself and your family into the 00477 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 City for a year while waiting to be offered a job. COMMISSIONER GAMBLE: Well, I'm not going to wait for a job. No, I wouldn't have done it without a job offer in hand, yes.
Because you're a highly qualified person that I'm sure is sought after by other municipalities. COMMISSIONER GAMBLE: That's correct, yes, I am.
When you worked in Cleveland, was there a similar requirement that you had to -- COMMISSIONER GAMBLE: No, Cleveland was a little different.
What happened in Cleveland? COMMISSIONER GAMBLE: What happened in Cleveland is that I was working for the state. We were overseeing the Cleveland City School District where they were in -- in state receivership, and I was part of a management team that was responsible for the day-to-day operations of the school district because they, 00478 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 for the past two years, two consecutive years, had requested funding from the state so that they could balance the budget, so we were a group of individuals who --
Sounds familiar, doesn't it? COMMISSIONER GAMBLE: Yes. So the group of individuals was actually recruited to come in and work with the City School District, and I was one of them.
Well, we had had a recent discussion, policy discussion, about an existing rule in Philadelphia where anyone who works for the City government needs to be -- other than someone at your level, needs to establish residency in Philadelphia for a year prior to even being able to submit an application for a job. But we're glad that, for example, the tenth time in this administration's history in two years, they've gone outside the City and brought a competent, qualified person in to run this department and we wish you well. COMMISSIONER GAMBLE: Thank you, 00479 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 very much.
But it's ironic that on one hand there's two different opinions. On one hand, what's good for the administration, is not good for the gander, but that's not your issue. Could you explain a little bit about what you see as a competitive bidding process? What do you think is a fair competitive bidding process and how do you think it should be undertaken? And I would like to get some information from you because you're from outside the City and I would like to get an idea what you think, how this process should work. COMMISSIONER GAMBLE: Well, Councilman, one of the things that we all face in government is the way the City Charter is written in that we have to award to the lowest responses, person or company meeting's specifications. Usually when you start -- when you have that kind of requirement it's very difficult to have companies, especially the small companies and minority companies that 00480 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 would be able to compete with larger companies. They don't have the expertise, they don't have the resources, they don't have --
Not to interrupt you, I want to talk a little bit about majority bidding as opposed to minority participation, which I do support. And I want to get -- COMMISSIONER GAMBLE: No, I'm talking about competitive bidding process, right.
I'm sorry to interrupt you. COMMISSIONER GAMBLE: So with the competitive bidding process, which you are asking, you're looking for the lowest price for the product that you need. And it's basically -- it's straight forward.
In your capacity as a professional in this area, what place do you think the politics play in it or should play in it? COMMISSIONER GAMBLE: Let me say this: in all candor, this is the first city where I worked where politics is a major 00481 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 role-player. Normally, in the bidding process it doesn't happen. You give out the specifications, the bids come in, you evaluate the bids based on what's there, and it's over.
And that's your experience in municipal bidding also? COMMISSIONER GAMBLE: Yes, all my work has been in municipal government.
With all due respect, and just as a word of caution, I'll paraphrase a famous movie: "You're not in Kansas anymore". COMMISSIONER GAMBLE: That's correct. But also, when I started, I said -- you asked me about my professional experience.
One of the things that happens in Philadelphia, which is very, very disconcerting for many of us here, is that often the lowest bidder, most responsible bidder is awarded the job. And for some reason or another, it seems to be a very, very low bid. And then as the process goes on, and the contract is undertaken, and the services are being rendered, we have these things called 00482 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 change orders. And change orders, in some cases in this city, have resulted in a payment that exceeded the highest responsible bidder in the original process. And it seems to be something -- we've had situations like this at the airport, for example, where the City sometimes is directly involved in the bidding process and sometimes not. But we've had an ongoing situation in Philadelphia where the lowest responsible bidder seemingly gets the work and if that lowest responsible bidder has some political connections either through being on a contributor's list or having some political juice, as the contract goes on, there seems to be this need to change the scope of the contract either by reducing the level of services, increasing the amount of the payment. And what happens in the end is the taxpayer winds up paying more than they ever should have for some form of featherbedding which happens in these politically connected contracts. 00483 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 And I offer this to you as a word of warning, but I also would expect that someone from outside the City who has not experienced this kind of situation before would be at least, hopefully standing up to try to stop, but I understand the tidal wave may be too strong at times. But I would hope that you would be able to stand up to some of those practices that has cost the taxpayer money in the City and that has given other contractors, other potential bidders, a very sour taste about doing business with the City. COMMISSIONER GAMBLE: Well, Councilman, let me just say that first of all, I am a taxpayer of the City myself.
Thank you. COMMISSIONER GAMBLE: So when I look at the process, it is my money that we're spending so I am very aware of that. And as far as change orders are concerned, normally you find change orders in construction aspects. Very seldom you find them in the goods and services area. And that's 00484 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 something really, as far as in the construction area, that's normally up to the department who is handling it to approve those types of change orders. But I agree, that is very difficult. A lot of times they are legitimate, but I do not believe in awarding a bid and then not holding the person accountable for what they bidded on.
Fine. We also have a process in Philadelphia here, where -- I don't know if it directly affects your department, but we're required to approve any contracts which are longer than one year. And in the last administration, they created an art form which has continued in this administration of giving a one-year contract with three to five one year options, which is really very -- we really appreciate that in-active way at looking at the law, but that may be subject for a different time. Is someone here dealing with NTI on the demolition bidding that someone would have information on? The minority participation goals for the bidding -- I'm sorry, for the 00485 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 demolition work in the NTI project as it is codified now prior to final passage, is there a percentage associated with what we're trying to attain the way of minority participation solely in demolition?
Currently, the way the NTI information is drafted, there are some ranges for participation being somewhere between 35 to 38 percent minority participation, 12 to percent female participation and to 14 percent disabled. 15
In Bill 020036, Part II, Section "A", demolition "A" employment opportunities, it says "the City of Philadelphia, through representatives of its departments and agencies, works with the contractors involved in the demolition phase so that all the contractors make a good-faith effort to employ a work force equal to goals of 75 percent minority and 10 percent female, of all work hours for each skilled and semi-skilled trade". 00486 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 Is that just the employment complement or is that the contracts?
No, that's the employment complement. They're the actual people who are working on it.
So you could have a majority firm that meets this goal of 75 and 10?
What has been the normal range for your experience when it comes to, there isn't really any similar projects like this, but projects that where there's a majority contractor, and in attempt to expand minority participation within the ranks, what's been the normal number?
Now, understand that demolition is only basically two trays. They are the laborers and the operating engineers. And right now the laborers are somewhere between 80 to 90 percent minority and female and operating engineers have a high level, not quite as high, but that participation range is achievable. 00487 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
I'm sorry, I'm confused. Are you saying that every person who is a laborer, 90 percent of them are African-American?
No, minority. They can be African-American, Hispanic or Latino, but they have a high concentration of minorities in the laborer tray.
I'm sorry, I'm not finished yet. Just a question: I'm confused as to who you're describing. Are you describing a laborer as a person or are you describing a particular organization?
I'm describing a laborer as a person, but an organization -- the laborer is a union. 332 --
But it doesn't mean that 90 percent of the people in Philadelphia or in the region who are actually laborers -- 00488 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
Oh, so this is -- and you're talking, when you say "operating engineers" you mean operating engineers union?
So this is solely going to be bid as you have to be a union member to get a job?
-- that's not how it's situated, but in reviewing how you set the target in range you have to take in available market.
Point of order, the Chair recognizes Councilman Goode.
Councilman Kenney asked Mr. Roundtree for a comparable project, why a comparable project does not exist. I think Mr. Roundtree probably can provide that information to Councilman Kenney with regard to the Eagles Stadium project where I believe that 90 percent of the work force hours as regards to 00489 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 laborers probably was 90 percent minority. So I think the type of number he was looking for in terms of whether the NTI numbers are actually realistic in terms of what you can reach in terms of laborers.
The supposition of my question is incorrect. I'm exploring all the areas of information that's available to me. I'd like to understand the definitions, I'd like to understand the numbers. I haven't even gotten to my premise yet, so any presupposition of where I'm going is almost impossible to tell unless you're Kreskin.
Madam Chair, he was speaking about the Economic Opportunity Plan that was attached to the Neighborhood Transformation which was drafted by the same person who did the Economic Opportunity Plan for the Stadium. So maybe he'll get there, but I was trying to help him along.
Well, I've been here going on for over ten years. I'll get myself there.
But you haven't 00490 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 done that much on minority business development.
Well, Madam President, I don't really think that this particular member has a right to judge anybody's record. I think that I voted in all circumstances to support minority enterprise, minority participation and not once have ever voted no. 10 So I think that -- I don't mind the point of information activity here, but it gets to the point where it becomes speech-making, and I would appreciate the Chair's indulgence.
Mr. Roundtree, I'm just trying to get an idea if you are fewer minority or female in the City of Philadelphia and you have lower-end skills, you're not a particular trades person, but you have a strong back and a willing heart and you want to be involved. And the City of Philadelphia is a city resident in this process, in this project. You see an opportunity for three, five, six years worth of work. 00491 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 How does that particular young African-American, young Latino, young Asian-American involve themselves in this process without being the member, an existing card-holding member of a building trades union?
They would first find out what the name of the company is who won the contract and then submit an application to them for work.
And if all of the contractors that are hired are union contractors, how does that person who's not a union member access the work opportunity?
Basically, it's the same no matter which way you go because it's going to be a community initiative. They also have a percentage in there for Philadelphia residents. It's a strong community base, so they are going to be looking for people who live in the community where these activities are taking place.
What if there is, for example, a demolition contractor in the 00492 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 City of Philadelphia who is an African-American family owned business who doesn't happen to be affiliated with either the operating engineers or the laborers union, how does that individual contractor or subcontractor access available work that is coming from City tax dollars?
Well, that part, the only thing he has to do is get on the Procurement business list and he will be sent dissertation, he can actually bid. Any contractor that's interested in pursuing the work could actually bid it, and if they're the lowest responsible bidder, they stand a good chance to get the work.
It doesn't say anything in the specifications that the firm has to be union or non-union.
Okay, I just want to make sure because I was a little confused as to your description. And maybe it was just the issue of terms that we're using that 90 percent of the laborers in Philadelphia 00493 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 are African-American, are minority or other minorities. You were speaking specifically of Local 332?
Okay, fine. That will be all for now, Madam President. Thank you.
Thank you. The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam President. Good afternoon and good afternoon, Commissioner Gamble, welcome to the City of Brotherly Love. COMMISSIONER GAMBLE: Thank you very much. COUNCILMAN DiCICCO: Your experiences in Los Angeles and in Cleveland came to procuring services, supplies, how does that compare to Philadelphia? Are there any 00494 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 similarities outside of the City charter -- which I guess ours is probably unique as you testified to earlier. When an RFP goes out, as an example, are there similarities? COMMISSIONER GAMBLE: Yes, they are similar in that usually LRPs is another vehicle for securing a bid. And RFPs usually are used for personnel service contracts, it's usually when it's done, or for an area where you're not sure what you really -- what's out there in the community. For instance, you'll use it for computerization or looking for software, hardware, a computerized system of some sort then you use an RFP, but it's just another form of using -- getting a bid. COUNCILMAN DiCICCO: Are there caps placed on timlets of what we have where I think up to 13 thousand we can not bid, do you have anything? That's what I'm getting at, from your experiences in those two municipalities, are there things that we can learn here that may make the process more simple? COMMISSIONER GAMBLE: Well, first of 00495 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 all, in Los Angeles when we started talking about formal bids advertising, we started at $100,000. COUNCILMAN DiCICCO: $100,000? COMMISSIONER GAMBLE: Yes. And below $100,000 we don't have the formula to advertising. And the formula of advertising simply means putting it in a newspaper. We can send it out to the bidders on our bid list without going through the newspapers. COUNCILMAN DiCICCO: It seems to be -- it's probably more efficient that way, I would assume. What are the safeguards? Because I think that's one of the reasons that some of these things had been in place in Philadelphia for a long time, that people were concerned that contracts would be awarded to friends and political supporters and things like that. I assume you have some safeguards out there? COMMISSIONER GAMBLE: Right. Well, one of the things is that the City charter in Los Angeles was similar to the City charter here in Philadelphia, but it was changed with the 00496 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 times, where the constituents and council realized that at the time the City charter was written, it was put out to make sure that corruption does not take place and nepotism does not take place in that process. So the people of Los Angeles, they didn't realize that they needed to increase that, and the limits were increased. The guarantees, again, is simply that you award to the lowest responsible bidder and that's basically -- meaning specifications is what it is about and it's not a political process --
Right, it's the lowest. COMMISSIONER GAMBLE: It's the lowest bidder.
It's the lowest and that's where it is. COMMISSIONER GAMBLE: That's where it is.
I've been here about six and a half years, not in Philadelphia, but in City Council, and every year when the 00497 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 former Procurement Commissioner would come before us, we would always get into this discussion about purchasing goods and services, but more so, goods, and trying to see if there are ways in which we could make Philadelphia businesses more -- give them an advantage, if you would, for lack of a better way of saying it. I've even drafted some legislation which I've not been able to introduce because the Law Department continues to tell me that there may be some constitutional issues to changing the way we do business. Whereas, I wanted to create a point system as an example. Could we create a point system that says if you're purchasing vehicles for the Police Department, Sanitation or whatever, and the lowest bid is -- in some cases, I'm told it's actually $10 less if we bought the car in New Jersey than if we bought it in Philadelphia. So since we have to go with the lowest bidder, New Jersey -- a dealership in New Jersey gets the contract. And I wonder that if we did that 00498 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 business in Philadelphia, given the sales taxes and other taxes that would be -- we would see the results of the benefit of shouldn't that somehow play into balance? Would that not make it equal to, if not even more advantageous, to do it here? Is there anything like that that occurs in Los Angeles or even where the county businesses would get a preferential treatment? COMMISSIONER GAMBLE: Well, let me say, that has been discussed, but no, for the simple reason is that when you start putting preferences like that, then you risk the possibility of retaliation, a reciprocal for another jurisdiction. For instance, City Council in Los Angeles were thinking about having a local preference or a state preference actually. And it says that only those businesses located in the State of California could be considered. And then they were told by our City attorney that what we would do is open up Pandora's Box because then other states would then start retaliating against them, which would not make 00499 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 us feasible. But one of the things that the City of Los Angels is looking at is not necessarily a local preference, but a preference for small businesses. And if you're within percent of 7 the low bid, then you could make that award. 8 Now, that's something that we're 9 just starting so how successful, how costly it 10 is, because when you start adding you have to add that onto the cost. So you no longer are dealing with the lowest bidder, but you're paying a 10 percent higher rate.
But my point is, and I'm not going to be argumentative with you obviously, because you're new here and you understand, I think, exactly where I'm going. If you sold 100 vehicles, 100 vehicles were purchased from South Jersey, from a dealership in South Jersey at $10 less than what we would have paid if we bought it at the auto mall in Philadelphia, what about the sales taxes that we would have generated as a result of those sales, would that not had made up the difference of the $10, plus? 00500 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 And actually, what I'm asking is that if you would consider this, drawing from some of those experiences in L.A., I'd like to see if we can do something about that. COMMISSIONER GAMBLE: I'll look into it, Councilman.
Without doing everything in a vacuum -- COMMISSIONER GAMBLE: Right.
-- and getting into this battle between the states, but I'm talking about when you're that close. I'm not talking 50 percent away, I'm talking when you're within a reasonable amount, 5 percent, 10 percent. And that number's debatable; we can always come up with a number. I think it behooves us to do that because we keep more people employed here. We get the wage taxes, we get the sales taxes and a lot of other things that go with it. And we've been talking about this probably, I have, at least for six years. And I would welcome the opportunity to work with you and see if we can come up with some sort of a formula that is 00501 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 legal, as they say. COMMISSIONER GAMBLE: Okay.
You're welcome. The Chair recognizes Councilman Goode.
Thank you, Madam Chair. I want to clarify my point of information earlier. Not even getting back into the issue again, but say simply, that when people discuss minority business and employment participation in this council, quite often it is subjected to a discussion of union politics. The issue of minority business and employment participation is a technical issue, it's an economic issue. And if people are not prepared to discuss that -- they are free to give their opinions politically, but they politically interject their opinions into what needs to be a technical discussion that's an economic reality. 00502 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 I really rather us get down to the technical aspects of why a population which is now a majority of the City, a minority population, is shut out of the process, and I think that Councilman Ortiz has raised that issue consistently has asked for a technical response from Minority Business Enterprise Council in terms of what does the actual study say from the experts. At some point, we have to move beyond purely discussion of union politics. We should discuss the union politics of it, but points have to be made at times when an issue is subjected to a political issue of union politics rather than a technical discussion of economics. Thank you.
I know I haven't been here as long as some other people, but in all the ten budgets or eleven budgets that we're doing now, I never remembered us passing a rule on Council that any subject that we would like 00503 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 to discuss with people sitting at that table should be subject to any particular restrictions or any particular editorial comment. If people want to use this point-of-information process to interject themselves in people's line of questioning, that's certainly fine. And the Chair will rule on whether or not that's appropriate, but I think that each individual member of Council here has the right to ask specific questions without being, at least their motives being questioned or their politics being questioned. I've asked very forthright questions of Mr. Roundtree, the new commissioner here, and I would appreciate the same respect that I give other Council members when they're asking their questions. If someone doesn't like the questions I'm asking, just like the radio you can turn it off or leave the room. But I really do also take great offense at a comment made by the colleague who has just finished speaking relative to my lack of support for minority participation goals in this City. There has not been a case, a piece 00504 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 of legislation, or an issue, where I've ever raised in the last, more than ten years any questioning that we should or should not be involved in this kind of effort. I think that not enough people in this City participate in the Public Work's projects and other economic development opportunities in the City, especially the minority communities, and the female community. I've always supported affirmative action or goals. I want the record to be clear that that is the case and it will always be the case. I believe that people, if they are given the opportunity to participate, will energize their own neighborhoods where they've grown up and where they live, will buy houses, will get married, will raise their kids and have the money to do so. So any intimation that somehow, I've not been involved in that in my ten years here in Council, I think, is really misleading. And I just wanted to make sure that that was set for the record. Thank you. 00505 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
Thank you. The Chair recognizes Councilman Ortiz.
Very briefly. That's the issue I was actually raising. This is not a matter of political support for minority business and employment participation. This is actually a matter of how we move a group of people or peoples from one level of opportunity to another level of opportunity. And sometimes a technical discussion needs to take place in terms of how we get there that it is not driven. In terms of people being here for 10 years or 20 years, however long they've been, there are a number of years, and I don't mind saying this for the record, where people rubber-stamped budgets and what they questioned on the record was irrelevant. People rubber-stamped projects and they will vote for 00506 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 minority participation knowing that it wasn't going to happen. So what people did during prior budget processes and what people did in terms of prior approval projects in regard to minority participation, I could care less. This is a legislative process. This is a political process. I will use procedure or whatever else to challenge whether people are being serious about creating new opportunity for people or not. Thank you.
You're welcome. The Chair now recognizes Councilman Ortiz.
Thank you. There have been structural problems that have prevented minorities from participating in the process and those structural problems have still not been eliminated. And it's part of, one, the political and economic culture of Philadelphia. And I think that's what the disparity study goes towards. 00507 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 And that's why we need to be able to look at it, because if we are able to look at this, we'll finally move the discussion from the simplistic to the real core of what it is that is preventing people from fully participating and why we have spent huge billions of dollars since 1980 in this City and before that in terms of construction, in terms of hotel building, convention centers and minorities. Although, we continuously become the majority in terms of populations. In terms of blacks and Latinos and women, they have not fully participated in that economic boom that has taken place. And that the dollars seem to be transferring outside and business have not been created. And what we see in that period of time, instead of having economic corridors and business corridors being renovated and new businesses, the Ridge Avenue, the 5th Street, the South Street, we have seen them deteriorate as the big boxes have come in. The retail small stores and businesses have been put out of business. A lot of those things have taken 00508 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 place because of the decisions that we have made in this Council without taking into consideration the full impact that it has. And I believe that it's about time, if we're going to talk about how much money is being spent, we have to be able to see who gets it and who makes the decisions as to how that money is spent and who it goes to. That goes for businesses, that goes for jobs, that goes for in terms of the union and the role the union plays in the overall process. I think if we get that picture, I think it's going to be a picture that is going to take courage, real political courage for political representatives to move forward and try to put into legislation the solutions that are needed. Mr. Gamble, welcome to Philadelphia. COMMISSIONER GAMBLE: Thank you very much.
A colleague of mine is not here, Mr. Cohen, and he would have had a field day today. He would have had incredible fun. He asked me to ask these 00509 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 questions and I'm going to ask them of you because he has a special interest. And we brought this up -- prior to this year we brought it up with universities like Temple and University of Pennsylvania. How much does the City spend on apparel such as uniforms and so on? COMMISSIONER GAMBLE: We'll have to get back with that information, Councilman.
Could you also provide us with a list of the bidders for the apparel products, including the type of apparel to be supplied in the amount of the overall contract? COMMISSIONER GAMBLE: Yes, we can.
And if you have any knowledge or anybody in your shop, I don't expect you recently here, but you come from a city that is well-known as one of the largest ones with sweat shops, specifically apparel sweat shops, and L.A. is famous for them. We would like to find out if that apparel is done in the United States or in China, in Taiwan, Ecuador or Guatemala or who's 00510 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 this lady on TV, Kathy whatever, she had them done in Hondorus, right? COMMISSIONER GAMBLE: Yes.
What percentage of that are union shops? And if you have set up any guidelines to determine the working conditions that the company has that we're buying from so that they're not exploiting workers, they're not going ahead and subcontracting out to sweat shops and so on, along the line. Could you give us answers to these questions? COMMISSIONER GAMBLE: Yes, I can. I will. I will try to.
By the way, how much are we paying the consultant that we're hiring for that thing about naming and rights and so on? COMMISSIONER GAMBLE: That hasn't really been determined as far as that, but we will give you the RFPs.
Well, you have a figure of how much we're going to spend on this? 00511 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 COMMISSIONER GAMBLE: Councilman, it's under evaluation. And we may not be moving forward with it at all. It's really just a planning process. Proposal doesn't mean it's going to take place.
The purchase of services in the 200 and 300 that you have, if you can give us the last two years of that, who we have purchased service from, and how much, and the quantity of money, and the ones that we have currently, and the expenditures along those lines? COMMISSIONER GAMBLE: Yes.
And could you put down in terms of that who are the majority companies, who are the subcontractors, minority input, and so on, down the line? COMMISSIONER GAMBLE: Yes.
Thank you. COMMISSIONER GAMBLE: Excuse me, Councilman, are you referring to just the goods?
Well, yes. You have here for purchase in terms of a certain amount in the 200 -- Class 200 and Class 300, 00512 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 and I just wanted to find out in both. COMMISSIONER GAMBLE: Are you talking about what we purchase?
I'll get to the other departments when they come in. COMMISSIONER GAMBLE: Okay.
Thank you. The Chair recognizes Councilwoman Brown.
Thank you, Madam President. Welcome to Philadelphia, Commissioner. This is my third year sitting here and I've always been struck by both the gender and ethnic make-up of department heads. How many deputy commissioners do you have? COMMISSIONER GAMBLE: I have two deputy commissioners.
And their gender? COMMISSIONER GAMBLE: One female and one male. 00513 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
Middle managers? COMMISSIONER GAMBLE: I have to get back with you on that.
Could you, please? COMMISSIONER GAMBLE: Yes. Yes, I will.
Thank you very, very much. COMMISSIONER GAMBLE: You're welcome.
Thank you. Are there any other questions for members of the committee? (No further questions.)
Thank you very much. And good luck to you. 00514 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 Board of Pensions and Retirement is next. (Witness comes forward.)
I am James Kidwell, Acting Executive Director of the Board of Pensions and Retirement. I am pleased to present testimony on behalf of the Board's trustees and its chairperson, Janice Davis. With me today is Anthony Johnson, Chief Investment Officer of the Board. 271 million. In Fiscal '03, we will have 72 budgeted positions. This represents an increase of four positions. The increase in staff positions is a direct result of DROP, bonus payments made to the retirees, survivors and beneficiaries, and changes to the Deferred Compensation Program. 3 million. In Fiscal '03, the City's general fund contributions to the fund will be more than 00515 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 the minium municipal obligation required under Act 205 of the Commonwealth of Pennsylvania. The City may take this funding approach because the Pension Fund remains over 70 percent funded. This funding level is very significant because it enables the fund to meet its pension obligations to current and future retirees. 6 million in debt service on Pension Obligation Bonds issued in February '99. 4 billion by the end of Fiscal Year '06. The fund recorded a significant growth between the late '80's and the later half of the '90's. 6 percent during the first half of FY02, the current capital market indicators show signs of an economic recovery. If the market returns continue to trend upward through the first half of FY03, investment earnings will help offset the benefit payments. 02 percent of 00516 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 the fund's market value because of the Enron collapse. Having a well-diversified portfolio has helped cushion the Pension Board against negative events. In January 02, the Board began to implement the asset reallocation of its portfolio that it adopted at its meeting in December '01. 5 percent in private 13 equity, and 5 percent in tactical asset 14 allocation. 15 Currently, the Pension Plan assets are invested with 26 investment managers, 30 alternative investment limited partnerships, 4 real estate investments and eight direct investments. Included in the 26 investment managers are the 10 managers in the Opportunity Fund which the Board funded in August '01 with $100 million. The Opportunity Fund which focuses on emerging and minority investment managers has been successful. The Board will allocate an 00517 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 additional $40 million to the program within FY03. 8 percent of the capital committed to the investment. In March 28, '02 the Pension Board will be providing a $14 million bonus payment to eligible retirees, survivors and beneficiaries. The bonus is being paid from the Pension Adjustment Fund established by active City Council on March 8th, '99. With this bonus, the Board has paid cost-of-living increases in four consecutive years totalling $126 million. In FY03 the Pension Fund is expected to make over $432 million in benefit payments to its retirees, survivors and beneficiaries. In Fiscal '03 the Board will significantly improve response time for requests for information from employees by developing an active employee database with the ultimate goal of providing 00518 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 employees with an immediate accurate pension estimate as well as with a more current pension estimate in their annual benefits statement. The Board continues its endeavor to expand its Website to make available such things as the Pension Code, benefit formulas and important information about upcoming finance and retirement seminars. The Board continues to promote the Deferred Retirement Option Plan which is 29 months into the four-year test periods the Board anticipates an increase on a number of employees retiring from DROP. The Board is establishing procedures to expedite payment of the accumulated lump sum retirement DROP benefit within 40 days of retirement. There are currently 2,582 uniform and non-uniformed employees enrolled in DROP.
The staff has determined that over 2500 employees will become eligible for DROP enrollment during the remainder of the four-year test. The Board has established financial education seminars to assist employees in deciding to participate in DROP or continue to 00519 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 earn credited pension service. On June 1, '02 the Board will be making available group long-term health care insurance to retirees, survivors, beneficiaries and their parents. The Board's cost is administrative only. The participants will be required to pay 100 percent of the premium. The group plan offers affordable monthly premiums to protect against the devastating cost of long-term care. Individuals who are unable to perform normal activities of daily living such as eating, dressing or bathing due to illness, injury or aging will be eligible for a daily benefit allowance based on the level of coverage selected. I thank you for listening to this testimony. Anthony Johnson and I will be happy to address any questions that you may have.
Mr. Kidwell, has the actuary reviewed the impact of the DROP Program, and if so, what are the preliminary findings?
The actuary made a presentation last week at the February Board 00520 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 meeting on a very early look at DROP as of June 30, 2000, which was only nine months into the four year test period. One concept they struggle with is how do you measure the cost of DROP versus if you did not have a DROP. And I guess what they came up with is that a very early look would indicate that they came up with $11 million cost for the DROP versus if there was not a DROP.
I heard, I think last week, that there are 2,400 employees whom have opted for the DROP Program?
That's correct. Our records would indicate -- our latest records that are official would be about 2,582.
So the first eligible group would be when, October of 03?
The earliest date of enrollment was 10/01 of '99, four years out would be if they stayed the entire four years they would have to be retired by September 30, '03, that is correct.
What is 00521 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 the projected unfunded liability of the Pension Fund for FY03, '04 and '05?
I don't have that information with me right now, but I will be glad to provide it to you.
And would you let us know will this represent the unfunded liability in excess of percent in any year; 10 and if so, what years? 11
Do you 13 expect funds to be paid into the Pension 14 Adjustment Fund in FY02 and FY03? 15
There will be no 16 payments made to the Pension Adjustment Fund in 17 FY02 or FY03. 18
19 Mr. Kidwell, can you tell us what type of 20 investments are included in your tactical 21 assessment allocation? 22
Good afternoon, I'm 23 Anthony Johnson, the Chief Investment Officer.
Good afternoon. 00522 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
We invest in outside managers in diversified portfolios both of stocks and of bonds.
Well, how many money managers does the fund have?
How often 10 do you review their performance and what is the 11 performance criteria that is used? 12
We look at the 13 performance monthly through a flash report, look 14 at their monthly returns, and formally, on a 15 quarterly basis for the Board, we look at both 16 the historical performance quarter, one year, 17 three years. We also look at the structure of 18 the companies to make sure that things are 19 sound. 20
For those 21 managers who are under-performing, what happens 22 to them and at what point do you replace a 23 manager? 24
We have an eight-stage 25 performance rating for each manager starting 00523 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 with satisfactory being the top, down seven levels determination, based on historical performance. We also factor in their performance given the market environment. There are times when a manager's style is out of factor. There are times when the market is acting in what term is called "irrationally" but their process is still sound. We have to factor those things into evaluating our managers. But we do mark them against a market benchmark and against a universe median of other comparable managers.
Thank you. The Chair recognizes Councilman Kenney.
Thank you, Madam President. In light of the discussion relative to money managers and the rating system, how are money managers selected in the first place?
We use an outside consultant to help us screen a database of 1,500 managers and call it down to a list relevant to 00524 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 the style in which we're searching. For instance, large cap value, we'll identify large-cap value managers that fit the criteria of the Board; criteria being performance, stability of the organization, fees.
They're selected, I believe, back in 1996 by a previous CIO.
Recently -- well, relatively recently, in the news there was some bit of a controversy relative to an investment company called Sturdivant. I don't know if you were there then or if you were familiar with that company. Could you explain to me what process was engaged in, seven step 00525 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 process, examination of that company, what happened and why did it seem to take a story in the paper to have them removed as a money manager?
I wasn't there when Sturdivant was hired and I also was appointed CIO right around the time Sturdivant was terminated, but I will give you my comments on that.
Staff had reached a recommendation of termination, that is true. However, at that time in the market -- and I'll step back a little bit -- there was a phenomena going on with gross stocks. And by that I mean, there's a lot of money coming into the country from foreign investors, and many domestic investors were pushing the value of technology stocks higher and higher. The benchmarks that we used to mark our managers, the Russell 1,000 value, are looked at by Russell, Frank Russell, once a year. There are stocks in the value benchmark that were once considered to be value and a 00526 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 comparable universe to our managers, but over a short period of time with the escalation of the technology market, many of those stocks became growth stocks. So you were looking at a benchmark that wasn't quite right for our managers. True, staff had put on a recommendation of termination, but we had to sort of see the market through that market cycle to make sure that it wasn't just a matter of their style, it was out of favor relative to the benchmark which had changed its stripes, or if it was truly a fundamental problem with Sturdivant. In the end it was determined by the Board that it was more appropriate to terminate our relationship with them than to continue on with them.
Was there any influence or any information that was being provided by the administration relative to the continuation of Sturdivant prior to its ultimate termination that they should stay on?
I believe it was a 00527 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 Board decision to continue to look at Sturdivant relevant to the market conditions.
And who on the Board supported the maintenance of Sturdivant until its ultimate termination?
Could we get the minutes to that or the appropriate parts of the minutes of that meeting to determine who it was that was actually suggesting that we retain them? It seems -- I mean, this is not something you need to comment on, but it seems that after the story broke is when the real consideration on whether to keep them or get rid of them was really made. And had the story not broke, we may be still sitting here with an under performing company. I mean, I will give credit to and admire the recommendations of the staff who are professionals in this and deal with this. I assume everyday that they saw some serious concerns that recommended that -- pushed them to 00528 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 recommend termination. So I think from a staff perspective, things were handled correctly and you were all looking out for the welfare of our retirees who depend on their City municipal pensions for their ability to live day-to-day.
Let me finish. So I want to thank the staff for their due diligence. My concern is what the Board did with that recommendation and what the motivations for that Board decision was in keeping them as long as they kept them.
Councilmember, as staff was reevaluating we continued to reduce our exposure to Sterdivant so that while they were making certain that it was in fact a problem with the firm and not just style drift, we had limited the exposure. We were in the process on a monthly basis reducing our exposure.
I guess, though, in some ways you have to question how they got there in the first place. And I know they got there prior to you, but we'll go back to the 00529 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 similar theme of political connections and the selection of professionals and other contractors and vendors with this City. Whenever there's a prior relationship with a City official that happens to be able to be linked in some way, whether it's just perception, to a company that's under-performing, and as a result of that under-performance, that hard working, long-time City employees, police officers, fire fighters, sanitation workers, recreation workers are somehow shortchanged because of political considerations in the appointment of the firm in the first place and any extended retention of them when staff was recommending that they go. So I will commend again, commend staff for their continued due diligence and thank them as a potential pensioner myself for your hard work in trying to protect us. It's the Board that I'm concerned about in their decision-making process and in the politicalzation of the selection of these money managers. Of the -- by the way, what are 30 00530 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 alternative investment limited partnerships, what do they do?
That's another -- a more common term you would hear would be "private equity", where we invest in companies that are typically not traded on the market, they are privately held. We invest in them at the early stage or later stage or pre-IPO stage.
Of those 26, is 15 there anybody who has a problem with performing? 16
No, that's a very good 17 question. Since I've been with the Board of 18 Pensions, which has been two years and a couple 19 of months, we have terminated 13 different 20 managers and we've hired three with the -- we 21 have a search going on now to hire an additional 22 five. 23 So we've done a lot of work in the 24 two years that I've been here to improve the 25 performance of the Pension Plan, but to-date, 00531 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 none of the managers hired by the Board of Pensions are at terminate status.
And who's conducting the search, is the staff doing it?
Currently, this particular search; is being conducted by William M. Mercer.
I want to thank you, and I want to thank you for your very forthright and intelligent testimony. I'm very comfortable with the way in which you present yourself in this particular board, and I am very confident that you guys are doing the right thing. I want to thank you personally for the way in which you have testified here today.
Thank you. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. Mr. Kidwell, did I understand your 00532 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 response to an earlier question that with regard to the Pension Adjustment Fund, you were not expected to make any payments in FY02 and FY03?
I believe the question was: will there be any credits made into the Pension Adjustment Fund? And I believe my answer was no, there will be no funds placed in the Pension Adjustment Fund. The Board did approve a bonus payment that will be made at the end of March.
Right, I have that. Now, what is your testimony based upon that you already have reason to believe that there would not be any credits placed in the Pension Adjustment Fund in FY03?
Under the formula to place money into the Pension Adjustment Fund, the fund had to have earnings in excess of 10 percent. And the fund did not earn an excess of 10 percent.
Well, we're 00533 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 still in FY02, aren't we? I think you're talking about FY01, for which you probably just did the certification in September?
The gains and losses are eradicated over a five-year period. And the way it's calculated, the losses that we suffered in Fiscal Year '01 were significant compared to some of the losses relative to the 10 percent that we experienced the year before that. So if you look out in the year '02, '03, the projection is that we will not have enough money to fund the PAF.
And what do you expect the -- the distribution in March, is this the $35 times the number of years?
Are you saying that the $14 million payment will then exhaust the money in the Pension Adjustment Fund?
Yes, the Board voted at its December meeting to use all remaining dollars in the Pension Adjustment Fund and that calculated to $35 for each full year. 00534 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
Now, I seem to remember that there was a provision somewhere in the bill that talked about if there was not going to be a distribution in a particular year, and I understand that you're looking at March 28th for this year's distribution, but it all stands to reason that if you're not making a credit to the fund in '02 and '03, then there's probably not going to be a distribution next year; does that all flow logically?
So my recollection is if that situation were to happen, then the Board, I believe, was supposed to make some kind of report to the Council about that to see what if anything we might do to help insure that there was a distribution; do you remember that?
I believe -- I don't have the -- I can't quote verbatim the code, but I believe it says if there is no distribution made within three years that there will be a report back to City Council that there has not been a distribution within three years. And 00535 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 then City Council may be able to take, or adjust, or make an appropriate amendment to the code to provide for our distribution.
I think my recollection is a little more. One, I think there is an annual report of requirement about what's going on, which, I would at least say for the record, I don't really remember getting much information about what's been going on with the Pension Adjustment Fund. I know that distributions have been made. I did not necessarily find them out from the Board or through any report. And I believe that there are a number of different reporting requirements in Bill 990001, that's my recollection. We spent a lot of time working on that. I mean, we can go back and certainly take a look at it, but I think that there were a number of different reporting requirements based on a variety of scenarios: if there is a distribution, if there's not a distribution, if there's not a distribution over a certain amount of time. I think what you mentioned about two 00536 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 years may actually be -- I'm sorry, what you mentioned as three years may actually be two years. And that the Council wanted to know at a fairly early stage if there are problems with the Pension Adjustment Fund. We want to know about them, we want to know about them early so that we can make any adjustments. I think that there is a provision in the bill that allows for a situation if there was not an adjustment that Council may be able to appropriate dollars specifically for a distribution. This is obviously now going back a couple of years and many bills ago, but I understand that you can't control what happens in the market place, but if we're now down to the last $14 million, I think we certainly need to know in as soon a time period as possible what our prospects are. We have now created a certain environment with our retirees and since there is no other mechanism, no automatic cost-of-living adjustment other than this mechanism that we put into place, I think if one of the reasons we're experiencing this is because of a downturn in 00537 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 the economy, then certainly retirees on fixed income are hit by that in a fairly significant fashion. I mean, their bills don't go down, but they also have no ability to grow in terms of if the pension is their primary source of income.
Councilman, if there's a report that the Board failed to file to Council, I certainly will see that that report is made to Council concerning the distribution to be made this Fiscal Year. And I believe I'll go back and review the bill in full to see what other reports or notices we need to provide to Council.
Thank you. What has been the return over the past couple of years?
I don't have the exact numbers. I can get that for you though. But Fiscal Year '01, I know, was a negative 5.5.
How does that compare with other municipal pension systems? 00538 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
They are about medium compared to other pension plans. 50 percentile, which is significantly higher than we were a few years ago. We are increasing the returns of the fund, but our return at that time was about median.
I'm going to recommend, or at least request, that there be some opportunity for direct conversation not only about the various reporting requirements which we discussed some of them today. And without having the bill in front of either of us -- we don't necessarily have to resolve that issue, but I think beyond whatever the ordinance required by way of reporting requirements, I think that given the amount of time and effort and interest the Councilmembers expressed back in 1999 about this particular issue, there needs to be some kind of meeting with the appropriate information so that we can anticipate what we might do in calender year '03 to help insure that there will be some distribution to our retirees, to make sure that we are able to maintain a certain level of 00539 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 support as it relates to this particular program and the benefits that people have received so far. Let me go back now and ask what our stated goal is in terms of a rate of return; is that still percent or is it 9 and a half? 8
There was also discussion at that time as to whether or not that was an appropriate rate. Is it your belief now that that is still an appropriate expected rate of return, or was that rate of return being driven by the size of our unfunded liability?
The actuary at the February Board meeting last week gave an indication that the 9 percent actual rate of return is a supportable rate.
Well, what's the rate year-to-date, Fiscal year-to-date?
Our rate of return? Fiscal year-to-date, December 31st was a negative 1.1. Just for the six months for this 00540 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 year.
You're going to have to have a pretty banged up six months of the Fiscal Year --
The actual rate of return really is a long-term goal. You're looking at a three-to five-year return. If you look at our plan over that long a period of time, we are currently not quite there, but if you look at the market benchmark we are above it, but still not close to 9 percent. Our estimated return going forward, we believe, will, over the next three to five years, reach that goal.
Let's talk about on of the testimony, you made mention of the number of managers you have and then broke down by categories. You talked about the Opportunity Fund, you talked about some limited partnerships. I could not completely clearly figure out from this testimony who is doing what. Now, it reads, "Demographically, the Pension Plan invests in six minority investment 00541 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 managers, which represent 4.5 percent of the Pension Plan, and four limited partnerships focused on minority and female operated businesses, which represent 11.8 percent of the capital committed to the investment". What does that all mean?
Sure. In actual invested dollars, about 4.5 percent of the plan is invested in those four managers that invest in public stocks. For the limited --
Correct. For the limited partnerships, those are investments in which we commit capital over time. Typically, a three-to five-year period is the investment period for our limited partnership, but we've already committed those dollars. And that percent, 11.8 percent, represents the amount of money we've committed 00542 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 up front to those investments, but it will take some time.
Is that separate and apart from the six investment managers?
Now, 4 and a half percent of the Pension Plan is -- it that $120-some-odd million, 130? It's 4 and a half percent of 4.3 billion?
And how does that compare with other major cities across the 00543 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 country and -- I mean, that and a half percent average, is it low, is it high?
Tell me a little bit about these limited partnerships, what exactly does that mean?
Those are the private equity investments in which the Board has invested. They purchase companies, or they buy into companies that are hoping to go public, or they buy into ideas in which they can parlay those ideas into a financial gain in which they can sell off their interest to somebody else. And those are typically ten-year investments.
The ones that represent the 4.5 or the limited partnerships?
For the six firms, Smith Graham & Company is one; the others are included in the Opportunity Fund. Off the top of my head, I couldn't 00544 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 tell you exact names. I can get that list for you though.
Okay. If you can get us a list to the Chair, I would greatly appreciate it. Now, lets talk a little bit about, on the first page, the minimum municipal obligation required under Act 205. I'd like you to speak in detail about what the proposal is. This is obviously a budgetary matter. Why are you not making the normal Pension Fund payment and what would it be? BUDGET DIRECTOR DUBOW: Rob Dubow, the City's budget director. When we got our initial letter from the actuary that laid out what our required contributions would be for this year under our current funding policy, they were substantially higher than the amounts that we had in last year's plan. I think about 169, but I don't have it in front of me. We asked the actuary whether there was a different payment stream that we could make that would cut into that payment. 00545 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 The first set of numbers they showed us was the MMO, which actually would have been about $40 million a year lower, but if we had only paid the MMO by the time we got out to 20, 25, our annual contribution would have actually been $220 million higher than the amount it would have been under our current funding policy. So we didn't think that was a real responsible way to go. We asked the actuary whether there was a middle ground and they said there was. And what they told us we could do is pay an amount that was halfway in between the MMO and the current policy and treat the difference so it was a $40 million gap. Paying that amount halfway in between would be about $20 million, and then they said you could pay that $20 million back over 10 years at the Pension Fund's assumed earning's rate of 9 percent. So in essence, the Pension Fund would be earning the same amount as if it had that money. And that was the best we could do in terms of holding the fund harmless.
At its most 00546 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 basic level, does this represent, in essence, a borrowing from the Pension Fund to reduce the City's overall debt obligations? BUDGET DIRECTOR DUBOW: Yes, you could call it a borrowing from the Pension Fund. I guess that's one way you can look at it.
If we made our regular payments and did not proceed down this particular path, what would our unfunded liability be in -- you seem to talk about these in either 10, or year time periods; is it 13 72 percent funded or is at 70 even? 14 BUDGET DIRECTOR DUBOW: I think it's 15 -- 76. 16
If we made 17 payments the way we were to make them -- 18 BUDGET DIRECTOR DUBOW: Yes, we 19 would incrementally go up. I think eventually 20 we would get into the mid 80s in the out-years. 21 That's the way the actuary described it to me. 22
And the 23 out-years being how far out? 24 BUDGET DIRECTOR DUBOW: I -- 25
Is that more of 00547 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 a 25-year thing or -- BUDGET DIRECTOR DUBOW: No, more like to years. 5
What if any 6 risks is there to the Pension Fund by pursuing 7 this particular strategy? 8 BUDGET DIRECTOR DUBOW: There's not 9 a risk to the Pension Fund. The risk to the 10 General Fund is that if earnings stay low, we'll 11 have to make added contributions next year, but 12 the Pension Fund is held harmless because we're 13 committing to make these payments to the fund. 14
You also make 15 mention of the need to pay $55 million in debt service on the Pension Obligation Bonds we issued in February of 1999? Now, how long were those bonds; were they 30 year?
Pension Obligation Bond is a 30-year bond. I believe $2,029 is the last payment.
And are the payments pretty much consistently up in the $55 million range on those? 00548 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
Am I reading the testimony correctly, that it's $55 million this year?
Don't the debt service payments usually stay fairly even overtime unless you back-loaded them? BUDGET DIRECTOR DUBOW: Actually, the payments for the next five years are on the back of the plan, but I don't have my plan with me.
I think it's in Appendix 3, maybe . I can come over and show you.
So 52.9 -- I'm sorry, that's back in '01. 55.6, 58, 67, 72, 76, so it actually seems to be slightly back-loaded. It seems to be increasing as we go out, is that accurate? BUDGET DIRECTOR DUBOW: I think the problem is none of us were actually involved 00549 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 with that, but we will get you a whole debt service schedule.
So let me make sure I understand what we have here. Because of the fund's performance, the City needs to make increased payments to the Pension Fund, correct? BUDGET DIRECTOR DUBOW: That's correct.
And because we did the Pension Obligation Bond in '99, we also have a separate stream of debt -- the primary purpose of the Pension Obligation Bond was to more immediately get our unfunded liability number down or our funded number up, but we took on an additional debt by doing that. And that debt has an increasing debt service over at least the next five years and possibly longer. At the same time that we're facing the pressure, unless the fund turns around and starts performing in the superior fashion, we're also faced by pressure on the fund's side that we have to increase support for that. So we have an increased operating support for the fund itself and increased debt 00550 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 service for the Pension Obligation Bond which we floated in the first place to help the fund to increase its funded liability level? BUDGET DIRECTOR DUBOW: That's right. And, actually, by the end of the plan, I think our pension payment is $100 million higher than it is at the beginning of the plan. So that combination of the factors you're pointing to significantly increases our contribution over the next five years.
Excuse me, Councilman, can I ask a question, if I may?
What happens if the Pension Fund doesn't earn 9 percent this year? BUDGET DIRECTOR DUBOW: Well, I guess you'd look at the smoothing fact, but that's one of the major risks in the plan. If we continue not to earn at 9 percent, then our contributions will have to be even higher than the amounts that are in the plan.
Thank you, 00551 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 Councilman.
Sure, thank you. Do you have any short or medium-term plans for how to try to work ourselves out of this situation? I mean, I thought part -- again, that was also a couple of years ago. I mean, I thought part of the sale's pitch on doing the Pension Obligation Bond was to get our unfunded liability number down, which ultimately was going to assist us in lowering the amount we had to pay into the pension system. It now appears that both numbers are going in the wrong direction.
One of the risks that any government undertook when it issued Pension Obligation Bonds was that it would be able -- because they were taxable bonds, that they would be able to earn a level of -- they'd have a level of earnings on the proceeds that would exceed the earnings -- the cost of the interest rate.
We've not achieved that, 00552 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 that's been difficult. And that was the risk that was taken.
Well, let me ask this question, and I understand all of this is in the short-term, relatively short-term evaluation. We took these actions a couple of years ago. I mean, what so far has been the benefit of having done that?
At this point, we are funded above the 70 percent level and that would be the primary benefit. BUDGET DIRECTOR DUBOW: I think one of the other benefits, and this also will depend on how earnings go overtime, is that in the out-years under the Pre-Pension Obligation Bond world, our payments kept going up and up and up so that the further you got out, the larger percent of your General Fund payments were going to -- your pension payments. It won't work that way under the schedule because if you look -- when you get out to 20, 25, for example, you're paying only about $94 million. So it actually would be a far smaller percent of your General Fund than it is 00553 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 now.
Well, I understand that, but we have to get through -- BUDGET DIRECTOR DUBOW: Oh, I understand that. I mean, you're asking whether there were any other benefits. I wasn't saying anything beyond that.
We have to survive to 2013 -- BUDGET DIRECTOR DUBOW: Yes.
-- to ever get to the decreasing level. BUDGET DIRECTOR DUBOW: That's absolutely right.
I mean, you have to basically live long enough to see the benefit. The question is, can you live that long? BUDGET DIRECTOR DUBOW: Right.
Just for the record, because I know that 70 percent funded was an important number, so Ms. Davis, I'd like to give you the opportunity -- I mean, you said one of the benefits was getting the 70 percent. 00554 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 Why don't you at least put on the record the significance of 70 percent and what that means to retirees?
Because at that point, the plan is said to be funded for those who are retired, those who are retired and current employees.
Because of what you do, I'm sure that you're going to continue to be mindful of this situation. I think, though, that given some of the decisions that have been made -- you didn't participate in the early ones -- you now have been kind of dealt a series of cards that you have to make the best out of the hand that you have. To the extent that you can keep us informed on a fairly regular basis as to how we are either moving out of the current situation, if we are moving to a better one, or if we are moving to an even more negative environment, it would be very helpful to stay on top of this one and not let it get too far before we are having even more problems similar to the Pension Adjustment Fund situation. 00555 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
I'm usually pretty easy to get along with. Yes or no. 9 Okay, thank you, very much.
Thank you, Madam Chair. I look at the testimony and it indicates that we are going to be increasing the number to 72 of the retirement councelors.
Could you tell me, state governments, municipal governments, private sector, do they have to in some cases out source the retirement counseling? Can you tell me how other municipalities, other governments, how this private sector approaches retirement counseling?
I have no knowledge 00556 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 of what other municipality pension plans do as far as how they conduct their pension counseling, pension calculations.
Just the people, the bodies, whether it's done by City employees, are these all civil service people?
Could you possibly conduct some research and find out how large Philadelphia corporations, how the State of Pennsylvania, Federal government do this business?
I would like to get at least a feel for that because we are going to re-call you to the budget process to ask about how we do that in other areas?
I will try to have that for you by the end of -- 00557 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
If it needs to be more elaborate, we will ask you for that?
To plug a possible loophole, I've learned that the DROP Program may have a loophole in it, that the employing officer, for lack of a better word, can hire a person back the day after they take advantage of the DROP.
The hiring of personnel is not really a Pension Code issue, it's really one of personnel under Civil Service regulations. Any employee who was previously employed has the ability to become reemployed.
But I understand the DROP Program was designed to limit the number of employees. Now, I'm running into people already that are telling me that they are being considered already for reemployment. If the Fire Department chooses to keep a person, the Fire Commissioner can make a request and 00558 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 that person can stay, the Police Department and so on and so on and so on. Do you call that a loophole?
Well, personnel matters are really outside my realm of expertise. Is it a loophole that an employee can retire and then immediately become reemployed --
This is beyond the normal realm of retirement, I would think, the DROP Program. Do all people that leave the employ of the City leave with the same financial condition that the DROP Program provides?
Well, the DROP Program certainly provides a benefit that's well above an employee who elected to retire and not participate in DROP, but at the end of the day, what is being credited to their DROP account is their monthly benefit. So it's a monthly benefit that if they opted not to participate in DROP, they would be receiving directly, as opposed to have it credited to a DROP account, and made available to them in a lump sum. 00559 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
Are you answering the question that a person in DROP today can legally be rehired by the City of Philadelphia?
I believe what I answered to is that that's not my area of expertise, personnel matters.
I did say that I am aware that employees are permitted to be reinstated or reemployed or rehired.
Who from the administration is here that can answer that question? That's sad in itself.
The person can be rehired, that's part of their Civil Service -- the Civil Service Code that a person can be rehired once they retired. Whether it was anticipated when DROP was put in place or not, I don't know. And I guess one could consider it a loophole, but again, it would have to be what 00560 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 was anticipated when DROP had some knowledge of the recommendations that were made at that time.
We -- and I think I can even see -- I'm not speaking for the Chair -- that she's even responding that that was not the case. The person entered the DROP Program, that they had to retire, and there was no coming back to the same job or any other job?
I don't know what was represented at that time I wasn't here. I'd have to ask someone who has some knowledge of the representations that were made at that time.
Then what was the purpose of the DROP Program -- well, obviously, we don't have the ability to --
I can only tell you the way it was implemented and the reasons it was implemented in Houston when I was there.
I guess we're going to have to wait until we get, Madam Chair, someone from the administration that can speak 00561 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 on this because I believe most of this -- we're lead to believe that --
-- once you file 7 that, it was basically history. And I'm already talking to employees that are going to be taking advantage of the DROP Program, telling me that they're already working to get reinstated the day after they leave, after taking advantage of this very, very lucrative program. Thank you, Madam Chair.
You're welcome. The Chair recognizes Councilman Ortiz.
Thank you. Wow, my head is swimming with the numbers that Michael just put forward. Let me ask one question of the DROP Program. You said 2,600 people were taking advantage of the DROP Program?
And out of that 00562 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 how many are uniformed people: firemen and fire persons and police persons?
You said we have money managers and 6 of them are minorities? 22
Did any Latinos make the final cut of anything in terms of money managers? You said you had a process, you cut them down from a couple of thousand or 1,500 down to 76 or down to 26?
My correction, one of the new investment managers that we hired, Aronson & Partners, one of the partners is Martha Ortiz. She's a partner of that firm.
Aronson & Partners. It's a local firm here in Philadelphia and she is a partner of that firm. It's a large-cap value manager.
She's a partner. It's not a majority-owned Latino firm, but she is a partner in that firm.
But it's not a majority owned. It's like Ballard getting a contract and somebody putting --
It's a rather small firm. People-wise, there are five partners 00564 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 there. She's one of the five.
You have somebody who works for a firm that's Latino or is a partner?
Do you know of any that you inquire, that you solicit, that you make an outreach on that?
There are two that I'm in conversation with. Both of them qualify for the Opportunity Fund.
And what do you need to -- you said they qualify, that means they don't qualify for the other -- 00565 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
We have a restriction in a large fund that we cannot invest more than -- we can't represent more than percent of 5 the investment or 20 percent of the total firm's 6 assets. 7 A lot of the minority funds are 8 rather small and the allocations that we 9 typically award would exceed both their fund 10 size and their total firm size. So we have established the Opportunity Fund, which was started up in August of 2000, to award smaller allocations to minority and local firms.
What's the extent of our loss in terms of Apple or when did we get out? And how much money did the Pension Fund lose because of Enron? And when did we get out? I mean, when did we get notice that they were a free fall?
As I mentioned earlier, just to repeat it, we are invested in outside funds managed by outside professional 00566 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 investment management firms. The estimate that we have to-date, and I think it's a pretty good estimate, we lost about $6 million. Now, that compared to a $4.3 billion fund is less than a half percent for loss. We are out of Enron and almost every single portfolio. There is one portfolio -- there are two portfolios in which we still own Enron. For one of them, it was in the Opportunity Fund and that manager's being addressed. The other one is through our private-equity investments. They bought interest in Enron as it was going down, in hopes of capitalizing on a slight upgrade.
Any other questions for members of the committee? (No further questions.) COUINCIL
Thank you 00567 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 very much. The last to be called is the City Planning Commission. (Witness comes forward.)
Good afternoon. COMMISSIONER GRIFFITH: Good afternoon, Council President Verna and Members of the City Council. I am Maxine Griffith, Executive Director of the Planning Commission and Secretary of Strategic Planning. I also have at the table, Carol Reber, who is our Director of Administrative Services. I want to thank you for the opportunity to discuss the Commission's proposed operating budget for Fiscal Year 2003, of $3,679,615. This budget has three components: a General Fund request for $3,308,712; a Community Development Block Grant request of $242,403; and $128,500 in Federal transportation grant funds. You will notice that this year's General Fund request is $242,902 more than our Fiscal Year 2002, estimated obligation level of $3,065,810. This budget reflects funding for 68 00568 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 positions, an increase of positions over FY02. The new positions are a landscape architect, an information officer, a clerk stenographer III and a clerk typist II. The Commission has received three Federal Transportation Administration grants. The $73,900 Short Range Planning grant will support staff who carry out basic capital programming and public transportation analysis. We will receive a $54,600 grant for the North Delaware Riverfront Public Transportation Study. The staff will continue to examine opportunities to make the City more -- I'm sorry, the staff will continue to examine opportunities to make the City more competitive with suburban communities in retaining and attracting residents. The work focuses on strategies for improving the quality of life in neighborhoods through a variety of public and private actions to improve the physical environment. The North Delaware area of the City contains a challenging mix of under-utilized industrial and port facilities, public 00569 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 utilities, as well as institutional, recreational and residential uses. Under the direction of the Planning Commission staff, a concept plan for the redevelopment of the North Delaware Riverfront has been completed by consultants, and the Commission has begun the process of evaluating and responding to the recommendations in the plan. This response includes reviewing recommendations for re-zonings where appropriate, working with others to refine the public space and environmentally-oriented elements of the plan, and working with our sister agencies to promote other plan components and the development of publications and other marketing tools. Housing redevelopment support activities, including blight certification and redevelopment planning, continue to require a high level of Commission staff involvement. These activities are undertaken in conjunction with the Office of Housing and Community Development and the Redevelopment Authority. In addition, Commission staff is responsible for developing the community 00570 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 planning component of the Mayor's Neighborhood Transformation Initiative and will coordinate planning and community participation during implementation through our chairmanship of an Interagency Task Force. We will continue to provide ongoing planning and technical support for community-initiated zoning changes such as those in South, West and Northeast Philadelphia. But in addition, the Commission has begun the process of drafting proposals for the modernization of Philadelphia's entire 40-year-old Zoning Code. We have eliminated redundant passages and unmapped districts, purged the text of arcane and overly complex language, and made the code easier to understand and use. Because the code does not acknowledge the technological innovations and new uses that have emerged over the years, it can be a difficult tool to use when rehabbing old buildings, reinventing neighborhoods, or responding to the needs of the 21st century business.
We will, therefore, work with our 00571 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 private-and public-sector colleagues to promulgate additional needed changes in the coming year. The Commission's Urban Design Division will continue to work on a long-range plan such as Avenue of the Arts North and Parkway enhancement. They are also developing a graphic guide to Center City development regulations and will maintain an active role in planning for the Schuylkill Riverfront. The division has also begun developing prototypical urban design guides for new NTI neighborhoods. And the Commission's vacant land use study continues to be the basis of the work we undertake with others to develop a menu of options for the aesthetic treatment of vacant lots and other vacant land in preparation for redevelopment and reuse. We have already issued our first analytical documents using 2000 census data. As census data continues to be released over the coming year, the Commission will continue to compile and publish population, housing, and 00572 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 socioeconomic data in both print and electronic formats. These will include maps, various data bulletins, and neighborhood profiles. These documents will be made available to the public and will provide the basis for in-house analysis and policy development. In addition to the specific projects and initiatives that I have highlighted, the Commission staff will continue its traditional responsibilities in neighborhood and development planning, environmental review, zoning and capital program preparation. And in conjunction with members of the City Council and our colleagues in other agencies, we also hope to host a broad conversation in a variety of formats to discuss the future of the physical City and to design a broad framework for future growth and development. I will be happy to take questions. Thank you.
Thank you, Commissioner. Could you elaborate on the work your 00573 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 office is doing in making the City more competitive with suburban communities? COMMISSIONER GRIFFITH: Well, one of the things that the development community and the real estate marketing community has told us is that we really don't have the products that people want to buy in terms of housing; that is, market rate housing. For instance, the North Delaware area and in other areas, we are trying to produce that product so that the person who has done fairly well, and maybe would still like to live near his church or near his mom, doesn't have to go across the river to New Jersey to find that product.
Do you think the City schools and the City tax structure are two of the City's largest impediments? COMMISSIONER GRIFFITH: Well, to be honest, taxation is not my strong suite. But certainly, in terms of the school situation, we are very interested and very concerned about bringing schools into sort 00574 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 of the neighborhood planning loop so that we are not just planning sort of denuded neighborhoods. We are looking at commercial facilities, we're looking at schools, we're looking at parks and playgrounds, et cetera.
What activities will your office be undertaking for the NTI program? COMMISSIONER GRIFFITH: We have fairly focused on an important area in NTI. We are coordinating the community planning aspect and also trying to promulgate Citywide criteria so that NTI can be judged against what we want to happen in Philadelphia and also can be judged against national standards.
Would you explain what the planning criteria is and what areas have been assessed and what areas you are planning on assessing? COMMISSIONER GRIFFITH: Planning criteria you may remember, we may have called it something a little different, but some months ago we handed out to Council, first I think, at an NTI briefing session and then in a packet a 00575 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 list of criteria. For instance, how close should any resident be to a public library or to a health clinic, that kind of Citywide criteria. We would then map those facilities and make judgments about -- to the extent that we can, given resources, capital budget planning, et cetera, based on those criteria. They came not only from our own studies over the years, but also from the American Planning Association, the American Library Association, et cetera. And we looked at what others were doing and what we thought was appropriate to Philadelphia. And then we circulated that criteria not only to Council and staff, but also to the agencies that, frankly, might know more about those areas of expertise than we do.
Thank you. In your testimony, you mention an Interagency Planning Task Force. What is the charge of the task force and what is its makeup? COMMISSIONER GRIFFITH: During the NTI planning, during the planning for the planning, the NTI Steering Committee, under Pat 00576 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 Smith's purview, formed a number of task forces to focus on various areas. We shared the Internet Agency Task Force on planning. That worked so well, the determination was if that was a good working model to continue as we implemented NTI. The call went out to all the secretaries and all agency heads that were involved in NTI in any way. We held the first meeting actually last week, in anticipation that we might actually be starting implementation very soon. And the idea is -- you mentioned schools, for instance. The idea is that all knowledge does not reside in the Planning Commission. We want to make sure that as we plan for these communities, agencies that have responsibility for various components of a community all can step up to the plate, speak about their issues, critique and comment on the plans, and are also there to respond to Council and community when necessary so that you won't have to -- one, won't have to shop or plan around to various agencies to get a response. 00577 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
Thank you. My last question. If I recall correctly, in last year's testimony and again today, you mention that the Commission is working on modernizing the Zoning Code. When do you anticipate or expect that this will be completed? Are we going to be talking about this next year also? COMMISSIONER GRIFFITH: I'm pleased to say, Council President, that we have completed a draft of this code. And as you know, we have been working with Council staff on this. It is now being reviewed by the Law Department for whatever magic they do, compliance. And frankly, we would hope to be able to bring that to Council in the spring or shortly thereafter.
Did you say Council staff? COMMISSIONER GRIFFITH: Yes.
May I ask who on Council staff? COMMISSIONER GRIFFITH: We can get back to you on that, but I'm told that both Rich 00578 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 Lombardo and Tom Chapman have been in conversation. It may have been a while ago, because frankly, we had finished our work about three or four months ago.
And I really don't know of anybody on staff. And I think that Mr. McPherson, who is sitting next to me, and I would ask, do you know anything about it? MR. McPERSON: No. 12 COMMISSIONER GRIFFITH: I will have to get back to you, Council President, with names.
Have any Councilmembers been shared the information that's on this draft? COMMISSIONER GRIFFITH: Antidotically, there's been sharing, but I've been -- it's been suggested to me that until it's been thoroughly reviewed by legal, it's not in a form that should be formally shared with Council. I did, however, to reiterate --
You said it shouldn't be shared with Council and you are 00579 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 also saying that it has been shared with Council staff; which is it? COMMISSIONER GRIFFITH: Well, I'm really saying two separate things and I apologize if I'm being unclear. I was told by my staff that the drafting of the -- and let me be clear. This first phase is not so much a change in substance, it is a change in format and the clarification that there were discussions stretching back almost a year ago. And again, I will get that information to you. In terms of the formal communication with Council, that is this is the bill that we would like to have submitted that would await legal review because they may have concerns about format. If I am incorrect about conversations with Council staff --
Well, I would like to know who in Council staff has any knowledge of this and I'd appreciate your getting back to me on that. COMMISSIONER GRIFFITH: I certainly will, Council President. 00580 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
Thank you. The Chair recognizes Councilman Kenney.
Thank you, Madam President. Just as a facade to that last conversation, just imagine what would have happened prior to the year 2000 had Council staff or Councilmembers had information shared with them by the Rendell Administration prior to running it through the President's office. Could you imagine the outcry?
I believe you're Chair of the LNI Committee, are you not?
No, not any longer. Ms. Griffith, the North Delaware Riverfront project, I just would recommend to you a very thorough review that we did 50 pages two years ago relative to that exact issue. I sent copies to the administration, I think, more than once, so I would refer that to you for review. There's some pretty good ideas in there and not all of them mine, and maybe you won't 00581 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 have to reinvent the wheel. COMMISSIONER GRIFFITH: Thank you.
Just one question relative to some information I had received and I would like to clarify it, clear it up, debunk it once and for all. During the course of the discussions over redistricting, the Council redistricting plan, was any City Planning Commission staff formally or informally assigned to assist with information-gathering, research, strategic planning, anything relative to the discussions on the redistricting of the Seventh District or the First District or the Fifth District? Was any Planning Commission staff either assigned to or worked with members of Council on redistricting? COMMISSIONER GRIFFITH: We were asked only to provide maps. Our GIS Division was asked to provide any maps that we would have in our database that would reflect the district boundaries as they existed, and also -- and I'm forgetting because I come from a place that calls it different things, the sub -- 00582 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
Divisions? COMMISSIONER GRIFFITH: -- divisions. Actually, we did not have that information, but we were able to provide maps related to the existing district boundaries.
As plans changed and as plans were submitted and things discussed, did the Planning Commission ever run or crunch any numbers relative to demographics or to division alignment, border alignment, nothing like that? COMMISSIONER GRIFFITH: No, sir.
Thank you. The Chair recognizes Councilman Rizzo.
Thank you, Madam Chair. In reference to your testimony here where you're going to hire a landscape architect, how many consultants does the Planning Commission have? COMMISSIONER GRIFFITH: At this 00583 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 point, the Planning Commission has no 3 consultants on staff.
Did you consider rather than bringing on a full-time employee with benefits, a landscape architect of -- utilizing maybe one or two landscape architects, which we have many of in the area, rather than bringing on an additional person? COMMISSIONER GRIFFITH: Yes.
How much are you planning to pay that landscape architect? COMMISSIONER GRIFFITH: Well, let me answer that question in two parts. We had from time-to-time brought in consultants. As a matter of fact, the North Delaware Riverfront study was led by a prominent landscape architect out of the University of Pennsylvania and we may have occasion to do that in the future. However, because of the amount of vacant property that we will be asked to plan for within the NTI project, which is a three-to five-year program stretching over a period of time, it was determined that we really needed someone on staff and that the cost of benefits 00584 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 of actually having a staff person there and able to interact freely with the other staff would be beneficial. I should point out that we have no 6 landscape architect or landscape designer at all in our staff. So when we look at the census of vacant lots and when we look at accumulation of property and how to deal with that in an interim basis prior to development, we had our urban designers and architects calling up their friends who are landscape architects, trying to get the terminology correct, et cetera. So we did think that one landscape architect -- and frankly, we are now talking to Personnel. It will probably be someone at a lower level than landscape architect. It will probably be a landscape designer, someone comparable to a planner to which has been the $30,000 range because that's the kind of -- the only word I can think of is "grunt work" that we need done. We really don't need a supervisorial person because we'll only have one person.
Have you considered at least seeing if Fairmount Park 00585 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 Commission, which I believe they have landscape architects already employed, seeing if they could provide some assistance to you? COMMISSIONER GRIFFITH: They will be providing assistance to NTI, and indeed, there are a number of very fine landscape architects on their staff. However, as you know, they have vast plans that they have to plan for and maintain, and their landscape architects are extraordinarily busy simply doing that and doing the kind of upgrade planning for the park that we foresee as part of the Neighborhood Transformation Initiative. I mean, I think your point is well taken. We were very careful about asking for additional positions, and believe me, this administration made us do reams and reams of justification and look at a number of options which the Budget Office also reviewed. And we did feel that one junior landscape architect was important not only to do the work, but so there would be someone on our staff that could judge the work of outside consultants and other assistance as we move 00586 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 forward, but we are not thinking of enlarging that staff.
What does an information officer do? COMMISSIONER GRIFFITH: Again, this relates to both our NTI charge and our community planning charge. As you will remember in my testimony in NTI and in the plans we have for that, we're talking about a lot of interaction with the community, a lot of communication. We're now trying to develop an actual document that would go out every couple of months to keep people apprised of what the Commission's doing, we're trying to upgrade our website, et cetera. What's happening now is, technical planners have undertaken that role, which means when they're doing that, they can't do the planning work that they were trained to do. So, again, this is what we believe is an opportunity to allow the planning staff to do the work that they got their graduate degrees to do, and to get a non-planner, though someone hopefully who is interested and involved in planning to focus on this very important 00587 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 community interaction component, Council interaction component. We are now, or hopefully soon will be, partners in this enterprise. There needs to be someone developing documents in ways to get the information out to the Council. And it's also a way to decentralize a little bit, I think, information that perhaps has traditionally come out of City Hall.
How many years -- the official NTI Program, what happens after NTI -- obviously a landscape architect comes with the Planning Commission. I don't think I would run off too quickly. I think you're going to inherit two positions that you're going to be funding for the next years. 18 What happens after NTI and all the 19 vacant lots have their pretty greenery and 20 things like that? You really believe that you have a need, long-term, for a landscape architect and an information officer? COMMISSIONER GRIFFITH: With all due respect, we are only talking about two people, and yes. 00588 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 As you know, what happened with the Planning Commission over the years is the Commission staff has shrunk from a high, some staff tell me, of over 80 to 50 to 60 when I came on board. So a lot of activities that had been traditionally part of the planning commission were sort of truncated and reined back. I know you are also probably tired of hearing this, but we also see the Neighbor Transformation Initiative not simply as a program with a beginning and end, but a different way of planning and developing through the City. So this new way of looking at things is permanent. The fact that we're going to be communicating more with communities and with a development community and with Council, we see is permanent. The fact that there' be some property that will need to be maintained in green and up-kept for many, many years to come. And the fact, and it's been pointed out, and I think correctly, so that a lot of the community-based organizations and others that 00589 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 are eagerly accepting responsibility are going to need help and assistance. So we're going to try to develop a menu of options and brochures and web based help lines. And we think this is pretty permanent. Cities grow and they contract and they change and new areas get developed and concerns happen. And, indeed, we think that one information officer and one landscape architect is not overly ambitious.
What motivated my question. And maybe the Chair can -- I thought we had a hiring freeze. COMMISSIONER GRIFFITH: We do, and we haven't been unfrozen. We still have to -- even though these lines are here on paper, I mention the reams of paper I had to submit to the Mayor's Office and to Rob to get these positions authorized. There will be other reams of paper that I have to submit on a case-by-case basis to show why in times of scarce resources each and every position is needed. So the same hard questions that you ask, Councilman, will be asked of me yet, again, 00590 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 by me and Mr. Dubow and others here at City Hall. And frankly, we have a number of positions, not just these new ones, that have not been filled, and we will hopefully be making a reasonable argument to unfreeze each one, but I doubt it.
And these are civil service positions so they will be civil service employees? COMMISSIONER GRIFFITH: These are all civil service positions, yes. By Charter we are unable to, at the Planning Commission, take on exempt employees. We can only take on civil service employees.
The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam Chair. Good afternoon. Are you familiar with the RPROD Bill, Bill number 010424, residential, preservation, revitalization, overlay district? 00591 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 COMMISSIONER GRIFFITH: Yes. COUNCILMAN DiCICCO: Because I think the Planning Commission played some role in formulating that legislation. COMMISSIONER GRIFFITH: Yes, as a -- the only word I can think of is, as a service to Council, we did -- COUNCILMAN DiCICCO: It would basically be something we drafted through some legal people in and outside of government. There are a number of different roles that government plays in the City of Philadelphia when it comes to neighborhoods, and the historical districts, obviously, have a certain amount of revenues and concentration pay that has paid attention to them. And then you also have in the lower-income neighborhoods with the Mayor's Blight Program, but we'll address some of those needs. There is kind of a layer in between the lower, middle income neighborhoods that really don't have any protections. That's one of the reasons that we thought RPROD might be beneficial. 00592 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 Do you think that there's any role that the Planning Commission should be playing or may want to play going forward when it comes to RPROD, and how would you like to see the Planning Commission's role play out? COMMISSIONER GRIFFITH: I think the Planning Commission -- I can't necessarily speak for each and every Commissioner, but I think the objectives of legislation are ones that we have a great deal of sympathy with, and in general, concur with. I think we do have some concerns taking off our service-to-the-Council hat and putting on our support for development. I think we do have some concerns about having another, what seems to be fairly complicated, layer of interaction before someone might be able to build or renovate something in the community. Not to say that there isn't some kind of mid point or to say that my view would necessarily prevail, but without having the legislation be forming and reviewing it in detail, I would say that that's sort of our general concern. I know that the Historical 00593 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 Commission also had some concerns, which were a little more legal in focus and I have a request from Mr. Tyler to discuss it. COUNCILMAN DiCICCO: Yes, and we'll continue to discuss this as it moves forward. I mean, my intention was certainly not to place another layer in the bureaucracy, but it's kind of one of those things, I think, that was necessary. What it says in a nutshell is that it would give community groups who choose to create an APROD, a district, the ability to basically make decisions on or make recommendations for either existing buildings or future development as to the types of materials that would be used on facades of buildings. I know there's a zoning process for a number of units and certain other things that are required on new construction and even some rehab. What really brought this to my attention is that in a lot of neighborhoods throughout the City of Philadelphia, from the Strawberry Mansion section through West Philadelphia, every neighborhood has its 00594 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 uniqueness, and even some of the uniqueness is to the character of the facade of the buildings or the properties that are within that neighborhood. South Broad Street, the area that both the Council President and I represent -- she's on the west side -- I'm on the east side, has probably some of the most beautiful brownstone buildings in the City of Philadelphia, as do other neighborhoods.
And what is sad is when you drive down South Broad Street, many of those neighborhoods, because there were no real controls -- and no one is at fault for this, I'm not suggesting that someone is to blame -- but there weren't any controls to protect the integrity of the facades of those brownstones, where now you have eight or ten brownstones in a row, and then someone decides to put yellow, or green, or whatever color, aluminum siding on the front of the property, and then you have additional brownstones. Or you have the properties that have some mixed use where they have some retail/commercial office space. And the signage 00595 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 becomes so offensive that it really distracts from the -- I mean, the beauty of what South Broad Street, and again, other neighborhoods leant itself towards the City of Philadelphia and that uniqueness. I mean that was really my intention. And I think what it does in the process, if you can maintain some level of continuity in the aesthetical value of the neighborhood, I think it does a lot for resale by values of properties. And it just gives somebody a place to say, I live on Broad Street or I live in such a neighborhood, and people can almost immediately identify. I mean Girard Estates, when you think of Girard Estates you think of twins with stone fronts and porch fronts. When you think of Strawberry Mansion, you think of these beautiful brownstones with these, I guess, English type of roof fixtures and the porch fronts and all. And someone comes along and decides to go -- I call it "on the cheap" to rehab it for investment purposes only, not even for their 00596 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 own use and just slap something on it without paying attention to the materials or even window sizes. You have a 30-inch window and someone goes to one of the home improvement centers and buys a 20-inch window because they think they're saving money and they plop it in. It doesn't meet with the facade of the building, and then you're bricking it up or cinder-blocking up the base, and it just -- it actually, in my opinion, turns something beautiful into blight. And I'm sure people may disagree on what I -- art is in the eyes of the beholder, but I think we all understand what I'm talking about. So I just was curious if you had any opinions on it. COMMISSIONER GRIFFITH: Well, it's something that we would like to continue to work with you on. As I said, I think we have enormous sympathy for the objectives and I could cite blocks where a wonderful block was ruined with aluminum siding. Of course, there are the protections of an Historic District, but you're talking about -- 00597 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 COUNCILMAN DiCICCO: Yet, there's no 3 protection for that -- COMMISSIONER GRIFFITH: -- that in-between -- COUNCILMAN DiCICCO: In between. That's really what it was all about. COMMISSIONER GRIFFITH: -- area, and I know that there are those of us who are very interested in, as we move forward with the development of the City, looking at ways we can preserve the aesthetic value of the City. When friends of mine come here they always say this is such a pretty city. So we would be very interested in working with you on it without, frankly, committing to every line of the bill that you discussed. COUNCILMAN DiCICCO: Thank you. No 20 further questions.
Thank you. Councilwoman Blackwell, your lights on did you want to be recognized?
Thank you, Madam President. 00598 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 I only wanted to thank the head of the Planning Commission. I'm surprised they didn't have some of those staff positions filled, but certainly we think they do an excellent job for us. In fact, we couldn't do what we do without them, and certainly, I look forward to supporting their budget request. COMMISSIONER GRIFFITH: Thank you, Councilwoman.
Thank you. Are there any other questions for members of the committee? The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. Good afternoon, Ms. Griffith. COMMISSIONER GRIFFITH: Good afternoon.
I may have missed this; if I did, I'll read it in the notes of testimony. I seem to remember either from this testimony or some other day's testimony discussion about the neighborhood plans. Have 00599 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 you talked about those already? COMMISSIONER GRIFFITH: Briefly, but in sort of global terms. If you have a specific question, I'd be happy to answer it.
Yes, when will that process start? And did you get -- was it in the last budget six or eight or nine -- COMMISSIONER GRIFFITH: Right --
-- additional people? When will the Neighborhood Planning Process start? And could you maybe bring us up to date on -- I'm left with the impression from other hearings and other testimony that some of that has actually started. Do you have plans for other neighborhoods that you've done already? COMMISSIONER GRIFFITH: What we've done -- and we haven't initiated any planning under NTI. What we've done is we've done a call for existing plans. As you know, it's not that there hasn't been community-based planning going on in Philadelphia; there's been a lot of very strong community-based organizations and block 00600 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 associations and others that have in some cases, worked with the Planning Commission, and in other cases, just gone ahead by themselves and develop plans. What we wanted to do in this interim period while there was still dialogue between the Administration and Council over the details of the NTI Program and sort of gather those plans in and be ready to go by letting them based on the NTI language and criteria. For instance, we did a chart, which we'd be happy to share with you, that takes all of those existing plans and takes the TRF neighborhood nomenclature and categorizes that. We look at the funds that the group say would be necessary to move the project forward, we look at the Council District. So what we've done, I believe, at last count there were 39 plans. We did both an E-mail call, a call through the Consortium of CDCs, the name escapes me right now, and we also looked at simply the plans that we, over the years, with my staff over the years, have promulgated with community organizations, and we 00601 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 have them charted and sort of ready to go. We have not started an engaged community planning process. We had our first Planning Task Force meeting, and I did respond to the Council President's question in this regard, last week, which was the sort of kickoff meeting, again, hoping that we would be given the go-ahead to start sometime this week, where we gathered all the agencies together that would be involved in the planning process. We sort of walked through the process that you got as part of my testimony and had each agency sort of report back to where they saw themselves placed in this spectrum. We also are trying to get the planning process hooked in somehow to the Helaganet Flemming Project (ph) tracking process. So just as Council tracks individual projects, you would be able to see how a plan moves through the process. A plan is just about ready to come to the Planning Commission, for instance, or a plan has been held up for legal review for some reason. And you would be able to hopefully, input comments, critiques or other 00602 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 issues. I'm sorry, that was kind of a long answer, but I'm frankly excited that it looks like we finally will be getting started, but right now we are poised to start. We are looking at the plans that have come to us as possible candidates to start first since we can't start everywhere at once. And also, perhaps equally important, looking at those areas, those neighborhoods in Philadelphia where there are no plans, where there has been no community-based capability, and that's where the new planners will come into play. Let me answer --
Kenney Gamble was doing work on Federal Street, and he was supposed to proceed on, and there is a plan, but we were told that there was no acquisition money available at this point in time. You are aware of that plan, are you 00603 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 not? COMMISSIONER GRIFFITH: Yes.
So when would he be able to move forward, when would the acquisition monies become available? COMMISSIONER GRIFFITH: I'm assuming that if the acquisition monies are acquisition monies coming out of the NTI bond funds that those two things are linked --
Then I hear rumors that because we didn't go out for the bonds this year, that the monies that would have been used for the bond issue are now going to be available. I don't know if Mr. Dubow could answer that. Are those monies going to be used for acquisition now? BUDGET DIRECTOR DUBOW: I think that the transfer ordinance that was just considered by the Appropriations Committee included almost 4.1 million for acquisitions.
Is that 00604 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 any specific area or aren't you aware? BUDGET DIRECTOR DUBOW: I'm not aware, but I know that we're actually --
Who would be aware of where that acquisition money would be? BUDGET DIRECTOR DUBOW: I'm sorry, we're actually putting together an answer to -- that came up during the Appropriations Committee hearing and we're putting together an answer to that question, and it should be over, I guess, within the week. COMMISSIONER GRIFFITH: Yes, perhaps I should say at this point, that although NTI planning hasn't been moving forward, at least an NTI engaged planning process with the community, it does not mean that plans that have been going through the process in some way and that are far forward in the process are not continuing.
I'm sorry, Ms. Griffith. When you use that terminology "plans going through the process" what process? COMMISSIONER GRIFFITH: Whatever 00605 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 processes were in place prior to the NTI discussion. For instance, there are -- and it's also a schematics issue. There are projects that OHCD would call plans that are in what they consider to be the pipeline. Those plans are being reviewed and considered by OHCD in a parallel process, but as I understand it, those plans are not being held up. If there are acquisition monies that have been identified, et cetera. So I want to be careful not to say that everything has stopped awaiting the NTI process. There are projects moving forward, but those plans that would rely totally on the leveraging of NTI monies or that were submitted, and many of them were, although they weren't solicited. We probably got at least a plan a month labeled "NTI". This has been a project that has been discussed for at least two years. The Planning Commission has not engaged in an involved planning process. The process that's outlined is part of my testimony, my NTI 00606 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 testimony.
Your NTI testimony from back -- COMMISSIONER GRIFFITH: Back when.
What is going to happen -- I mean what is the -- I understand you have to do plans for areas where you certainly anticipate significant demolition and you either want to work on public infrastructure, you obviously want to put -- if there were houses there, you want to put houses back, if it was a large commercial building, you'll try to figure out whether it should be commerce or housing use or retail use or something like that. Tell me about the planning that will go on in neighborhoods that are relatively stable, showing some signs of deterioration, never really had a plan primarily, because in most neighborhoods, plans are being done by CDCs more than your kind of average regular garden variety civic association. I mean, I guess in a more blunt fashion, what's in it for those neighborhoods where people have decided to stay? They have 00607 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 options, they could go, and there seems to be a tremendous amount of activity and thought and concern targeted at places, where in many instances, personally no one lives. What happens everywhere else? COMMISSIONER GRIFFITH: I'm reminded, Councilman, of someone who called me shortly after the Neighborhood Transformation Initiative had been announced and he was very polite. And he said, "I'm terribly sorry to bother you", and he gave me his address, and he said, "I just want to let you know that I don't want to be transformed, we're fine". And there are lots of communities out there who may want intervention so that when the lady down the street breaks her hip and can't keep up with the upkeep of her house and there's no one to help her out, there's a way to intervene. Or there's a way to intervene to prune street trees in a better fashion. Or a bus might need to be rerouted so that folks from the elderly center or the 202 housing can get the bus more conveniently. Not every planning effort has to be 00608 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 comprehensive in its impact, although it needs to be comprehensive in its review. The two components of a planning effort are: one, a needs assessment, what are the needs; and two, an existing condition study, what's the condition. If the needs and the conditions mesh, we don't have to do anything. And to the extent that they don't mesh, we have to intervene. And those communities that are in extremely distressed condition, obviously the intervention will be high. In those communities that are not as distressed, the intervention may be minimal, but it could be very important and it could be the thing that helps stabilize a community and stop it from declining. I remember when I was buying a house in Brooklyn, New York, I passed by a couple of blocks because I saw a house with a boarded up window or a house that didn't seem to be kept up well because I had other options. That may be a minimal intervention, but a very important one and one that doesn't necessarily need a lot of massaging. It's just kind of common sense. 00609 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001
My last question, Madam Chair. Where will activities start? COMMISSIONER GRIFFITH: Well, that's not a question that we can answer unilaterally. It's going to be a question that's being discussed probably even as we speak. You've heard press accounts and I have heard as well that there are two communities that are being discussed now as really as demolition pilots to vet through the process of putting together big packages and seeing exactly how that would work. Hill International has requested that. Those will probably not be the only communities. I think from our vantage point, for the City Planning Commission's vantage point, we would like to begin in a number of communities and in a number of communities where there are different conditions so that we can -- I don't want to use the word "test", because this isn't an experiment, but so that we can put together the linkages that are necessary for the high impact, high-intervention communities, for those 00610 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 communities where there is development interests, for those communities where there is not development interest, and also, for those communities that require some kind of stabilization effort and where the Planning Commission's input may be minimal. We may be handing -- we may do a quick survey and hand it off to the Police Department, or the Fire Department, or the Health Commissioner, or Fairmont Park, or Recreation to follow through on primarily.
I'm sorry, and I may have missed those accounts. Where are the two neighborhoods? COMMISSIONER GRIFFITH: Well, the press accounts that I have heard talk about Frankford and another community in North Philadelphia, which is not coming to me right now. But at least initially, that work -- and I don't even know whether it's been decided -- has been done by the L&I demolition, Managing Director's Office sort of side of the equation because they have been again, looking at the technical aspects. 00611 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 If indeed those neighborhoods are chosen, we would be engaged to move forward with the community-planning aspects.
Who made the decision? COMMISSIONER GRIFFITH: Again, I don't know whether the decision has been made, but I would assume that Pat Smith and others were involved in that decision, and I would assume that the Councilmembers were involved in that decision.
Well, I'm usually pretty much here everyday; I don't think I was a part of that decision. COMMISSIONER GRIFFITH: Well, again, I'm recounting sort of what I heard secondarily through press accounts. We haven't been, I keep using the word "engaged" directly. However, as I said earlier, our recommendation would be -- I think we have a capability of going into a number of neighborhoods at once, and our recommendation would be to do that and would be to work with Council to come up with a list of what we would 00612 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 call "candidate neighborhoods" that would test all of the models and that would vet through, as I said earlier, both those communities where there was going to be a great need for intervention and where there was demolition -- going to be demolition as well as those communities that weren't. Let me also respond to a -- I'm sorry.
When you say you're going into various areas at the same time, is that merely to address the eminently dangerous properties? COMMISSIONER GRIFFITH: No. From our standpoint, that would be to actually do the community planning. So that from our standpoint, we would engage in the community-planning aspect both where the decision had been made to go in and take down eminently dangerous buildings as well as the kind of community that the Councilmen mentioned, where that kind of extreme intervention would not be considered. I want to be clear: the Planning 00613 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 Commission at this point has purview only over, as I said earlier, a fairly narrowly focused area. We are not determining which buildings are eminently dangerous or what the protocol is for that.
I understand. COMMISSIONER GRIFFITH: So for that, we sort of have to follow on for those who are making those determinations.
Well, I understand that. Let me say this, I mean, with every respect possible: certainly, a decision about which building needs to be taken down, I think most days, unless there are extenuating circumstances, most of us are willing to rely on the more expert and engineering-based judgment of the folks over at L&I on a day-to-day basis. On the other hand, in terms of where do you start or what are you going to do or who has what plans, I mean, I think in somewhat, unprecedented fashion at least from a title standpoint, and I'll assume with the title comes additional responsibility and authority, I mean 00614 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 you're the Secretary of Strategic Planning and the Director of the Planning Commission? COMMISSIONER GRIFFITH: Indeed.
So based on that, I don't understand how anybody could be doing any kind of planning about anything without your -- certainly your knowledge if not your sign-off and approval. I mean, you mention that for some of the stuff you may have been informed through press accounts. I mean, this is an incredible enterprise here. COMMISSIONER GRIFFITH: Let me be clear about what I said and hope that I didn't misspeak. It's my understanding that Hill International, L&I and the Managing Director's Office, et cetera, is interested in understanding technically the connections between demolitions and encapsulations, putting together bid packages, understanding who the range of bidders might be, making sure the connections amongst and between agencies that have to be responsive are in place, making sure that the people who have to remove the rubble 00615 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 and the people who have to come and seed are in place, and they are looking at what areas would give them the experience that they need to do that. That, indeed, is a separate consideration, and I would expect that those areas will be part of the initial Year 1 candidate area determinations.
I understand somebody has to make a decision about kind of where to try to test things out. COMMISSIONER GRIFFITH: So in addition to those communities, as I said earlier, our recommendation is going to be that we move forward in a number of areas including those, but not exclusive of other areas that would vet through both high impact, very distressed communities and how we plan for those. That would look at communities where there might be targeted concerns that we could respond to, as well as communities where infill development might be the model, and also work with banks and developers about how these dollars are going to be leveraged. So we will 00616 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 be making recommendations. However, as you said, we are not going to say to L&I, No, don't go to that area, we don't really want to plan for that area right now, even though it meets your needs, to test the protocols that you need, to test to make sure this is a good program. Simply from the determination of how do you take down a building most effectively and cost effectively. So we will be inclusive of those communities. Those will not be the only communities. And I'm also very flattered by your discussion of my qualifications and the City Planning Commission's involvement and we will be very involved and are very involved. I also wanted to respond to a question that you raised earlier about where we were in the process of hiring staff because of the freeze and because we're in a sort of unusual situation. In most agencies if you want to hire someone, you go to a list that's been established and you go to the next two people on 00617 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 that list, let's say, for a manger or management trainee. You go to the next two people on that list, you interview those people and you choose one of them. Because the Planning Commission is the only agency that has the planner title, and because up until this administration, the Planning Commission was getting smaller, not larger, there was no list established. This has been especially problematic for some of our more complicated titles and for our bilingual titles, et cetera. So by the time we had finished that process, we're sort of caught up in the freeze. And as I responded to earlier, although we think we can make a good rationale for moving forward with some of these lines, it does mean that we haven't completed the hiring process.
Let me make two last comments, and I appreciate your responses. I mean, this has been a longstanding issue, and I'm sure it's not just here in Philadelphia, but for this unique program that we're talking 00618 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 about. I mean, I would at least ask as a part of the planning process and the decision-making process, when it comes to the expenditure of significant dollars in a unique way, that not only do you look at your high-impact areas, because I think that there are two types of high impacts in this process. The one that you mentioned is areas that obviously have serious distress and you're going to go in and do certain things. But it seems to me by definition, areas of serious distress have experienced a level of deterioration. I don't know whether based on TRF its reclamation, or I think that's the end of the line. And, fine, you'll go in and at least initially, it seems that the measure of success is the complete demolition, if not, evaporation of everything in that particular area to get it down to ground level, to then make it available for somebody in the future that we hope will come along and do something. You have the rest of the City kind 00619 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 of sitting around waiting to see what's happening. Some people are not sitting around waiting to see what happens; they moved, and they can move. And so there are other high-impact neighborhoods where for not much money, you can have a high impact. It's not as grand and wondrous as taking a whole lot of buildings down, but it is also to some extent, transforming, if not revitalizing, those neighborhoods at much less cost with a great amount of impact that is visible that people can actually see. I don't look at the demolition of a building or a series of buildings or a whole lot of demolition, at least initially, as any measure of success. It is the completion of the failure of things that have happened over a long period of time where people, for whatever reason, were allowed not to take care of their buildings and we now have to come along and basically clean up their mess. What I want to better understand, though, is: what are we doing with the folks who 00620 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 decided to stay? COMMISSIONER GRIFFITH: I hope I haven't miscommunicated because I agree with you totally and I thought that's what I was trying to say.
I hear you agree with me totally; what I'm not hearing is that the decision-making process and the directive and the -- whether it's the planning process or the ultimate decisions especially coming out of the Planning Commission will also have a sense of influence in them that says not only do we need to make -- COMMISSIONER GRIFFITH: Absolutely.
-- multiple things going on at the same time, but as much as we're focused on the places that have begun or have already fallen apart, we're going to give the same time and attention to the places where there are actually people living, paying taxes, working, whether they're coming downtown or living in the neighborhood, decided to stay, but have options to leave. COMMISSIONER GRIFFITH: Well, 00621 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 absolutely. I would just say we're going to give the appropriate time and attention, whatever that is, but when I mentioned that my recommendation -- and there's nothing that I've heard in discussions with other members of NTI leadership that would say anything else. We would hope to move forward in a number of areas in various stages and conditions to test various ways of intervening. That's exactly what I meant: that we would not simply start in areas where one would have to demolish every building. I would, however, beg to differ a little bit, if I may. Even in those areas where we might have to do large numbers of demolitions, in some of those areas, there's already been developer interest, some of them have come through members of Council. So it isn't necessarily that in each one of those areas, we'll then be sort of keeping our fingers crossed. Even in those areas, there are sub-types. There are going to be areas where we are going to have to wait and make a market and try to do something on an interim basis that's really wonderful. 00622 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 I had recently a number of artists, for instance, come to me and talk about the New York model, this art on the beach model that was a precursor to development. There will be those areas, but there will also be areas that when we're able to clear land and we're able to move hopefully, relatively a few people that will provide an immediate response that will be developer. But I don't want to obscure your more important point, which I concur with totally, that this is a Citywide program that should be responsive to each level of need that Council President earlier talked about, how do we keep people in the City, how do you we provide a base. And I mentioned product, but product isn't the only element. We have to make the City as great as we can to make sure that the middle class, the upper middle class, and everybody wants to live here. And if that means pruning a tree, or cleaning up a yard, or beatifying a vacant lot, or some other strategy, we're all for that.
All right, last 00623 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 question. When you were here, I think, during Capital Budget time, I asked you about funding for an area that already has a plan, which is Lancaster Avenue. You and the Streets Commissioner were at the table, you were trying to figure out, I think, where some design money might come from. Has that been resolved? COMMISSIONER GRIFFITH: Yes, and I think if not already, that response is on its way to the Council President's Office. But it's my understanding that $500,000 was appropriated for design that the Streets Department is just beginning the design process for the project. Its design is expected to take about 12 months. And also that the product design is included in the regional tip so that Federal funds will be available and that the expectation is that construction funds would follow on in the next -- so it's --
Is the $500,000 being put in the FY03? COMMISSIONER GRIFFITH: Funds totalling $500,000 -- a $100,000 City, $400,000 00624 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 Federal -- were appropriated for this project rolled over to $2,300, and the Streets Department is expected to begin the design process, though I bet you, after your question they have actually started the design process. And that process should take about months. 8 So hopefully the next Fiscal Year we 9 can allocate, if the resources are available, 10 construction dollars. 11
Okay, I'll 12 await the response. I am, though, left with the impression that based on the rollover language that you used that this money was actually available in '02. COMMISSIONER GRIFFITH: Apparently the original appropriation was, if I'm reading this correctly, was in '02, rolled over to 03.
Okay, because I think it was not showing in the '03 Capital Budget, which is -- COMMISSIONER GRIFFITH: Which is why you --
Which is why the question was asked in the first place. 00625 2/25/02, COMMITTEE OF THE WHOLE, BILL 02001 COMMISSIONER GRIFFITH: And I'm reading really the Streets Department response.
If you can get a little more backup on that, I'd appreciate it. COMMISSIONER GRIFFITH: Okay.
You're welcome. Are there any other questions for members of the committee? (No further questions.)
Thank you very much. COMMISSIONER GRIFFITH: Thank you, Council President.
This committee will stand in recess until tomorrow, Tuesday, February 26th at 9:30. (Proceedings end at 5:20 p.m.) 00626 CERTIFICATE We HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia's meeting of the Committee of the Whole of Monday, February 25, 2002, are contained fully and accurately in the stenographic notes taken by us, and that this is a true and correct transcript of same. RE: Ordinance No. 020001 _______________________________, Josephine Cardillo Registered Professional Reporter and Notary Public -------------------------------, Meghan Martella, Professional Reporter and Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)