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?