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.