COUNCIL OF THE CITY OF PHILADELPHIA CONTINUED PUBLIC HEARING COMMITTEE OF THE WHOLE FY '04 OPERATING BUDGET - - - Room 696, City Hall Philadelphia, Pennsylvania Tuesday, February 25, 2003 10:00 a.m. - - - BILL 030004 BILL 030008 BILL 030010 - - - PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DARRELL L. CLARKE COUNCILMAN DAVID COHEN COUNCILMAN FRANK J. DI CICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI 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 - - - V A R A L L O, INCORPORATED Litigation Support Services 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 (215) 561-2220 I N D E X WITNESSES PAGE JANICE DAVIS, Director of Finance .......... 385 ROBERT DUBOW, Budget Director .............. 392 DOMINICK CERMELE, Deputy Finance Director .. 396 NORM JOHNSON, Director, Risk Management .... 402 LINDA BERKOWITZ, Deputy Director, Financial Oversight.............................. 412 JAMES ROUNDTREE, MBEC ...................... 415 NANCY KAMMERDEINER, Revenue Commissioner ... 515 VINCE JANETTI, Sinking Fund Commission ..... 562 CORY KEMP, City Treasurer .................. 565 WILLIAM GAMBLE, Procurement Commissioner ... 569 ALICE DEYOUNG, Procurement ................. 588 JANET HAGAN, Procurement ................... 609 GWENDOLYN BELL, Board of Pensions .......... 643 ANTHONY JOHNSON, Board of Pensions .......... 646 MS. GRIFFITH, City Planning Commission ...... 560 RICH LOMBARDO, City Planning Commission ..... 653 385 2/25/03 - FY '04 OPERATING BUDGET
Good morning, everyone. This is the continued public hearing of the Committee of the Whole regarding Bill Nos. 030004, 030008 and 030010. I believe the Finance Department will testify first. Good morning.
Good morning, Council President Verna and Members of the City Council. I'm Janice Davis, the Director of Finance. On behalf of the employees of the Office of the Director of Finance, I am pleased to provide testimony on the Department's proposed FY '04 Operating Budget. With me are finance representatives who are available to answer your questions. The Office of the Director of Finance's FY '04 budget for all funds totals $920,550,912. The single largest component of the all funds budget is employee fringe benefits budgeted at $648,946,629. This represents a $34,655,900, or a 5.34 percent, increase over the current FY '03 projection. This change is due to increases in Pension Fund and health care costs. The General Fund budget request is $711,994,030. The General Fund share of employee fringe benefits is $576,100,000. Other significant elements of the Finance 386 2/25/03 - FY '04 OPERATING BUDGET Budget are legal services and witness fees, contributions to educational organizations and refunds and indemnities. This budget includes a contribution to the Community College of $22,467,924, an increase of $400,000 over the FY '03 funding level. The Street Administration has increased funding for Community College by 16.5 percent since taking office. The Office of the Director of Finance is comprised of six divisions; Executive Direction, the Accounting Bureau, the Office of Budget and Program Evaluation, Minority Business Enterprise Council, the Office of Administrative Review, and Risk Management. The proposed direct appropriation in FY '04 General Fund budget for the office is $15,772,636, a decrease of $666,094 from the current projection for FY '03. This decrease is the result of reductions in appropriations across the division. This budget anticipates 151 full-time General Fund positions, a decrease of 20 positions from the FY '03 budgeted positions. The Department has eliminated positions as a part of the Administration's efforts to cut cost and to avoid 387 2/25/03 - FY '04 OPERATING BUDGET potential huge deficits. Other departments, boards and commissions under the direction of the Office of Director of Finance will provide separate testimony. I am happy to answer any questions you may have at this time.
Thank you. Of the positions, the decrease of 20 positions, how many 10 of them are under the DROP Program and would they be 11 available under the DROP Program? 12
We'll have to get that for you. 13 Not a significant number. As I recall, in Finance 14 there's probably two or three that are DROP related. 15
And are the other 16 employees eligible for retirement? 17
All right. Ms. 20 Davis, your budget includes $375,000 for financial advisory services at $125,000 to each of three firms. Please explain why the City uses three firms and what services they provide.
We use three firms in order to get diversity of experience and to provide 388 2/25/03 - FY '04 OPERATING BUDGET opportunities for inclusiveness and diversity. These firms assist us in structuring of bond deals in other financial analyses and in support of preparations of the Five-Year Plan and other opportunities that may be required as we go through the Fiscal Year.
On -19 of the detail, you're requesting $222,000 for the Philadelphia Authority for Industrial Development, or a lobbying contract. Would you please explain what lobbying services they are providing?
This is a pass-through for a contract with Wojdak and Associates and they provide lobbying in Harrisburg in conjunction with economic development and other topics that may be of interest to the City.
What does the City spend on lobbyists in a year? Can you provide us with a listing of the City's lobbyists, the amount of their contracts and the services they provide?
Thank you. Also, on -20, why are you contracting with the RDA for Housing with Dignity administrative 389 2/25/03 - FY '04 OPERATING BUDGET costs? I believe it's $150,000.
This has been in the budget for some time. We'll have to get that information for you.
Also, you're requesting $260,000 in FY '04 for a management information consultant. How will this money be spent? And why isn't it being done by MOIS?
This is to look at potential changes to the financial systems that are housed currently in Finance. And since those are financial systems related to the Finance Department, it is budgeted here. Once there is a consolidation of services under MOIS, these are the type of things that would then be migrated to a central budget. But this is specifically finance related and that's is why it's here. It's not an enterprise item.
On of the Five-Year Plan it states, "Ensuring that the Pension Board maintains a diverse portfolio that provides a balance between risk and return." As Chairperson of the Pension Board, what actions have you taken to accomplish this?
We've had an asset allocation 390 2/25/03 - FY '04 OPERATING BUDGET study and we've had our portfolio re-balanced in accordance with that asset allocation study to provide just that diversification and risk management.
With the losses that the Pension Fund has experienced over the last few years, what actions has the board taken to stem the losses?
The board has done this asset allocation study and risk assessment to ensure or to attempt to protect the board's assets as much as possible against such risks. But in this environment, diversification over the long haul is the best haul to take. But in the short haul, when the market is not performing, your equities do suffer.
I have several other questions, but at this time I would recognize Councilman Goode.
Good morning. I promise to be nice to you this morning, which means I'll 391 2/25/03 - FY '04 OPERATING BUDGET smile while I ask my questions. Regarding the Philadelphia Community Reinvestment Commission, which was created through legislation, unanimously passed by City Council and, more importantly, through Executive Order in December of 2000 it's commission-funded in this next Fiscal Year?
I'm speaking of the commission, not of the community development.
The commission doesn't have a budget. It operates out of my department. And any meeting expenses are carried in my department, just under our general expenses, so it is staffed and funded. That's the way the Executive Order is written, so whatever --
Executive order placed under your department, is it budgeted in the next Fiscal Year?
It's not budgeted as a specific item, if there are any needs within.
It's never been budgeted as a specific item. 392 2/25/03 - FY '04 OPERATING BUDGET
We have a Tax Reform Commission that just came into being that was budgeted.
The amount of funding is something that we determined, and we came to Council with a Transfer Ordinance and Council approved the Transfer Ordinance. Now we're carrying the same amount in the '04 budget. I didn't identify myself. I'm sorry. I'm Rob Dubow, Budget Director.
I do remember the Transfer Ordinance because I had a conversation with Councilman Nutter, the primary sponsor of the legislation, and he was actually surprised to find that it was being funded without being consulted on what level of funding it should receive. And I'm just as surprised at having a sponsored legislation to form a commission in December of 2000. It also 393 2/25/03 - FY '04 OPERATING BUDGET had a parallel Executive Order that has not been funded in any level since that time.
The Tax Reform Commission was different, because under the Charter amendment that set it up, it was established as a separate unit within the government, so it needed a separate budget to function.
The Community Reinvestment Commission is also its own permanent agency.
I think what Ms. Davis is saying is, that in the Executive Order it was set up as part of the Finance Department, whereas the Tax Reform Commission was set up as a separate entity.
The legislation set it up as a permanent agency. The Executive Order placed it under the Finance Department.
I'll have the Law Department look at it and give us some guidance as to how it should be treated.
So you feel all the needs 394 2/25/03 - FY '04 OPERATING BUDGET of the commission are being --
Whenever there's any need that they have, we're funding it out of my department. And to date, my secretary provides all of the phone calls, makes of all the arrangements. That's been the level of support that they've required.
So there's nothing in black and white that says that there's a commission, other than the Executive Order and the Bill passed in December of 2000?
There's nothing. I will get with the Law Department and see what's required. As we interpreted the Executive Order, we provided the level of support that was indicated in the Executive Order. It did not indicate that there was staff --
An Executive Order is an Executive Order. I can't take issue with the 395 2/25/03 - FY '04 OPERATING BUDGET Executive Order. It is something the Mayor decides he wants to do. Did you say that the Administration has decided that there is no need for stationery for a commission that was supposed to be in place since December 7th of 2000, and there is no need for any formal budget? And I would just think in a time with shrinking government resources, we would be doing as much as possible to look at private sector resources, which is the whole purpose of the commission.
I'll get with the Law Department and I'll let you know what we determine.
You're welcome. The Chair recognizes Councilwoman Krajewski.
How many employees does the BAA have? And another question while we're at it, how much annually do they take in, how much revenue? 396 2/25/03 - FY '04 OPERATING BUDGET
Good morning, Councilwoman. I'm Dominick Cermele, Deputy Finance Director. The BAA does not take in money itself. It's taken in through the Parking Authority through the Parking Violations Branch. We do have some reports that indicate those people who have hearings, how many of them pay at the end of the hearing or how many pay within 60 days of the hearing. We can make those reports available to you.
May I ask another question? How does the BAA handle appeals?
Whatever. Whether it be Streets Department or what.
On parking tickets there's a two-step process within the legislation that set it up. So they're entitled to a hearing before a hearing examiner, and an appeal before a panel 397 2/25/03 - FY '04 OPERATING BUDGET consisting of one or more hearing examiners, not including the one who heard the original case. So you get, in essence, two bites at the apple.
I'm sorry. That's the first time someone accused me of not speaking loudly enough. Essentially you get two bites at the apple on parking tickets at 9th and Filbert at the BAA. And then your appeal from that point is to the Court of Common Pleas under local agency law, the civil side of the Court of Common Pleas. On the other violations, violations for Code violations, it's not exactly the same hearing process. It is more akin to a settlement conference prior to the matter going to Municipal Court, because Code violation complaints end up being Code enforcement complaints before the Municipal Court. So what we do at the Office of Administrative Review is act as a diversion program to allow people the opportunity for a settlement conference prior to going to Municipal Court. Those matters need to resolve at that settlement conference, or the matter proceeds eventually to a Code enforcement claim and 398 2/25/03 - FY '04 OPERATING BUDGET to Municipal Court.
How many tickets are issued by the department, such as the Streets, CLIP, L&I?
I have those statistics, but not with me today. I'll send them to you.
Unpaid tickets eventually all go to the Municipal Board of Code Enforcement Complaints. So if you would consider those that go to the Municipal Court as appeals, we can give you that statistic.
Thank you. But you will be sending it over to the Chair? Thank you.
Can you describe to me what the Productivity Bank does?
The Productivity Bank makes loans to departments after they've submitted an application for those types of projects that will result in either an increase in revenue or a reduction in their expenses. And every year the loan is repaid through the department's budget.
They submit an application to the committee that sits to review applications.
The committee is the Director of Finance, a member from Labor Relations, Budget Director, the Chief Information Officer -- I think Charlie McPherson sits on Productivity Bank Committee -- and I'm missing someone. I'll get you the full list.
On , you have a listing of consultants, I guess contracts that have been given out?
Can you tell me what 400 2/25/03 - FY '04 OPERATING BUDGET Bulwark Associates does for its money?
Bulwark conducted the search and recruitment for the housing czar, for Kevin Hanley's (ph) position.
There's a contract that is put out for bids, or how do they get it?
Usually by RFP or informal solicitation. But that was by RFP, I believe.
Informal is, you call in a number of firms and ask them to submit a proposal instead of going through the very formal advertising a RFP. But I believe that one was through an RFP process.
Brokerage Concepts, Inc. are a health benefits advisory services. We use them in conjunction with looking at the cost and benefits that we were getting from Blue Cross before we began our negotiations on health and insurance, other prescription insurance plans.
On the level of benefits, 401 2/25/03 - FY '04 OPERATING BUDGET healthcare.
Not who we should contract to, but they provide the support in analyzing what we're getting from the vendors that are providing healthcare.
That one, I believe, was through a referral. That wasn't a competitive bid or an RFP. That was someone who had knowledge of this company.
Right now, I don't remember who made that recommendation. I'll have to get that to you.
The Curly (ph) Adjustment Bureau Claims Administrative Services; what do they do?
They provide claims services in conjunction with, I believe, automobile accidents. 402 2/25/03 - FY '04 OPERATING BUDGET
Could you explain in more detail what that does for us? And do we have anyone in the City that might be able to do that?
Sir, Norm Johnson, Director of Risk Management for the City. Curly provides a service that we do not have within house because of the number of personnel that the department has. It includes appraisals on vehicles that -- this is third party. These are individuals that are suing the City. It's not necessarily City vehicles. They are a determining agency that negotiates with the injured party to reduce the size of the claim in the City's interest. The recovery factor for last year, I believe, was $600,000, but please don't hold me to that exact figure. That's a rough figure. I can get you an exact figure.
I would like the figure. Continue. I don't think you were finished.
That's basically what they provide. They're one of a group of agencies that we contract with to provide services in-house that we don't have the personnel to do.
Isn't that what the City 403 2/25/03 - FY '04 OPERATING BUDGET Solicitor's Office is supposed to be doing in terms of -- you say accidents and third claim individuals -- negotiating settlements?
No, sir. My department was created, which was, from what I understand, originally part of the Law Department. And we streamline services so that we do have claims adjustors in-house, as well as services out, in order to perform the fastest claims management as possible to reduce the liability to the City. So it only goes to the Law Department if it cannot be executed within my department, if it exceeds certain monetary factors or for which litigation is the only option.
Have they been there long? Have they had this contract for a long time?
I do not know. I can get that 404 2/25/03 - FY '04 OPERATING BUDGET information for you, sir.
Thank you. Carmine D'Alassandro, the consultant for the Tax Review Board, are they responsible for this last reassessment?
No. That's not the Board of Revision of Taxes. This is the Tax Review Board. Carmine does various accounting work for the Tax Review Board and most recently completed, I think, an internal control review of the Tax Review Board. Tax review is part of the Office of Administrative Review.
These are specific services for administrative review. Dominick.
Good morning, Councilman. Carmine D'Alassandro formerly was the accounting manager of the City of Philadelphia. He now works as a consultant for me at the Tax Review Board. He provides a number of services, including acting as a master in disputed tax and water cases. We have a project with the Philadelphia Traffic Court where we manage their collections and 405 2/25/03 - FY '04 OPERATING BUDGET their production control account. And Mr. D'Alessandro also works on that project.
Thank you. We have another search and recruitment contract, DHR International?
Yes. That firm was used to conduct a search for a personnel director and also for a chief investment officer at the Pension Fund.
What's the difference between that and Bulwark Associates? Can one firm do both?
Yes, they can. We just use multiple firms because different firms have different areas of expertise when it comes to recruiting people.
They are separate. There are multiple recruiting agencies. We tend to use different agencies depending on the type of employee we're looking for.
Do you review all of the contracts that the City gives out, even the procurement contracts? 406 2/25/03 - FY '04 OPERATING BUDGET
We have a Contract Review Committee that does sit in. It was started in May of '02 and we do review every contract that comes through the City, yes.
We would like to see the contracts of at least the last four years. I'm sure you kept records of those things.
Well, we started this in May of '02. We should have contract available through that period and we'll get them together. You want to see every contract or a list of the contracts?
For every department that has been given out to the City with the amount of money. And I'd like to see if you can give me what has been the minority percentage of African Americans, Latinos, women, and the names of the companies each.
So you want a listing of every contract with minority participation --
I want a listing of all contracts. And I want to know out of all of those 407 2/25/03 - FY '04 OPERATING BUDGET contracts, the percentages of African American, Latinos and women participation.
Is there any consideration given to Philadelphia business owners when it comes to awarding contracts, or are their regulations or laws that say that's inappropriate, we simply can't do it.
We don't currently do it because we don't have the ability to do a preference. Usually states allow preference and there's reciprocity. I am not certain, but I don't believe that we can just do it in that way.
Secretary Davis, I thought Councilwoman Reynolds Brown's question had to do with professional services contracts. Aren't we in that area right now?
The Councilman asked about all contracts. I'm not certain that we moved to professional services. I was still dealing with all contracts.
I thought the original 408 2/25/03 - FY '04 OPERATING BUDGET questioning, though, was in the professional services area and then he moved to the larger universe of all contracts.
With regard to the bid preference issue, there is a bill that was introduced that allows for a bid preference for Philadelphia-based firms.
Councilman, I wanted to see a listing of all contracts and to see what participation and the totality of each contract with the amount of monies that the contract is for. Obviously, it's for one year. And if you can do that, I really would appreciate it. Send this to the Chair. 409 2/25/03 - FY '04 OPERATING BUDGET
I understand that there may be some difficulty in identifying ethnicity, but we can tell whether it's minority or women.
And I believe Councilwoman Blondel Reynolds would like to see if you can begin identifying which contracts are Philadelphia owned or residents. Thank you, Madam Chair. I'll come back to this.
We'll have to do that based on address. That doesn't tell us whether or not they are, you know, residents.
Give us what you got. We'll bring you back. We're going to have discussions. It's an ongoing process.
Thank you. I would just like to make a statement, please. Any and all requests that are being made for information, I would appreciate your forwarding 410 2/25/03 - FY '04 OPERATING BUDGET to my office.
Madam President, on that 10 point about the information coming back to the 11 Chair, one of the things that would be very helpful 12 is if somebody could really keep track of all these 13 questions. 14
We do have a member 15 of our staff here who is on a computer making a list 16 of -- 17
Well, it's good. Because I had to kind of, like, pull teeth last budget process to get answers to questions, especially from the Police Department, where I had to go back and back and back and ask for information of questions I 411 2/25/03 - FY '04 OPERATING BUDGET asked. I had to go get transcripts. So it made it very difficult. No disrespect to the process, but I would just hope that --
We do have a member of our staff making a list of all of the questions that must be answered. And Joan is here.
We will keep a tab of what has not been answered.
Ms. Davis, on of the Plan, it states, quote, negotiating health benefit agreements for almost 8,000 City employees not enrolled in union health plans in order to offer quality coverage by eliminating the growth of City costs. Could you explain what this statement means? What role does the Finance Department have in both the setting of rates and the coverage provided?
During this process, Linda Berkowitz, who is a part of the office, was involved in the negotiation of the coverages, along with the Personnel Department. And part of the determination of how much would be borne by employees versus the 412 2/25/03 - FY '04 OPERATING BUDGET City was made in conjunction with Finance and the Mayor's Office.
Can you tell us how the cost and coverage compares with the uniformed and the civilian unions?
President Verna, Members of Council, I'm Linda Berkowitz, Deputy Secretary of Financial Oversight. We'll be happy to get you that comparison. I can tell you that the City-administered health plan compares favorably with the FOP's plan. I can't tell you about the fire fighters because there has been no award. So their current level may not reflect the most recent price increases that all providers of employer health plans have faced in the last year.
Thank you. Ms. Davis, on of the Plan, it states, "In June 2003 the Board will assess DROP to determine the extent to which it actually served its original purpose." What does the Board believe its original purpose is? And what steps did the Board take to ensure that the DROP funds would at least earn the 413 2/25/03 - FY '04 OPERATING BUDGET 4.5 percent return?
The Board's assumption is that the DROP plan was intended to retain employees and also to give those employees who are retiring an opportunity to retire with a nest egg. Those funds were invested in the same way that the rest of the Pension Funds were. And the other funds have an assumption of 9 percent. So it was assumed that using the Diversified Asset Allocation Strategy that was employed for the entire fund would, in fact, generate the four and a half identified in the legislation.
Well, did the Board consider putting these funds in a guaranteed investment? If not, why not?
I wasn't here at the point when that decision was made. I can do the research and find out.
Is it anticipated that the Administration will extend the DROP program?
That is a decision that has to be made by the trustees of the board. The Administration does not control a majority of those 414 2/25/03 - FY '04 OPERATING BUDGET seats, and so that is strictly something that the trustees will determine in a vote.
Thank you. Do you have a position on extending the DROP program?
Personally, I do. I don't know how valuable it is to anybody else. I think at this point some of the factors involved in changing of behavior by employees has had a negative impact on the fund. And in an environment where there is not a lack of employees with significant experience, I would support not extending the DROP. But that's one person's opinion.
Okay. With the work force reductions that are included in the budget, why is the City's unemployment compensation budget being reduced by $300,000? That's -83.
I'll have to get that information for you. I believe it was higher last year because of a catch-up on something that had not been done previously. And I will get the information for you. I think last year was sort of an anomaly.
Thank you. The Chair at this time recognizes Councilwoman Miller. 415 2/25/03 - FY '04 OPERATING BUDGET
Hi. Thank you, Madam President. Good morning, Ms. Davis.
I have some questions regarding the MBEC programs. How many firms are actually certified?
Good morning. My name is James Roundtree. I'm the Director of the Minority Business Enterprise Council. Approximately 1,200.
How many firms start the application process and don't continue it for some reason? I know out in neighborhoods people feel that the process is very complicated. Do you have a sense of how many?