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?
No, we don't. We can tell you how many firms withdraw on any given year, but they don't give a reason for withdrawing. We have held several workshops on certification to kind of dispel the myth of the complications. Generally, it's a matter of 416 2/25/03 - FY '04 OPERATING BUDGET information gathering. A lot of firms who have been in business for a while may have been grass roots business that may not have the financial information. So if they call our office, we try to provide them with some technical assistance to let them know the kind of information that can be utilized in that effect.
So you do do outreach and have workshops and all those kinds of things to encourage participation?
Yes. And certification. Because, like you say, Councilwoman, a big part of it is their fear of the information. And when they take a look at the application and the attachments, it can be somewhat overwhelming. So what we try and do is let them know the information that they can provide and when they can provide it. Mainly we're looking for control documents. They have a great reluctance of supplying tax returns, if they have them. If they don't have them, they will say, if there's an established firm, that the accountant may have them. So we give the leeway to do that. We also let them know that there's some 417 2/25/03 - FY '04 OPERATING BUDGET assistance out there. They don't have to wait for a long period of time. They could submit the information. As long as it's not controlled information that's lacking, we can help them do a preliminary review and tell them what they're missing.
We have a separate unit for it. However, since I've joined the organization, we've required all of our MBEC specialists and coordinators to participate in the certification process because it helps them in setting their goals and ranges. One of the things that we need to know when we're setting goals and ranges on contracts and projects is that there's a ready, willing and able marketplace out there that is available to do the work. If our professional staff members are involved in the review process, they become familiar with the entities that they are dealing with in trying to identify and match up contracts with.
I know that Councilman Ortiz asked for information, and I know that sending 418 2/25/03 - FY '04 OPERATING BUDGET over the total amount or all the contracts is important, but could you separate the capital projects out of that and the minority numbers, minority participation numbers with capital projects?
In the Five-Year Plan, on , in your last paragraph you talk about the US Department of Transportation's new initiative to unify the certification process. That would only relate to Department of Transportation contracts?
So you think that that -- it sounds like in the paragraph that you think that that's going to help.
That will help greatly because we will have more than one entry place into the certification process. But again, what we try to caution people is, that's really just the Department of Transportation's mode. But because we use the same regulation, it becomes easier. Those firms are grandfathered into the Department of Transportation's contract agreement.
Thank you. 419 2/25/03 - FY '04 OPERATING BUDGET Thank you, Madam President.
You're welcome. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. Secretary Davis, in response to a question by the Chair, you offered an opinion with regard to the DROP program. I took down some of what you said. I probably did not get all of it, although I did hear the final part of the answer. You said that there had been a negative impact on the fund, at least in terms of your opinion. And I can appreciate your self-deprecating style and the lowering of the expectation of your worth, but I think from our perspective you would be our local version of Alan Greenspan, so everyone actually does pay attention to what you say. And you can try that with some other people, but you'll never get away with it with me. So I actually do pay attention to what you say. Why are you saying, though, at least from your perspective, that the DROP program should not be extended? And if you could be as detailed as possible in terms of what the either positive or negative impacts are, I'd be very interested. 420 2/25/03 - FY '04 OPERATING BUDGET
And I'll give it from several perspectives. The actuary said that there's been a change in behavior, which is that people are going into DROP two years before they would have retired. That means that we're paying into it earlier.
Paying benefits two years earlier. So that has a negative impact.
Yes. Because instead of waiting until they're 62, they may sign up for DROP at 60 or 58 or whatever.
The point is not -- and I think it's kind of the confusion here. The point of DROP programs across the country has not been to encourage people to leave, but instead, encourage people to stay. In some of your Sun Belt areas where the job market for private sector was more vigorous and there were higher paying jobs in the private sector 421 2/25/03 - FY '04 OPERATING BUDGET than there were in government, people would leave government to go into the private sector. So you didn't have a wealth of 20, 30-year people. People used government as an entry into the workplace and then out into, what we call, the real world. Particularly in Texas there was difficultly holding policemen and firemen who would work in a big City, gain the big City experience, and then leave and go to a small town as a police chief. So DROP was implemented.
Let me back up for one second. I hate to cut across you. And I know that you were not here when our program was created. But I paid fairly close attention to the program when it was put together. Now, my recollection is that it was, to some extent, our version of an early retirement program, that people would have the opportunity to sign up in this program. It had a definite end to it. I mean, once you signed up -- and I think even now Police Commissioner Johnson may have -- I don't know what happened at the end of his situation -- but there was some concern prior to his appointment that since he had signed up it's irrevocable. You're in, you can't get out. You 422 2/25/03 - FY '04 OPERATING BUDGET can come back and all that, but that this was a way to give people an incentive, at that point in time, to leave and have cash in the pocket, which they otherwise would not have. Now, I wasn't in any of the conferences, but if I were at that particular stage in life -- and we know people are working longer. And given some of the retirement ages, I think by contract or collective bargaining agreement, some people, if they came into the government rather earlier, they can do their, quote/unquote, time, leave there kind of generally, some of them, a little young to be considered retired, and almost start another career with a big chunk of change in their hand as they leave here, a pension, and start at least the beginning of some other kind of career. That's my recollection at the time as to how it was sold.
And that may have been what was used as the selling point here. I'm just going from my experience in other places.
It seems to me somewhat counter-intuitive that if we wanted people to stay, wouldn't continuing the program encourage them? Because the word around town in some sectors, from 423 2/25/03 - FY '04 OPERATING BUDGET some employees at least -- I'm not saying this is universal -- is people say, "Well, I really now don't want to go, but now I'm forced to leave because I signed up for this program. It's a four-year thing. And if it was extended, I actually would stay." So I'm not promoting that notion either way. I'm just trying to understand where we are now, because we were somewhere else four or five years ago when this started.
Again, I wasn't here four or five years ago to understand what that discussion was. DROP has traditionally, in other places, been used because of the disparity between what the market would bear, and you were trying to hold people for another four years. Now, if it was used as early retirement option here, it is probably because there are so many people who are in 25, 35-year ranges, and that was an incentive to get people -- because they were coming into the government very young and not leaving after 30 years when they hit 55 or whatever and so you had no turnover. And I can very well imagine that it would have been -- 424 2/25/03 - FY '04 OPERATING BUDGET
But there's some younger employees who are hoping that they leave soon because it's the only way they're going to be able to move up. This is one of those, where you stand is where you sit.
It's kind of counter to what the experience was in other places where they were attempting to hold because of the salary differential.
Okay. Let me ask this question. My recollection from last year with the NTI program was that there was $20 million set aside for debt service for the NTI bonds. But my second recollection is that we only floated about half of what we anticipated; $142, $146, somewhere up in that neighborhood. Total program, I think, is supposed to be $295, which is, what, $20 million in debt service, I believe, would support. What happened to the other $10 million in debt service, which at the moment is clearly not needed because we're only supporting about 140-some million?
Most of it has been moved out through Transfer Ordinances. In fact, some of it was specifically identified as being moved for 425 2/25/03 - FY '04 OPERATING BUDGET neighborhood improvement projects, CLIP. So that's really where it's gone. We can give you a complete break-out.
No. In fact, what we said was that we would lower the amount of debt service that we paid. The debt service would no longer ever equal million. The most it's going to equal is 14 18 million. And that gap would be used for CLIP 15 and CLIP-like programs. 16
But there was a million 17 dollars in the FY '03 program budget and statement 18 for the NTI Program listed for CLIP. That's my 19 recollection. 20
This is funding for CLIP and CLIP-like programs beyond that million dollars. There's $2 million that's been taken out of what was going to go to debt service, and that is being paid out of the General Fund for NTI programs.
Was this for the 426 2/25/03 - FY '04 OPERATING BUDGET expansion of the program, or is it still for the operations in the 6th and 10th?
In '03 it's the 6th and the 10th. In '04, it'll be part of what helps with the expansion of the program.
Well, the program hasn't been expanded in '03, so what was the $2 million used for?
In '03 it's used for the 6th and the 10th. In '04 it's part of the expansion of the program.
Well, how much is it going to cost to expand the program citywide?
We have not done that calculation. We don't know what the total cost will be when it goes citywide.
So $2 million of the $10 million, in excess, that service was used for CLIP? What was the other $8 million used for?
Yes. We'll give you a complete break-out of how that money was moved. We 427 2/25/03 - FY '04 OPERATING BUDGET identified it in a couple of Transfer Ordinances, but we'll break that out.
Ms. Davis, I need to come back for one second, not for my own personal information, but for general information. I want to make that very clear. It's not for personal information, but general information. What is the last day to sign up for the DROP program? This is not a personal request. This is a general request.
I have, at the moment, no 13 interest in the DROP program, although some people would like me to sign up tomorrow.
At this point, if the Board were to discontinue DROP, there has been a regulation safe that has been promulgated that gives employees an additional 210 days from the point that the determination is made that DROP will no longer to continue for employees to sign up. So if we were to 428 2/25/03 - FY '04 OPERATING BUDGET discontinue at the end of September, you would have another seven months to sign up.
And is September the time at which the Board has to make a decision?
Yes. It may take two months or so to make a determination. So, sometime in the fall a determination and vote will be taken, and then 210 days from then.
I will share that information with the appropriately interested parties.
A lot of our constituents are asking about it. Let me have Mr. Roundtree back up as a follow-up to some questions raised by Councilwoman Miller. Mr. Roundtree, I think that Councilwoman Miller asked you how many firms were certified through the MBEC program. Did she ask you that?
Yes. James Roundtree, 429 2/25/03 - FY '04 OPERATING BUDGET Director of the Minority Business Enterprise Council.
Of the 1,200, in the past year, how many of those businesses were successful in bids for contracts with the City?
I'd have to get you that information. Do you want to know how many bid as primes or how many received contracts?
When you say successful, do you mean as prime bidders, or do you mean as subcontractors or consultants?
Yes. Resource-wise, it would very difficult to monitor the number of the firms 430 2/25/03 - FY '04 OPERATING BUDGET that we have in the directory that actually seek bids without being successful.
Well, are you given any information by, I'm assuming, Procurement that indicates back to you that an MBEC-certified firm was a successful bidder?
Yes. The actual bid itself. The process for a bid, the MBEC would review the actual bid, so we would know whether or not the firm that's successful was a certified firm. However, currently, we only review the top three lowest bidders. So if it's a bid scenario, we only review the top three lowest bidders.
So you at least have at your disposal, at a minimum, if one of the MBEC-certified firms is in the top three, you at least have that information?
And you don't need to get it from anywhere and it's right there. That's not a resource issue?
I mean, if we kind of play this out to its completely illogical conclusion, it's possible since, one, we normally don't monitor it; and, two, we just don't know at the moment, is it possible that out of the 1,200 certified firms that none of them were successful bidders in contracts last year? Is that possible?
Do you have a ball park figure as to many of the 1,200 --
No. But I will respond to you. I can get that information for you. We track participation, but we don't -- the annual report that we provide to the Administration and Council will indicate the number of firms that have received contracts, not necessarily who were prime contractors or who bid. What we can find out for you, though, is the number of firms that receive prime contracts or contracts together. I really don't know what you're asking, but I assume that you want to know the number of firms that received prime contracts that were minority.
Well, I think my response 432 2/25/03 - FY '04 OPERATING BUDGET to that earlier was, I want both.
All of this becomes a context issue. You might tell me that for the top three that you're reviewing, that 98 percent of the people who bid were successful. What I want to know about is people who bid who are not successful. And I want to know how many of the 1,200 people are even bothering to bid. So knowing me the way you do, Mr. Roundtree, you know that I want to know everything, be as broad and comprehensive as possible, and then I'll figure out how much I actually want to read.
Point of information. Mr. Roundtree, can you state the purpose of these firms becoming certified?
Yes. For the benefit of participating in the City's minority business program. That's the greatest benefit. 433 2/25/03 - FY '04 OPERATING BUDGET
To give them more of an opportunity towards their bottom line?
Do you have a sense of how many contractors have become certified and have not received any additional business? I've had calls from contractors that are certified, and maybe they sell paper products. We're not just talking about contractors that are doing the trades. And they haven't gotten one piece of business.
Well, one of the perceptions is that when you become certified, that that guarantees you a certain amount of business, and it really doesn't. What it guarantees you is an opportunity to participate. You still have to do all the other things. You have to pursue the marketplace. We spend a fair amount of time providing information to our certified firms about opportunities that exist in the bid process or the proposal. We also provide information on how the system works now. Because right now they can get the information right off the Web. Anything that we 434 2/25/03 - FY '04 OPERATING BUDGET bid or most of our requests for proposal is advertised on our Web site, on the Philadelphia Web site. So we inform them of that. We also receive inquiries from prime vendors who are interested in using minority women or disabled businesses. Then we develop a list for them and we provide that information, not only to the primes, but then to the minority and female vendors who we've supplied their names for.
Okay. I'll probably come back to this a little later. Thank you.
Madam Chair, I think that Councilman Goode has a question.
Thank you, Madam President. Mr. Roundtree, I will look forward to seeing the information that Councilman Nutter requested. And rarely do we ask for anecdotal information, but I'm assuming that you're somewhat familiar with the 1,200 people who are certified?
And could tell us whether 435 2/25/03 - FY '04 OPERATING BUDGET the amount of people receiving contracts are in single digits, double digits or triple digits? In terms of the amount of the 1,200, how many people are receiving work? Is it in the single digits? Is it in the double digits? Is it in the triple digits? I'm sure it's not over a thousand.
It's in the double digits, as far as firms receiving contracts.
I would prefer to provide that information more specifically to you.
I would prefer to request it anecdotally, in terms of your familiarity with those 1,200 people who are certified, whether less than a hundred of them are receiving work. You should know that. You should know whether it's in the single digits or double digits or triple digits. We know it's not over a thousand of the 1,200 firms.
No, it's not over a thousand. I would say the triple digits. I would say somewhere in the vicinity --
So there are hundreds of firms? 436 2/25/03 - FY '04 OPERATING BUDGET
Can you say that with confidence, that there are hundreds of firms?
No, because you asked me to say something succinctly about something anecdotal.
I am asking you in the context of requesting anecdotal information.
I'm not asking you for absolute. I'm asking your confidence of whether it's in the triple digits, whether there are hundreds of firms out of 1,200 certified that are receiving work. Or is it possible that it's in the double digits, only tens of firms?
I am, Madam President. Thanks. Let me ask this question. If there's a bid -- and let's say that Councilman Goode has a firm 437 2/25/03 - FY '04 OPERATING BUDGET and he bids on a contract and he's successful. He's the prime or maybe sharing it with another firm, and he's 100 percent owner of his firm and he's certified. He's a minority business and he gets that contract. And I guess we put down on our records that his company receives 60 percent of that particular bid or a 100 percent of that particular bid. And not that the Councilman would do this, so maybe it's inappropriate to use his name in the example -- but Joe Schmo's company happens to be a 100 percent minority owned. And they then subcontract a significant amount of that work from the bid, as they may be allowed to do with other firms that are not minority owned. For record keeping purposes and calculation purposes, do you credit the winning minority company with having a 100 percent of that work?
No. For record keeping purposes and for percentages purposes, the way the system works is, when the bid comes in, if a minority firm is identified for participation, it will be on what we call the Solicitation and Commitment Form. We would then call Joe Schmo, whoever the firm is, and ask them if they had 438 2/25/03 - FY '04 OPERATING BUDGET participated in the process and if they can tell us what level of participation they were at. That's our first contact with the firm.
In the bid form it will say what the level of participation that the prime is going to perform on that contract. But if they said prime contract and they are within the guidelines of the procurement process, we will count it 100 percent.
No. First of all, you can't prime all the work out to other people. In matters of a prime contract, they have to be able to perform -- it would vary -- a certain amount of the work with their own forces.
Suppose I tell you I'm going to do all the work and then something happens, some of my folks can't come in, whatever the case may be, my truck broke down, the dog ate 439 2/25/03 - FY '04 OPERATING BUDGET the form, whatever. And we're now coming up on the time to do the work And I decide, well, I've got to get this job done and Sam is sick and Joe is in the hospital and the other one couldn't come in, whatever the case may be. And I decide to hook up with somebody else to make sure this job gets done. Are you saying that I can't do that?
I'm saying I would have no 10 way of knowing based on the detail you just provided that that happens.
It's your scenario, so I have to assume that it could happen. I can't say here categorically it has happened or it hasn't happened. I'm basing on your scenario, the possibility exists.
Okay. We'll re-visit that topic. Madam Secretary, could you tell us about this -- again, this is where your expertise will be tremendously helpful -- this proposed financial transaction regarding the Free Library?
I've only heard bits and pieces of information, something to do with 440 2/25/03 - FY '04 OPERATING BUDGET depreciation and selling it off and we get some money and then we pay some money, a tremendously complicated kind of thing and I just cannot understand it. Could you explain it?
Yes. We're going to provide the written explanation. It is, in fact, a sale lease back that will take advantage of the fact that we have depreciation that we do not use because we are a non-tax entity. And there are businesses who want that. They also want to get a special accounting treatment, whereby they don't have to reflect the rents that we pay on their books. So between that and the depreciation, they're able to give us a lower rate, although it is a taxable rate.
When you talk about a sale lease back, are we're talking about the sale of the library and our leasing it back, the government leasing it back?
Yes. But we maintain the 441 2/25/03 - FY '04 OPERATING BUDGET property under the building. It is more complex than just a straight sales lease back. And that's why I prefer to give you a written explanation and that's being prepared.
Lastly, in the testimony, in the fifth paragraph, you have, "This budget anticipates 151 full-time General Fund positions, a decrease of positions from the FY '03 budgeted 10 positions." 11 So, are you saying presently you have 171 12 employees? Or is that what you were budgeted for? 13
As of the increment run in 17 November, there were 166 filled slots. 18
Is there one page in the 19 large book that would give me that answer, or do I 20 have to go to the six different units?
So let's see here. In FY '03 you were budgeted for 175?
171 full-time, 4 part-time. In the General Fund. 442 2/25/03 - FY '04 OPERATING BUDGET
I see it. And then the run, you're saying you were at 166 plus 1.
So, again, as we went through this yesterday, does that mean that there are actually five unfilled full-time positions and three unfilled positions that you were carrying?
And now you're talking about in FY '04, going to 151. Let me go back for a second. You have 166 full-time live bodies in the shop?
And when you have in your testimony, though, 20, can you reconcile those for me? 443 2/25/03 - FY '04 OPERATING BUDGET
The is the difference between last year's budget and this year's budget.
Now, yesterday we learned 10 that the Mayor's Office is showing a reduction of 19 11 positions, although only 7 of them are actually 12 filled; 12 are vacant. And we're anticipating 7 13 filled positions leaving the Health Department. 14 That leaves 36 from the Mayor's announced 50 coming 15 from four different agencies; the Mayor's Office, 16 MDO, Finance, and Health. Of the 36, are you 17 saying now that your part in that is 15? 18
No. My part in the 50 is not all 19 of the 15. Some of the 15 are coming for other 20 reasons, you know, some DROP. I'm losing because of the DROP. They're not all in that 50 administrative people that have been identified going forward.
I'm assuming you're referring to the 50 that have been announced as leaving by July 444 2/25/03 - FY '04 OPERATING BUDGET 1st?
Yes. Now, this was 50 announced on January 28th as leaving in 30 days.
No. I think what the Mayor said that he would announce the 50 within 30 days, and they would be leaving City employment by April 1st.
Okay. So let me make sure I understand that. We're going to announce in 30 days who's leaving and they're leaving by the end of the fiscal year?
That there will be people who will leave because of the DROP and for other reasons.
I have to get the specifics. 445 2/25/03 - FY '04 OPERATING BUDGET
Just for the record, this is what the speech said: "Within the next 30 days, I will eliminate 50 Administration positions, mostly in the Mayor's Office, Finance Department, and the Managing Director's Office." So I think, as a somewhat reasonable person, I took that to mean that in 30 days, 50 people would be terminated. I think it could have been a misunderstanding on my part.
Yes. I think what we had always been telling people was that we would announce the 50 and they would be gone by April 1st.
Look, I'm not trying to rush anybody out of the door. I'm just trying to understand what's going on. So, Ms. Davis, you have 15, but you're not saying at the moment that they're tied into the balance of the 36 that we learned from yesterday?
You have been most generous with your time and your answers, and I will come back if the time allows to ask you some other questions about the budget book. Thank you. 446 2/25/03 - FY '04 OPERATING BUDGET Thank you, Madam Chair.
I wanted to do a couple of additional follow-up questions that were initially mentioned by Councilwoman Donna Reed Miller and Councilman Angel Ortiz. When you prepare the document that provides for us the breakdown of contracts, the initial request was contracts across the board, and then Councilwoman Donna Reed Miller's request was to separate out capital. I would ask that you also separate out professional services in those four categories we asked about; Philadelphia residents, women, minority, African American, and Latino.
I don't think we can do it by ethnicity. We can do minority contracts.
Could we please ask Mr. Roundtree to join the table again? At the bottom of the testimony -- this is 447 2/25/03 - FY '04 OPERATING BUDGET actually provided by the Procurement Commissioner. It says, "Procurement will continue to partner with MBEC in training programs designed to educate minority vendors about the bidding process and business opportunity with the City." How often does that type of activity happen on a case by case basis? Is it structured over the year quarterly or monthly or what?
No, Councilwoman. James Roundtree, Director of Minority Business Enterprise Council. Up until November of last year we were having it on the third Wednesday of every month. We would have representatives from the Procurement Department, the Revenue Department, and MBEC to talk about the process of doing business with the City. We also hold seminars at various locations for specific projects. Every year we had one for MED Week, which is called the Philadelphia Day. We invite a number of the major purchasing-type people to meet with the minority and women business community. We conduct a seminar during March for women's business. It's called Women's Month. We co-sponsor with a number of organizations 448 2/25/03 - FY '04 OPERATING BUDGET an activity primarily to interest women and talk about the certification process in doing business with the City in that activity. And then we participate with a number of other resources or other agencies around the calendar year for them. When they have seminars we participate with the big Chamber of Commerce and their Business Day. We set up a table and provide information about the City's process. And we work with a number of other groups around the calendar year, but most of them invite us to participate.
So when you say other groups, might that not include interfacing with PCDC and PIDC as well?
Yes. More so PCDC than PIDC. PIDC, the Greater Philadelphia Urban Affairs Coalition, we've held workshops with the African American Chamber's contractors round table. Last year we held a conference with the Mid-Atlantic Business Association. They're basically small businesses around the Southeastern Region Pennsylvania. And then the other organizations contacted us and asked us to participate. 449 2/25/03 - FY '04 OPERATING BUDGET
So the outreach is certainly there and, I guess, the recruitment business inviting them to do business with the City, but is there any tracking at the point that you have the 1,200, any procedures in place that allow you to track those individuals down the line to see if they, A, ultimately end up in the system and, B, ultimately get an opportunity to do business?
Yes. And that's a matter of reviewing the bid solicitations that come in from the City. For example, under NTI we've held three outreach meetings. And we plan the whole outreach meetings in every Councilmatic district that has some activity. And specifically we go to a high school and we invite the contractors to the high school, ask them to come to the high school, because you need to know how to get through to the business in order to do business there. We invite the minority business community and we do a card exchange or some kind of information format or networking session. We limit it to 20 minutes a presentation, but the other 45 minutes to 450 2/25/03 - FY '04 OPERATING BUDGET an hour is just identifying who you are and trying to do some networking so that the prime contractors who may be bidding the project know some of the minority firms who are interested in doing business with them. And then we review the bids that come in. Basically we compare who attended the conferences and who's responding to the bids.
So is that what you mean when you say you track participation? That was your quote.
Yes. From that standpoint. But what I was responding to Councilman Nutter, we don't have a formal process that says, you came in March. You got certified in March. And then some time in November we go back to you and say, you still have not done any business with the City? Or if you're certified for three years and a whole year has passed, you haven't done any business with the City.
Mr. Roundtree, you referenced the NTI project. And you could have referenced the stadium projects that have their own accounting system set up. In many cases, 451 2/25/03 - FY '04 OPERATING BUDGET particularly the stadium projects, GPUAC is doing that monitoring and is very involved in that process. In terms of MBEC itself, what do you do?
We are involved in the process also. We attend all of the pre-bid conferences --
But what do you do on City-funded projects where there's no GPUAC monitoring?
The same thing. We provide the information about the projects --
We provide the information about the projects. We receive the information and monitor it. One Parkway would have been an example of that. With the renovation for One Parkway, there was no GPUAC involved in that. We had the total responsibility of monitoring that whole process from top to bottom.
I guess my concern is, still, that of 1,200 you don't know how many of the 1,200 have actually done business with the City. And I'm trying to still figure out why. And in the citing of NTI, which has probably 452 2/25/03 - FY '04 OPERATING BUDGET only done a few million in contracting, seems strange to me, that you would even cite NTI as opposed to what you've been doing over the last several years you've been in the position, in terms of tracking. NTI has done a few million in contracting.
Because I was trying to give an example of a project that was readily available, that was visual, that you knew about.
But I'm really asking for an example that doesn't include an NTI or a stadium and maybe not a One Parkway, but an example of how you monitor capital projects, which Councilwoman Miller has an interest in, or how you generally monitor professional service contracts. What monitoring process is actually in place for those type of things in general?
In general we provide a desk audit after we receive the contract and we review it. We send out a letter asking the firm if they have actually participated, what the dollar of the level of participation --
I'm talking about the tracking of your certified -- 453 2/25/03 - FY '04 OPERATING BUDGET
I can tell you from that vantage point, I think my most difficult aspect would be to tell you who hasn't bid. I can tell you who has, but I cannot tell you who's not.
So you can tell us how many of the 1,200 certified business have received work?
We're asking about your tracking process in terms of how can you tell us -- how do track that?
By using the documents that would come in from either the proposal or the bid contract.
My final question is around professional services. And let me put the context in place with hopes that I can ask this question properly. There are institutions in the City of Philadelphia that receive City support, City dollars. Less than half of their overall operational budget is supported by the City. When it comes to those institutions putting bids out for capital programs, one response I've heard is, "But this is a private project." Yet you're receiving City support at whatever level. Are there any requirements in place that sends a message that, private, public or otherwise, opportunities for women and people of color, they should still be granted an opportunity to bid in spite of the fact that it's a private project? Are there any requirements in place that say --
No, there are no requirements that are in place for -- if I understand this correctly -- for us to tell a private entity that they have to have --
That's receiving City dollars. That's a line item in our budget, in the 455 2/25/03 - FY '04 OPERATING BUDGET City budget.
Then we consider them a quasi City agency. If there's not a formal agreement between us -- and you'd have to give me an example of one of those entities -- then I can you specifically whether of not we have a relationship with them.
Okay. Speaking system-wide, there's no requirement on the book that say, even if you're a quasi public, you have to follow ABC procedures?
Under 193, it's a cooperative agreement that they provide that information and they participate. But there is nothing that requires them to do that. In the TIF activity that the City -- and I use the TIF because it comes through City Council -- in some cases, in the writing of the language, it specifies that Minority Business Enterprise will be responsible for monitoring the participation, or they have to use an MBEC-certified firm. We then can get involved with that process. If, in fact, they only use Title 3 language, then Minority Business Enterprise Council will not have any 456 2/25/03 - FY '04 OPERATING BUDGET leverage to request or demand information from them.
You're welcome. Councilwoman Miller, I understand you have a follow-up question.
I have a follow-up question regarding minority certification. There are a lot of questions today around that. In the seven years I've been here, there's always been questions and there continues to be questions. Because I know as a Councilperson -- I'll just speak for myself -- that we just don't feel that minority firms are getting their fair share. I'd like to know if the Mayor has created an Executive Board, or are we still using the Executive Order as it relates to the participation efforts requested from the City that we had before?
The Mayor has given his support to use whatever means that are legal and moral to increase the level of participation for minority, women and disabled businesses. We are still acting, though, under Executive Order 193, as we are under the re establishment of 17-500. 457 2/25/03 - FY '04 OPERATING BUDGET
Excuse me. We are reviewing a new Executive Order that Mr. Roundtree has prepared for implementation.
Okay. That's good. And I guess there are a group of people that's looking at this very closely and will be monitoring participation levels more closer. Public means public, and that means everybody. And I am very much concerned, as my colleagues, about the level of participation of minority firms. I have a question as relates to risk management. I'd like to know how many medical providers that we have serving injured City workers? What happens? A City worker goes where for medical service?
Norm Johnson, City Risk Manager. Ma'am, the medical providers as they are today are members of major providers, i.e., Temple University Medical Center, Roxborough, Nova Care. The question that you're asking, I have no idea any numbers specifically.
I'd like to know the number of minority medical providers that are 458 2/25/03 - FY '04 OPERATING BUDGET providing medical services to injured City workers.
I don't work with risk management. I have not a clue whether they're contracted, whether they're a part of Temple. MR, JOHNSON: If I may explain the situation. The City goes out and gets a third party administrator. At this time it's called Comp Services. They contract directly with the medical providers in order to determine prices, and those medical providers are made as part of a PPO, a preferred process. Employees go to those providers that are co-located with their addresses. As it stands today, I could not tell you how many of those providers hit the minority business or women.
Comp Services, I don't know. I can't answer for them. I know of one particular. It's a business called LaFortaleza that receives a large percentage of the City 's physical therapy and in-home services. They're the only agency that 459 2/25/03 - FY '04 OPERATING BUDGET I know of directly that is fully a minority provider under the medical. But most of the medical providers to the City are major organizations. You know, we're talking about Temple or Hahnemann, whichever hospital it is. I would not be able to give you that information. I can ask Comp Services if they would ask the providers in their network to give them information about the balanced number of individuals on their staff, and whether or not they release that would be a question that the medical provider would have to make that determination on.
We contract directly with LaFortaleza because there was a problem with getting the utilization -- CSI would not utilize them until we contracted directly with LaFortaleza. And that's why we know about LaFortaleza. All of the others, because they don't have contracts with the City, we don't have the information and we're sort of captive to CSI's providing that information, if they have it.
And if I may just add one thing to that. I can request that from CSI. CSI is a member of the Independence Blue Cross. There may 460 2/25/03 - FY '04 OPERATING BUDGET be confidentiality issues with providers and all. I'll address that and I will get a return to the Council President and to the Members as to their response to your question.
Thank you. Because wouldn't the City have participation requirements to Comp Services or CSI?
There is directly with Comp Services. Comp Services must meet the requirements set up by MBE as to the number of individuals in their organization, but not to those individuals that perform medical services. Plus, we're talking about a very specific oriented-type contract in which only certain medical providers can perform because they have the facilities. You may have a group of doctors that would meet all the criteria as far as minority, but may not have the MRIs and the CAT scans and all the other issues that are needed in order for them to bid with CSI and with Independence Blue Cross in order to provide services.
Well, we understand that. And in their report they can say that, what they did to outreach, whether they were qualified 461 2/25/03 - FY '04 OPERATING BUDGET people service areas. I understand in terms of equipment and whatnot, but they need to state that. I just need to know what it is.
I will ask that of them and their response I will get to Council.
Okay. Because it's my understanding there are no minority medical providers that are providing services to injured City workers. I'm not talking about that group you just talked about, but other than that, that's my understanding.
Thank you, Madam President. Could I have Mr. Roundtree, please? Mr. Roundtree, Ms. Davis, I'm going to give you this document after I quote from it. My question is about process. I have a letter dated October 1, 2002, and it is from a female that applied for a woman's disadvantaged business enterprise. She was written stating -- now, this is 462 2/25/03 - FY '04 OPERATING BUDGET interesting, because I don't know a business in the world that the top person has all the brains and all the knowledge to make it work. "Information and documents reviewed by this office reveal that" -- and I'll leave the last name out -- "does not possess the required technical expertise and experience to independently manage and control the daily operations of a firm, specializing in cleaning equipment and industrial portable heaters." Mrs. Brown clearly stated that she handles all the administrative work for the company and basically she depends on employees to make the company work, one being her son. To me, this sounds really outrageous that you would disqualify a person because they don't have the complete knowledge of how to change the buffing wheel on a buffer. I'm sure there's a lot of things in both of your operations that you don't have hands-on. Because I see a lot of managers in this government turning around saying, would you come up here and answer this question, or would you come up here and clarify. The bigger problem is that she wrote a letter to you, Ms. Davis, dated October 7th asking for an 463 2/25/03 - FY '04 OPERATING BUDGET appeal. She never heard a word. At least that's the information that I have. And I'll apologize if she did. I'll give you this document.
And we'll research it. We review and do appeals on everyone that we get. Thank you.
Not this one. Mr. Roundtree, I'd like you to comment on the fact that you disqualified someone because they don't have all of the knowledge to independently, quote, run that business. It sounds to me like you're asking for a person to know an operation to A to Z, and I hope that's not the case.
No, but we would like them to know from A to M, or A to P.
From our review, she didn't. Our review is subjective, of course, based on the criteria that we have. You have one sheet of paper here. You have her comments. We have about or 21 30 supporting documents that we used to illustrate 22 whether or not she can cause a direction of the 23 business. We didn't say that she had to have all 24 the expertise. She also has to have the ability to 25 cause a direction of the company. How was the 464 2/25/03 - FY '04 OPERATING BUDGET company formed? When was it formed? Who were the incorporators? All of that goes into whether they have the ability to do that.
Right. And her resume and any other additional information that she supplied for that basis did not indicate to us at that particular time she had the prerequisite requirements to do that.
October, November, December, January, February. No results of her appeal. Again, this isn't the Supreme Court.
Yes. That's a long time. In other words, why would she not, from what I understand -- and again, I'll be the first to apologize if she has heard. But let's assume she has not based on the information that I have. Should it take all these months to get a result?
Okay. So maybe there's just an Administrative glitch there. 465 2/25/03 - FY '04 OPERATING BUDGET Ms. Davis, I want to go back because there's a lot of confusion on my part and I think people involving the DROP. Could you clarify me, clarify for the record, what the absolute purpose of the DROP program is? What was it supposed to accomplish when it was put into place?
I can tell you what DROP programs in other areas were, but Councilman Nutter said that at the time his recollection is that it was used as an early retirement incentive. That is not the reason it's been use in other places. It's been used as an incentive to hold those people who are close to retirement age longer, especially your uniforms who are able to retire at a much younger age and begin other careers. So I don't have the information on why it was implemented here. I will check in the Pension records -- well, that would have been the City Council mandate. I will attempt to discover why, but I do not know the reason. 466 2/25/03 - FY '04 OPERATING BUDGET
So I would assume somewhere in a file someone created the DROP Program.
It was a legislation action. It was by an action of this Board.
But I'm assuming that the Finance Department at the time had some input on that, right?
I have no idea. I wasn't here at that point. I would have to do research and get back to you.
Okay. Let me ask you about the program. You stated something that caught my attention today, that people are leaving. The purpose of the DROP program was to retain people. But then there was something you mentioned about people leaving to go to the private sector. How would you know that?
That's not in this environment. It's in other environments. I was not referring to that happening here. In other cities where I 467 2/25/03 - FY '04 OPERATING BUDGET worked, where the economies and the job markets have been much more vigorous than that here, where there is a definite differential between government pay and the pay in the private sector. Employees would, in fact, leave government to go to higher paying jobs outside of government. Here, that difference is not there. So there is longer tenured employees here than there are with most governments.
How will, again, the other departments be affected? Will those jobs be eliminated? Will people be hired at lesser salaries? How exactly will those voids in the other departments that jobs are aren't eliminated be dealt with?
It is our intent that in those other departments that are not being held harmless, that 50 percent of the people will not be replaced, that there will be restructuring in the way that the work is accomplished. And that we will once again do more with less.
Through efficiencies? 468 2/25/03 - FY '04 OPERATING BUDGET
Through efficiencies and restructuring of operations and redirections of work.
I think it would be interesting for you to -- and for me -- whatever documents you can get for me to let me know exactly what analysis was done by the Administration. You indicated that, yes, it was a legislative action. But I'm sure before that legislation was adopted there had to be some studies or some information developed to see what impact there would be on this government.
You're welcome. The Chair recognizes Councilman Nutter.
Madam President, Councilman Ortiz asked if he could go.
The Chair will therefore recognize Councilman Ortiz.
Thank you, Madam Chair. 469 2/25/03 - FY '04 OPERATING BUDGET Councilwoman Miller was talking about medical services, and I'd like an answer in terms of the comparisons between what the non-represented City workers' medical plan looks like as compared to AFSCME, the FOP and the fire fighters, and what's the differences between us, the non-represented workers, and those three planets. And I know Ms. Berkowitz has the answers to that.
It's been requested and we're going to put together a report that identifies that.
Another thing that -- because we continuously go on with this. And the thing that really is shocking is the fact that after all of these years -- if Mr. Roundtree answers to Councilman Goode, if we really had good answers to the questions about minority and female participation, I'm sure that we would be putting those numbers up. If those numbers were exemplary and really be an inclusive in terms of the contracting that we have, I'm sure that we would have charts up there in color. We might even have a power presentation and computers with the names of each and every minority company and the contract they got highlighted. And 470 2/25/03 - FY '04 OPERATING BUDGET after 15, years of asking these questions and really not seeing any significant progress as we grow in population in this City and as we grow in numbers, it's really very disappointing. And the fact that you still have an Executive Order only in draft when this problem is a problem that is a recurring problem in every budget period. And that we continuously ask for progress reports just leads me to believe, where are we going? What priority do we give to this?
It is an important priority of 13 the Administration's and of mine, in particular. 14 We have done a lot of outreach. We have 15 created bonding programs and education programs. We 16 have credit repair. We have recently funded a special initiative in order to help minorities to become better able to do business.
Ms. Davis, excuse me, if I may. And I pardon my interruption. But the thing is that finance directors and other individuals have been saying that since the '80s, '90s, and now it's the year 2000. In other cities where minorities are very heavily represented, Atlanta, Chicago, all of these numbers really have gone up dramatically and 471 2/25/03 - FY '04 OPERATING BUDGET can be shown. And to me, the situation is that we continuously do this. And Mr. Roundtree could not even give Councilman Goode any indication of whether we were in single digits, double digits, or even whether he knew what minority firms were getting contracts. And that's something that should be known, should be there. And if we were being successful, I know that we would be charting that and we would have it in front of us and be bragging about how successful we have been. So the efforts are very nice and noticed. The results are dismaying. Thank you, Madam Chair.
And I'd like to add, there is dismay to us. It's disappointing to me that we're not performing at a higher level.
Thank you. The Chair recognizes Councilman Goode.
Thank you, Madam President. Mr. Roundtree, please approach the witness table again. Mr. Roundtree, you are drafting a new 472 2/25/03 - FY '04 OPERATING BUDGET Executive Order?
It was based upon the information that we had at the time. That's what it's based upon.
It was drafted. The weaknesses and the nuances that we felt should be replaced from the existing Executive Order. We wanted to do what we call some creative things.
Is your answer to me that you drafted the new Executive Order based upon the old Executive Order?
No. If I can interject. I asked Mr. Roundtree soon after I got here and looked at the situation to look at what he felt he needed in an Executive Order or mandate in order to get accomplished what we want to have accomplished. To look at the old Order and look at its deficiencies.
Madam Director, you can 473 2/25/03 - FY '04 OPERATING BUDGET let him answer the question, because that was only the set-up question.
It's based on what we experience are the weaknesses of the prior Executive Order and where we are today as far as it relates to the minority and women business community.
So it is not necessarily based upon the requisite technical due diligence of actually finalizing a disparity study regarding disadvantaged businesses? I mean, can you at this point prove disparity? Have you done the technical due diligence to prove disparity?
Yes. I'm surprised you're asking me that particular question, because in August of last year we provided a copy of the disparity study to the Committee for Economic Development.
You provided the executive summary or the full disparity study?
The full disparity study. 474 2/25/03 - FY '04 OPERATING BUDGET
Councilman Nutter is looking at me questionable too. I had somebody deliver two volumes.
Let's move beyond that. If you have the benefit of a disparity study that proves disparity, are you prepared to move on and is the Administration prepared to actually draft new legislation?
Yes and no. 15 One of the things that has to happen is this Body has to hold legislative hearings to find fact of finding to determine whether or not the predicate that the study is based on is relevant for today's time and to come up with legislation that says, this is the Body that does that. We can make a recommendation --
The Administration cannot offer a Bill based upon a disparity study?
It will be defeated very quickly because what has to happen -- 475 2/25/03 - FY '04 OPERATING BUDGET
I'm asking a question of whether the Administration, based upon its disparity study, can offer a Bill based upon what it wants to do. I mean, the director says, she came here. She said essentially that she knew things were bad. She asked you to work on it. You completed a study. Based upon the study that was completed, could the Administration, based upon what it wants to do, draft legislation that it can submit to Council?
The process for legitimacy is the Council has to have a legislative process.
We have a hearing on every Bill that's introduced in City Council. Are you saying it has to be initiated by City Council or it has to considered by City Council?
I would doubt that very 476 2/25/03 - FY '04 OPERATING BUDGET seriously.
Okay. Then I will seek a legal response. I can tell you that this Administration is prepared to provide.
I can tell you that we absolutely cannot draft legislation based upon a disparity study we do not have.
Okay. My assumption was you had it. I got a request from Councilman Ortiz --
Would it be possible for us to have a copy of that?
So you assumed, as legislators, we had a copy of the disparity study and chose not to introduce legislation?
You assumed that we had a disparity study and no member of this Council would have chosen to introduce legislation based upon the findings of that disparity study?
It was not submitted to all the Members of the Council. It was submitted to the Commerce and Economic Development Committee. I got a request in August from Councilman 477 2/25/03 - FY '04 OPERATING BUDGET Ortiz to provide this to this Council. He was having some kind of hearings and I was requested to provide that information to Council. I sent it over here to each one of the Councilmembers who were on that list. I haven't heard from anybody since that request.
Point of information. Mr. Roundtree, I got the disparity report not because you sent it to me. If you remember -- and we can go back to the minutes of the budget hearings. Because last year I asked questions based on the disparity report because I had gotten it the way we usually get things in this Council, not because we get it from the Administration, but because we get it from other sources. I had gotten a copy of the disparity report from your office. I can't say where I got it from. But I asked you questions about the disparity report during that budget. Not in August. I was going to have hearings August, but I used that information to use it in the budget hearings. I told you at that point when you asked me. I said, I have the 478 2/25/03 - FY '04 OPERATING BUDGET disparity report. And I will get you the budget hearing minutes in order to tell you that in detail.
And since then, I have made copies and I have given those copies to my colleagues, whoever has requested it of me.
Councilman Ortiz, I think our staff has been asking for that report for at least two or three years and we never got a copy of it.
Councilman Goode, I happen to have legislation based on that disparity report and it will be introduced.
I'm sure many Members of Council would have prepared legislation had they had a copy of the disparity report. Let me say this to you, Mr. Roundtree. As a member of the Executive Branch, I assume that you have 1,200 certified. You don't know how many of them have been given business.
I assume there is a member of the Executive Branch -- if you have 1,200 479 2/25/03 - FY '04 OPERATING BUDGET people certified, you should know how many people are getting business. You should assume that a legislator -- if I had a copy of the disparity report, that I would have drafted legislation. But let's say that no member of this Council -- and Councilman Ortiz is the only one who had a copy of the disparity report because he had to supposedly sneak it. If no member of this Council decided to offer legislation based upon the disparity report that you definitely have, you would have not taken it upon yourself to suggest to the Administration that they offer legislation based upon the disparity report?
What I asked the Administration to do was to review it and we would have plans and hold strategy for that process.
I can't draft legislation for you. I can only submit it to my superiors. And the information that we had, we wanted to do a briefing to Council because a briefing had never been done either, so...
Thank you, Madam 480 2/25/03 - FY '04 OPERATING BUDGET President.
Thank you. The Chair recognizes Councilman Nutter.
I was going to add that the study itself, one of the reasons why we wanted to have a briefing for Council, it needs to be refreshed, the actual data. The information that's being bandied about and being requested needs to be put in that document to make it more relevant activity for today.
The number of contracts that the City has had, the level of participation, because, now, the premise that it's based on was, I believe, 1998 and it needs to be updated to 2003.
Well, let me ask this question. Has there been a request to have a briefing of City Council for this information?
We had made a request to Administration for the Administration to have the briefing, yes.
He has submitted a request. 481 2/25/03 - FY '04 OPERATING BUDGET Yes, he has.
Has the Administration ever informed the Council President that you'd like to brief us on something?
We have not briefed the Mayor yet internally. Once we brief the Mayor.
So I assume you cannot brief us until you have that opportunity? And the information has been available since when?
Since August. And I'm astonished that now I'm hearing for the first time that you haven't received it. I received a direct request from the committee, from your subcommittee. I informed the Finance Director of that request and she gave me permission and authority to release it.
Let me put a little bit of clarifying information on the record. First, you are correct. I did seem somewhat incredulous at your statement. Now, we receive a lot of information. There's no question about that. Although, we actually generally don't get a ton of mail in August. And I was around last August. And if a disparity study had come to me, I think I would 482 2/25/03 - FY '04 OPERATING BUDGET remember it.
I remember all kinds of worthless pieces information that no one should be keeping track of. So if I got that, I think I'd pay attention to it. Secondly, if a Councilmember makes an individual request, regardless of what committee they're on, I would encourage you not to assume that that information is going anywhere other than to that Councilmember, regardless of what committee they're on. I'm on 10 committees on the Council and anything that I receive based on a personal request generally is not going anywhere, other than in my office. So if Councilman Ortiz, as is his right, makes a request for information, do not assume that it's going to the Committee on Commerce and Economic Development, of which I am Chair. Now, my recollection of last summer is that I think it was the US Commission on Civil Rights, didn't they have some hearings last year on this particular issue?
And there was a whole host of testimony. And I remember reading a Q and A back and forth that sounded like a combination of "Where's Waldo" and "Follow the Bouncing Ball," because no one at that time was willing to admit that they even had the study. The Law Department said they didn't have it. Public Property said they didn't have it. Procurement said they didn't have it. Finance said they didn't have it. No one was willing to admit they even had the dog-gone thing at that time, which is my recollection from reading the notes of testimony from what the US Commission on Civil Rights did. Is that your recollection?
No. Up to a point. We always acknowledged we had the report. And we acknowledged that it was a draft. It was not ready for public consumption.
Not ready for public consumption and possibly that you didn't have the authority to give it out; is that correct?
Because I got approval from 484 2/25/03 - FY '04 OPERATING BUDGET the Finance Director.
No, no, no. Now, I stand corrected. Because my assumption since -- Council President Verna was right. Just about after every budget hearing, several weeks or months, the request came. I forwarded the information that I received. And then when Ms. Janice Davis became the Secretary of Financial Oversight, I sought her approval to, at that point, relinquish it because it was no longer a draft.
I'll tell you what we're going to do. One, for the record, I don't have the study. I don't have it from you. I have what Councilman Ortiz gave me, which virtually seems like almost a bootleg copy. It's the difference between getting DVD firsthand or somebody taking a video in a movie theater. I'd like the DVD version with the 5.1, okay? 485 2/25/03 - FY '04 OPERATING BUDGET Second, we can have a hearing on the disparity study and we can have a resolution 4 introduced on Thursday in the Council authorizing the Committee on Commerce and Economic Development to have a hearing on that particular issue. But I think as Councilman Goode raised, it is not over here for us to make a process happen on a document that the rest of us don't even know exists. And if you're going to have new legislation or new Executive Order on this particular issue, it actually might be nice that some of the people who are responsible for what goes on in the legislative process might have a role in having a say on what's in the document before it comes over here. So we don't get to write Executive Orders, although some of us have been involved in that process and we've helped to shape and influence what an Executive Order says. We clearly are involved in the legislative process. So as the Councilman asked you the question, what's the Executive Order based on, or the next question would be, what would legislation be based on, I think it would be helpful if you dialogue with us about what a new Bill or a new 486 2/25/03 - FY '04 OPERATING BUDGET Executive Order would look like, because some of us have some experience in this. I mean, you may recall, unlike maybe a colleague yesterday, I think you actually know that the MBEC was created by the City Council.
Not by the Executive Branch, who fought it tooth and nail.
So we actually do over here have a little bit of institutional history and knowledge about that department, what it does, what it's supposed to do, and what it could be for the City. So if you're going to have new legislation or a new Executive Order, I'd only encourage you to have a conversation with some of us before you put something forward.
Councilman, you wanted on that point. I'd like the opportunity to come back because I still had on the third round or fourth round some additional questions.
Mr. Roundtree, is this disparity study a draft or final? 487 2/25/03 - FY '04 OPERATING BUDGET
Specifically within the Administration, who determined that it was final?
So you've got a final document, but it's not your final document?
They submitted a final submission, but is it your disparity study?
Yes. That's what we paid for. It's going to be what we paid for.
Do you take ownership of 488 2/25/03 - FY '04 OPERATING BUDGET it now?
When? When did you make that determination? Who made the determination?
Collectively I did based on a conversation I had with the Law Department.
So you made determination after consulting the Law Department that it could be final, that it is final and so it should be considered final?
I mean, we could go back through -- we have a copy of the record right now, 489 2/25/03 - FY '04 OPERATING BUDGET but in your testimony, probably about minutes ago, you referred to it as a draft again.
Of this year. Of this month. The Committee on Community Development -- and we sent letters out over a month ago to the Administration Officials. In essence, the resolution -- there are two resolutions, one by Councilman Goode on some aspects of training and employment that needs to take place. But the crux of the resolution that this Council has and Councilman Nutter's chairing is about the disparity report. The hearings are based on information that we got and we want to be able to perceive, to substantiate, enlarge, flesh out in the 490 2/25/03 - FY '04 OPERATING BUDGET disparity report. I sent letters out over a month ago. I get a letter yesterday from Ms. Davis, a two-sentence letter, "Unfortunately, I'll be unable to testify at the hearing on Thursday, February 27th due to a prior commitment. If I can assist in some other way, please let me know." The thing is that it would have been nice to know, Ms. Davis, a few weeks ago, because without the Administration's top leadership, it makes no 12 sense having a hearing. And the letter went out to your office and everybody else in the Administration way back. People understood that this thing was happening. And to receive a letter about an issue that is obviously of importance to this Council in this budget over the years and on the aspect of contracting and minority participation in this City, and then to receive a letter dated February 24th, a couple days before the hearing, that you're not going to attend, to me, is baffling.
I have to Chair the Pension Committee on that day. Mr. Roundtree and the Procurement Commissioner have been asked to provide 491 2/25/03 - FY '04 OPERATING BUDGET testimony and are preparing it.
Ms. Davis, you knew about this for a very long time. I know the Pension Committee, but I think this Council needs your presence at these hearings as we go because we want the policymaker, top policymaker next to the Mayor, to be here to answer and direct. With all due respect to Mr. Roundtree and the Procurement Commissioner, they're not at that level.
I felt because they were the subject matter experts that you'd be better served by them.
The subject matter expert is fine. But when we are looking to change policy and institute and draft legislation of this nature, when we request the policymaker within the Administration, not the implementors, because what we need to be talking about is public policy and what needs to be done and how we get it into an ordinance and legislation. I'm sorry. That is not good enough. And to do it just two days before the hearing is even worse. Because our staff has spent an inordinate amount of time seeking information, preparing for 492 2/25/03 - FY '04 OPERATING BUDGET this hearing, and it's really, really insulting to them and to us to be told in a two-page letter that, sorry, you know, can't be there. And with all due respect, the policy board you can meet, you can reschedule. With us we have to get together eight, seven people at a time when we're also preparing for budget hearings and all the wherewithal. You've got to understand when we have hearings and we request the top public policy individuals and administrators, we expect the top public policy individuals and administrators to be at those hearings. Thank you, Madam Chair.
You are welcome. Councilman Nutter, did you want to be recognized?
Yes, Madam President. Thank you. Let me make one more formal request, that if Mr. Roundtree or Ms. davis could have delivered over to us today, to the Council President, 17 copies of the disparity report, the full report, today. And if they can be brought to the President's office, I'm sure that we will all receive them. Is that 493 2/25/03 - FY '04 OPERATING BUDGET possible?
Secretary Davis, you made reference earlier to minority and female businesses. You talked about some of the outreach that's done, and I think you talked about some seminars and education and those kinds of issues. Do you find that those types of efforts need to be made for non-minority businesses?
We make those offers available to all small businesses and all disadvantaged businesses, whether they're minority or not. Any small business.
I haven't looked at the stats of who's accessing that service. At one point we had 41 firms to access the service. I believe the majority of them would have been women or minority, but not all of them.
Why do you think it is that some of those firms seem to have so much difficulty accessing the system, participating in the system and ultimately being successful in doing 494 2/25/03 - FY '04 OPERATING BUDGET business with the City? Why is that?
I think it isn't just in doing business with the City. I think it is doing business in general in this economy across the country.
Were the numbers better during the greatest -- as often was the story in the '90s -- during the greatest economic expansion in the history of the country during the Clinton years? I mean, were things better?
Things were better for minorities and women before Crosen. Once Crosen came into being, then things were dealt with very differently. So during that tremendous economic expansion there would have been some trickle down, but it was not what you would have expected in percentages nearing anything what was happening in the greater economy. And that's because minorities and women have traditionally been denied access to those things --
So it's not just about the economics. It's about opportunity. It's about the will to do things in a certain way.
It's about opportunity and the will to do, yes. 495 2/25/03 - FY '04 OPERATING BUDGET
And it's not just a government issue. It is the issue that the general economy does not provide that access, and so government is sort of viewed as the place of last resort.
Most governments aren't. Unfortunately -- or maybe fortunately -- there are impediments because there are bid laws that prevent people from just giving business. It has to be on a competitive basis. And without having something in place that allows you to do preferences --
Well, just for the record, I'm not advocating that we give the business away. You've got to perform. The way I deal with it is, if you're selling copiers and you tell me that the copier makes 60 copies a minute, then when you're making a sale, it should do 61. But the question is, did you have the opportunity to make the sale?
And we, through all of our programs, attempt to give access and level the 496 2/25/03 - FY '04 OPERATING BUDGET playing field. Leveling the playing field does not necessarily mean if someone is getting a different price from a supplier, that we can impact that. We can attempt to do what we can on our side of it, but we can't eliminate those environmental kind of things that might cause a minority or a woman or small business to prepare a higher bid. Their costs are higher very often.
On that particular point, do you think a bid preference program or legislative opportunity would be helpful? This is businesses across the board who are Philadelphia based is what the present legislation would provide, without any distinction between male, female, black white, tall, short, whatever.
That's a double-edged sword. And very often what we might find is that other municipalities implement a preference in their jurisdiction that would then be counter ours, so that our people may not get opportunities in other areas.
I hear what you're saying, but do think our folks are doing better in the counties as opposed to here? 497 2/25/03 - FY '04 OPERATING BUDGET
I understand. Well, I look at it, in terms of my perspective, it's not anti-anyone. It's pro the City and it's pro businesses here. If you want to have that opportunity, open an office and operation here and you can compete with everybody would else.
I think it's a wonderful opportunity for small businesses in the City. I just think we have to be cautious and careful because we could trigger a backlash.
I understand. I have two questions related to DROP and then I have some budget questions. You made a statement earlier. I took it down. Hopefully, I got it correct. Your experience was that there were longer tenured employees in Philadelphia City Government as compared to other governments?
What's the average tenure of a Philadelphia employee compared to other governments? 498 2/25/03 - FY '04 OPERATING BUDGET
I don't know exact average. But this is the first job I've had where I'm actually not the oldest person in the department. In every other occasion, I have very rarely had people with tenure of more than, say, years, because 7 government is not the end. 8
Ms. Davis, it's just a 9 recognition that you've continued to have a stellar 10 career and you've moved at a much younger age as compared to everyone else. You're a star. What do you expect?
Can you get information for us in terms of the people who are in the DROP; the number of people who are in, the ages just by grouping of the employees when they entered the DROP Program and their years of service? Now, I do want to -- you know, if you have enough time up here, you can find just about anything. So what I'd like to share with you, at least for the record, is the testimony from the DROP hearings.
Oh, absolutely. I'll 499 2/25/03 - FY '04 OPERATING BUDGET send it to you this afternoon. Tuesday, June 8, 1999, your predecessor was here testifying. That would have been Mr. Ben Hayllar. And it starts on , continues into . This is his testimony: "We are here to testify in favor of Bill 8 990288. This Bill would create a new option for our employees contemplating retirement." It was the purpose of the DROP plan.
That was my recollection. Essentially the DROP Program means Deferred Retirement Option Plan. It allows employees the option of accumulating lump sum pension payment that is awarded to him at the time they take their requirement or take their pension. And he goes on for a while. "There are certain disadvantages to this plan that we recognize. One, once an employee has declared, they must retire after the period. Secondly, the lump sum payment is taxable unless rolled over into an IRA. However, because DROP 500 2/25/03 - FY '04 OPERATING BUDGET plans are somewhat new in the pension business, as a precaution, we have set up this program as a three year test period. If after three years the Pension Board and its actuary find that the DROP pilot program has, in fact, cost the pension a substantial amount of money, it will retire the plan leaving those who are still in the plan to complete the program, but not allowing new employees to enter." I'll read you one last thing, which I think is interesting. Mr. Hayllar said, "This plan has been carefully designed so that it will not incur any additional costs to the fund." That was the previous sentence. That then led into, however, because DROP plans are somewhat new in the pension business, they've set up the three year piece. And, lastly, , Mr. Hayllar, "The biggest problem is that the existence of the DROP Program changed the average age of retirement of our employees. Right now, on average, our employees retire at age 61. If that age is substantially reduced, the Pension Fund will be making additional years' payments, therefore, costing it money. We believe that in the end, with the DROP Program, 501 2/25/03 - FY '04 OPERATING BUDGET that basically the 61-year average retirement age will be withheld, but that's our fundamental concern. It could alter the retirement pattern. We don't think so, but we want to be cautious about this." This is in a Q and A between --
That is, in fact, what did happen. People are retiring before that.
That was in a Q and A between Mr. Hayllar and Council President Verna. But you'll get us the additional DROP information, right?
Thank you. There were a couple of those little situations where things were promoted one way and turned out another. Can you tell me why on of the budget book, I'm seeing here a contract for $1.2 million for writ service for municipal courts. Why are we paying that?
Let's talk about on 2/25/03 - FY '04 OPERATING BUDGET 820, contract with the Redevelopment Authority, $150,000 to Housing with Dignity Admin. Costs?
That was asked before and we said we were going to get you a response.
Okay. Sorry about that. And then on , there's a bunch of folks who are in the FY '02 actual obligations that don't show up in '03 or '04, one of which I'm certainly particularly concerned about. But if you have in line items number 505, Fund for Philadelphia, $89,000, Freedom Theater, Mann Music Center, Cultural Fund, Sports Complex, Special Services district. Are these being funded somewhere else in '04, or are they, in fact, not being funded at all? Did they just end in some other parts of the budget?
For some of them, they wound up elsewhere in the budget. For some, they were one-time things that don't repeat.
For instance, the Special Services District is part of the stadium deal. There was an agreement for a one-time payment. So that's what's reflected here. 503 2/25/03 - FY '04 OPERATING BUDGET
Well, it's not my area and I think it's covered by the President. But just to be nosy, the one time payment of the million dollars, is that supposed to cover a certain number of years, or is that funding being supplemented by private parties?
After the first year. Mann Music Center, I thought there was somewhat of a multi-year agreement.
Yeah. That will wind up getting funded somewhere in the budget each year. It might not necessarily be here. It might wind up being in one of the departments, but it will be funded.
Okay. As you know, I'm particularly concerned about that.
If you could let me know where else it's going to show up, I'd like to follow that one. Lastly, I'm certainly familiar with Tentella (ph) Associates. I didn't realize that they're 504 2/25/03 - FY '04 OPERATING BUDGET apparently under contract to us to deal with, I'm assuming, L&I, bizarre situations out in the universe?
If I may, Councilman. Tentella is on retainer to provide engineering services in relationship to property loss or property damage that is caused by a City operation. The Water Department, L&I, they're coming in, they're making the determination, as in your district, with the water. They're making a determination on the properties and assuring us the capability of either repairing them or looking at long term loss.
You're talking about from the most recent water main break?
And I believe they have also done a study regarding the sinking homes in Eastwick?
That is correct. And to the best of my knowledge, all of the issues coming with structural questions and private residents has been handled by Tentella.
I'm familiar with that. 505 2/25/03 - FY '04 OPERATING BUDGET I certainly have no issue, no argument with their work. I'd only -- this may be more on the realm of possibly a philosophical concern. I know sometimes they're brought in seemingly as an independent entity making an assessment where there are disputes between situations between citizens and the government. I'd only raise a little bit of a red flag on how do you maintain completely this sense of an independent assessment that the taxpayer is trying to figure out, you know, kind of, where do I go from here? And the people who are doing it are really under contract with us. I don't know that that's your farthest arms length transaction.
The best situation in the world is to be able to tell you that they're perfect in every respect. I can't necessarily say that's a fact.
I'm not questioning the integrity of their work. I'm just saying that, if I have to sit with a constituent and say, well, this company says that your place is X or it's not the City's fault. And they're under a universal contract to us, it might raise a little bit of 506 2/25/03 - FY '04 OPERATING BUDGET concern in the taxpayer's mind as to, am I getting the real deal or am I getting something else.
What Tentella is doing is that they're setting a dollar figure for repair work or for the amount of damage that was done. Each individual homeowner has their own home insurance, and hopefully renters have renters' insurance. The responsibility firsthand is for their insurance company to come in and make a determination, and basically Tentella is a cross reference factors.
I have no dispute. I have interacted with them on a number occasions. Last question. , Madam Secretary, the line item 250, to be selected, management information consultants; is that for Finance or is this MOIS issue?
That's with Finance. It's related to our financial systems. It's related to the financial systems.
These contracts, mostly covering pages 819, 820, we talked about 821, these 507 2/25/03 - FY '04 OPERATING BUDGET are basically professional services contracts of a no bid nature; is that correct?
And do you usually know pretty much who you want, or do you go out and solicit a few people, or you just say, hey, we want XYZ service and we're picking so and so?
We may do an RFP, RFQ, even an RFI or have experience with someone that we've used in the past. So it's a wide variety.
You're welcome. Councilman Rizzo, do you have any questions?
I have a quick question for Risk Management. I think it would be interesting just to take maybe two minutes to explain, now that this storm has passed, the roads are in terrible, terrible condition. And you just mentioned about claims against the City. What rights does a visitor or a constituent have if their vehicle is damaged? And what should they do in the effect they have some relief? And what I'm seeing more so than potholes, 508 2/25/03 - FY '04 OPERATING BUDGET I'm seeing restoration by the Water Department, by PGW, by the other utilities, that are not being done properly and causing significant damage to vehicles. So I'd like to know from Risk Management what can we tell our constituents on how to deal with these issues?
I think the first thing that has to be understood is that there's a torts claim act involved and there's some legal issues from the standpoint of law rule and regulation. And that does cause me to say that there's no right answer and there's no wrong answer. The best thing for a constituent to do is, if they feel that they've been wronged by a City action, to submit a request for claim. My people and my organization are there to find out and rule out what is fact and what is not fact. If they are entitled to something, they should be reimbursed. If not, they should not. I have to do it on a case by case basis. That is because of the torts claim. There are times in which a municipality is definitely legally responsible for, say, a stop sign not being in place. And there are other times that they're not. It depends on numerous circumstances. 509 2/25/03 - FY '04 OPERATING BUDGET
Let's create a quick situation here. I don't want to take too much time on this. A person hits a pothole. It's right on Germantown Avenue. It might be a state highway. I don't know if that changes things. It wasn't there on Monday, but today it's there. They damage the vehicle, blow out a tire, bend a wheel. Do they go to their insurance company, and then does their insurance company come after you, or does the insurance company not even waste their time, just pay the claim, if there is a claim?
In this circumstance, each individual has to have their own car insurance. Their deductible is the only thing that we're looking at, which would be, if the damage to the car is $600 and their deductible is $500, the City might have a liability at $500. But directly for a pothole, what the City's responsibility would be, have they used the amount of consideration to get the pothole filled? Were they aware of the pothole being there? Was there negligence on the part of the City for not taking care of something that they were aware of? Those would be the criteria as to whether or not the City would hold liability. 510 2/25/03 - FY '04 OPERATING BUDGET
Well, since you're new, I've been talking for years about the fact that I don't think we have good coordination with the utilities. I'll give you an example. On my way home last night, about o'clock 7 -- about two weeks ago a Water Department 8 excavation, a water leak -- last night we came home 9 and there was a hole where, in fact, the Water 10 Department never backed filled with black top. They just threw the dirt back in the hole, and whatever was broken up, back in that hole. Now, a week goes by, the rains, the mud, and everything has gone. There's a hole in the center of Chestnut Hill Avenue just west -- and I'm just using this an example -- of Bethlehem Pike that has got to be at least a foot deep. You hit that with any -- I don't care if you even have a Hummer. The Hummer is going to stop humming. That's been like that. I reported it two weeks ago to the Municipal radio. I reported it to the gas company. The dispatcher last night on radio said he was surprised that that wasn't taken care of because he personally reported it two weeks ago. My point being is that we are putting people 511 2/25/03 - FY '04 OPERATING BUDGET in situations where -- the Police Department, they don't have a barricade to go out and put on a dangerous highway condition. They have these eight foot wooden horses that don't lend to protecting the community. In this particular application it wouldn't work. Somebody's really got to take this on and figure a way that, if there is a dangerous highway condition in the County of Philadelphia and the City of Philadelphia, that we have a way of either making it safe or putting a traffic cone at that location. The dispatchers ask the Police Department to do it. The Police Department says it's not their job. It's terribly confusing. Forget the aggravation you have. But I can imagine having a nice, brand-new vehicle, and coming up Chestnut Hill Avenue last night, hitting that pothole and destroying the front end of that vehicle unnecessarily because someone in that case was negligent. There's obviously a break down in the Water Department 's system that could allow even during this inclement weather for a pothole or an excavation not to at least be fixed temporarily. Forget the permanent repair where it looks all nice and pretty. I'm talking about just 512 2/25/03 - FY '04 OPERATING BUDGET temporarily to make it safe. So I would hope that you would really review this entire process because it really upsets me when I see a poor person, their first brand-new car, sitting there in disgust because they hit a pothole. And, you know, the troubling thing is, they don't know that it's been like that for a week or two weeks, but many of us that ride by those potholes know that they've been there a long time and that poor person happened to be the victim of that particular situation.
Well, I can let the Members of the Council know and rest assured that I was brought on board with not just the background in risk management, but a large background in safety and safety management. That's prevention. That's something that I'm working now with the department heads. I've been working with Water and with Streets and with Fleet in order to come up with a means by which we identify high hazard issues and correct them. It's doable. There's no question whatsoever. It's doable.
I walk through the City and I wish I had a magic wand and I could get all these things taken care of that I see. And everyone 513 2/25/03 - FY '04 OPERATING BUDGET in this room has probably seen it. Where you have an inlet that is completely missing at a corner, especially in some of the inner-City neighborhoods, where, my God, if at night you're walking and your vision isn't good and it's dark you can fall right down one of these open inlet that's totally missing. My point being is that, if I saw that in let and called even 911 and told them about this dangerous condition, I guarantee you, I'd have to say, it's Councilman Rizzo, to get it taken care of. An average citizen would not get any response from that call. The Police Department's got a hole with this big eight foot barricade around. It's a circus the way these things are dealt with. I hope since you have a degree in safety or a background in corporate safety -- and so do I. I told you that when I talked to you on the telephone. That it is really upsetting to me to see people injured by facilities that aren't well maintained by the City of Philadelphia.
I believe that the resources are already in place. I think it's a question of communication. That's where I will address it first. 514 2/25/03 - FY '04 OPERATING BUDGET
Well, in all fairness, I do my little speech telling people that I've talked about this last year. I talked about this last year. You weren't here. You're the new guy. I talked about it the year before and the year before that. Hopefully, maybe because of you I won't talk about it next year. Thanks.
Thank you. Are there any other questions from Members of the Committee? (No response.)
Seeing none, thank you very much. At the request of the stenographer, we're going to recess for 15 minutes. (Brief recess.)
The Committee of the Whole is now back in session. We will now hear from the Revenue Department. Thank you for your patience. Please identify yourself and proceed with your testimony. 515 2/25/03 - FY '04 OPERATING BUDGET
Good afternoon, President Verna and Members of City Council. I'm Nancy Kammerdeiner, Revenue Commissioner, and I'm pleased to be with you today to discuss the proposed Fiscal Year 2004 Operating Budget for the Department of Revenue, including the Water Revenue Bureau. With me today is Marlene Duley who has recently been appointed as Deputy Revenue Commissioner for Water Revenue.
You have my written testimony, so I'll offer some highlights at this time and then we'll be happy to answer any questions that you might have at the conclusion at my testimony. The General Fund appropriation request for the Department of Revenue totals $18,177,343. 3 million is for personal services and supports 267 full-time positions. It provides for the 3 percent wage increases effective 12/15/02 and 7/1/03, increments in longevity payments due to employees and the estimated cost of lump sum payments due to employees who will be retiring under DROP. The department is requesting just over $4 516 2/25/03 - FY '04 OPERATING BUDGET million for purchase of services and $784,000 for materials, supplies, and equipment. 5 percent for the general budget reduction assigned to the Department. In the Water Fund, the Fiscal '04 appropriation request totals $25,380,382. 8 million for payment processing and outgoing mail services that support the bureau. $11,217,949 is in personal service and supports 245 positions in the Water Revenue Bureau and 44 full-time positions in payment processing and outgoing mail center. And again, this amount for personal services includes the wage increase increments in longevity payments that are due to employees. We're also requesting $12,698,633 for the purchase of services; $1,453,300 for materials, supplies and equipment; and $9,500 for meritorious awards and contributions. The increases over the Fiscal '03 estimated obligations in classes 200 and 400 will provide additional funding for collection agency contracts 517 2/25/03 - FY '04 OPERATING BUDGET for the water side of the operation, support the implementation of a new customer service information system, and provide hardware and communications required for this software application. The new system, utilizing relational database technology, will provide a modern platform for customer collection and billing and is also expected to enhance customer service delivery by automating processes that are now paper based and manual. I'd like to touch on just a few of the Department's efforts to maximize the collection of revenue and improve services to taxpayers. Using federal tax data from the Internal Revenue Service, we've developed a variety of discovery programs to identify new taxpayers who are liable for school income tax, business privilege tax, net profits tax, and wage tax. These programs increase current revenue in Fiscal 2002. It was about $6 million that they brought in, and they have a long-term positive impact on revenue. Building on the relationships that we developed when the department supported the Commonwealth's homeowners rebate program, revenues initiating a cooperative compliance and discovery 518 2/25/03 - FY '04 OPERATING BUDGET program with the Pennsylvania Department of Revenue. This initiative, coupled with an E-Government initiative that will provide a link between the Commonwealth of Pennsylvania's on-line business registration program and the City's on-line business registration will lead to the early identification of those doing business in Philadelphia that are not paying business taxes in Philadelphia. Also as a result of this relationship with the State, senior citizens from Philadelphia can now apply for the state real estate tax rebate without a paper real estate tax receipt. We are providing a data file that the State can use to confirm taxpayer eligibility. This is a win/win/win. It makes it easier for the taxpayer to file for the rebate, expedites the State's review of the application, and saves the City from printing and mailing thousands of receipts. The Water Revenue Bureau has continued to focus on collection efforts to pursue delinquent customers and to better manage accounts receivable balances. This is often measured with the current collections rate, customers that pay within 30 to 120 days. 8 percent in Fiscal '03.
Similarly, we look at the decline or the rise, if that would be the case, in accounts receivable balances. 6 million in Fiscal '02. That's a percent decrease and is the result of 10 the effective use of collection agencies and Law 11 Department enforcement action. 12 As I mentioned before, the Water Revenue 13 Bureau is now preparing for the implementation of a 14 new customer information system. It's anticipated 15 that the initial phase of this system will be in 16 place by the end of calendar 2003 with 3 additional 17 phases in place within six months thereafter. 18 Before I conclude, I would just like to 19 mention a couple of our E-Government applications 20 that are being implemented. 21 Tax forms are now downloadable from the Departments's website and most can be completed on-line with edits before being printed male in. New businesses can now apply for a tax account and a business privilege license with a 520 2/25/03 - FY '04 OPERATING BUDGET single application on-line. Earlier this month, we also introduced the electronic filing of wage tax reconciliation and school income tax returns. During fiscal '04, additional tax returns will be made available for full electronic filing. Tax regulations and other tax information are available for reference on-line, thus giving tax practitioners and individual taxpayers an opportunity to obtain detailed tax information easily. We continue to work to enhance and increase the things we offer on-line and would welcome your feedback on this. This concludes my formal testimony. And as I mentioned before, we're now available to answer any questions you may have.
Thank you. One of the initiatives included in the budget is the formation of the 311 call center. How will your department be impacted by this initiative?
We know that the original plan or initial plan calls for 11 of our staff to be included in the 311 call center, and the budget that's before you shows a decrease in 11 positions 521 2/25/03 - FY '04 OPERATING BUDGET and the related staff costs. We're just at the beginning of the process of getting involve in, in working out the arrangements on that, and so are not in a position to tell you exactly how that will impact us. We do expect that a lot of the initial calls that we get in terms of what are tax due dates, I haven't gotten my bill yet, that kind of call will be handled by the 311 call center. We would expect --
Are there any other types of calls that will be handled by that center?
Since we're just in the early formulative stages of the process for that, I really can't tell you what calls will go to 311 and which calls will remain with the department, other than to say that a complex call dealing with the resolution of details on a taxpayer's account would still need to be resolved by someone who has information on the details of the tax law.
The 311 call center will be used to handle those calls that can be easily scripted so that there is a very definite yes, no, where you have frequently asked questions those are the type that will stay with 311. Any that require more 522 2/25/03 - FY '04 OPERATING BUDGET detail will be routed by that 311 operator to someone within a department or within a specialized call center who is equipped to handle those types of questions.
Do we have an indication when this would be implemented and how many staff would be required?
It will be implemented during FY '04. The first phase of it should be in place by probably August. In terms of the staffing pattern, we have a report on that and we'll send that to you so you can see the exact numbers.
I would just like to clear this in my mind. I remember years ago we had another number. Councilman Rizzo, I think I had mentioned it to you. Was it 231-3131?
It was supposed to be non-emergency. 523 2/25/03 - FY '04 OPERATING BUDGET
All non-emergency calls should come in through that number, yes.
Again, I believe the questions were asked when you folks were in here a week or so ago. I don't really know what you're trying to accomplish here. 311 is a very expensive undertaking. The fixed charges to a establish a 311 system, I don't get it. Most people who are home can call a 7-digit phone number, they have unlimited dialing in the local calling area. What are you trying to accomplish, so they don't have to dial the extra digits? What I would like you to do -- most people at home have dialers now on their telephones. If you want to make it easier for them, just tell them to program 3 into their dialer and call 686-1776. I think you'd be saving this Administration a lot of money in eliminating the Verizon charges each month 524 2/25/03 - FY '04 OPERATING BUDGET for the maintenance and the engineering and -- you're duplicated basically the 911 system, which we all know is a very, very expensive infrastructure to manage. I'm not going to be supportive and I'll be a critic of this Administration until I hear how much we're going to pay up front, what the monthly charges are. From what I understand from some telecommunication executives, this a very, very expensive undertaking and maybe an unnecessary undertaking. I don't know what the requirement is to have people call 311. We've had 686-1776 for a lot of years, and that number can still go to the same call center without all the overhead and expenses of a 311 system. I just don't get what this is all about.
The primary objective of this initiative is to consolidate our disparate centers so that now, for example, people would call the Streets Department with a question or L&I and not get satisfactory answers. We want to have one central location people can call for that kind of information where people will be satisfactorily trained so that you can call in and actually get information. 525 2/25/03 - FY '04 OPERATING BUDGET
Mr. Dubow, I'm not questioning that concept. The concept is fine. It's what you're trying to do to accomplish that goal, to establish a 311 system. A 7-digit phone number with an area code of 215 for millions of dollars less can go to the same -- when you call a public utility company, you don't call 311 or 611 or 411. You don't need a 311 number to move to accomplish what your goal is. The existing 1776 number can accomplish that, and that number can be routed to any call center that you develop. As a mater of fact, people with Water Department expertise, when the recording comes on, push 3 for water, goes to a representative that has expertise in a particular discipline. But spending -- and I don't even know how much, but I can bet -- and those numbers that you threw out before were a low ball on the set-up cost for a 311 system and then the monthly Verizon charges that are associated with maintaining that system.
I thought we said we were going 526 2/25/03 - FY '04 OPERATING BUDGET to get back to you.
No, you threw out a number. As a matter of fact, it was even in the testimony, a million-something. You even told me that you had an initial estimate on that.
I told you we were going to supply you that information, which we're still going to do.
It amazes me that you're talking about setting up the system you don't even know what it's going to cost.
What I told is we have a report that I would get you. That report lays out the cost.
Well, you're telling us it's going to be implemented in August. It sounds to me as though you're saying, "We're going to do this because it's sexy and it sounds good no matter what it costs.
No, why we're doing it is because it will be an improvement in service and because the report that we have which we'll show you, shows that there are savings that can be generated.
I can't imagine any 527 2/25/03 - FY '04 OPERATING BUDGET savings being generated on spending a big, big installation cost and a monthly charge to maintain a 311 system where you can accomplish all the things that you want to accomplish with a plain old phone number.
I would like to indicate that the Five-Year Plan states that the start-up costs are estimated to be $540,000 and an annual operating cost for a 24-hour contact center with 40 agents are estimated to be $1.4 million. The plan assumes a total savings of $4.7 million through FY '08.
I'm not questioning your 24-hour call center. I'm not questioning any of those good things. I'm questioning one item in the whole scenario of how our residents communicate to 528 2/25/03 - FY '04 OPERATING BUDGET City Government. Certainly a 311 number will lessen the number of digits to be dialed. But if you back the 311 number out of this entire scenario, let me know what the cost will be without the 311 factored in and using the existing lines that we already have to support this facility. That's what I want to know.
Thank you. Ms. Kammerdeiner, what services does Mara Management (ph) provide for 1.1 million? It's on -43 of the detail. And can you tell us why these services could not be provided in-house?
Mara Management provides support for our existing Revenue computer system and for the development of enhancements to that system. About half of that $1.1 million is for the development and conversion of our stand-alone real estate tax system from being a stand-alone system to the integrated taxpayer information processing systems known as TIPS. They provide analytical and programming support to supplement the support we get from the Mayor's Office of Information Services. 529 2/25/03 - FY '04 OPERATING BUDGET
On -53 of the detail, you are requesting $390,000 for a collection agency consultant to be determined. What is the purpose of this request?
This anticipates having an additional collection agency established for the Water Revenue area for collection of water and sewer fees.
Right now we have three. And this was drawn up with an expectation that we would be adding a fourth to that. I don't know that there's anything else that we could add to that specifically.
Is that just Water or is it Water and Revenue? How about the real estate?
This is in the Water Fund and this is for water collections. And I hasten to add that with any of these collection agency contracts, we don't spend the money unless they actually collect. They are paid on a percentage of the collection. 530 2/25/03 - FY '04 OPERATING BUDGET
There are different rates for each of the contracts. I can get those rates for you. But they're in the vicinity of percent. 7 But I will get the specific information for you on 8 each one of them. 9 These were selected as a result of an RFP 10 process, and the collection agency contracts include 11 both tax and water and sewer collections for basic 12 collections in addition in the Water Fund you have 13 collections for a program called the Utility 14 Services Tenants Rights Act, USTRA, and they are 15 there are separate activities for collection under 16 that Act because of the additional services that 17 need to be provided to tenants when their landlord 18 fails to pay for the water. 19
I don't have that exact number with me. I will get it. We generally collect about 89 percent to 90 percent of the year's amount in the tax year.
In the current 531 2/25/03 - FY '04 OPERATING BUDGET year?
In the current year. And then in the next several years three, four, five years, we bring that number up to 95 to 96 percent of the amount that was billed. But to tell you the cumulative amount, I will have to get an update on that.
So would you say that our collection rate is much better than it has been in the last several years?
I don't whether I would use the word "much," but it is improved. I think we are coming up very slightly in those percentages but not by a dramatic amount.
On -53 of the detail, you're asking for $5.3 million for a CIS Project. Please enlighten me. What is a CIS Project and what is the funding for?
I reference that in my testimony. That's the Customer Information System for water billing and collection. And it will basically replace a 25-year-old billing system that's currently being used for producing water bills, a system that is an outdated language, very 532 2/25/03 - FY '04 OPERATING BUDGET inflexible, creates lots of problems in terms of changes, and has been in need of replacement. This will be a modern relational database. We're working with MOIS and with the Office of Director of the Finance in determining the full parameters of that system and the selection is being made in conjunction with them for two reasons: One, because that's where we get our guidance on technology; secondly, because this will need to fit into an enterprise wide system that will be coming later on. But right now we're concentrating on the customer information and billing and collection activities for the Water and Sewer Fund.
Thank you. The Chair recognizes Councilman Goode.
A few quick areas of questioning regarding the CDC Tax Credit Program and the Job Creation Tax Credit Program and the Discovery Projects. First, in terms of the CDC Tax Credit Program, how many agreements have been signed to 533 2/25/03 - FY '04 OPERATING BUDGET date?
I believe it's that 4 have been signed and two are with the business 5 partners for their signature, as we speak. 6
It's Beach and -- they 9 were the last two that came in. I will verify and 10 tell you exactly. 11
That sounds like the right 13 two, but I will reconfirm that.
Thank you. Did you issue an annual report related to the CDC Tax Credit Program? According to the legislation, it was supposed to be a review of experience of the program over the year issued by December 31st.
I have to say I failed to do that. And I thought that this was in the start-up period. I thought that that would begin after the first full year of operation. I apologize if you were expecting a report during this start-up period, but I was expecting to file the first report 534 2/25/03 - FY '04 OPERATING BUDGET next year.
Actually, can we have a report for last year just dealing with the whole selection process? I think it would be helpful.
Not a problem. I misread what was anticipated there and expected to do the first report after the first full year of operation.
Okay, thank you. Regarding the Job Creation Tax Credit Program, what's the status of it?
The regulations are on file in records as we speak. I think they went in about a week ago, and they sit for 30 days before they're official. We've referenced the Job Credit Program in our business tax forms with the instructions, and there's information on the website in reference to the job credit, but the full regulations are not yet fully official. So far as I know, there haven't been any requests for a public hearing on those. So assuming that that stays the case, they would be in effect in mid-March.
And what was the reason for a delay in creating the regulation? From what I've read, they basically were based upon the bill 535 2/25/03 - FY '04 OPERATING BUDGET and the regulations can basically be found within the bill.
Okay. Regarding your discovery projects, identifying new taxpayers through federal and state data, my understanding that people who know they're earning money and don't pay taxes on it, people who run businesses and know that they are earning profit; but for something like the school income tax, do you think that there is enough notification that tax exists in terms of stock dividends and unearned income out there or are we actually catching people with something they actually don't know they're guilty of?
We get a lot of complaints from people who feel that they didn't know about the tax. We've tried with our literature, we take out ads in community papers each year. We took out ads he earlier this month. I believe they were all published in the week of February 5th in probably a dozen newspapers; our Plain Talk Tax Guide, which is available to individual taxpayers. And certainly, 536 2/25/03 - FY '04 OPERATING BUDGET I'll make a pitch for it. If any Member of Council would like more of those for their offices, we have some available. We talk to practitioner. We try to get the word out about the tax, but it's one that people just don't seem to know about.
Based upon your marketing efforts, have you found the complaints are going down or are the complaints steady?
I really don't have a good measure on that. I know we still get complaints from people who feel that they were totally unaware a tax and say they would have paid had they known about it. I would say in terms of the number that come to me, it's somewhat lower than the number of complaints I got a year or two ago; but they're still fairly steady.
I was made aware of a specific constituent situation in Councilman's Clarke's district. One of his constituents, which is also one of my constituents since I'm at-large, a teacher who probably wouldn't mind paying the school income tax happened to have unearned income or stock dividend income, but through discovery they found that she owed for five years and she was hit at 537 2/25/03 - FY '04 OPERATING BUDGET once. And that's not particularly fair. And that compounded by real estate issues. Is there a way to address this through some more aggressive marketing? Maybe by marketing the program through real estate tax bills or sending it with a water bill. Is there some other way that you can market the fact that this is another tax you may have to pay?
I believe a few years ago we did put a flyer in with water bills, and it didn't really generate much change in terms of the number of filers. A number of years ago, the Department sent out thousands and thousands of forms and actually then we got complaints from people who said, "Why are you waisting City money sending me this form when I don't have this kind of income?" Certainly, we're open to your suggestions and ideas. We are looking constantly for new ways of getting the word out to people who might actually have this type of unearned income and so certainly would welcome your suggestions in terms of improving the marketing.
Do you keep a record of the level of complaints, how many complaints you 538 2/25/03 - FY '04 OPERATING BUDGET receive per year related to that particular tax?
Not in that manner, no. 4 Most of the ones who complain are the ones we've found in discovery and who are complaining because they've now, as you pointed out, gotten a bill for multiple years.
So is there any way to address that to be a bit more fair to them.
We're already waiving penalty and reducing the amount of interest that they pay if they cooperate in terms of a filing. And I'm not sure how much further we can go on that.
Are you suggesting that they position for that or do they have to know to petition?
We offer that to them in the first instance. And if they pay or enter into a payment agreement at the outset, we waive the penalty.
You're welcome. The Chair recognizes Councilman Nutter.
Good afternoon, 539 2/25/03 - FY '04 OPERATING BUDGET Commissioner.
Good afternoon, Ms. Duley. Nice meeting you. Commissioner, just a couple items. Why don't we start with the testimony and then I'm going to go to the budget book. In the next to last paragraph of your testimony with reference to the 267 full-time positions, and then you go on to say, "49 less than the budget supported in FY '03." Of the 49, how many are actually filled positions and how many are vacant?
They were all filled at one time, but some of them we've lost through attrition, people who've retired or who have moved on to other positions and they weren't refilled during the course of Fiscal '03.
They were not refilled. So the attrition has taken place over the course of 540 2/25/03 - FY '04 OPERATING BUDGET Fiscal '03, and are of those are the positions that will be transferred to the new 311 call center.
So your 49 fewer 5 positions are not as a result of any layoffs or your 6 department, at least, participating in the 7 much-discussed group of 50 who are being terminated 8 from the government? 9
That's correct. Some of 10 these will actually be attrition during the early 11 part of Fiscal '04. Some of them will still be on board in July, but we know we have about 8 or 10 people who are in the early portion of drop. And so basically we will have more people on board on July 1 then that 267, but the budget funds 267 over the full year.
Thank you. Can you give us some relatively up-to-date information regarding wage tax collections, year to date or let's say if you have first half of the Fiscal Year compared to first half of the Fiscal Year '02?
I don't have the numbers here with me, but in general I can tell you that by the end of January, if you compared -- so it's 541 2/25/03 - FY '04 OPERATING BUDGET slightly more than half the year.
Right. In both Fiscal '03 as compared to Fiscal '02, we showed growth of about 1.8 percent in that time frame. I will be supplying to Council this week in accordance with the legislation on the wage tax reductions a letter that compares the Fiscal 2002 collections to Fiscal 2001, and we'll use that to establish the rate for real estate tax collections for Fiscal '04.
It's due by the 1st of March, so I expect to be conveying it to you this week.
Now, I'm assuming that you must get these reports from the City Controller, these monthly economic snapshot --
Well, we should talk to him about that. This report shows -- he runs through a 542 2/25/03 - FY '04 OPERATING BUDGET variety of different criteria, unemployment, city tax collection, sales, wage, office availability, and a whole host of things. They are certainly interesting, and I'll encourage him to make sure that you get them.
I'm assuming this is somewhere between Revenue and Finance. Who is responsible in the government for on a regular basis reviewing and thinking about tax policy in the City?
It's a combination of people and I think really center through the Budget Office and the Office of the Director of Finance. And we participate from Revenue in terms of supplying some raw data in terms of what the impact would be and assist with some of the analyses on impact of changes both in the economy and in terms of any impact of changes in rate or other things that might change in legislation.
Tax rate. If there would be a proposed tax rate change, we assist in the analysis on that.
Tell in the course of the 543 2/25/03 - FY '04 OPERATING BUDGET past year or so of any tax policy changes that were proposed by this group. Is this a formal group? Is there a tax policy group?
And tell me in the course of the past year what the group came up with and recommended either to the Mayor or to the Council about changes to the tax policy?
In the last year we've primarily been looking at the impact of things that had been proposed either at the State level or here in City Council in terms of what the costs and impact would be.
Well, I understand that. That's more a reactive posture. I'm talking about a proactive --
And in addition to that, attempting to see what the best mix of taxes might be going forward, particularly as it relates to statewide tax reform for schools. And I would really defer to the Director of Finance or the Budget Director on that because they've been involved in it in more detail than I have. 544 2/25/03 - FY '04 OPERATING BUDGET
Well, I'll catch up with them later. I think both of them are pretty much tired of me at the moment. I'll get back to them another day. Let me ask this question: Who works with citizens, if anyone, on making sure that the citizens of Philadelphia are able to, as is their right, take as much advantage as possible of the various tax programs or tax abatements or any of the other kind of general tax reduction programs that the City may have? Is it any one person or unit or department's responsibility to work with citizens in a way that helps to ensure that they get whatever abatements they should get for improvements to their home or that they take advantage of the earned income tax credit, depending on their income or other -- I mean, we have easily half a dozen, possibly outwards of 10 or so different abatement kinds of programs that basically help people save money. Is it anyone's responsibility in the government to actually work with citizens to make sure they're paying what they're supposed to pay but basically not paying more than they should pay?
You're referring primarily 545 2/25/03 - FY '04 OPERATING BUDGET in your question to individual taxpayers as opposed to businesses and seem to be referring primarily to the real estate abatement programs that are run by the Board of Revision of Taxes. I say "run by," they're the ones who work with taxpayers who apply and identify whether or not they're eligible and, if so, what amount of abatement they might be eligible for. And I would have to defer to them in terms of whether they provide any educational programs or do anything in a consolidated way. Out of Revenue, we are more likely to be providing assistance to a business taxpayer. We provide taxpayer assists for a business that has a problem or question regarding their business tax returns. We have staff, our technical staff, who will visit with practitioner groups or individual organizations. I know we've gone to Board of Realtor training sessions and a number of other programs like that when people request our input and assistance. And we're more likely to be providing from our Department assistance to businesses.
And I'm glad that we're providing those kinds of services. I'm primarily concerned about individual citizens and their tax 546 2/25/03 - FY '04 OPERATING BUDGET situations involving the City and making sure that people have as much information as possible that they can go somewhere and sit down with someone and go over all their different situations and make sure that if there's a program that helps them that someone would know about it and be able to point them in the right direction.
To an extent, our customer service area in our taxpayer services area will do this when an individual comes in and has a question or a problem, but it's not in the manner that you're suggesting.
All right. There are some other cities across the country that have essentially taxpayer assistance offices. They partner with non-profit organizations or professional accounting groups and legal services and the like, and it's a place where people can go and actually kind of figure out their situation. I just wondered whether anyone in the government had that responsibility.
Not at this point. It's an idea that is worth exploring.
Thank you. I appreciate 547 2/25/03 - FY '04 OPERATING BUDGET that. I don't get that often, so I take it where I can. Let me ask you about -53 in the budget book. This is under Water Revenue Collections. I see we work with a number of collection entities. Similar to the question I asked Ms. Davis, these contracts are professional services contracts?
The 250 contracts are services. The 251s are also professional services but with a computer orientation.
The 250s, and most of them are in the collection area, so these are professional service contracts and generally are they no bid or --
We do an RFP so we request proposals and review them in terms of the ability of the firms to carry out the tasks that have been outlined and also the pricing.
Right. How much they would propose in terms of the rate.
And it appears that you're anticipating possibly either bringing on an additional firm or just having some money set aside 548 2/25/03 - FY '04 OPERATING BUDGET for one of the others. The last item in the 250 section you have, to be determined and a collection agency consultant for 393,000.
There is a particular firm that I'm familiar with. It happens to be African American owned, National Allied Bureau. Do you know if there's ever been any contact or conversation with that firm about doing business with the City?
They were a sub on a contract several years ago. And I believe they've had direct contracts with the Law Department. The Law Department also has collection agency services, and NAV who is involved in contract work for them.
Now are you directly involved in determining who the contracting agencies are?
Would you mind reaching out to that particular firm in the course of the next fiscal year?
We don't expect to be 549 2/25/03 - FY '04 OPERATING BUDGET going out with another RFP until about a year from now, but we can certainly include them on our RFP list at the time we're going to do that.
It's really an expectation that one of the other firms might exceed the amount that's already identified for them.
But if there would be an opportunity, should that change, we can certainly include anyone who is in that business. They probably are already on our list because of their prior association.
If you could follow-up on that, I'd appreciate it. Thank you. Thank you, Madam Chair.
You're welcome. The Chair recognizes Councilwoman Tasco.
On the 311 call center, could you tell me again what the objective for the call center and what is it envisioned to do?
I guess the best way for me to describe it, and I have to say that I'm just 550 2/25/03 - FY '04 OPERATING BUDGET really getting involved in the planning on this and perhaps a bit of a novice in terms of the actual description, but the idea or the concept behind a 311 call center is to give citizens one place to go to quickly access information about the City, to have their questions answered, you use software with prompts that give the operators an ability to answer basic questions about a variety of City services and to provide short and simple answers to the typical questions that citizens will have. If it becomes more complex, then that issue needs to be forwarded on to subject matter experts. Some of them will be within that main call center, in other cases they will be located in the departments where the full subject matter will be addressed.
Has there been an analysis of the kinds of questions that citizens call in the individual call centers? Has there been an analysis of the kinds of calls or questions people ask? Are they asking questions about when do you file your taxes or where do you go to vote or are they calling about services?
It will vary in terms of where they're calling. When they call Revenue, it 551 2/25/03 - FY '04 OPERATING BUDGET depends on the time of the year. This year, for example, we sent out real estate tax bills later than usual. We got a flood of calls from people who said, "I normally have my real estate bill by now. I don't have it. Why not?" And that kind of call with a script could be readily and easily handled by 311 and leave the more detailed tax oriented questions to someone within Revenue where they could deal with the detailed account information. I don't know and I'm turning to see whether --
It was a proposal that came out of budget with Public Property. The impetus was primarily Public Property, I am told, and it's an administration initiative for the coming fiscal year.
Mr. Dubow, will Public Property testify about this when they come?
Madam Chair, follow-up on 552 2/25/03 - FY '04 OPERATING BUDGET the Councilwoman's question.
I'm sorry. I wanted to know more about the details. It seems to me since they initiated maybe they'll be the ones to ask the question I have for that.
We'll be involved in the next phase in terms of the planning for the actual implementation, but the analysis that led to the determination that this was something to do came from Public Property.
Thank you. Just a follow-up. And I know that you're kind of one component of this larger thing. Tell me about -- I mean, what do we have now? I mean, obviously, I don't call into the government with my complaints, otherwise people would never be able to get any work done. But when people call, aren't they generally calling the department directly or possibly 1776? So presently what you call, these call centers, where are they?
Revenue, Water Revenue, Water Department, Health, L&I, Streets and Services, then of course the switch board at 1776 are all call 553 2/25/03 - FY '04 OPERATING BUDGET centers. Some of them are better developed than others. Some of them have automated equipment that let's you stack up your calls, provide messages for someone coming into the system and really are operating as call centers. In other cases, they may have several phone lines and sophisticated call management process where you can manage the calls that are coming in. One of the things that will happen then by bringing them all together is you'll be able to get more uniform service and be able to provide quicker and better service to taxpayers perhaps across multiple departments. You might have two questions or three questions and need to go to multiple numbers to get the answers to those questions.
I'm interested in cross-training people, knowing as much as possible. On the other hand, I was left with the impression based on one of your comments that these folks are going to the 311 location and this is going to be one centralized place, a big room where everybody catch a call as it comes in.
It could be that. Or it could be virtual call centers where they're 554 2/25/03 - FY '04 OPERATING BUDGET physically located in different places but they can handle one another's calls they have overloads. So I'm not sure how this is going to be designed and it may change over time.
So in this situation, though, you have a group of people who are catching all the calls and you're anticipating that they're going to be either so well versed or have these different scripts, I guess like a little booklet and if it's Water --
But presently, I assume, the people who are in the departmental call centers, as you're laying them out, they work for that department, right?
And they've probably worked for that department for some time and they've built up a certain amount of institutional knowledge and experience and information that they can just kind of respond to the question because they know it, right?
In some cases that would 555 2/25/03 - FY '04 OPERATING BUDGET be correct.
And so under this scenario, I mean, you're going to have people in a situation where it's either in the script or it's not, to some extent, until they learn over time some of the nuance of that particular department or how it operates or what the issue is?
And if they can't figure out or if the script doesn't address X, what are they going to do?
They will be need to be referring to the experts in the department for a more detailed situation or something that goes beyond their level of knowledge, and that process is built into the concept of a 311 call center. As it's developed, and since as I've said a couple times I'm not yet fully involved in the planning process for this, so I may be sketchy on details, but it's my understanding that within the 311 call center there will be people who have a more in-depth level of expertise who can handle the calls. For one thing, we will be transferring some 556 2/25/03 - FY '04 OPERATING BUDGET of our staff the as will people from these other departments all be transferred to the call center. And so they would be able to handle some of the more complex calls that relate to their subject area of expertise right there in the call center without having to pass them off. But in some instances they will have to go to subject matter experts back in the departments.
Well, I just kind of lay out to you for the record to at least articulate a concern that to the extent citizens call in and either have a not-so-great experience or hear from other people that you may or may not have a particular good experience in going through this, I mean, I would be slightly concerned for the moment that the next place for most of those calls is going to be to us. Now, we only have two lines, and most of them stay busy already.
That's the task for the next several months to ensure that we plan the process so that we have many of those issues outlined and dealt with. Training for staff is going to be very important and the protocols for transferring from one place to another are going to 557 2/25/03 - FY '04 OPERATING BUDGET be very important. Right now people get loss and there isn't a body of knowledge. If you called Streets and asked a question of Streets about where do I find out about something relating to taxes, they wouldn't know. Likewise, if you called Revenue and said, "Who do I call because I have this other problem?" They don't know in our call center who to refer to you. At 311, they would have available to them all of the supporting information that we don't have in the individual call centers now. So there's an opportunity for improvement.
There's always a way to make something work. What's the anticipated start-up date for this?
But you're anticipating transferring the 11 people now?
The funds will be transferred in July, but the actual movement of the people will take place gradually after that.
And the implementing agency here is Public Property? 558 2/25/03 - FY '04 OPERATING BUDGET
You're welcome. The Chair recognizes Councilwoman Brown.
I would like to first say thank you for working with my office and with our collective were successful in changing the start-up provision for small businesses. Can you just update us on where you are with the regulations and the roll-out of that new piece of legislation?
I'd like to thank you for your help in getting that through. We had a very short time window after the Governor signed the State enabling legislation because the tax booklets had to be out on the street with people so that they could file by April 15th. And as a result we had to very quickly put together a program for the transition. The expectation of having some sort of 559 2/25/03 - FY '04 OPERATING BUDGET safe harbor, which I know you and a number of other people were concerned about for someone who found that their estimated payment that they would be making for the next year would be too high because the circumstances of their business was known to be changed, was something we didn't get into the initial tax booklets that are out on the street right now. We are in the process of putting together more details on how a safe harbor will work. We have an application form that's already on the website that could be used by a business as they file their return on April 15, 2003, and this will be a final or actual 2002 run and then they'll be making an estimated payment for 2003. They will be able to file to pay something less than the amount that estimated payment would be called for if they complete that application and provide some justification for it. Basically, I'll give you an example. Someone who had a small businesses. They rented out real estate. They own several properties and rented them out. They sell a property. They know their income is going to be drastically reduced in the next year because they no longer have this property. If they 560 2/25/03 - FY '04 OPERATING BUDGET provided that kind of explanation to us and indicated that they expected their tax in the next year to be -- in that hypothetical if they had three properties of somewhat equal value and income and they sold one, they might say that we expect our tax liability to be a third less next year, and then with that justification be able to pay smaller estimated amount. And the actual regulations for this are in the works right now. It will be filed, hopefully, within the next several years putting in more detail. But if anyone has problems or questions, our technical staff is fielding those on a daily basis right now as cases arise. And we understand that this year in transition is going to be confusing for people. So we are expecting to reach out and work with a number of businesses to help smooth that process.
When a new initiative happens like that, is there any notification to City agencies in the business of helping businesses like PCDC or PIDC or MBEC, even, so that the awareness is heightened.
We've shared some of the information, but I'm not sure we've gone to every 561 2/25/03 - FY '04 OPERATING BUDGET one of the organizations you've just mentioned. And I will double-check to make sure that we get to even more organizations. We do have a good bit of information on the website and we are trying to share this information on a regular basis with those we work with regularly. But I know a couple of the organizations you just mentioned we don't work with quite as regularly and may not have contacted.
Given the nature of their mission, I know having spoken with representatives from PCDC in particular, they would welcome an opportunity to hear how this impacts the world that they serve.
And I know we have been to a number of tax practitioner seminars and have been to a couple of organizations with explanations of the tax law changes and the implementation, and we should do that for some of the agencies that are affiliated with the City but perhaps don't regularly do tax work. We've been looking at the tax-related people primary and making sure that the tax practitioners have access to inform and are as informed as possible. We need to go to that next step and make sure that others who work with 562 2/25/03 - FY '04 OPERATING BUDGET businesses are equally well informed.
You're welcome. Are there any other questions from Members of the Committee? (No response.)
The Sinking Fund Commission is next. Good afternoon. Thank you for your patience. Please identify yourself and proceed with your testimony.
Good afternoon, Madam President and Members of City Council. I'm Vince Janetti, Executive Director of the Sinking Fund Commission. I'm here to testify on behalf of the Commission on our Fiscal 2004 Operating Budget request. The Sinking Fund Commission's Fiscal 2004 563 2/25/03 - FY '04 OPERATING BUDGET budget request all funds totals $476.1 million. The General Fund portion of this request totals $193 million and includes 79.9 million for capital lease payments and $113.1 million for debt service and other debt related expenditures. The request from the Water Fund for Fiscal 2004 totals $163.9 million all in Class 700 for a payment of debt service on water and sewer revenue bonds and general obligation bonds. The Commission's request from the Aviation Fund for Fiscal 2004, $114.8 million, all Class 700 is provided for payment of scheduled airport revenue bond and general obligation bond debt service. The request of 4.3 million from the Car Rental Tax Fund is provided for payments on security leases for the new sports stadiums. This concludes my prepared testimony many. I'll be happy to answer any questions the Council may have relative to the operating budget request of the Sinking Fund Commission.
Thank you. On -10 of the detail, you're requesting $38.7 million for lease payments for PMA and $41.2 million for other rents. Would you please 564 2/25/03 - FY '04 OPERATING BUDGET break these amounts down by specific transactions? If it's rather lengthy and you want to send it to us --
And would you make certain that when you send this response you send 9 copies, please? 10
Thank you. 12 You state in your testimony that you have 13 included a new general obligation bond borrowing to 14 be issued later this year. When do you plan on 15 issuing the bonds, the size of the issue and thier 16 effective interest rates? 17
I'm not exactly sure the timing 18 of the bonds. I believe there's about $250 million. 19 And I'm not sure of the structure of fixed or 20 floating rate.
We're not exactly sure of the structure, but we think it's going to be a floating rate bonds so the rates will, you know, start out 565 2/25/03 - FY '04 OPERATING BUDGET low and increase as time goes by, I guess.
And you have no 4 indication as to when we'll be going out for the bond issue?
My name is Cory Kemp, the City Treasurer. We're planning on issuing the bonds, at the earliest, July, but early in Fiscal Year '04.
How much is in the budget for the payment of the bond?
Thank you. Also, you state in your testimony that your Fiscal Year 2002 request includes payments on Parking Authority bonds that the City guaranteed. What is the amount that you have included for these payments and what is the status of these projects?
The amount in the budget, Madam President, is $3.4 million in round numbers. The status of the projects, I do not know.
Janice Davis, Director of Finance. The Market Street project is now a surface 566 2/25/03 - FY '04 OPERATING BUDGET parking lot. We've defeased the bonds not used to construct a garage and so have reduced the outstanding on that and also reduced the debt service attributable because of the defeasance. The 19th and walnut project, I don't have the current status on, but we understand that after having been challenged in Court for sometime, there now appears to be a resolution and there is high interest in getting the development underway. So the Court challenges, I believe, have all been put to rest.
Thank you. The Chair recognizes Councilwoman Krajewski.
Thank you. Would money for a possible Convention Center expansion come from the Sinking Fund?
No, Councilwoman. Normally it isn't. The Convention Center bonds now are not paid through us, through the Sinking Fund Commission.
Are any other 567 2/25/03 - FY '04 OPERATING BUDGET questions from Members of the Committee? (No response.)
Thank you very much. The next to testify is the City Treasurer. Good afternoon. Please identify yourself for the record and proceed with your testimony.
Good day, Madam President and Members of City Council. I am Cory Kemp, City Treasurer. And with me today is Joe Faraldo, Deputy City Treasurer. I appreciate this opportunity to testify before you about the FY 2004 budget request for City Treasurer's Office in total amount of $932,895, which includes $907,895 from the General Fund, an increase of $11,004 from estimated FY 2003 obligations in order to fund negotiated salary increases. Since you were provided with a copy of my written testimony, I would like to summarize by budget testimony at this time. Class 100 expenditures. The Treasurer Office proposed FY 2004 budget includes 15 employees which is 2 less than the FY 2003 staffing levels. 85 568 2/25/03 - FY '04 OPERATING BUDGET percent of the Treasurer's Office proposed budget, $798,571 is appropriated towards Class 100 personnel expenses. Class 200 expenses. The Class 200 component of the Treasurer's Office proposed budget totals $115,797, including $90,797 from the General Fund, which is $2,328 less than the FY 2003 estimated obligations. The purchase of professional services, postage, the maintenance and support of computers and office equipment dominates this class of expenditures. The class 300/400 component of the Treasurer's Office proposed budget totals $27,527 which is $706 less than the FY 2003 estimated obligations. Office supplies, the cost of purchasing and printing the envelopes used to mail the City's checks as well as purchase computer equipment are included in these classes of expenditures. This concludes my verbal testimony. I am happy to answer any question you may have at this time.
Thank you very much. 569 2/25/03 - FY '04 OPERATING BUDGET Mr. Kemp, you state that in FY '03 the City will participate in financings, while in FY '04 4 you anticipate only three financings. Was '03 5 unusually high or is '04 unusually low? 6
'03 was unusually high because of 7 the low interest rate costs, so a lot of entities 8 were doing refinancings. The majority of the 9 finances came through the Hospital and Higher 10 Education Authority, and those we cannot predict at 11 this time. 12
Members of the 13 Committee have any questions of the Treasurer? (No response.)
Thank you. Procurement is next. Good afternoon, sir. I notice that have you have been patiently waiting. Please identify yourself for the record and proceed with your testimony.
Good afternoon, Council President. My name is William Gamble, the Procurement Commissioner. With me today is Deputy Commissioner Janet Hagan. I'll be presenting for 570 2/25/03 - FY '04 OPERATING BUDGET your consideration the Procurement Department's Fiscal Year 2004 budget requests. The Procurement Department is requesting a total appropriation for all funds of $5,119,030 of which $4,900,438 is in the General Fund. This budget represents an overall increase of $8,001 from the Fiscal Year '03 projected obligations of $4,900,436. The FY '04 Class 100 General Fund budget is increased by $51,343 from the FY '03 projected payroll expense. Salary increases are due to a negotiated 3 percent wage increase effective December 15, 2002, and July 1, 2003. As a result of the DROP, lump sum terminal lead payments will cost approximately $69,500. To offset the rising salary expense, the authorized position levels were reduced by 3 positions. Since the positions have been eliminated are in the purchasing and public work units, we are projecting an increase in the processing time with bids as shown on the attached key performance measure schedule. However, we will continue to explore ways to improvement the bid processing and implement changes that will minimize the impact on the bid process. 571 2/25/03 - FY '04 OPERATING BUDGET The mission of the Procurement Department is to obtain quality goods, services, and construction in a timely, cost effective, and professional manner through a competitive, fair, and social responsive process in accordance with the law. The Fiscal Year 2004 General Fund budget request will provide the resources necessary to accomplish this mission. In partnership with the Minority Business Enterprise, Procurement will continue to work diligently and proactively to increase the amount of awards given to our minority vendors. At meetings vendors are encouraged to seek minority participation or introduced to minority businesses. Procurement will continue to partner with MBEC in training programs designed to educate minority vendors about the bidding process and business opportunities within the City. I would like to like to highlight a few of Procurement's major accomplishments during the past year. To increase the use of small business as suppliers Procurement has developed a program to provide bidding opportunities to small businesses. Starting in January 2003, departments now limits 572 2/25/03 - FY '04 OPERATING BUDGET solicitation of bids with small order purchases to small businesses. The Departments have been notified of the policy change and new procedure distributed. Procurement has sent a letter to our current vendors asking them to complete a vendor update form which will include their names, establish that it's a certified firm with MBEC and of the registration of the small business with the US Business Administration. Beginning in March 2003, procurement will publish a list of upcoming small order purchases. The list will contain a description of the commodity and the name of the contact person in the Department who will soliciting the bids. During the next fiscal year, Procurement will continue to explore E-Procuement opportunities and the use of Internet to improve the efficiencies of the bid process, increase vendor competition in a number of areas. We have started a project to publish Public Works bid results on the Internet and make the information available to the public under the Procurement Department website. The first step will be to publish Public Works bid results, but in our 573 2/25/03 - FY '04 OPERATING BUDGET future goal to publish public services supplies and equipment bid results. Madam President, this concludes my testimony. I'll be glad to answer any questions you or other Members of City Council may have regarding my testimony.
Thank you. The Chair recognizes Councilman Kenney.
Thank you, Madam President. Commissioner Gamble, are you aware of the process that the last administration, I think, engaged in and this administration also in awarding one-year contracts with multiple year options, whether they're service contracts, vending contracts, whatever it is where a vendor or a professional selected for a one-year contract and then given three or four multiple year options on those contracts. Are you familiar with that process.
What's my opinion of it? 574 2/25/03 - FY '04 OPERATING BUDGET
Part of what my concern is, and it's been my concern for a while, is that City Council always had to review and approve contracts that were for more than one year. And in many ways, I think awarding a one-year contract with multiple year options is clearly an effort to keep a lot of these contracts away from this Body and the scrutiny and questions that may be asked. And I'm not saying that's your policy. I'm saying you're overseeing the department that deals with this stuff. I think the Charter is clear that Council was intended to be a board of directors, so to speak, for a company this size and should have the ability to review and approve and make comment on contracts that affect large amounts of money and are really in effect for more than one year because, again, practice has been awarding one-year contracts with multi-year options. And I'd just like to hear your opinion on that.
Well, Councilman Kenney. We really don't -- we offer a contract for a year that's a competitive bid and it's only good for one year because the funding is only for one year. If 575 2/25/03 - FY '04 OPERATING BUDGET there are multi-funding of multiple years in the City's best interest then those options could be taken. But the intent I don't think is to circumvent the system. The intent is to be able to take allow the City to take advantages of a situation where it may not be in the City's best interest to bid it out each year. When you bid each year, there are different things that must take place. If we bid it for one year, then company must come back with a security bond or a bid bond. They must also secure other type of funding. And also, a lot of companies really don't want to just obligate one year to a contract that will require them to use a lot of their resources up front.
My point is that the other side of this argument is that the City, by giving three-year contracts, for example, as opposed one and one-year options, would be, I think, in a better position and the company would be in a better position to offer a better price locked in over a three-year period as opposed to coming back and re-doing it again every year. Are we at a disadvantage as a result of not being able to -- will companies who come in who know 576 2/25/03 - FY '04 OPERATING BUDGET that this practice is in place, they're only going to get one year are going to get what they can up front because they don't know if they're coming back. If they know in fact that they have a three-year deal, perhaps they would be more realistic when it comes to price because they know they're locked in for three years and they what they have to spend, what they have to do internally to provide the services associated with that contract. Isn't it natural that if I only think I have one year, I might come in high -- everybody might come in high and even the lowest bidder would be higher than normal because "I don't know if I'm going to be around next year."
Surely, that's a possibility. And of course, when you do a multi-year contract, you're going to attract more companies because they realize they would have it over a longer period of time.
In general terms -- and again, I'm not looking to put you in a position of policy criticism position because I'm sure it's not your policy. It's a policy of the City and policy of your Department to carry it out. But it seems to 577 2/25/03 - FY '04 OPERATING BUDGET me that the taxpayer winds up paying more money in the end with this arrangement, which the only benefit to the arrangement, in my view, is to keep it away from my Council because now we have a certain set of questions and answers that we need that we can't get our arms around because the contract never comes here. And I personally don't think that that's the best way to be doing business in a $3.2 billion where the Board of Directors does not see large contracts that are let to vendors and service providers and then we don't even know about it. We've had situations in the City where long-time providers of service to City Government have been basically put out in the street in favor of people who have come in, supplanted them, and get one-year contract with three one-year options. I just think it's not good public policy and I don't think it's good for the taxpayer to not have us have the ability to look at and to ask questions and to see if we can get a better deal down the road when these kind of things come up. So I would urge you to kind of review that and see if some of these contracts that are let that 578 2/25/03 - FY '04 OPERATING BUDGET are large amounts of money, that are done in this way, have the opportunity to come through this Council. I think it's what our job is to review that and to have comment and be aware of what's going on. What I would like to do, if you could -- obviously you don't have it today. I would like a list of every contract that we have with the City, the vendor, the amount, the service provided, anyone that falls into that one-year contract and multiple options.
Correct. And can you tell me what areas of contracting do not come through Procurement?
Whatever comes through you, I would like to get a list of who the contractor is, what the amount of the contract is, 579 2/25/03 - FY '04 OPERATING BUDGET what the services that are provided, and for all those one-year contracts with multiple year options.
Mr. Gamble, when you direct the response, would you send it to my office? I'd like copies please, so I can 9 distribute them. 10
Thank you. 12 The Chair recognizes Councilman Nutter. 13
Thank you, Madam Chair. 14 I actually had the questions about the same issue in 15 the area where Councilman Kenney just left, so I 16 wanted to, I guess, better understand some of the 17 rationale here. In this practice, Mr. Gamble, just 18 so you have some context for it, did not just start. 19 I am most familiar with this when we were dealing 20 many, many years ago with the Rite-Aid contract, which was another one-year with a three one-year renewals. The effect of which -- I don't know if this was the purpose, but the effect of which was to essentially shut out many other potential bidders. Now, you made a statement in response to a 580 2/25/03 - FY '04 OPERATING BUDGET question raised by Councilman Kenney that -- I took it down and I may not have gotten it all correctly -- that the companies don't want to just bid on the one-year contract because it may financially not work for them or they don't want to utilize all their resources. What exactly did you say?
Well, what I said basically is that they may not be willing to go through a process that requires them to get bonding each time that they bid on a project, also to pay a fee in order to bid. So there's some financial things that go along with bidding that a lot of companies don't want to do business with us because of this.
But if there's not guarantee that they're going to get the contract the following year, don't they have to go back through the same process?
That's correct. There is that possibility. Depending what happens in that one year.
So then what difference does it make? Explain to me what the process is. If you have a one-year contract with three one-year 581 2/25/03 - FY '04 OPERATING BUDGET renewals, what happens in Year 2 that makes it more financially worthwhile to you as opposed to going back through the same process.
In Year 2, the prices may not be raised, it will be the same.
There's no guarantee that they're not going to be raised.
Which there would be if you had a multi-year contract with guaranteed prices in it. I mean, what happens, from my perspective at least, in effect is, you have a one-contract with three one-year renewals. You pretty much know unless you screw up tremendously that you're going to get it the next year because the company knows that we're not going to pretty much go through an examination process or a re-bidding process because you're already there. And as they say, possession is nine-tenths of the law. You're already in the mix, you're already providing the service, we're happy with you, you're happy with us and all we do 582 2/25/03 - FY '04 OPERATING BUDGET is say "Take another year," right?
So if we're talking about locking in prices, then it seems to me on behalf of the City as opposed to just doing what makes the company feel good, because last I checked we're supposed to be looking out for the taxpayers not the individual and their particular business and what they like and what they're comfortable with, then we do a multi-year contract, lock in and guarantee and prices and then we don't have to worry about whether they're going to suddenly up the price the following year because, again, from my limited experience with this, once you know you have a one-year contract with three one-year renewals, you can jack up the price, the City's now in a unfavorable because if we don't like that price other than whatever your ability is to negotiate a different price, which may not be very much, we're then in a position to say, "Well, no, we're not thrilled with the price, but now we're so far along in he course of the fiscal year, we're not in position to start a new process and so we're stuck." Isn't that possible?
Yes, it's possible. But the 583 2/25/03 - FY '04 OPERATING BUDGET process doesn't start in the middle of the process. For instance, what I mean by that is if a contract starts in July, July 1st, and goes to July 1st to June 30th, then if we find that six months before the contract is expired and we decide to do another option, then we will ask them if anything has changed regarding the prices and terms and conditions concerned. And if at that time we find that the terms and conditions and the prices are not favorable to City, then we will go ahead and re-bid it.
How many times has that happened and how many times have we decided to re-bid a contract where we already had a firm in place with a one-year contract with two or three or four one-year renewals? How many times have we come back and said, "We don't like what it is that you had to provide. We're going to re-bid the contract." How many times has that happened?
I don't have the exact figure 584 2/25/03 - FY '04 OPERATING BUDGET with me, Councilman, but I can get it for you.
Yes, it has happened. In the year that I've been here, it's happened several times.
Well, I can't give you the exact number now. But I will give you that figure.
Is it fair to say if it was a big number, it would probably stick out in your mind?
No, it's not a large number that sticks out in my mind, no. 17
My question was, if it were a large number, more than likely it would stick out in your mind?
Tell me this. Section 22 2-309 of the Philadelphia Home Rule Charter is leases and contracts for more than one year. "The Council may by ordinance authorize the leasing of real estate for more than one year and the 585 2/25/03 - FY '04 OPERATING BUDGET contracting for personal property to be supplied or for services to be rendered over a period of more than one year without making appropriations therefore beyond the current year. Such leases and contracts shall be valid and binding upon the City although no appropriations have been made for the ensuing years during which the leases and contracts are to be operative, but it shall be the duty of the Council to make subsequent appropriations from year to year to pay amounts coming due under such leases and contracts. The obligation of the City under such leases and contracts shall not be considered to be a part of the indebtedness of the City." What does that provision of the Home Rule Charter mean to you?
What it means to me is that on a year-to-year basis, Council will approve appropriations for that contract.
What does it mean with regard to multi-year contracts of more than year?
The multi-year contractors -- we only obligate the City for one year. And then during the operational budgets when Council approves the department's funding and then at that time 586 2/25/03 - FY '04 OPERATING BUDGET they're approving those contracts that are in place.
Well, then I'll give you my opinion. My opinion is you either do a one-contract without our approval or you do a multi-year contract with our approval. In any effort to sign a one-year contract with multi-year renewals is a blatant effort to circumvent the Home Rule Charter and not have a contract come over here to City Council. Now that's my opinion of what this situation is. I'm not saying that you created it. It started before you got here. It now seems to be part and parcel of the general practice around here to do that in an effort to avoid coming over here to expose what goes on in some of contracting opportunities. It is a blatant violation of the Philadelphia Home Rule Charter. And we will take whatever action is necessary to stop that practice. If people want to have a multi-year contract with us, wonderful. If they want to lock in a price and ensure the taxpayers the best possible price, wonderful. But any system that seeks overtly, covertly or any other "vertly" to get around this City Council and not bring contracts over here when you know that when you sign a one-year contract with 587 2/25/03 - FY '04 OPERATING BUDGET multi-year renewals more often times than not, and I'm sure your research will indicate, those companies continue to provide those services year and year after year with virtually no danger of losing that contract even though they only signed for one year. That seems to be the standard operating procedure more and more. I'm offended by it, and I think it needs to stop. That's my position on that particular issue. I have some other questions. I'd like a list of all the contracts where Philadelphia-based firms were the successful winning bidder and I'd like a list of all the contracts where a non-Philadelphia firm was a successful winning bidder. Are you able to provide that information?
I have to check and see. I'm not sure if we can by Philadelphia-based companies or not, but I will check and see.
Well, I don't know the system they have would be able to do it or not.
Well, you know who wins 588 2/25/03 - FY '04 OPERATING BUDGET the bids, right?
We might have to mail them something from time to time, right?
So is the system capable of doing a run based on ZIP code? We know that anyone who has a 191 ZIP code is a Philadelphia firm and anyone who doesn't is a non-Philadelphia firm.
My name is Alice DeYoung. I'm the Information Systems Director for the Procurement Department. The information that we have is based in a system that was built in 1997. It's a proprietary software system. And reporting capabilities are very limited. We can provide that list for you. It will require us some consulting service that we have to purchase to do that. But 589 2/25/03 - FY '04 OPERATING BUDGET it's not a matter of not ever being able to generate that report.
You're telling me that in order to determine which firms were the successful bidders that are Philadelphia based versus non-Philadelphia based that you would have to go out and hire a consultant to help interpret your software to figure that out? Is that your testimony?
No. My answer is that the consulting firm that developed the software will have to generate a new report for us.
I'm unable to understand your response. What does the system tell you?
We have a complete contract list, but there's no way to narrow that list by saying, "Only give me Philadelphia reports. Only give me contracts that are outside of Philadelphia." 590 2/25/03 - FY '04 OPERATING BUDGET It's just a straight run of the contracts.
Did they bid for the work or was that a no-bid contract also?
I believe there were several companies that presented options to the City and Polaris got the job.
Dandy for them. What was the purpose of the contract that they got? I mean, what were we buying?
We replaced four mainframe applications. The primary concern at the time was year 2000 compliance because we were using four separate mainframe databases. The system that replaced it moved these applications from mainframe to relational database and provided a single 591 2/25/03 - FY '04 OPERATING BUDGET location to enter data rather than in four separate database.
Forget the program that you have in the computer. You have a list of the contracts. What is to prevent you from getting somebody to go through that list?
Well, I think that's what the Councilman is asking you.
Well, Mr. Gamble, I'm not -- as unreasonable as I can be, and I can be unreasonable sometimes. It's 2:35 in the afternoon. 592 2/25/03 - FY '04 OPERATING BUDGET It's not like I was asking for it by o'clock. The 3 response was, "We've got to get a consultant to help us with our software to generate a new report." I mean, I've got a system on a computer downstairs that I keep track of friends, and it can tell me who are my Philadelphia-based friends versus my non-Philadelphia-based friends, and I've had that for over years. 10
Well, Councilman, you can do it, but the system that we have cannot do it. And we will get you that information.
Well, the system that you bought, what did you buy it for?
You were not there. I understand that. But somebody's got to know what is the purpose of the system you have.
I don't why we bought what we bought or why it was bought that way. I inherited the system that we have.
The system is used -- the four separate databases that existed before this system was put in place, one system was to track 593 2/25/03 - FY '04 OPERATING BUDGET requisitions, one system was used to track contracts and there was no relationship between the two so there was no way to know if a requisition that was received ever became a contract. This system was developed to provide several different options of function, one, so you would know how long it took for a requisition to become a contract, also to provide that relationship between the requisition and a bid. That relationship didn't exist in any kind of database form. So it provides a means for the department to track what has happened to the requisition from the time it comes to our department and also how long it takes for the process. It's also a document repository. We have a place central bid contracts or contract documents letters of award that sort of thing. It's not a sophisticated system. It's built in access 95.
Let me make sure I'm clear on my request. I'd like a complete listing of all the contracts that came through the procurement in the last fiscal year. So I'd like to establish that as a universe first. And then I'd like that universe broken down into subsets. One is the Philadelphia-based firms who were the successful 594 2/25/03 - FY '04 OPERATING BUDGET bidders on those contracts, and the second is the non-Philadelphia-based firms who were the successful bidders on the contracts. I'd like to know what the contract was, contract amount. How long do you think that will take.
The answer was, hopefully you can get it to me in a week.
Has there ever been any interest by Procurement in this kind of information just in general? I mean, is anybody in the slight slightest way, shape, and form curious as to who's doing all this business with the City and where are they based and what their relationship is with our town? Are we just so happy that people bid on our contracts that we can just throw the money right out the window and give it to whoever shows up? Don't we want to know? Is there any interest in knowing the answers to those questions?
It's not something we have thought about, no. The only thing we're interested 595 2/25/03 - FY '04 OPERATING BUDGET in is making sure that we get the best price for the product that we're looking for, and we do not necessarily worry about where the company resides.
Well, I can appreciate the first half of the priority, but I think the citizens of this City and the taxpayers of this City might have a slightly different perspective. Given the unemployment rate in Philadelphia, given the dismal lack of participation by a variety of sectors in business with the City of Philadelphia, I mean, it's a fairly large operation we have here. It's a $3 billion enterprise. And some people might actually want to do business with the City if they know more about what the opportunities were. And you here for some of the testimony through the MBEC office and a wide variety of entities. But if those kinds of runs were being done and if we were not only looking at price but outcomes and had a policy that says, "We'd like to better promote the people who are here. We'd like to make sure that people had an opportunity to do business with this City because we'd actually like more people to have businesses here in the City. As a mater of fact, we'd like more people to live here. We'd like more 596 2/25/03 - FY '04 OPERATING BUDGET people to work here." And if we were paying attention to where the money was going, we might know some of those issues and we might better change our systems to reflect the fact that more and more people are leaving town and businesses don't want to be here and opportunities are being lost. Now, I'm not saying that we shouldn't pursuing price because price is very, very important. But there should be some be, I think, some other goals that we take a look at. And if we had information, if we were looking at our systems to figure out where is the money going and who's participating and where are they located, we might actually be able to change some things here in the City.
Councilman, one of the first things that we have to realize is that we are governed by the City Charter which says that we have to award to the lowest responsible bidder within specifications and we cannot look at any other thing other than that.
Well, we're going to give you an opportunity to look at something different besides that.
That's give me the opportunity. 597 2/25/03 - FY '04 OPERATING BUDGET
Fine. We will give you the information that you asked for so that you can use it for the information. But the thing is that our hands are tied as to what we can do. The way we award it is the lowest responsible bid.
I'm not asking you at the moment to do anything different. What I'm asking you is that we think a little bit outside the box and if somebody had looked at this information before -- and I don't know what the numbers are going show. Maybe all the money is going to Philadelphia firms. That would be a wonderful day. I think not, but maybe it is. But if we just had information, it's very powerful. You can actually do something with it. And if we found imbalances, then somebody would say, "You know, I did a report the other day and I found whatever I found and I think there's an imbalance here and maybe we should try to do something a little different." That makes change, when you have information, not just filling out forms, not just filling in the dots, not just reading books and saying, "Well, it says we can only 598 2/25/03 - FY '04 OPERATING BUDGET so X, so I don't want to think about anything besides X."
Since I have been here, I have been looking at ways in which to change the system, Councilman.
Well, I'm glad to hear it and I'd like to hear some of those ideas.
Well, some of the ideas that we changed as an example that's within the City Charter is that when departments have bids under 13,000 or a price under 13,000, we limit those to small businesses where you can procure to small businesses rather than large businesses because one the things we're looking at is trying to increase the amount of money that we spend with small companies. Now, the intent is not --
When did it start, 599 2/25/03 - FY '04 OPERATING BUDGET yesterday?
Well, I didn't know anything about it and I just got your testimony yesterday. I'm glad to hear about it. And if you have other ideas, some of us might actually like to know about them. Last I checked, I just checked with Cory Kemp as he was walking down the hall, I'm still on the payroll. We all work for the same people, we're in the same government. Let's start sharing some information back and forth. We might be able to help each other.
Well, that's the intent, Councilman, to help each other. One of the things that I said when I arrived and I still say now is that I want to make sure that we don't do things just because we've done it that way in the past; that's not the intent. The intent is to find ways which to do things better, think outside of the box, which we are trying to do. So we will welcome the partnership.
I look forward to it. You'll have the information to the Council President 600 2/25/03 - FY '04 OPERATING BUDGET in a week?
Thank you. The Chair recognizes Councilman Rizzo.
Thank you, Madam Chair. Commissioner, I'd like to follow up on Councilman Kenney and Nutter's questioning about the policy that you indicated how important following the City Charter is and, again, suggesting that you're not following that in the area of the one-year contracts. I've got a question for you. You reinforced -- again, you said you inherited this system, but I have a document that suggests that you reinforced to your staff via e-mail their requirement to do a one-year contract with the three-year renewal. Did you reinforce your staff with an e-mail?
What I said to them was to look at it and if it's in the City's best interest interest to go beyond a year, we should take a look at that, yes.
Commissioner, do you want 601 2/25/03 - FY '04 OPERATING BUDGET me to read that e-mail? Would you just think about what you just said and tell me do you that that's what you said in that e-mail?
What I said was that we have to look on an individual basis of the contracts and those that are in the City's best interest then we will look at approving those on a case-by-case basis.
So basically you suggested -- even though you inherited a policy, you agreed with that policy?
Your interpretation of that is that it does not violate the Charter that Councilman Nutter just read to you?
Going back to this embarrassing information system that you have. And again, you inherited it. You send checks to most of these vendors, don't you? Who sends the checks?
That's done in Finance. 602 2/25/03 - FY '04 OPERATING BUDGET
Don't you think Finance would know where these checks are going and be of support to you and tell you the vendors that you've sent checks to that reside outside the City? I would think that there's some tax consequence and some Internal Revenue reporting issues. I think within your organization may be outside of Procurement that that data would be available without hiring a consultant.
It may be available outside of my department I was only speaking Department. I was only speaking regarding my Department.
But Commissioner, if you have tools to get this information outside your Department without spending more money, I think you should use them.
Got a question. Following up Councilman Nutter and the hope we can do business with people in our region. Is it true that we buy vehicles from a company in Connecticut?
Commissioner, either we do 603 2/25/03 - FY '04 OPERATING BUDGET or we don't. Do we buy cars, polices cars --
Commissioner, do we presently buy police vehicles from a car dealership in Connecticut?
You do not know that we buy vehicles from a company in Connecticut.
We've spent millions and millions and millions of dollars on vehicles from a company in Connecticut, and you don't know that?
We don't necessarily -- that does not mean, Councilman, that we have spent millions of dollars in that one company. What it means is that that company submitted the lowest bid which we do not have any requirements that says that a company outside of the City of Philadelphia cannot had bid on any item that we have.
Commissioner, all I want is a straight answer. Do we buy cars from a company 604 2/25/03 - FY '04 OPERATING BUDGET outside of --
Why are you saying it's possible. Are you saying you don't know? You honestly don't know or you're just playing with me here?
Do you have any representatives of your organization that can answer that question?
Here's what I'd like to know. If we buy vehicles from a car dealership in Connecticut that has a little specialty niche, they sell police cars to lots of municipalities, I'd like to know the difference between the second bidder that may be from our region and the rationale on how 605 2/25/03 - FY '04 OPERATING BUDGET much money we save by buying our police vehicles from a dealership, from what I understand, located in the State of Connecticut. So what I'd like to find out is if we're saving bucks a car, bucks 6 a car, and that's basically what you're supposed to 7 do, save the City money whether it's a dollar or 10 8 dollars, what indirectly we lose in wage tax and 9 other taxes in sending this business to the State of 10 Connecticut when we have car dealerships here in 11 this City and in this State struggling at this time. 12 So I'd really like to know what is your business 13 decision to do that, to buy these vehicles from this 14 car dealership in Connecticut. Is it really 15 something that we should be do doing. And if it is 16 something that you're doing, are you absolutely 17 required to do it? If there's a 10 spread between 18 the bid from a car dealership here and the one in 19 Connecticut, as the Commissioner can you say you'd 20 like to keep this business at home rather than save 20 bucks?
I'd still like to know the dollar amount of money we spend with this car 606 2/25/03 - FY '04 OPERATING BUDGET dealership in Connecticut and I'd like to know what the spread is in the loss in business. I don't need how much the vehicle cost. I'd just like for work that I'm going to do in preparing my support for this budget whether or not these are smart decisions. Because it's very depressing to people work here in the City to hear hat they're not able to capture that business and that we're buying vehicles from other places.
Councilman, let me just say this. They have the opportunity to make the slowest bid. Now, the opportunity is there. If they don't submit a bid that's low, then we can't be held accountable for them not sharpening their pencils. They know we have to award based on the lowest responsible bidder meeting specifications.
Commissioner, in a small town in Connecticut doing business is a lot less than it is to run a business in the fifth largest City in the United States of America. When you tell a person to be sharp, they're competing apples to apples. They're competing against a dealership that basically -- I don't want to get into the nuts and bolts of this thing, but my point is here, that it's 607 2/25/03 - FY '04 OPERATING BUDGET discouraging to people. We lose in the long run even though the Procurement Department is doing what you're charged to do. We are losing sales -- may not sales tax, but employees that are no longer working in various dealerships that sold vehicles to the City. And I'm not talking about specialty equipment that you have to buy in Indiana or other places. I'm just talking about plain old cars. So I'd just like to know that information. Is my request clear? I just would like to know how much money we spent on buying cars in Connecticut, police cars and other vehicles, and what the real savings to the City is to authorize that transaction in another state?
Thank you, Commissioner. And by the way, thank you for your recent cooperation on an issue that I'm involved with the fire fighters.
Thank you, Madam President. 608 2/25/03 - FY '04 OPERATING BUDGET Commissioner, I want to go back for a moment to the airport. You had indicated that there were certain contracts at the Airport that procurement was involved with and certain contracts they're not. Can you give me a general frame work as to what contracts you are involved with at the Airport, what types of services, what types of supplies and products.
We're involved with office supplies for them. We're involved with their construction projects. We're involved with any of their equipment, supplies, and services.
So you were involved in the recent change in maintenance companies for the Airport? I think a year ago or so there was a contract awarded. Elliott Lewis used to have the contract to maintain the airport and a new company came in and replaced Elliott Lewis. Were you involved in any of those negotiations?
Who was involved in that 609 2/25/03 - FY '04 OPERATING BUDGET in your office, anybody?
I'm Janet Hagan, Deputy Procurement Commissioner for Services, Supplies and Equipment. That was a bid, it wasn't an RFP. It was a competitive bid with a pre-qualification that was sent out first. There were maybe four vendors that I believe were pre-qualified, but only two submitted bids, Elliot Lewis and Philadelphia Airport Services. Philadelphia Airport Service was the lowest bidder. In that particular bid, was there a section of the bid package or the specifications for the contract that included the maintenance of elevators, escalators and other moving sidewalks and such things at the airport the original bid package inclusive of that?
Yes. I believe it was divided into various, what they called, schedules, and I believe Schedule A was for elevator/escalator maintenance.
Is Philadelphia Airport Service providing the maintenance on that under the 610 2/25/03 - FY '04 OPERATING BUDGET terms of the original bid that was awarded?
I wouldn't know that for sure, but I would believe they are. Each one of those schedules, there are also subcontractors and I believe for elevators/escalators it was Theis and Krup (ph).
And they are the subcontractors for Philadelphia Airport Services.
SO as far as you are aware, post the award of the bid, there was no 13 requirements or services removed from the scope of the contract ultimately awarded to Philadelphia Airport Services.
My understanding is that the elevator and escalator maintenance, which would seem to be one of the most expensive parts of providing that kind of maintenance service was subsequently removed from the requirements of Philadelphia Airport Services and bid under a separate bid package.
Because that would 611 2/25/03 - FY '04 OPERATING BUDGET certainly put the other bidder -- if the other bidder was aware that or of the belief that that particular service was going to be required as part of the contract, then amount bid would be certainly different than if they knew it was coming out.
Yes. We could certainly look into that, but I'm not aware of any change in the elevator company or that have been removed from the contract. Schedule A was worth about $2 million of the 13-something contract.
Were you aware of the fact that -- were you involved with any of the pre-bid conferences or anything like that?
No. The buyer and the former Deputy Commissioner had a lot of involvement. When I became the Deputy Commissioner, I believe the bid had already opened and we were just in the evaluation stage for who was low and some pre-award meetings.
Are you aware, either personally or through institutional knowledge as a result of being in your position now that there was contemplation at the time of possibly re-bidding the whole job prior to its award? 612 2/25/03 - FY '04 OPERATING BUDGET
Are you aware of a letter that was allegedly drafted by the Airport Director that was asking for a re-bid of the whole job?
I believe there's something that came in on the morning of a schedule meeting from the Airport Director I believe to the former Commissioner, but I don't know exactly what was in that.
I'd appreciate taking a look at it as opposed to -- that would be the same day of the award?
I believe it was on the morning of a pre-award scheduled meeting.
I believe the vendor mentioned -- 613 2/25/03 - FY '04 OPERATING BUDGET
Philadelphia Airport Services. The pre-award would have only been with the company that was determined to be the apparent lowest bidder.
And that letter was discussed at that pre-award meeting?
No. I believe that the vendor made mention of -- he asked the question, "Are you aware of" -- and I don't know if it was a letter or a memo. He asked the question to someone, "Are you aware of a memo?"
I'd like to see if I can get a copy of that letter. I'd appreciate seeing it and any other information you may have about that.
Thank you, Madam Chair. Can a bid be changed that way without going through the discussion with the procurement Commissioner and other folks?
The change in that manner, I mean, that seems to be sort of like a very informal way and not being able other inform other responsible bidders that all of a sudden the contract that they thought they had bid on all of a sudden changes miraculously to fit a different company's requirements.
But it does happen, it seems. 615 2/25/03 - FY '04 OPERATING BUDGET
Could you detail to us how many of those contracts that you have given through the procurement have been either single sole source, multiple bids and how many have been done without RFPs going out.
But sometimes you just don't do it, you have a sole source?
Well, I would like to find out how many companies you have done that with and how many have gone out, how many request for bids and how many responses you have gotten. Of all of these contracts, I'd like you to Councilman Nutter asked for -- you probably will have a problem because you probably don't have the system to be able to do it with. 616 2/25/03 - FY '04 OPERATING BUDGET
The Chair recognizes Councilwoman Blondel Reynolds-Brown.
Thank you, Madam Chair. Good afternoon Commissioner. I want to add the voice first of all to the sentiments expressed by my colleagues around procurement with particular emphasis on doing better at ensuring that Philadelphia small businesses get greater opportunity when it comes to doing business with the City. I learned in previous testimony that we may be restricted in some ways as to ensuring that Philadelphia residents are part of bids once they're ultimately awarded and so I too will have an interest in of those contracts that have been awarded how many are Philadelphia residents. And as part of a bigger picture, my personal opinion is that government has to lead by example. And when you have government leading by example, quasi public agencies like SEPTA specifically who blatantly abuse 617 2/25/03 - FY '04 OPERATING BUDGET giving Philadelphia residents and people of color and women opportunity, we look to professionals like yourself to say that it can be done. That's Item No. 1. I want to shift the conversation to the composition of your department. I'm pleased to see that a person of color heads it up. That was not the case a long time in the past. How many deputies do you have?
So there's the Deputy Commissioner and then the next staff category would be what, managers or what? Help me out.
Do they come up through the Civil Service system? 618 2/25/03 - FY '04 OPERATING BUDGET
Most of them, yes, directors, yes. I have a manager -- well, the systems person was appointed by the former Commissioner. So that's an appointed position. But the Director of Administrative Services is a Civil Service position.
So of those positions you just mentioned, three are appointed by you?
I just have a quick question. But I do want to mention that I do support my colleagues quest to have a priority keeping in Philadelphians working, okay?
I want to talk about capital projects. When capital projects are 619 2/25/03 - FY '04 OPERATING BUDGET awarded, I guess really the question is what happens? Tell me the process. Once the bids are out there, we have the companies that bid on the job, and I believe MBEC sets minority participation goals.
What happens is that the prime or those who are bidding the prime have to go out and solicit subcontractors for this particular bid. And then they will submit with their bid the prices of their subcontractors as well. And then an award is made based on the lowest prices meeting specification.
Who monitors the level of the MBEC percentages for minority participation?
So if the firm that won the bid now has pretty much, I guess, the contract, if they have not met the percentages requirement, what do you do?
I'm James Roundtree, I'm Director of the Minority Business Enterprise 620 2/25/03 - FY '04 OPERATING BUDGET Council. We contact both entities to find out why. And then based on the contract obligations, we determine what can be done next. Either recommend to the Procurement Commissioner that they be debarred if it was a blatant omission by the firm or come up with some financial incentives of how the minority or women businesses can be paid or participate in the contract.
But will you release the contract without the percentages?
Oh, no. That process is once the bids are turned into Procurement, the commitment form is sent to the MBEC. The MBEC reviews it, contacts the minority and women businesses that are listed on the solicitation commitment form to confirm that they are expected to be participating and what they're supposed to be doing. Then we write a recommendation to the Procurement Commissioner as to the acceptance or non-acceptance of that activity. If we approve it and then it's accepted, then it's sent on to the Law Department for conformance. And at that point, I think is where you're interested, what happens if the firm did not live up to its obligations. Generally, it's 621 2/25/03 - FY '04 OPERATING BUDGET at that point when we send out a letter asking firms if they have participated on the project for this dollar amount. Then we find out whether or not they have. Unless it's a capital project or a TIF project where we've had some responsibility for doing on-site monitoring, then we do a monitoring on a monthly basis and ensure that the firms are participating. But if not, we do it by sending out a letter asking for them to verify the contract level of participation that they had listed on the S&C form. Once that comes back, we put it in our report.
Most Public Works are capital projects, and it starts off in the professional service realm and then goes through Procurement for the actual building. So what happens in Capital Projects from a professional side winds up being a Procurement opportunity and the actual bid, bricks and mortar type of scenario.
So then no Public Works contract should be awarded or let go or given them the go-ahead to start the work without the 622 2/25/03 - FY '04 OPERATING BUDGET percentages being met?
Part of the evaluation, remember this is the 193 is the anti-discrimination policy --
And it's not an affirmative action. So what we have to determine whether or not the firm discriminated in this marketing or contract effort. If we deemed that the firm did not discriminate and they have not met the percentages but they did not discrimination for other reasons other than discrimination, then we have to award the contract to the lowest responsive responsible bidder. And that's where the kind of difficulty or sensitivity comes in when we set a range and a firm did meet it by saying, "We're going to perform the work with our forces." If they can demonstrate that they are going to do 98 percent of the work with their own forces, then we cannot deny them a contract.
But if they're going to go out and get subcontracts?
Then we have to make sure, as 623 2/25/03 - FY '04 OPERATING BUDGET you said earlier, that they perform a good faith effort in including minority and women and disabled businesses.
And I notice everybody has their own interpretation of what "good faith" means. And I think that's where we run into these problems, around good faith.
There are a list of about -- it used to be 10, but it's about 8 different items that they have done to assure good faith. One of the things that we are proposing in the new executive order is to give the good faith area a weighted point percentage. And say that in order to be deemed good faith you have to hit somewhere in between a 70 and the Commissioner and I are working out the levels between a 70 and 85 percentile just to be deemed a good faith effort, a responsive and a good faith effort. Right now we don't have a weighted system. If they indicate that they did solicit a firm, the did solicit minority or women firms and that they were not satisfied with the results, be it the price is too high, the capacity was limited or there was not a discriminatory practice, then we would still have to award the 624 2/25/03 - FY '04 OPERATING BUDGET contract to them -- I'm sorry. We don't award. We'd have to recommend to the Procurement Commissioner that the contract be awarded.
And suppose you recommend to the Procurement Commission that the contract not be awarded, then what happens?
So with the new definition or the new 10 points or the 8 points, whatever you said, the good faith criteria, hopefully, your goal in doing that is to maybe enhance the level of minority participation on City contracts?
I'd be interested in seeing the results. How soon do you think this draft is going to be ready? I know you're meeting with Janice and everybody, so when do we think this new executive order will be ready for implementation?
Janice Davis, Director of Finance. As soon as we can schedule a meeting with the Mayor to go over what's contained in that executive order and then address any issues that 625 2/25/03 - FY '04 OPERATING BUDGET anyone else may have in the executive order. We will be rolling it out. I've shared a copy of it with John Macklin to get his perspective on any items that he might see missing in it. So we're ready now to go to the Mayor with it.
Are there any other questions of the witnesses? The Chair recognizes Councilman Mariano.
I just want to say for the record Councilman Nutter asked all the questions that I was going to ask.
The thing through this discussion at this hearing, the thing that really bothered me about the latest testimony, it expresses sort of an informality about the bidding process in the Procurement Department. That is bothersome and questionable. I would like for you to give us in writing in detail what is the process from A to Z that you go through to give somebody a contract and decide upon that company or that individual? I also am adding to Councilman Nutter's request, because he 626 2/25/03 - FY '04 OPERATING BUDGET asked you about Philadelphia firms, I'd like to find out as much as I can about the background of the individuals, whether they're African American, Latino companies and so on down the line. And if you have a prime with subcontractors, I would like to find out who those subcontractors are, and the ethnicity or African or Latino women background of them. And I know that you're coming up and saying you don't have a system that does that.
Our system currently tracks minority or women or disable, not by ethnicity, though. Strictly minority purposes only.
Well, minority, you're black, Latino, or you're Asian, Native American or female. But in your shop that go through the Procurement Department, we have asked this about the contracts from Ms. Davis, that together with the process that you have in your shop in terms of determining --
The listing contracts that we have was sort of all inclusive. So I'll be looking to this young man, to the professional services group and we'll pull it from multiple --
We'll be looking to him 627 2/25/03 - FY '04 OPERATING BUDGET also.
We'll pull it from multiple directions, but we should be able to get you what you're looking for.
What I would like in writing is the process from A to Z.
One quick question. Commissioner, can you tell us -- I've heard different things about it. I don't completely understand it. But there's supposed to be a group now reviewing every contract that comes through the City, some Contract Review Committee or team. Do you know anything about that?
It's the Contract Review Committee. The various individuals from City government, Procurement, Finance, MBEC, Budget, who actually looks at every contract that comes through 628 2/25/03 - FY '04 OPERATING BUDGET the City. Every bidding opportunity before the department can submit a request to procurement or go out and solicit an RFP, it must come through this committee.
The impetus for doing it was that the Mayor wanted to know who was responsible for actually approving or obligating the City for contracts. And so at that time --
He wanted to know who was responsible because at that time departments would go out and buy without proper authorization. Also, he was concerned about making sure that there were opportunities for companies within a city so that we would not do business as usual. If a company or if a department has been comfortable with a company for the past 10 years or so, then normally what happens in professional services arena they will just continue to renew it. So it was the intent to try 629 2/25/03 - FY '04 OPERATING BUDGET to stop this type of action from taking place.
Where companies were -- where vendors were given contracts on a professional basis without some type of procurement opportunities or without sending out some type of competition.
So what's been the result so far? Have more Philadelphia companies had opportunities.
There are some. I don't know the number, Councilman. We will get that information to you that does talk about the opportunities for Philadelphia, especially in the professional services area.
Now, I have to assume, you'll correct me if I'm wrong, that many of the contracts that you're reviewing are not professional services.
The ones that procurement deals with are non-professional, but the CRC, the Contract Review Committee, we look at all contracts, professional services as well as Procurement.
I was intrigued by your comment, and I'm pleased to hear that that was of 630 2/25/03 - FY '04 OPERATING BUDGET concern to the Mayor. But I remember in our earlier discussion, you seemed to indicate that given any kind of preference to Philadelphia firms wasn't possible and you cited the City Charter as an obstacle. So which is it?
Well, when I was speaking of the City Charter, I'm referring to procurement opportunities where we have to bid them. In the RFP you have more latitude where you can determine award based on different values or different criterions. In Procurement, I really don't have that leeway or that luxury because it says if a company resides in Timbuktu that they can bid on the project. So in the professional services area, we do have opportunity to do that where that can be done.
If I might add, one of the reasons why we also looked at bid contracts was sometimes projects can be put together in a way that makes it almost impossible to have inclusiveness or to have opportunities for smaller companies or companies located even in Philadelphia. So we've been looking at the opportunities to see if there aren't ways that we can restructure the way a bid goes out, whether it is a gigantic bid or a bid that 631 2/25/03 - FY '04 OPERATING BUDGET goes out in smaller packages to see if there is not a way to get participation both from a diversity standpoint and from a local preference standpoint without violating the Charter.
I understand. So Commissioner, you said that you'll be able to get us a report from the start of the Contract Review Committee which would lay out where new opportunities have been provided or where Philadelphia-based businesses have been able to more fully participate in these contracting opportunities; is that what you said earlier?
No. What I was saying to you earlier is that we will provide to you -- the contracts you had asked for as far as companies living in Philadelphia versus non-Philadelphians. And I said that I'll provide that to you.
That was in the earlier discussion. I'm saying in this discussion I thought I heard you say that you could -- because this discussion has only been about the Contract Review Committee and its work. And I thought I heard you say earlier in this discussion that you could get me a report showing where new opportunities have been 632 2/25/03 - FY '04 OPERATING BUDGET created as a result of the existence of the Contract Review Committee. Now, did I mishear you?
I didn't -- I don't know if that's available. The only we do actually is look at -- we approve the expenditure before it takes place. We don't, at that level, look at determining whether or not it's a Philadelphia-based company or not.
Well then, let's go back to the beginning. What does the Contract Review Committee do?
One of the things it does is that it makes sure that, one, that a company or that a department does not go out and spend money without the proper authorization.
Well, let's say we never had a Contract Review Committee. What governs whether -- I mean, who tells L&I whether they can go buy X or Streets can go Y or Recreation can go buy Z? I mean, isn't that more a function of what dollars they have in the appropriate budget category and based on whether they need it or not? I mean, were people buying too many pencils?
No. Prior to CRC that is what 633 2/25/03 - FY '04 OPERATING BUDGET was taking place was that a department felt that it could go out and buy whatever they wanted because they had the money in their budget without any rhyme or reasoning for it.
Give me an example of a department that bought something that they should not have bought.
Let's say that a department decides that they want to use a consultant to build a bridge. Normally what has happened is that the department usual will work with companies that they know, that they have worked with in the past and they feel comfortable with. They don't give other companies the opportunity to bid on the project. So they would go out and they would solicit those individuals that they're familiar with and there's possibility that they would do this year after year after year because they're comfortable and because that's the way they've always done it. So the CRS process --
Or because they knew that that firm had favorable status with the Administration or they're 's known to the government or whatever. 634 2/25/03 - FY '04 OPERATING BUDGET
Whatever. So they would go out and they would do it. What the CRC does is that when those type of things come up, then we make sure that there are opportunities, that MBEC is made aware of those opportunities that's there so that they have minority participation in those.
So tell me about some of the contracts where that has happened.
We're not tracking specifically which ones we've changed the participation on. What has happened, and Mr. Roundtree can attest to it, is we've gotten MBEC involved earlier in the process now. Before people would do RFPs and not let MBEC know that there was an RFP coming. We're setting ranges earlier in the process. Not so much with the bid stuff because the bid is what the bid is unless we can restructure it. But on those professional services contracts, we have on a number of occasion when we've gotten the answer that we're going used this firm because we've always used them, we force them to go back out and issue an RFP. We looked at training that was going to be provided by MOIS and forced that contract back out 635 2/25/03 - FY '04 OPERATING BUDGET for review because we were doing training at multiple different levels. The same training was costing multiple different prices to the departments depending on who was doing it. We sent that out for a new RFP to give more people opportunities to bid on it. We're also doing that were the desk top support. That went back as a result of it coming to CRC and CRC not being satisfied with participation and the composition of the providers. So there have been a number of instances where we have, in fact, held up the award of contract, and usually those are professional services in order to have it either go out for new RFPs or allow additional time for more responders.
But did I understand you to say that you're not keeping track of it or --
At this point we've not tracked our success in changing the dynamic. We know anecdotally because of the way MBEC is being involved and the fact they are getting inquiries 636 2/25/03 - FY '04 OPERATING BUDGET from departments. In the past, departments would not go to MBEC to get their ranges. So we have involvement now.
But Secretary Davis, if you're going to go through all of this time and effort, and my sense is all of you are pretty busy, if you're going to sit and review contracts -- and I don't know how long a CRC meeting lasts or how involved it is or how much you have to read. It's beyond me to imagine if you're going to spend that amount of time and effort trying to do the right thing that someone wouldn't be keeping track of it. Otherwise, I mean, other than the good feeling you might get int he meeting, what's the point?
We know that we have additional participation, but we have not measured from the change prior to May. It's something, you're right, we should be tracking. And my crew just got something else that we have to do now.
It will appear in our next annual report because we will be able to chart and compare what we did this year versus what we're doing in the next fiscal year.
But you wouldn't be able 637 2/25/03 - FY '04 OPERATING BUDGET to give us a preliminary report from May '02 up through, say, January of the number and type and the actual contracts to show where a change was made or who else had the additional participation opportunity?
What, if any, has been the impact on the ability to keep the process moving as smoothly as possible if every contract is going through CRC? Has there been some time lag?
What we do is that we meet on a monthly basis and we have all departments to submit all of their expenditures that they anticipate for the month to receive by the 15th of the month. And then all of those expenditures and all of those contracts are reviewed and discussed in a monthly meeting at the end of the month and a decision is made at that time.
Unless there is a problem. Only in those cases when there is a problem where we take exception to what has been done, there is usually no 638 2/25/03 - FY '04 OPERATING BUDGET great delay in getting back. We notify everyone usually within a day or two of the decision of the CRC on the individual items. If there is a need for them to provide additional information or if we're saying, "No, we're not approving this at all, this needs to go back out," then there will be a delay. But for the most part, they know what the outcome is within two days. So we've not held up the process at all.
Okay. But you're going to get us a report of all the contracts that have gone through this process where there has been a change made or greater bidding opportunities that have either enhanced the diversity of the team working on the contract or given some opportunity to a Philadelphia-based business?
We'll get you whatever information we have available. We'll do our best.
Thank you very much. Can I have a sense of a time line on that?
One business week. He's further defining his terms. I assume that's still 639 2/25/03 - FY '04 OPERATING BUDGET seven days.
I'm just checking. I want to make sure I'm getting what I'm supposed to get.
Councilman Nutter, we need until next Friday. Give us until next Friday.
You asked me to be specific. And since I was trying to be specific, I am now asking for your indulgence to give us until Friday of next week.
All right, fine. Take next Friday. Friday is a good day to get a report to me. Don't send it over after 3, though. (Laughter.)
You're welcome. The Chair recognizes Councilman Goode.
Thank you, Madam President. 640 2/25/03 - FY '04 OPERATING BUDGET Now that we've set the timeline, let's deal with a clarification in terms of what the total portfolio of contracts is. What is the totality of contracts? Are we talking about contracts that are just funded through general Operating Budget and Capital, or are we also talking about contracts that may be funded through state and federal funds or private funds?
We're only talking about contracts that are funded through the City's Operating Budget.
So we're not talking about hundreds of millions of dollars in contracts that may be let through the Community Development Block Grant Program?
Because we don't control -- at least from my perspective, we don't control the Community Block Grant's information and the TIFs. We do control what's going in the Operating Budget. And I think in relevance to Councilman Nutter's request, it was directly about the contracts that 641 2/25/03 - FY '04 OPERATING BUDGET the CRC reviews.
The original request was not made either of you two, but the original request was made through the Finance Director.
Are we getting just things that are funded by the General Operating Budget and Capital Budget? Or are we also getting things that are funded by other sources of funds like private funds, state funds, and federal funds like Community Development Block Grant Program?
Those things that the City has oversight on where the City issued the contract are the ones that we will be dealing with. I don't have access to other people's contracts. If it's not a City contract --
For instance, the Office of Housing Community Development --
If it's a City contract, yes, we will be providing that; and that is a City contract.
Right. Because it is a City 642 2/25/03 - FY '04 OPERATING BUDGET department so that's a City contract.
And the airport. Any that are City contracts we will be providing.
Commissioner, I just have one last question to ask you. In the budget you have more than 1.3 million for advertising and promotional activities. Would you please provide us with a list of the newspapers that we advertise in and how much we have spent in the last year and what is being proposed for the coming year?
Thank you. Are there any other questions from Members of the Committee? (No response.)
Thank you so much. I appreciate your patience. We will take a five-minute break. (Brief recess.)
The Board of 643 2/25/03 - FY '04 OPERATING BUDGET Pension and Retirement. Ms. Bell, may I ask you to summarize your testimony, please.
The stenographer will be given a copy of your testimony.
Good afternoon, Council President Verna and Members of City Council. I'm Gwendolyn Bell, Executive Director of the Board of Pensions and Retirement; and with me, I have Anthony Johnson, Chief Operating Officer. Our budget requests for the year 2004 is $6,556,000, a decline of $200,000 from the budgeted amount for Fiscal Year 2003. It includes 71 staff members which is the same number we had budgeted for last year. We are reorganizing the Department and reassigning staff members but have not increased the number of employees. We are currently looking at and getting ready to mail out an explanation of Regulation 6 which was adopted by the Board of Pensions and Retirements which is a procedure to terminate the differed retirement option plan. That is explained in the testimony. But it basically extends the number of 644 2/25/03 - FY '04 OPERATING BUDGET days that a person can elect to enroll in the plan and gives us some administrative time to process these applications. We're also unifying the disability application process which is handled through the departments so that we're using a standardized application process. In 1999, there was a death audit initiated in the Department. It resulted in some press last summer that stated that we had paid deceased members. We have a policy in place, a very comprehensive policy in place to address those issues and we re currently pursuing collecting from 38 participants who had either collected funds fraudulently or mistakenly. We have recovered $80,000 of those overpayments, which were about $550,000. Our technology is enhanced. When I started last summer, they were calculating benefits manually. And we are now on-line to prepare calculations for estimates and we can provide multiple estimates. We're still offering the retirement seminars. There are several types, the DROP seminars, the regular retirement seminars, and the differed 645 2/25/03 - FY '04 OPERATING BUDGET compensation, which we are proud to say are attended very well and there is demand for us to go out into the departments to continue those. There is currently not a procedures manual for the Department. We have begun to work on that where we have collected information from the units within the department. And hopefully, within the next six months we should have that finished. For the investments, the market value of the fund as of December 2002 was $3.7 million, down from December 2001 from $4.2 million. Part of that is decline in the performance in stock and as well as benefits payments. The fund did outperform the benchmark by 3 basis points. We were negative 5.2 percent for last year. The asset allocation is currently 39 percent domestic equity, 15 percent international, 30 percent global, 7.5 percent private equity, and 5 percent in a tactical asset allocation. The asset allocation currently is overweighted in fixed income which has helped the fund, actually. The third paragraph of testimony tells you that we do have minority representation on within the 36 investment managers. We list the minority 646 2/25/03 - FY '04 OPERATING BUDGET and women-owned managers. And out of that are actively managed, we have 8 from the Philadelphia area. Our differed compensation plan is going out to bid. We are going to do a RFP process at the end of the year to look at other firms offering deferred Comp. We currently have a request in from a board to do an RFP. So I would respectfully request that you approve the budget submitted to you.
Thank you. 13 Can you tell us if the pension fund is losing 14 over 5 percent and the benchmark is a negative 5 15 percent return, why do we continue to assume a 9 16 percent rate of return? 17
9 percent rate of return is a 18 return that they forecast over a longer period of 19 time. It has been over the past three years that the stock market has performed as poorly as it has performed, totally unexpected by most of the folks in the market. I think they expected a downturn for maybe a year, but three years is far beyond what many believed would happen. The expectation going forward has been 647 2/25/03 - FY '04 OPERATING BUDGET reviewed by the actuary and our official report will be submitted to the board in March, I believe.
The pension plan assets are invested with 36 managers. Is this more or fewer managers from prior years? And how do you decide the appropriate number of managers?
I'll first answer the second half of your question. Our allocation to managers typically is designed to have two managers per asset class. We combine different styles of management so that when one manager is in favor another manager should be in favor at that time. The number of managers appropriate for our fund is dictated by the number of asset classes that we do have. The numbers of managers that we have in our plan today is about equal to what we had last year. We terminated several managers and then hired several more. We're about two managers higher than we were than last year. A significant increase was in the opportunity fund. We had such success over a year and a half that we were in that particular fund that we allowed them to expand the number of managers that they have up to 10 managers each. We have two opportunity 648 2/25/03 - FY '04 OPERATING BUDGET fund consultants. Presently, they have about six in one and seven in another.
On average for the entire plan we pay about basis points or 2.2 percent of the 8 fund is paid out in management fees. Going back 9 historically from Fiscal Year '98 through today, 10 it's been about the same, 20 basis points. 11
Their fees are related to the 14 market value of assets. If their assets go down, we 15 pay a lower fee; if assets go up, we pay a higher 16 fee. 17
Would you be kind 18 enough to forward to us the listing of all the 19 managers and what they have been paid in the last 20 two years?
Yes. 649 2/25/03 - FY '04 OPERATING BUDGET Are there any questions from Members of the Committee? (No response.)
There are no 6 questions of you. Thank you very much. City Planning Commission is next. Councilman Nutter.
Thank you, Madam President. Fortunately for the Planning folks for the moment and my colleagues, I'm going to have to leave. (Laughter.)
I know we had a big snow day the other day for Capital Budget. And I'm assuming somewhere in the course of our budget season here, we'll have full presentation on that. Has that been rescheduled?
We have sent a revised list of public hearings to all of the Councilmembers, and the Capital Budget is scheduled for March the 17th.
We have a copy of 650 2/25/03 - FY '04 OPERATING BUDGET your testimony. If you would summarize it, we'd be very appreciative. We'll make certain that the stenographer does transcribe your testimony in full. (See testimony attached.)
Well then, Council President, since you have copies of the testimony, perhaps the best thing to do would simply be to launch into any questions. I have with me our Director of Administrative Services Carol Reba and also the Deputy Executive Director Rich Lombardo, and we also have with us Victoria Mason Ailey who is our Director of Community Planning and coordinates our community revitalization and NTI work. What you have before you is our request for the coming Fiscal Year and an outline of the work that that we believe we're going to be undertaking for the coming year and to some extent a recap of the work that we've done in the past fiscal year. I did promise my community planning and urban design staff that I would emphasize the fact that those two units collaborated and did a body of work which won a 2002 National American Planning Association Award for the best planning project in America. 651 2/25/03 - FY '04 OPERATING BUDGET And we'll be happy to take any questions you might have.
Thank you very much. Can you provide me with detail concerning the stadium area transportation study?
We have undertaken -- or we're about to undertake a transportation study, as you indicated, for that area. We obtained funds through the DVRPC, Delaware Valley Planning Commission. Obviously, with the new stadiums, we anticipate increased traffic and also perhaps different traffic patterns. And we don't have the wherewithal on staff to do that kind of study, so we've reached out. I'd be happy to get you a summary of the scope and also have my staff brief your staff in detail.
I don't believe we have chosen a firm or a group of firms. I know that our policy staff -- and unfortunately, they're not representing here -- just finished interviews with potential consultants and there's probably a recommendation in my inbox that I have not reviewed. But the study itself I don't believe is done. 652 2/25/03 - FY '04 OPERATING BUDGET
I would really appreciate your keeping me apprised of that.
Thank you. What type of information is contained in an "existing condition" NTI neighborhood study? Do you ask for input from the District Councilperson? And will you share these reports with us?
The existing condition study in a way neutral or objective information. So staff goes out and documents the conditions of properties, for instance, whether there are trees on a block, whether a building has been vandalized, as well as looking at data that we have in the office. Is there a library? Is there a school? What's the condition of those entities? And once we complete the existing condition study, which is Phase of the overall community planning study, that existing condition study is submitted to Council and their staff for review and input, not only for comment, 653 2/25/03 - FY '04 OPERATING BUDGET but also to make sure that we have than the missed something, a building that looks vacant, for instance, from the outside, you and your staff may have knowledge that it's actually occupied, et cetera. So it is the first part of community revitalization study. Obviously, we have to know what's there before we can determine with Council what should happen in a community.
Thank you. Of the 358 development plans reviewed by your community planning and development staff this year, how many were NTI related?
We would have to get you that information. However, for the most part, they are not NTI related. For the most part, these are in some cases very small projects that have been put forward by developers; in some cases large process. But if we're talking about NTI as projects where NTI funds has been expended, which is sort of how we define them, that would be minimal. Let me Mr. Lombardo if he knows.
Council President, that would be the case. Most of these 358 properties listed in our testimony are various reviews we do under the 654 2/25/03 - FY '04 OPERATING BUDGET zoning code under the subdivision code under environmental. There could be projects that are with NTI areas along some of the commercial strips. If they're not NTI projects as such, they probably are more than likely are going to be private market projects where someone will be coming in for some type of review mandated by City or State law that we have to do reviews of.
Okay. Thank you. The Chair recognizes Councilwoman Tasco.
I don't have any questions. I think we'll wait for you to come back for the Capital Budget. But I'd just like to say thank you to you and your staff for the work you've done with us in the 9th Councilmatic District. And to say to your director planning and staff for working with us particularly in the Logan area and in the Lawncrest area on the planning program that we have up there. And I must say on Saturday we had our meeting with the Logan community and they seemed to be quite receptive of the concept that your office have come up with. So we're looking forward to having a continuing relationship with you.
Thank you, so much 655 2/25/03 - FY '04 OPERATING BUDGET Councilwoman. We have actually enjoyed the interaction as well, especially our young staffers who ar very pleased that the work that they did was well received.
Are there any other questions from Members of the Committee? (No response.)
Thank you very much. We appreciate your patience. The Committee of the Whole will stand in recess until tomorrow, Wednesday, February 26th at 9:30. Thank you. (Council adjourned at 3:55 p.m.) - - - 656 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of February 25, 2003, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE OF THE WHOLE ___________________________ Lisa C. Bradley, RPR and Notary Public