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?