Committee Hearing, November 30, 2006

COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON FINANCE - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, November 30, 2006 1:05 p.m. - - - PRESENT: COUNCILWOMAN JANNIE BLACKWELL, CHAIR COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCIL PRESIDENT VERNA COUNCILMAN DARRELL L. CLARKE COUNCILMAN FRANK DiCICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN WILLIAM GREENLEE COUNCILMAN BRIAN J. O'NEILL COUNCILMAN JUAN RAMOS COUNCILMAN DANIEL SAVAGE COUNCILWOMAN MARIAN B. TASCO BILLS 060108, 060109, 060504, 060766, 060005 - - - V A R A L L O Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2

Good afternoon, everyone. AUDIENCE MEMBERS: Good afternoon.

Thank you for being here. It's 1:05, and we have to show our new Councilpeople that we try to start on time. So we're trying real good to give them a positive impression. The Finance Committee is now being called to order. Councilman Goode to my right, he's always here and always on time. To my left, Councilman Greenlee, we welcome him or, as they said on the radio one day, Greentree. And to his left, Councilman Savage. And we have Councilman Clarke, who is providing us a quorum today. The majority of members being present, we will begin our hearing. We're going to ask the Clerk to read the title of the bills.

Bill 060005, an ordinance amending Section 4.09 of the 3 11/30/06 - FINANCE - BILL 060108, ETC. Restated General Water and Wastewater Revenue Bond Ordinance of 1989 to authorize the Director of Finance to use funds currently held in the Debt Reserve Account established and maintained under the said General Ordinance to purchase appropriate surety bonds or insurance policies for deposit in the said Debt Reserve Account in lieu of current deposits; further, directing the Director of Finance to transfer all excess funds remaining in the said Debt Reserve Account after purchase of the said surety bonds or insurance policies to the Water and Wastewater Revenue Fund; and further, amending Section 4.12 of the said Restated General Water and Wastewater Revenue Bond Ordinance of 1989, entitled "Residual Fund," to establish a new sub-account into which shall be deposited all residual water and wastewater operating revenues resulting from the transfer of funds from the Debt Reserve Account to the Revenue Fund and 4 11/30/06 - FINANCE - BILL 060108, ETC. thereafter to the Residual Fund, the entire balance of the said new Residual Fund sub-account to be used to finance water-related infrastructure projects.

Thank you. Thank you all for being here. We'll start with this hearing. We will ask those who are here, we see our Managing Director, Pedro Ramos, if you're testifying on this bill. Our City Solicitor, Mr. Diaz, are you testifying here? Thank you very much. Is there anyone here other than yourself, Ms. Gladstein, to testify on this bill?

I'm begging your forbearance. We're expecting the City Solicitor, as well as an amendment that we'd like to offer today. So if we could respectfully request that you put another bill in front of this and give us a few minutes, we'd appreciate it.

Thank 5 11/30/06 - FINANCE - BILL 060108, ETC. you very much. We would only request that we be straight. We don't want four or five amendments and changes during the whole process.

We agree. You're going to get one clean version.

Thank you.

You're welcome.

Thank you very much. We will ask the Clerk to read the title of -- do I assume then that you're prepared for Bill No. 060504 and all the other bills? Because we'll move forward with whomever is here. We have a lot of people here, too, and we don't want to hold up anybody's time. The Clerk then will read the title of the bills in their order, Bill 22 No. 060504.

Bill 060504, an ordinance removing a portion of a property in the 41st Ward of the City, 6 11/30/06 - FINANCE - BILL 060108, ETC. from the Philadelphia Keystone Opportunity Zone, subject to the request and consent of the owners of said property, under certain terms and conditions.

Is Ms. Califano here? (No response.)

We will ask the Clerk to read the title of Bill 060766. And we note that we expect that when you ask to come, be ready. We have Commissioners. We have people around the City. We have our Managing Director, all of these people, all of those here from the unions, people across the City. If you're not able to be here, then why don't you call us and tell us. That's all. You disrespect everybody's time. Bill No. 060766.

Bill 060766, an ordinance amending Chapter 19-1500 of The Philadelphia Code, entitled "Wage and Net 7 11/30/06 - FINANCE - BILL 060108, ETC. Profits Tax," and Chapter 19-2800 of The Philadelphia Code, entitled "Pennsylvania Intergovernmental Cooperation Authority Tax on Wages and Net Profits," by excluding certain tuition reduction benefits from the definition of taxable compensation, under certain terms and conditions.

Do we have our Commissioner of Revenue or Mr. Diaz here? We're prepared to move forward. The Chair likewise notes that to my right is Councilman Frank DiCicco, who is also here, and we thank him for being a member of this Committee. Please identify yourself for the record and begin your testimony. COMMISSIONER KAMMERDEINER: Good afternoon, Councilwoman Blackwell and members of the Committee on Finance. I'm Nancy Kammerdeiner, Revenue Commissioner, and I'm pleased to be here with you today to present testimony 8 11/30/06 - FINANCE - BILL 060108, ETC. regarding Bill No. 060766. This bill will amend Section 4 19-1500 of The Philadelphia Code, entitled "Wage and Net Profits Tax," and Chapter 19-2800 of The Philadelphia Code, entitled "Pennsylvania Intergovernmental Cooperation Tax Authority on Wages and Net Profits," by excluding certain tuition reduction benefits from the definition of taxable compensation. If enacted, this bill will exclude tuition benefits received by employees of not-for-profit healthcare systems that are affiliated with not-for-profit universities from taxable compensation for purposes of the City wage tax. And when I use "wage tax" from here on in, I'm referring to both the City wage tax and the PICA tax portions of the wage tax. Tuition remission or reimbursement programs are often provided as benefits for the employees of educational organizations, and the 9 11/30/06 - FINANCE - BILL 060108, ETC. " The City of Philadelphia mirrors the federal treatment and excludes these benefits from compensation for purposes of City wage tax. Philadelphia is fortunate to have several medical schools and teaching hospitals that are part of larger universities. These educational organizations offer "qualified tuition reduction" programs for their employees that are recognized as excluded from compensation for City wage tax. However, one of these universities has chosen to establish a separate entity for its healthcare system. While this entity remains a not-for-profit healthcare system and is affiliated with and 100 percent owned by a not-for-profit university, it is no longer an educational organization as defined by 10 11/30/06 - FINANCE - BILL 060108, ETC. the Internal Revenue Code and as recognized by the City of Philadelphia. As a result, its employees who participate in the tuition reduction program are now required to include these benefits as part of their compensation for calculation of City wage tax. The bill before you would permit these benefits to be treated as if these employees worked for an educational organization. The financial impact of this bill is limited. I'm advised that the wage tax paid in 2005 included approximately $240,000 for tuition reduction benefits received by employees of this healthcare system. However, I've also been advised that the maximum benefit for participants in the tuition reduction program have been reduced and that this, in turn, will reduce the amount of tax that would be paid if this benefit remains part of taxable compensation. 11 11/30/06 - FINANCE - BILL 060108, ETC. The description I have given of this bill and its financial impact are based on my understanding of the proposed intent of this legislation. However, I do have a concern about the way an affiliate is defined in the bill before you. The bill refers to a section of the Pennsylvania Code regarding Non-Profit Corporation Law for the definition. That provision contains a much broader, more ambiguous definition than the one that's been described above. If indeed the narrower interpretation is the one desired by this Council, then I would suggest that the bill be amended to clarify that the not-for-profit affiliates intended to be recognized here are those that are wholly or 100 percent owned and controlled by a not-for-profit university. I have attached some draft language for an amendment for your consideration so that you could take this into account in your deliberations. This concludes my testimony.

12 11/30/06 - FINANCE - BILL 060108, ETC. I'd be happy to answer any questions you might have.

Thank you very much. Are there questions from members of the Committee with regard to this legislation? (No response.)

Thank you, Commissioner. The Chair notes to my left we have Councilwoman Marian Tasco, who is likewise present. We thank her. We'll now ask the Clerk to read the title of Bill Nos. 060108 and 109. We welcome our Managing Director, thank him for his patience, the Water Commissioner, Bernie Brunwasser, and all of those from Air Management. We likewise will be hearing after that Mr. Matthews, is he here, District Council 33 and the union representative, Andy Bond, Mike Keough, Louis Willis, Dave Sharpanski, Mike Coia, Don Brindley, 13 11/30/06 - FINANCE - BILL 060108, ETC. and then we will hear from members of the PAC and Donna Henry, Southwest CDC, with regard to this bill. We welcome you, Managing Director, and whomever you would like to bring forward. We'll ask the Clerk to read the title of both bills.

Bill 060108, an ordinance authorizing the Water Commissioner and the Procurement Commissioner, on behalf of the City of Philadelphia, to enter into a Service Contract with the Philadelphia Municipal Authority, pursuant to which the City will assume certain obligations under an agreement that the Authority will enter into with Philadelphia Biosolids Services, LLC to design, finance, build, own and maintain facilities and equipment, and provide operating services, for the management of the City's wastewater treatment solids, all under certain terms and conditions; and Bill 060109, an ordinance 14 11/30/06 - FINANCE - BILL 060108, ETC. approving an extension of the term of existence of the Philadelphia Municipal Authority and authorizing the Authority to design, build, finance, own, operate, maintain and lease facilities and equipment, and provide related services, for the management of the City's wastewater treatment solids, all under certain terms and conditions.

Thank you very much. We welcome you and invite you to begin your testimony.

Good afternoon, Councilwoman Blackwell and members of the Finance Committee. I'm Pedro Ramos, Managing Director. Thank you for the opportunity to provide testimony in support of the Biosolids Recycling Center improvement project. Water Commissioner Brunwasser and his staff are prepared to provide you with comprehensive testimony on the plan to transform the existing 72 acres into a clean, odor free processing facility, 15 11/30/06 - FINANCE - BILL 060108, ETC. with state-of-the-art pollution control systems that will benefit our community and our environment, while saving ratepayers approximately $190 million over the life of the program without anyone losing their job or getting demoted. The BRC improvement project will benefit the surrounding community and our City. As you will hear from Commissioner Brunwasser, by implementing the proposed technologies with the improvement project, the City will become compliant with air quality standards. The new thermal-drying facility will be enclosed and will produce 10 percent Class A pathogen-free biosolids. Our current facility produces 30 percent Class A biosolids and 70 percent Class B biosolids. Class A biosolids are considered fertilizer, while Class B biosolids are considered solid waste. Unpleasant odors from the BRC that have impacted our citizens for years 16 11/30/06 - FINANCE - BILL 060108, ETC. will be eliminated. Outdoor biosolids storage piles will not be required with this enclosed facility. The absence of outdoor storage piles will reduce the space required to process materials by approximately one-half and significantly improve site aesthetics. Therefore, the space occupied by the facility will be reduced from approximately 72 acres in size to approximately 35 acres. The amount of truck traffic will also be reduced. New technology will result in the reduction of finished product from 200,000 tons of material a year to approximately 60,000 tons of material, because the Class A pellets that are produced are so much lower in weight than currently produced de-watered biosolids. Approximately 7,000 truck trips will be averted under this proposal. Of course, this will have a positive impact on the surrounding community and our City by reducing the 17 11/30/06 - FINANCE - BILL 060108, ETC. diesel truck air pollution and the associated noise and other disturbances associated with truck traffic. I understand fully that DC 33 leadership at the plant continues to oppose this project because it is a form of privatization. However, I wish to stress that we have committed that no 10 person will lose his or her job or be demoted on account of this project. I also want to make clear that with the previously planned, apart from anything happening with BRC, with the previously planned elimination of composting at the BRC, the number of workers that would be transferred on account of this project is approximately 60. All of the employees at the BRC will be transferred to other units in the Water Department or other City departments. Again, no one would lose their job and no one would be demoted. To summarize, again, no one will be demoted or lose their job on 18 11/30/06 - FINANCE - BILL 060108, ETC. account of this project. Odor from the BRC will be eliminated. Truck traffic will be dramatically reduced. The space occupied by the BRC will be reduced from 72 to 35 acres. Philadelphians will benefit $190 million over the life of the transaction, with the present value of $102 million. I think the issue here around this transaction at the end of the day boils down to the issue over the 60 positions that would be transferred but not demoted or anybody lose their job and the value of the transaction to the ratepayers, regardless of any dispute that may arise as to what that is, and we believe the Water Department has budgeted that responsibly. Finally, I want to thank you for the opportunity to present testimony.

We ask for a favorable recommendation and action to vote this bill out of Committee following today's testimony. And I'll now ask Commissioner Brunwasser and his 19 11/30/06 - FINANCE - BILL 060108, ETC. staff to present testimony.

Thank you. Might I note, to my right we have the Council President here. This is her area and she's entertained community meetings in this regard. She is here. Councilwoman Blondell Reynolds Brown and Councilman Juan Ramos, as well as Councilman O'Neill, who are on this Committee, are likewise present. And let me say, Mr. Managing Director, there are many aspects of this, and Water Commissioner, of this legislation that concern us. One is, of course, the process, the odor, all of that, and that we need to discuss. But the whole issue of jobs and privatization affects many of us who support labor unions. Many of my colleagues came to me this morning about the issue. And may I also say that it really upsets us, because we were told in housing reorg that nobody would lose their job. Now 20 11/30/06 - FINANCE - BILL 060108, ETC. they're even threatening to take Vacant Property Review Committee. They've already laid off John Coates and his staff, and now they're threatening to take the whole process away from us, without me knowing it, so that by December 10th, we won't even have a Vacant Property Review Committee to use to transfer properties into and to help people in neighborhoods do side yards and that sort of thing. So not only have they taken the jobs away, they've also taken a committee away, the function of VPRC, a committee that Council formed in 1976. So you know, we're really concerned when we hear that no one will be demoted, nobody will lose their job and everything is going to be okay, because we were told that likewise through eight hearings in housing reorganization, and it just hasn't happened. So there are many aspects to this. 21 11/30/06 - FINANCE - BILL 060108, ETC. (Applause.)

So as you know, we have union people here, we have community people to likewise testify. We have the President here, whose area is affected by odor and other aspects. This is a tough one, and so I think it is, in all fairness, it is up to the Administration to kind of take us there if you think we can get there given the issues that are at stake. Thank you. Commissioner?

Councilwoman, may I just have one comment --

Absolutely.

-- on the credibility of the assertion about no one losing their job or being demoted. We're prepared to put that in whatever form is acceptable to the union or this body. That's a commitment that the Commissioner has made publicly and privately, and 22 11/30/06 - FINANCE - BILL 060108, ETC. we're prepared to stand by in whatever form is acceptable.

Thank you. Thank you very much. Commissioner Brunwasser? COMMISSIONER BRUNWASSER: Good afternoon, Councilwoman Blackwell and members of the Finance Committee. My name is Bernard Brunwasser and I'm the Water Commissioner. I'm here today to testify on Bill Nos. 060108 and 060109. These bills will authorize the City of Philadelphia, acting through the Philadelphia Municipal Authority, to engage in a long-term contract for the operation of the City's Biosolids Recycle Center. This project will make major improvements to that facility, including a significant reduction in odors. Rather than read my testimony, which I hope you all have and hope you'll have a chance to review it if you haven't already, I'd rather kind of just take you quickly through our presentation booklet 23 11/30/06 - FINANCE - BILL 060108, ETC. to kind of shorten the presentation and leave more time for questions. I do have one slight change to one of the pages in the presentation booklet, , and I have copies of that change here. Also, as you mentioned earlier, Councilwoman Blackwell, we do have Morris Fine from Air Management Services, who will, I guess, be able to answer some of the air pollution questions that you may have. Going through the presentation booklet rather quickly, Slide No. 2 gives you an aerial view of the Biosolids Recycle Center as it's been generally in the past years or so. It's a 72-acre 19 site. Most of the time it has a large 20 amount of biosolids product, whether it's sludge cake, the initial de-watered product or compost. There's generally a significant amount of product on site. We're going to change the view. This is obviously a site that people see 24 11/30/06 - FINANCE - BILL 060108, ETC. coming into Philadelphia from the south from I-95, and that's also bounded by the Platt Bridge, where you would probably experience the worst of the odors. Slide 3 is an artist's rendition of what the new biosolids site would look like, and that's an odor-free enclosed processing facility and it has state-of-the-art pollution control systems and air scrubbers, which virtually eliminate odors. On Slide 4, just a quick overview on what biosolids actually are, we collect wastewater from all of Philadelphia at our three wastewater treatment plants and we pump that product to the solids. We pump or barge to the biosolids plant in Southwest Philadelphia. Prior to 1980, we did not have to dispose of biosolids on land, but we got out of ocean dumping of biosolids in the late '70s and early '80s. Slide 5, another overview of the plant. It's 72 acres. It's close to 25 11/30/06 - FINANCE - BILL 060108, ETC. the airport, next to the Platt Bridge again, and it processes the biosolids from all three plants. And the de-watered biosolids are processed into either Class A or Class B product. The next slide tells you that Class A is our compost product and it's basically pathogen free and it's regulated as a fertilizer. Class B biosolids is not pathogen free and is regulated as solid waste. And currently we can only do about 30 percent Class A on site, and that's done by composting, and 70 percent, the rest of it, is Class B product. Slide 7 tells you how we dispose of the product today. Class A, 60,000 tons per year is composted. Class B, 140,000 tons go to agricultural applications, strip mine reclamation and landfill. And currently the site has budgeted 108 positions and filled approximately 93 employees.

Define 11/30/06 - FINANCE - BILL 060108, ETC. "compost" for us.

Hi. My name is Dennis Blair and I'm Manager of Planning and Research. Compost is a product where biosolids have been placed in piles and air has been drawn through the piles and temperatures have elevated in those piles and, as a result, the higher temperatures have killed the pathogens. So it's a process by which Class B biosolids can be made into Class A biosolids.

Thank you.

I think it means putting hot air through sludge until the waste becomes fertilizer.

Thank you. COMMISSIONER BRUNWASSER: The next slide gives you our annual BRC costs currently, both operating and capital combined. On the rehab and renewal, you'll see $3 million. That's actually 27 11/30/06 - FINANCE - BILL 060108, ETC. from our capital budget, and we base that number on looking back the past years 4 and seeing how much we had invested in 5 capital at that site, and it's averaged 6 about $3 million. It can vary from year 7 to year, and, in fact, some of you may 8 have gotten a report as early as 9 yesterday afternoon. That's when we saw 10 a report from the City Controller, which 11 called into question some of our numbers. 12 The two basic numbers that the 13 Controller's report had question with was 14 the capital costs that we have been 15 expending out at the biosolids site, the future costs. We believe that 3 million is a conservative figure, because that's what we've been spending for the past 15 years. The plan is now 25 years old. The City Controller has allocated half a million dollars per year for capital at that site, and we think that's woefully short of what we would need, based on our past experience and based on our experience on wastewater facility 28 11/30/06 - FINANCE - BILL 060108, ETC. maintenance as a whole. We'll be responding in a letter shortly to the Controller about our disagreements. , these are the problems that we've been facing for a number of years actually, and some of these problems, of course, have affected the neighborhoods surrounding the plant. First and foremost, odor issues. Our Clean Act Air permit has not been renewed because we have continuous odor problems at that site. The site aesthetics. As you saw, it was a 72-acre site basically covered with biosolids or sludge product, and we certainly want to clean that up. As I said earlier, 30 percent of our biosolids gets composted into Class A. The other 70 percent, Class B, had a lot of opposition by environmental groups and local ordinances within the state and we're not sure of its future and how long we'll be able to continue to use land application for Class B. 29 11/30/06 - FINANCE - BILL 060108, ETC. And we believe there is going to be a pretty rapid landfill disposal cost escalation. And that's the other point that we differ with the City Controller, if you've seen his report. It's about a $5 per ton difference in what we estimate to be the costs going out. What I should tell you is that this bid came to us through an RFQ/RFP process. We had a group put together, which included a member of City Council's staff and folks from the Law Department, MBEC and Procurement. We also hired a technical expert to help us evaluate all of the options, all of the options not only in the United States but in the world. This is a -- Camp, Dresser and McKee has an international reputation and expertise in the area of biosolids. There are a lot of processes out there. We have studied all of the ones that we believe were feasible for a city like Philadelphia, with the size and 30 11/30/06 - FINANCE - BILL 060108, ETC. the location of the site. So we issued an RFQ and an RFP, and PBS, Philadelphia Biosolids, submitted a responsive proposal. Now, Philadelphia Biosolids Services is made up of Synagro, which is the largest biosolids processor in the United States; McKissack and McKissack, a percent WBE equity member, also for 11 design and construction; and Len Parker 12 Associates, general contractor, and he's 13 a ten percent MBE equity member. The 14 other key component is Andritz-Ruther. 15 They're the builder of this 16 thermal-drying equipment, and CH2MHill, 17 which is an engineering firm that is on 18 board to design the plant. 19 Slide 12 gives you M/W/DBE 20 participation plan for the project, and this was vetted all along through the Procurement Department and MBEC.

As you can see, the interim operations portion, which is the construction of the plant and the getting rid of the biosolids on 31 11/30/06 - FINANCE - BILL 060108, ETC. site, that's 50 percent participation. Design of the plant is 40 percent MBE participation; construction of the plant, 39 percent participation; and long-term operations, 28 percent participation. The plan is for PBS to manage the current BRC operation for a three to five-year interim construction period, and they would shut down the composting operation, which we all recognize needs to be shut down. Unfortunately, that's our Class A way of getting to the best type of product, but it also has a major effect on the odors there. PBS is to finance, design, build, operate and own this facility, this-thermal drying facility at BRC, for years, with a five-year extension 20 option by the City. And what a thermal-drying facility is, it evaporates water similar to a clothes dryer, then forms fertilizer pellets to use in agriculture. And some of the pictures behind you there will 32 11/30/06 - FINANCE - BILL 060108, ETC. show you what these plants look like, and we actually have photographs of the complexity of them inside, indoors. But the technology has been around for a while and it's been perfected. Every year it gets even better. The benefits of the project, it eliminates the odors and achieves the CAA, the Clean Air Act permit compliance. It will all be Class A pathogen-free biosolids or pellets, and it will be a new enclosed facility and state-of-the-art pollution controls. No 15 more outdoor storage of biosolids, no 16 more sludge, no more piles, and it reduces the truck traffic in the area by 7,000 trips a year. Currently it's about 10,000 trips a year to handle 200,000 tons of product, and it will be approximately 3,000 trips a year now, a decline of 7,000, because there's 60,000 tons of product as opposed to 200,000. What that also does for us, for the City, is to basically make 35 to 40 33 11/30/06 - FINANCE - BILL 060108, ETC. acres available for something else, and since the plant will not give off odors, there's a wider variety of things that could go out there. The City is going to pay PBS $20 million per year during the interim period, and PBS is going to finance, design, build and operate and own this facility. They will have to -- they will be investing $66 million in that facility. 3 million 15 goes to energy. 16 Next there's a chart up there. 17 It also indicates the same thing. We 18 have projected savings over the 23-year 19 period of $193 million. On a net present value savings basis, if you -- we acknowledge that 20 years from now a dollar saved might be worth 50 cents to us, and so net present value analysis says $102 million in net present value savings in today's dollars basically if 34 11/30/06 - FINANCE - BILL 060108, ETC. we go to this process. And that will accrue to the benefit of our ratepayers, because the increases of the future will be moderated by the savings at this facility. This is another area where we had a disagreement with the Controller's estimates, and, again, he had assumed that we would only be spending half a million dollars for capital at the current plant that we have as opposed to 3 million, which is up in our historic number. So the facility is now 25 years old and its replacement value is about $75 million. So $500,000 per year would provide less than one percent of the replacement value of the facility. And you have to remember, this is a biosolids facility. This is not -- there's some caustic -- this is not something that's free from problems. And our experience tells us that less than one percent is just not enough to renew a plant. One of the things that we have 35 11/30/06 - FINANCE - BILL 060108, ETC.

done because we have been looking at this possibility of outsourcing this particular plant, we did not invest heavily in capital the last couple of years, nor did we project to spend a lot in capital, and that may have led to this opinion that only half a million dollars in capital would do it. Now, one of the major -- one of the most important things to us has been the labor issues. As Managing Director Ramos has said, there will be no layoffs that will result from the project. We will do whatever it takes to assure City Council that that will be the fact. All current employees will be transferred within the Water Department to equivalent positions, many with exact same title. There will be no demotions. There will be, again, no layoffs. The staff at Biosolids currently are free to seek jobs with PBS if they like, and if they try it and don't like it, we will guarantee that the 36 11/30/06 - FINANCE - BILL 060108, ETC. Water Department will take them back within one year. Whether they leave for another City agency or another company, if they choose, they will be welcomed back into the Water Department. We have had a number of meetings with DC 33. We also met with DC 47. And we received this winning bid from Synagro and Philadelphia Biosolids in late 2004. We took several weeks to evaluate the bid, and when we determined that this was something we wanted to pursue, we contacted the union and began having meetings with them. They had some options that they wanted us to look at, including one that was raised by the Controller's report called thermophilic digestion, but I wanted to assure you that the Department and its experts have looked at thermophilic digestion and have looked at many other options out there. Unfortunately, many of them are not appropriate for Philadelphia, and we've 37 11/30/06 - FINANCE - BILL 060108, ETC. evaluated them and we've decided that they were not right for us. What this project also does is, it does create 75 construction jobs that will be union run and 30 permanent jobs at the new site. So if I can summarize, basically just repeating what Managing Director Ramos has said, the project is good for the environment. It's good for the community. Very important, it's good for the ratepayers. It keeps City workers employed with the City. And project approval now will allow us to immediately begin implementation of these benefits. So I'm ready to take any questions, unless you want to hear --

I guess we'd like, Madam Chairwoman, if you would accept the long version of the Commissioner's printed testimony into the record, we request that and ask whether you would prefer to have question and answer to the 38 11/30/06 - FINANCE - BILL 060108, ETC. testimony thus far or take the testimony of Morris Fine, the Director of Air Management.

I would like to, if the Committee will agree, to entertain some questions now based on the testimony that you've given, and we're happy to submit the Commissioner's full testimony as part of the record for this Committee hearing. I'll defer my questions. I'll call on President Verna first.

Thank you. Thank you very much.

You're welcome.

Commissioner, can you describe the process and time line that was followed in developing this proposed transaction? COMMISSIONER BRUNWASSER: I believe this particular transaction began about 2002, but I'd like to turn that over to Dennis Blair. 39 11/30/06 - FINANCE - BILL 060108, ETC.

We first started this process in late 2002. We were approached by a company called U.S. Filter. At the time, we had had a lot of problems down at the site and were beginning to think about alternatives to control odors and to deal with the issues there. U.S. Filter proposed to us that this technology was available, was growing in use and that they could implement it in a fashion that would probably result in a savings to the City, while at the same time giving us a Class A product and an odor-free facility. That began our process. And in 2003, we issued a request for qualifications. Based on that, we had four firms submit. Two of those were qualified. In 2004, we issued a request for proposal. The two firms that received that, only one of those actually finished and submitted a proposal, and that was the Synagro proposal creating 40 11/30/06 - FINANCE - BILL 060108, ETC. the limited liability corporation, Philadelphia Biosolids. And we received that proposal shortly after Thanksgiving at the end of 2004.

Thank you. Commissioner, whenever I hear scrubbers, I think of trash-to-steam, and I know you said that this is an air scrubber and I believe you indicated that it's similar to a clothes dryer. I think the record has to be very clear as to precisely what this air scrubber is. There is no burning; am I correct? COMMISSIONER BRUNWASSER: Correct. Correct. The biosolids are not burned.

I'd like you to say that, please. COMMISSIONER BRUNWASSER: Yes. And, again, the dryer is a very good analogy, we believe. In fact, I think one of the large pictures that we have does have a dryer, at least a portion of 41 11/30/06 - FINANCE - BILL 060108, ETC. the dryer there.

Is it here? COMMISSIONER BRUNWASSER: Yes. Let's see if we can point that out. UNIDENTIFIED SPEAKER: These are slides here that show the dryer, what it looks like. This slide over there shows the odor dispersion model. This slide shows the odor dispersion model, with the outer rings showing the current odor dispersion on the max an average day, and this little dot in the center showing the dispersion of the odors with the thermal-drying facility. Thank you.

Councilwoman, the dryer is -- the analogy is perfect to a clothes dryer. It's basically that. It's a large rotating drum. It has multiple channels by which the biosolids can move through that drum, and hot air is fed into there just as it is in your dryer, and basically the biosolids are 42 11/30/06 - FINANCE - BILL 060108, ETC. being dried through that process into a small pellet that then can be used as a fertilizer. The air that goes through there, the majority of it is recycled. About 85 percent of it is recycled. The percent that is not is going to be 9 discharged to the outside, and that's 10 where the scrubber comes in. The 11 scrubber is basically a pollution-control 12 device that removes essentially 13 everything from that air stream. It can 14 be scrubbed with water or it can be 15 scrubbed with chemicals, but it's a process to remove all of the pollution from that air stream before it's discharged to the outside.

Thank you very much. Commissioner, can you tell us, what involvement did the Water Department have with District Council 33 through this process? COMMISSIONER BRUNWASSER: Yes. 43 11/30/06 - FINANCE - BILL 060108, ETC. We initially had our first formal meeting with District Council 33 in January of 2005. That doesn't include anything that may have been -- informal meetings that may have happened on the plant itself. But we met at the beginning of 2005 and we met later in March of that year. And then actually since we introduced the ordinance, we've met a number of times and listened, tried to explain what this project was all about. We did explain that this project from the very beginning would never have gone forward if layoffs were part of the bargain. That was a non-starter for me anyway. And we said that we would absorb all employees at their same level in other places within the Department. We discussed the details of the financial comparison between going to this Synagro or Philadelphia Biosolids solution versus continuing with what we have today and just eliminating the composting, which is a large contributor 44 11/30/06 - FINANCE - BILL 060108, ETC. of the odor problem. So we made those kinds of explanations, and we listened to -- received and listened to any other alternatives that the union had.

Were any other alternatives proposed? COMMISSIONER BRUNWASSER: Yes.

How many?

I would say they probably talked about four or five different alternatives. By far, the majority of those alternatives are things that have never even been tried, not even on a bench-scale application. And one of the requirements that we clearly made clear was that we weren't going to implement a technology unless it had been in practice in full scale in a number of applications in cities of comparable size to ours.

With that being said, how many cities does the company in question have, how many other 45 11/30/06 - FINANCE - BILL 060108, ETC. cities do they have their facilities?

They have them in a number of large cities. They operate thermal dryers in New York City; Baltimore; Pinellas County, Florida; Sacramento; Honolulu. And in addition, this technology that we're talking about, thermal drying, is also operated in Houston, in Louisville, in Milwaukee and Chicago and other cities like that. So it's a widely used technology both here and in Europe. It's been around in Europe since the 1970s.

Council President, if I can add to that -- and I apologize, and we'll make sure that we get standard-size copies of the boards that are up in Council Chambers for distribution and for the record. Okay. I understand you do have them in your packet. If you look at the second aisle from my left on the bottom, that is a facility in Florida, and you can see a facility right there in the 46 11/30/06 - FINANCE - BILL 060108, ETC. middle of the footprint with a fair amount of typical dense suburban residential development right around the plant.

Isn't there one in New Jersey? COMMISSIONER BRUNWASSER: Yes. In fact, some of the members of Council staff --

Did attend. COMMISSIONER BRUNWASSER: -- were taken out there, yes.

Commissioner, if the Water Department were to delay the implementation and continue with your current process for 18 months -- it's my understanding that the union is asking for an 18-month delay -- can you tell us what would the impact on the Department and the water ratepayers be? COMMISSIONER BRUNWASSER: Well, financially it would be significant. The 47 11/30/06 - FINANCE - BILL 060108, ETC. delay would cost us about 250,000 a month in additional costs to bring the facility into compliance with the Clean Air Act, another 250,000 a month in escalating costs of construction at the facility. Some of the capital plans that we have delayed would have to be implemented, because some of the equipment will fail. We also would lose half a million dollars per month in lost savings because of the difference in costs between the Philadelphia Biosolids submission and our having to continue to operate that plant pretty much as it is and switch most of the compost to landfill. The other part of it -- so the ratepayer really for an 18-month period, that would be almost a million dollars a month that they would be losing out, and 18 months is roughly $18 million. So the next set of rates that we would have to look at to balance our books would be that much higher. 48 11/30/06 - FINANCE - BILL 060108, ETC.

Councilwoman, if I may add in the context of that, again, if it balanced out against some of the labor issues, the number of people that would be transferred but none of them laid off or demoted at that point after composting goes away as currently scheduled is 60 positions, 60 people. COMMISSIONER BRUNWASSER: Sixty people, yes. And I think the biggest losers would actually be the community, because the odors would continue. The trucking -- the 10,000 trips would continue, as opposed to 3,000 trips and so air pollution from the trucks would continue. So it would delay the benefits to the area.

Commissioner, I think you touched on it very slightly, but I'd like you to elaborate, what are the air quality issues with the current process and how will they be improved by your proposed system. 49 11/30/06 - FINANCE - BILL 060108, ETC. COMMISSIONER BRUNWASSER: Yes. We do have Morris Fine here from Air Management Services, but the key thing would be -- it's also in this booklet, but the air dispersion, the odor dispersion study that was done by experts indicate that there's approximately eight-tenths of a mile, I believe, is the average day of dispersion from the site. And Mr. Bolno from my staff is pointing out. And the further out ring, on worse days, a larger swath of the neighborhoods are affected. But with this thermal-drying plant, it is really just a very small part of the site that might have some odor to it, but it's all on site, not beyond the fence line. So all of the neighborhoods would be improved. They would not have odors from this facility any longer. And the next slide over, you can see what the difference is. You can hardly see the amount as far as the amount of odor escaping. It's almost 50 11/30/06 - FINANCE - BILL 060108, ETC. gone.

Would you mind if we have someone from Air Management come up to address that? COMMISSIONER BRUNWASSER: Not at all.

Is Mr. Fine here?

Yes. Councilwoman, while Mr. Fine comes up, if I can just reiterate that the description of that chart, it looks like a target, with the hazy blue outer and green center. The little section, the little bull's eye in the middle, is the difference between the before and after, the little piece in the middle being impact post project versus the current situation by the outer circles.

Thank you. Mr. Fine.

Yes. Good afternoon. I have testimony, if now 51 11/30/06 - FINANCE - BILL 060108, ETC. would be appropriate to deliver it or if you would like to ask questions. Either way.

The Chairwoman said it would be fine to present your testimony.

Thank you. Good afternoon, Chairwoman Blackwell and members of the Committee on Finance. I am Morris Fine, Director of Air Management Services in the Department of Public Health. I appreciate the opportunity to present comments today on behalf of the Department regarding the odor compliance status of the Philadelphia Water Department's Biosolids Recycling Center. Air Management Services is responsible for enforcing state, federal and local air quality standards for stationary sources of air pollutants in Philadelphia, including the issuance of operating permits to sources that emit regulated pollutants. 52 11/30/06 - FINANCE - BILL 060108, ETC. Air Management Services issued an air operating permit to the Water Department for this facility on June 1, 2001. Since the operating permit was issued, Air Management Services has received numerous odor complaints from nearby residents and has cited the Water Department on numerous occasions for odors emanating from the facility. The five-year term of the permit expired on June 1, 2006. Pennsylvania regulations currently prevent Air Management Services from reissuing an operating permit to any party with outstanding violations against it unless the party has entered into a binding agreement that includes a definitive correction plan and compliance schedule. As a result, because of outstanding issues that prevent the Water Department from entering into such an agreement, Air Management Services has not been able to renew the Biosolids Recycling Center air operating permit. 53 11/30/06 - FINANCE - BILL 060108, ETC. Having neither a compliance plan nor a current operating permit, this facility continues to operate in violation of federal, state and local laws. The Water Department and Air Management Services through the Law Department have, however, been in cooperative discussion for several years regarding development of a plan to implement odor controls at the BRC. Air Management Services has taken into consideration the planning complexities, including the economic expenses, in allowing additional time for concluding the compliance process. In addition, the Water Department has implemented some interim control methods to reduce off-site odors, including redesigning the existing compost pile, treating emissions from the main process building, reducing the amount of stockpiled materials and covering and relocating the cake storage area further away from the residential neighborhoods. 54 11/30/06 - FINANCE - BILL 060108, ETC. Air Management Services strongly believes that the only reasonable long-term solution to eliminate odors from the BRC would be by applying additional appropriate technologies and practices. Odor control technologies for water pollution control plants are available and in use in many other areas of the country. The Boston, New York City, Los Angeles and Sacramento municipalities have successfully addressed problem odors from biosolids recycling operations by pelletizing to produce fertilizer and installing biofilter systems. I would like to emphasize that as an air enforcement agency, Air Management Services has no preference as to whether the odor mitigation strategy pursued by the Water Department is performed through outsourcing or by traditional City services. Our concern in this case is that whichever strategy is finally chosen, it will be designed 55 11/30/06 - FINANCE - BILL 060108, ETC. and operated in a manner that will eliminate the current odor nuisance. The odors from the BRC are well known to the residents of the area, and many visitors' first experience of Philadelphia's air quality may very well be the odors from this facility as they travel from Philadelphia International Airport into the City. Eliminating odor emissions from the BRC would be beneficial to Philadelphia's air quality in general and perhaps also be a positive influence to the City's image. Thank you very much for your attention. I'd be happy to answer your questions at this time.

Madam President, do you have more questions?

No, not for Air Management at this time. I don't want to belabor this by asking all of these questions, and I think the Managing Director and the Commissioner have made it eminently clear 56 11/30/06 - FINANCE - BILL 060108, ETC. and they have repeated it at least three or four times that there would be no City employee from the Water Department laid off.

Or demoted.

Or demoted. And I personally would feel a lot more comfortable if in fact, Mr. Director, we could get something in writing from the Mayor stating that, so if in the future something were to happen, I think then the union members and we could have something to hang our hat on.

On behalf of the Administration, we'd be pleased to provide that to City Council.

Thank you.

Thank you very much. This is very important, because, again, with regard to the housing reorg, we have union people 57 11/30/06 - FINANCE - BILL 060108, ETC. fighting union people. We have people who are bumping down, fighting people that they've worked with and 30 and 35 5 and 38 years. It's a nightmare. We have 6 people who, since they come to City 7 Council, now get that deducted from their 8 pay, and just all kinds of measures that 9 are just insufferable. And now to be 10 told that they're even not only -- they 11 laid off 42 people and said they were 12 hiring 44, but obviously at lower 13 salaries. So that's union busting by any 14 definition. 15 (Applause.) 16

And 17 all of this concerns us, because not only 18 does the President have an area -- and 19 it's City-wide when you deal with air 20 pollution and odors and all of that -- but you have people who live -- we have a requirement that people live in our City, as you know. And when people live in our City, work in our City, they deserve a right to feel that they're protected by 58 11/30/06 - FINANCE - BILL 060108, ETC. the officials they elect. It's very disheartening to fight over and over and over again for the same people who elect us and who pay all of our taxes so that we can sit here today. So it really, really upsets us, because as I said, we try to stay close to these issues. We try to defend and support our people. And the people here and the people across the City who work in the City and who are members of the union are our neighbors, too. They're somebody's neighbor. Somebody up there has a neighbor. And they're all our residents. And so we really, really are concerned and we would really have to have those assurances tightly written or amended into the bill, as my colleague said, so that we are sure that our people are protected. Those of us who are up here -- and we know we'll get a fuller discussion as we go on and we know that as we go on, we translate English into English, and 59 11/30/06 - FINANCE - BILL 060108, ETC. the unions help us understand what we're talking about here. And as much as all of us, those of us who know people who may work for Synagro or some other company, we don't really know the -- at least let me speak for myself. I don't really know what makes this process or this company better than some other. And we'll ask the unions when they come. In glancing through their document, AFSCME District Council 33, Local 394, they're asking for time themselves to come up with a process. Why can't we do that? I realize we'll save some monies, but in terms of trying to work it out -- and we have no problem with Synagro. Is this the best process? Is there something else that's not pellets or that's just washing the stuff so it becomes something else, some other process, for those of us who don't know this? We realize all of you who work with it, it's second nature, but if it's not kind of poetry or housing, I don't know what you're talking 60 11/30/06 - FINANCE - BILL 060108, ETC. about. So why is this best? Why is this company best? And why shouldn't we work with the unions and give them two years to come up with a process? (Applause.)

Councilwoman, in response to President Verna's question, the Commissioner laid out the process that's been going on for some time, starting with legal and technical objectives that the Water Department has to fulfill, and described the process that's been really several years in getting to this point. Now, at the end of the day, it's pretty much about what -- at the end of the day, you're absolutely correct. It's a policy decision about whether this is a fair deal for the ratepayers at this time. The professionals that are in the management of our Water Department certainly believe that this is the best proposal they have. Even if there were 61 11/30/06 - FINANCE - BILL 060108, ETC. another proposal out there -- and I don't think we encountered a better solution -- we are at a point with a very strong plan for the life of this deal to save the ratepayers, but in today's dollars it's worth over $100 million. And even the people that want to argue with that still are talking about tens of millions, scores of millions of dollars at the end of the day versus 60 positions, where nobody loses their job or gets demoted. So it's really a matter of what -- in terms of what's fair overall.

Thank you very much. Councilman O'Neill, your light has been on a while.

I just have two questions. One is a follow-up to both the Council President and Majority Leader. Is it possible to work an amendment into this legislation? As much as I appreciate that the Mayor, Managing Director would abide by their 62 11/30/06 - FINANCE - BILL 060108, ETC. letter -- and I don't have any doubt about that -- the next Mayor and the next Managing Director say, Hey, that was the last Mayor and the last Managing Director, assuming you move on to something else, too. I know you're not bound by the two-term limit as the Mayor is. Is it possible, has it been looked at to do it that way so that it is more binding than just a document that would have 13 months' duration?

We're prepared to entertain any way of documenting and institutionalizing the commitment that we're making, and we'll be happy to talk to the Law Department staff, Council's tech staff and anybody else that wants to be a part of that process, because we're prepared to make that a solid commitment as -- it's a solid commitment and we're willing to document it any way that works for you.

My second 63 11/30/06 - FINANCE - BILL 060108, ETC. question is, I know we're going to hear about alternatives that weren't considered, that language in the RFP that excluded other alternatives, and I think Mr. Blair mentioned one thing, that there was this criteria of having seen it in operation in other places. And we'll hear more about that, but just looking at this from the Commissioner's standpoint and from the Administration's standpoint that, hey, if this is what we want, we've studied it, this is the best and it's going to save us a lot of money, why can't we do it ourselves and save the money? (Applause.)

Commissioner, I don't want to sound like -- I mean, I'm pretty serious about this question. We have treatment facilities. Those treatment facilities could have been farmed out. There's nothing magical about the treatment facilities' technology or anything that 64 11/30/06 - FINANCE - BILL 060108, ETC. it couldn't be done by a private company. There was a decision to do it. They're being operated very well. Every time there's a problem, it gets fixed. It's just a matter of whether we're in control of our environment or somebody else, and that's what I'm driving at here. Because we've in the past, not just in the water treatment area but in other areas, we could have brought Oracle in to run our IT. We'll use Oracle's stuff, but we're running it.

And I'll have the Water Commissioner describe it in greater detail, but at the end of the day, it's an opportunity for the City to -- well, first of all, I think you acknowledge in your question that there's a history in the Water Department in particular of wherever there's an opportunity for collaboration around alternatives and doing things in-house, I think particularly Commissioner Brunwasser's history is one where he and his team have 65 11/30/06 - FINANCE - BILL 060108, ETC. found ways of doing things internally. I don't think there's any dispute that we've done that, that whenever -- and it's not like they have a record of going around and trying to find ways of doing things non-union. That's not how this Department has operated, and I think that there's a history of discussion.

I didn't mean non-union. I assume the new employees are going to be unionized. They're in Philadelphia.

Well, right.

If we want this operation to run, I don't think it's going to run if it's not union.

But the project gives us an opportunity, gives the City an opportunity, to get a substantial capital investment done in a way that caps our costs and contains our costs in a predictable way over the long term. Some variables, like energy is going to be a variable, but they're going to be a 66 11/30/06 - FINANCE - BILL 060108, ETC. variable regardless. But it is a way of getting into compliance and getting a more useful, more compliant, more community-friendly facility in a short period of time and starting to realize the benefit to the ratepayers of what we're doing now versus what we're doing then. You can always go back to step one and start all over again and get to the end and start all over again.

But I think maybe my question wasn't made clear. Assuming the savings are there, if the savings are there, we do revenue bonds and clearly justify them to bondholders. We did that with these other facilities. I mean, every one of them could have been -- we could have saved money if we had farmed them out to the private sector. And that happens in a lot of cases, but we have other reasons for -- I mean, we own the airport. There's companies that do that. I mean, you can go on and on with -- and the risk 67 11/30/06 - FINANCE - BILL 060108, ETC. and the responsibility goes somewhere else. But there are a lot of good reasons to have control of it. One, you mentioned community friendly. I'd rather have the City be community friendly than a company headquartered somewhere else. I mean, that's just -- (Applause.)

I mean, is the savings -- you don't have to answer this. If it's a much bigger question, don't consider just a yes or no. But is the primary savings here someone else's labor costs versus ours? Because if the technology is going to be the same cost whether we buy it or they buy it, I don't understand where the savings are. (Applause.)

A lot of the savings is in the number of people that Synagro would use to operate this facility, but the real reason I think --

Why would they have to use any more than us? And, 68 11/30/06 - FINANCE - BILL 060108, ETC. again, I don't want to --

I don't know. I don't know why -- I mean, it's compared to what we're doing now.

I don't care about what we're doing now. What we're doing now, we're going to change. Everybody agrees on that. Even the union agrees on that, we got to do something different.

When you operate this new facility, I think the real issue here is it's this new complex technology that we've never operated. It's not a part of our core business. It's nothing that we have experience with. And the integration that's required between the de-watering step, where the material must be de-watered precisely to a certain level when it enters this dryer or you end up with something other than pellets out the other end. You end up with clumps. You end up with things that are not marketable. And if that product is 69 11/30/06 - FINANCE - BILL 060108, ETC. not marketable, it goes from something that can generate a revenue to something that might incur a large cost to just be simply landfilled rather than sold to a blender who is going blend those little pellets in bagged fertilizer and sell them at Lowe's. So it's a very complex technology that requires control and it requires somebody with experience. We do not have that experience. These folks have that experience. They operate these all over the country. And a really good example to look at is Milwaukee. They were famous for making Milorganite, their product, but even Milwaukee has contracted out the operation of their facility. They, too, found that competing with other pellets and the complexity involved caused them to decide to contract that out. And around the country this is a technology that's operated almost exclusively by the private sector. As a matter of fact, I'm 70 11/30/06 - FINANCE - BILL 060108, ETC. not aware of any utility that does all aspects of this, including doing the integrated design build, constructing the facility, operating it and marketing the product. What we get here with Synagro is, we get linked into a national market for the product. So the ability to take it to Florida, to take it to many markets throughout the country, to possibly market it as an energy product, all of that comes with that facility. All of that is something that we would have to try and develop on our own, and it would be very difficult, very costly. We had a lot of problems going from ocean dumping to composting and we incurred tremendous costs at that facility for well over a decade before we finally were able to figure out how to do that, because it wasn't our core competency. We don't want to repeat that.

Councilman, if I could just add one other thing from a 71 11/30/06 - FINANCE - BILL 060108, ETC. compliance perspective and sort of risk of compliance, which is that one of the elements of this transaction is that, in a sense, the risk of the laws changing on the end product is borne by the company, as well as the risk of the market for the end product, meaning that if nobody wants to buy the pellets, the little fertilizer pellets, as opposed to --

They'll eat them, but not literally.

Synagro will have to eat them. And also if the rules change about what's a good enough pellet, it's their problem, not the City's. So the City is able to at least get some predictability of cost and a little bit more avoid some of the risk around compliance.

Thank you. I have one more question, Madam Chair, before I let somebody else go. What you've said is clear and both the different reasons you gave, and 72 11/30/06 - FINANCE - BILL 060108, ETC. at least I understand them. I may not know enough to disagree or agree with them, but it involves this system. As Mr. Blair said, this is in a lot of places. A lot of cities, big cities, are doing this, and they've been doing it since the '70s. Are there any facilities dealing with compost, the biosolid area here that we're dealing with, of any size, other than a small town or a very small jurisdiction, that are doing something else? And the reason I ask that is, a technology that's been around since the '70s, it's reliable, a lot of jurisdictions use it is comforting, but I'd rather know what the cutting-edge technologies are that somebody may be using and maybe doesn't have the track record of 1970s until now but might be something that would be taken into consideration. I know if there is an answer, it may be against your interest with my 73 11/30/06 - FINANCE - BILL 060108, ETC. vote, but I just want to know, what else is there and is anybody doing it, even if it's not enough to satisfy the Water Department's requirement that it be pervasive?

One of the things that you hear -- and it was in the Controller's report, and you probably heard it in some of these others things -- is thermophilic digestion. This is a technology that's gaining a little bit more use in the 2000s. The Controller's report mentions that there are four cities using this. However, this is a technology that still does not reduce odors. It still leaves you with an odors problem. It still potentially has an odors problem and a disposal of the final product.

You said reduce. Doesn't the one you're talking about eliminate odor?

It doesn't completely eliminate odor, no. 74 11/30/06 - FINANCE - BILL 060108, ETC. We had taken a look at it. We had estimated with the consultant that it would cost us $90 million just to implement it at our wastewater treatment plants. And really it's a process that's implemented before the BRC facility. It's actually implemented at the wastewater treatment plant. And with that kind of cost, it is certainly more expensive than even our current operations, let alone the technology that we're proposing here. So even though you hear this technology now and you'll hear that a few cities may be using it -- LA is, by far, the biggest. LA, though, is having constant challenges over the quality of the product that it's trying to dispose of from the surrounding communities.

It's not pellets?

No. It's a thermophilic-digested product that's then further treated. 75 11/30/06 - FINANCE - BILL 060108, ETC.

What's its after life or next life? Where does it go once they dispose of it?

They form it into various products that they can apply --

What's it look like if it's not pellets, thermal something?

When you do thermophilic digestion, you still end up with a product that looks a lot like our Class B cake. It's basically --

Sludge.

-- been heated and killed the pathogens, but it still looks like that sludge that we produce down at this facility. So it still has the same disposal problems. The product has definite air issues, and I'm aware of the fact that facilities have been closed in Myrtle Beach, South Carolina and in Mobile, Alabama and I believe there are probably a couple of other facilities in this 76 11/30/06 - FINANCE - BILL 060108, ETC. country that went to that and --

Mr. Blair, I don't want to go on too much. That doesn't sound too cutting edge to me. Is there anything that's more of a cutting-edge technology that's out there that seems to have a lot of promise and, for whatever reason, you decided not to go with it?

No. I'm not aware of any other technology.

So it's pretty much this or something that isn't close, based on what you just summarized?

Barry just mentioned to me -- I mean, I don't know what you're thinking about. The Changing World Technology facility that operated our site for about five years and --

I'm not thinking of anything. I'm hoping you'll think of something to tell me.

That company has gone bankrupt. 77 11/30/06 - FINANCE - BILL 060108, ETC. Barry mentioned another one. There's a turkey processing type facility that supposedly turns biosolids into oil that you may have read about. That's never been proven to work. I mean, I don't really consider these kinds of technologies that are in a small pilot scale that hasn't been able to work as something that we can really be considering at this time. They're probably a decade away from ever being implemented, if they work out. So I don't really even consider those as the kinds of things that you were asking about. I still consider them to be things like thermophilic digestion.

Okay. Thank you.

Councilman, if I can go back and just footnote the issue of elimination versus reduction of odor. I mean, we're really talking about impact of any odor coming out of the process on the community, and the board with the 78 11/30/06 - FINANCE - BILL 060108, ETC. little targets on it represents that the small little quarter-size image in yellow being the after and the bigger green circles being the current.

So it's significantly reduced.

Virtually eliminated, or the impact on --

If you get close enough, you'll still smell it, but not many people will be that close.

Right.

Thank you.

Thank you, Councilman. Councilwoman Tasco.

Thank you.

Thank you for your patience.

Good afternoon. It's a very interesting discussion, and I certainly understand the need to try and reduce the odors and beautify that site down near the airport. 79 11/30/06 - FINANCE - BILL 060108, ETC. My questions, though, go back to the labor issues. I am concerned about the 60 employees who might be transferred or have the opportunity to go someplace else. We sat here all spring and through the fall as we watched the reorganization of the housing department and we were told over and over again that these employees would not lose their jobs. But what happened, even though we might want to amend this bill and put some clause in there that these people can't be fired or they can't be -- they have their rights, we don't have any jurisdiction over the civil service rules, because -- (Applause.)

Because what happened -- and certainly I hear both sides, and we do need the facility, but you also have people we have to look at and protect. And so I want to know, how do the seniority rights work when someone else selects another position in another 80 11/30/06 - FINANCE - BILL 060108, ETC. department? Certainly this Administration won't be here. What's the binding rule on future administrations? And if there are layoffs in the department where the employee is sent, there are layoffs, what are the seniority rights and are they the last one hired, the first one to go? I mean, those issues are very important to me as we look at it. It's more than just saying, Oh, well, they'll have a job. That may be true for a minute, but we know down the line there could be cuts, there could be -- and what are the bumping rights and all of that? We don't control what the process is. We can only come out and express our concerns and give support, but we can't change the rules.

Councilwoman, those are very important questions, and all of them should be addressed. I'd like to, first of all, offer to give you a very prompt written response to all of these, 81 11/30/06 - FINANCE - BILL 060108, ETC. but the short answer is that we're prepared to make that commitment. The rules about after somebody is transferred and how the seniority for a person that came from the plant stacks up against a person of similar seniority, it's something that I assume is -- there are already rules under the collective bargaining. If there are not, we'd be prepared to clarify them.

But right now these employees are in an environment where they are not threatened with layoffs or cutbacks and they seem to know that in years, they're going to be 17 able to retire from their job. If they 18 go someplace else, that may not be so 19 comforting. 20

Hi. My name is Teresa Vollmer. I'm the Human Resources Manager for the Water Department and petrified witness. Never done this before, so bear with me if I stutter and stumble. 82 11/30/06 - FINANCE - BILL 060108, ETC. I also worked in the Personnel Department for years and I pretty much 4 know all the ins and outs of civil 5 service. Civil service rules will have 6 no impact on what happens with the people 7 at BRC. We have close to 200 vacancies, 8 all of which these people will fill, and 9 their seniority will stay exactly the 10 same. They'll be in the same department. 11 They'll be in the same job class. Their 12 performance reports are still going to be 13 done by the Water Department. There is 14 actually no impact on seniority 15 whatsoever. And we have never had 16 layoffs at all in the history of the 17 Water Department, and we don't foresee 18 any layoffs in the future, especially 19 with the number of vacancies we have. 20

So you're 21 saying that these 60 employees would 22 still be employed within the Water 23 Department? 24

Right. We have 25 sufficient vacancies at this moment that 83 11/30/06 - FINANCE - BILL 060108, ETC. we could place everybody and still have vacancies left.

Councilwoman, another difference between the two scenarios you've described is, when you talk about the Water Department, you're talking about a total population of about --

Close to 2,000.

-- 2,000 employees in the Water Department. So when you're talking about 60 people, you certainly have a lot more -- it's not as difficult a challenge as the other case that you've cited. COMMISSIONER BRUNWASSER: And also your question about bumping, that would not be an issue. No one of those employees from BRC will be bumping anyone else. There are existing vacancies for all of those employees.

But they would not be working in the BRC, they would go to other -- 84 11/30/06 - FINANCE - BILL 060108, ETC.

They'll work in similar situations in other parts of the Department. They will use their skills.

Within their job class.

So if you are an equipment operator right now at BRC, you will be an equipment operator at another site in the Water Department, same salary, same seniority.

Well, let me just ask you another question about the savings. Are you counting savings also on the BRC relative to personnel? Because if you place the employees in other departments, there's not a savings, because you still have to pay them their salary, right? COMMISSIONER BRUNWASSER: That's correct, Councilwoman.

So is that counted in the savings that you have calculated, the personnel issue? COMMISSIONER BRUNWASSER: We 85 11/30/06 - FINANCE - BILL 060108, ETC. have appropriations sufficient in Class 100 for personnel at other units of the Water Department to take on people from BRC or hire new people and that will not count against the BRC. In other words --

Councilwoman, the bottom line is that the 60 positions that would otherwise exist at the BRC would not exist. The 60 people who are currently filling all those positions would be guaranteed that they'd have a job and that they would not be demoted. They'd be working within class. So in a sense, I mean, what you're getting at is, those 60 positions do go away at the BRC, at least as far as the City employment is concerned. The private provider will run that plant with about 30 people, and people that work for the City would have a chance to also have a chance for those employment opportunities. Other savings from the project come from the changes in operating costs and efficiencies. 86 11/30/06 - FINANCE - BILL 060108, ETC.

Would the employees who might choose to stay with BRC be City employees or would they work for BRC?

They would be employees of the company. The Commissioner has also made a commitment that if within a year an employee who had transferred to the private company wishes to come back, that they would be brought back. That's a separate guarantee and separate promise from the one we've said over and over again, which is that nobody would lose their job and no one would get demoted and everybody would have the opportunity to stay within class inside the City, and we expect them all to be in the Water Department.

Do the employees at -- I guess this is not an issue for us, but would the employees at BRC be part of a collective bargaining unit?

Yes. 87 11/30/06 - FINANCE - BILL 060108, ETC.

That's probably a question -- you're asking about whether the employees of the private company would be part of a collective bargaining unit. That's something that we would probably ask Mr. McKissack or somebody from Synagro to answer. Our understanding is that this is a company that has experience with organized labor.

Could you come to the table, please.

I'm Pam Racey with Philadelphia Biosolids Services. And we certainly expect to be organized -- we don't know which union yet. Typically we use Operating Engineers, but we're open to whatever unit our employees would like to work with. We've priced this project at union-scale wages and fully expect to be represented by a bargaining unit. Which one is unsure yet.

Thank you. Were there any other questions?

I don't 88 11/30/06 - FINANCE - BILL 060108, ETC. have any more questions around the labor issue. Councilwoman Brown has, and I may come back.

Thank you. Councilwoman Blondell Reynolds Brown.

Thank you, Madam Chair. I do have a follow-up to Councilwoman Tasco's questions regarding keeping the employees whole once the transfer has been made. Could I please trouble you to bring your Human Resource Director back to the witness table.

I have written something up. Is it okay if I read it?

Why don't you wait for her to ask a question.

Oh, sorry.

You're here to answer questions.

Sorry.

Good 89 11/30/06 - FINANCE - BILL 060108, ETC. afternoon. You mentioned in response to Councilwoman Tasco's question that the employees will be transferred and their status remains untouched, correct?

Correct.

Is this a special accommodation specific for this initiative or is that standard operating procedure within the Department?

That's standard operating procedure in civil service. Even if a function that you have performed is eliminated, if you are in a current civil service title, you may be moved to another position, but you do not lose status or pay or benefits.

Okay.

And, Councilwoman, in addition to that, as we've said several times this morning, we're prepared to document and make that part of the record, the legislation, something to the union. We're prepared to document that in any way that gives you comfort. 90 11/30/06 - FINANCE - BILL 060108, ETC.

Okay. COMMISSIONER BRUNWASSER: We also, I should mention, we are very concerned about our employees, and we have reached out to the union, and we know that at least the composting employees in any case will have to be reassigned within the Department. And what we would like to do is to work with the union to determine the best way to do this with the least amount of heartache for anyone. And we have some ideas on how to accomplish a smooth transition for all employees, whether they just be the ones that are affected by composting or all of the employees, and Ms. Vollmer here will be assigning someone full time to help with any transition issues.

That raises two subsequent questions for me. "Reached out" is a relative phrase, to reach out, and it has different definitions depending upon what side of the table you're on, number one. And 91 11/30/06 - FINANCE - BILL 060108, ETC. number two, to what Councilman Juan Ramos and I were discussing, what you just articulated, would it not have been in order to have those very same discussions prior to this hour? (Applause.)

Actually --

Councilwoman, if I may respond, I believe that the Water Department has made every effort. Certainly has made every commitment that it's made here, it's made before and will be prepared to make again. As for transition issues, you have to get to a point where a transition is on the table, and it has not been for want of trying to have those discussions that they haven't happened. We're prepared -- we've made as solid a commitment I think as anybody could make on this issue of people not losing their jobs, not getting demoted and working, because I think anybody would -- I think the leadership and 92 11/30/06 - FINANCE - BILL 060108, ETC. management would agree that this is an organization where today there's some disagreement. On a day-to-day basis, I think there's been an ability to work through all issues together, and I think this is one area where we're confident that those transition issues would get worked out. We're confident of that and prepared to document that commitment.

I thank you all for your testimony. Madam Chair.

Thank you. Councilwoman Tasco, a follow-up.

Thank you. Commissioner, how many vacancies did you tell me you have in the Water Department? You have appropriation power for how many vacancies, how many positions? COMMISSIONER BRUNWASSER: In total, we have probably -- what we do is, 93 11/30/06 - FINANCE - BILL 060108, ETC. we about half fund vacant positions, and we have in excess of 300 vacancies right now.

So why haven't you filled them? COMMISSIONER BRUNWASSER: We --

Is there a budget issue with that? COMMISSIONER BRUNWASSER: No, there is no budget issue. We have had a lot of folks leave on DROP in recent years and we have had some difficulty in getting eligibles for some of our positions. (Audience member yelling "hiring fee.")

There's no hiring fee. COMMISSIONER BRUNWASSER: We have been working with the Managing Director's Office and hope to work with Central Personnel to aggressively fill many of our vacancies, but we do have sufficient vacancies to take on everyone 94 11/30/06 - FINANCE - BILL 060108, ETC. at BRC. One thing I should mention, I've said it in months past, we are not saying anything negative about the union. The union has done a fine job at that site. We had issues back in the late '80s and early '90s when that site was very unpleasant and not operating as nearly as efficiently as it's been operating under in recent years, the past 12 years or so. What has happened is a technology change. It's hard to walk away from this new technology. It's not -- although it's not new to -- it's new to us. It's not new in the industry per se, but this is what's happened. And the union, we worked very well with the union in the early '90s to come up with better and better ways to be more efficient with the type of operation that's out there, and we have gone about as far as we can with that operation in efficiency. What we are looking at now is this brand new technology to us, and 95 11/30/06 - FINANCE - BILL 060108, ETC. that's where the differences lie. If you switch technologies, you need a different skill set in some cases. In other cases, you don't need as many employees, et cetera. And this is what we're dealing with today.

If you had, let's say, a forklift driver -- I don't know what the positions are. If you had four positions vacant and they're filled, but a forklift driver is going to transfer from the BRC, so you have five, would you increase it to five or would that person have to do something else? COMMISSIONER BRUNWASSER: Right. It depends on the situation. We know that we have exact same title vacancies for many of the employees out there, but we have also begun to look at equivalent titles which are at the same pay range. But in no case -- if we have to have an overage, with the fact that people have to take sick time from time to time, they have to take vacation time 96 11/30/06 - FINANCE - BILL 060108, ETC. from time to time, I don't think we'll have a major problem, but I'll let Teresa Vollmer answer that.

The question is whether we'd have five equipment operators rather than one? Yes, we would have five. Number one, we have a lot of people who will be attriting out shortly, because we have lots of people in the DROP program. So even if we had an overage, it would be very temporary. We don't see any issue absorbing people at all. We actually have more vacancies than we have people that are going to be fitted into the vacancies.

And we're prepared to work with DC 33 around, again, any transition issues, and we have -- I think there's a good history of being able to work through those issues once that's where we are in the process.

Thank you.

Councilman Ramos. 97 11/30/06 - FINANCE - BILL 060108, ETC.

Thank you, Madam Chair. This is directed at the Water Department. This sounds like a good project, this Synagro project, but something seems to have -- I don't know if the word is "wrong," but it doesn't seem like you had the union in the real process deciding -- (Applause.)

And I say that because if you would have -- and I'm not saying you didn't try, but if you would have, I don't think we'd now be confronted with a partner in this government, which are our municipal unions, getting ready to sit there at the witness table and say that they're opposed to this. I mean, if we look at our unions as partners, then we have to make sure that we walk out as partners and that their concerns are reconciled to the point where we won't have this type of 98 11/30/06 - FINANCE - BILL 060108, ETC. almost adversarial hearing of the government, the Administration presenting a project. And to a certain extent, it's almost unfair to Synagro, that there is a project and that at least what I'm hearing is that, Yeah, we reached out to the unions, but now we have to move on. And you're not saying it, but I'm interpreting correctly is that you go ahead with them or without them. And as partners, we can't have that type of approach in government, or at least in my view of governing. What are you proposing so that the union can come back into partnership with this idea that here this afternoon sounds like something that is a serious proposition being made by the Administration? COMMISSIONER BRUNWASSER: Well, I do understand the point. Again, we have been in conversation with the union for nearly two years, but --

99 11/30/06 - FINANCE - BILL 060108, ETC. Conversation, you mean meetings where you have exchanged proposals and you've gone back and forth on the details. Because I can have a conversation on the phone with anyone about anything and sometimes it might, either my fault or the other side, the conversation doesn't get anywhere. I'm just conversing. I'm not negotiating. I'm not being necessarily in a conversation being meticulous about sentence two in this contract, in the second paragraph, sentence number two. I mean, was it that exhausting that finally you had to say, We have to move on, or was it just conversations? COMMISSIONER BRUNWASSER: Well, Councilman, again, we started the project back in late 2002, as Mr. Blair has spoken about, and first of all, that was the beginning of evaluating what was out in the marketplace. And we ourselves, although we have lots of engineers and we were into wastewater treatment and we've been involved with the BRC, are not 100 11/30/06 - FINANCE - BILL 060108, ETC. necessarily experts on what is out in the marketplace, and that's why we contracted with the company Camp, Dresser and McKee as an international expert on biosolids to help us evaluate what was out in the marketplace. It's more of an engineering scientific thing. This is why I made the point that --

Well, because it was engineering scientific, you left maybe the union out of that part of the process? COMMISSIONER BRUNWASSER: Well, at that point in time, we knew that we wanted to move to all Class A biosolids and we knew that our method of going to Class A biosolids with the technology that we had was composting, which exacerbated an existing odor problem. We could not see, and we cannot today, that we can continue with the process that we have now and meet all of our objectives. And so what we did is hire an expert, worked with a team and do an RFQ/RFP 101 11/30/06 - FINANCE - BILL 060108, ETC. process to see what was out there. And when we got a proposal that we knew could work, that's when we began to talk to the union and inform them of what we were considering and where it was going. Now, we had eliminated many of these other processes simply from they would not work in Philadelphia or if they have not been proven to work elsewhere, and that's kind of the approach that we took. It's kind of hard to go to the union at the outset and say, Hey, look, we have to change this process. They are experts at the current process, just as we had some people who are experts at the current process, but they probably, most cases, would not know what was out in all of the areas in the country and in the world in doing an efficient job of converting biosolids to Class A and then ultimate disposal.

I understand. I can follow your answer. I worked in the environmental business, not 102 11/30/06 - FINANCE - BILL 060108, ETC. in this particular area of the environmental work, but I understand it a little bit. It still doesn't answer my question. What my concern is, why is it that it is not resolved by now? If we started in 2002 to talk to the unions and you treated them as partners, how come we're now hearing an adversarial -- or you guys are in adversarial respective roles?

Well, Councilman, if I may add, I mean, I think on this particular issue, there's just a fundamental difference that while we're talking about, whether it's 190 million or 100 million forbearance to the ratepayers to avoid transferring 60 positions to equivalent roles or not, there is the fundamental issue, which we understand and respect and track record in this department of working around, and that's that privatization historically is a bad term. We understand it and have 103 11/30/06 - FINANCE - BILL 060108, ETC. tried to consider other alternatives. The professionals, the engineers, the finance folks in the Water Department have tried to do that. I guess I want to also for the record make one other offer, and I stepped aside for a minute to consult with the City Solicitor, who had been in the corner, and that's that we're prepared to, either by side letter or through mutual agreement with DC 33, to also document as part of our agreement with DC 33 the commitment we've made here today about no layoffs and no demotions.

Are you referring to within the collective bargaining agreement?

Within the framework of the collective bargaining agreement, either by side letter or by mutual agreement, we're prepared to do that.

Thank you, Madam Chair. 104 11/30/06 - FINANCE - BILL 060108, ETC.

Thank you very much. Are there questions? Councilwoman Tasco, was your mike on?

No. 8

Thank you.

And I believe, Councilman, if it's by letter, if what's deemed appropriate is a side letter, we're prepared to offer that up today.

What is the total cost of the project? COMMISSIONER BRUNWASSER: Do you mean over the 23-year period?

What is it going to cost to build and construct? COMMISSIONER BRUNWASSER: The plant itself will cost approximately $66 million, but that is going to be built by Philadelphia Biosolids.

Then I have another question. It says that the 105 11/30/06 - FINANCE - BILL 060108, ETC. City would pay PBS 24.3 million per year during Class A period. What's Class A period? COMMISSIONER BRUNWASSER: Class A period is after the new building is built and is operational.

It's to Synagro, 9 plus the energy costs. That's the that was corrected. 11

I believe that 12 you're looking at the old version of 15. It says we would pay PBS 25 -- I 14 forget the exact number. We handed out a 15 new version today that splits that number 16 between a payment to PBS of, I believe, 17 19 million and a direct payment of energy 18 costs of about 5.3 million. 19

For the entire years of operation? For what period?

That's for the Class A period, the first year of it, which would be around 2010, 2011. Obviously the contract has escalators 106 11/30/06 - FINANCE - BILL 060108, ETC. that would change those costs over time. No one can hold the same cost for 20-some years. So the contract has built-in escalators that generally follow the Consumer Price Index that would increase the price each year that Synagro -- the price that they would charge us for those services.

And it's costing us now how much?

Right now it's costing us about $26-some million to operate BRC. COMMISSIONER BRUNWASSER: 26.2, I believe.

Our current costs of operation are shown on of the handout, and they're about 26.2 million, and that's for operating costs for capital, for renewal and replacement of the facility, amortized vehicle purchase, for a total of 26.2.

Thank you.