Ñ›-œ COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE OF THE WHOLE - - - Room 401, City Hall Philadelphia, Pennsylvania Thursday, November 30, 2000 9:30 a.m. - - - BILL NOS. 000721, 000722, 000723, 000724, 000725, 000729, 000730, 000731, 000732 and 000733 PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DARRELL L. CLARKE COUNCILMAN DAVID COHEN COUNCILMAN FRANK J. DI CICCO COUNCILMAN WILSON W. GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN W. THACHER LONGSTRETH COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN BRIAN J. O'NEILL COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 (215) 561-2220 Ñ›-œ I N D E X WITNESS: MAYOR JOHN STREET ...................... WILLIAM HANKOWSKY, PIDC ................ 25 MARK ROSENTRAUB, Consultant ............ 47 ROBERT DUBOW, Budget Director .......... 143 WILLIAM HANKOWSKY, PIDC ................ 145 CRAIG MARTIN ........................... 313 3 11/30/00 - STADIUM HEARINGS
Good morning. Because of the importance of the issue of providing public funding for the development and operation of sports facilities, I have placed this issue before the Committee of the Whole. The purpose of this hearing is to receive testimony, both negative and positive, regarding the appropriateness for which and the extent to which public funding should be used to finance public stadiums, to determine the sites for these projects and to receive reliable information to provide assurances that the City's financial obligations will remain finite, that the citizens of the City, in particular, the citizens in the vicinity of the stadium complex, are protected from unwarranted intrusions resulting from the operation of the facilities. This hearing is to provide an opportunity to all witnesses to express their opinions in an open and congenial form. To this end, I want to establish certain ground rules regarding how this hearing will proceed. Anyone who wishes to testify will certainly be given the opportunity to do so. If necessary, time limits may 4 11/30/00 - STADIUM HEARINGS be placed on the testimony of witnesses. The audience will treat all witnesses with respect and shall not be allowed to interrupt testimony. If the audience does not maintain order, any individual causing a disruption will be asked to leave the Chambers. If a person fails to leave on their volition, that person will be escorted from the Chambers. If they resist removal, they will be subject to arrest. I am insisting that we have to quorum in this session. At this time I would ask Mr. McPherson to please read Bill Nos. 000721, 000722, 000723, 000724, 000725, 000729, 000730, 000731, 000732 and 000733.
Bill No. 000721, an ordinance authorizing the Commissioner of Public Property and the Director of Commerce, on behalf of the City of Philadelphia, to enter into a Ground Lease Agreement with the Philadelphia Authority for Industrial Development providing for the leasing by the city to PAID of certain parcels of land owned or to be acquired by the City, and further authorizing said officers to enter into a Prime Lease Agreement between PAID and the City providing for the 5 11/30/00 - STADIUM HEARINGS subleasing by PAID to the City of all or a portion of such land and certain improvements to be constructed thereon, including a football stadium and accessory and related amenities, improvements and infrastructure and the payment of certain costs for such stadium complex and further authorizing said officers to enter into a Leaseback-Lease Agreement. Bill No. 000722, an ordinance 11 authorizing the Commissioner of Public Property and the Director of Commerce, on behalf of the City of Philadelphia, to enter into a Ground Lease Agreement with the Philadelphia Authority for Industrial Development providing for the leasing by the City to PAID of certain parcels of land owned or to be acquired by the City, and further authorizing said officers to enter into a Prime Lease Agreement, the Phillies Prime Leas, between PAID and the City providing for the subleasing by PAID to the City of all or a portion of such land and certain improvements to be constructed thereon, including a baseball ballpark and accessory and related amenities, improvements and infrastructure and the payment of certain costs for such stadium complex 6 11/30/00 - STADIUM HEARINGS and further authorizing said officers to enter into a Leaseback-Lease Agreement with the Phillies Leaseback. Bill No. 000725, an ordinance 6 authorizing the Philadelphia Authority for Industrial Development to file an application and enter into a grant agreement with the Office of the Budget, Commonwealth of Pennsylvania, under the Capital Redevelopment Assistance Program to provide partial funding to assist in the development of a professional baseball stadium and a professional football stadium and training facility in the City of Philadelphia. Bill No. 000729, an ordinance 16 authorizing the Commissioner of Public Property, on behalf of the City of Philadelphia, to acquire by amicable negotiations or by condemnation fee simple title to a certain parcel of real estate with the improvements situated thereon and any covenants, restrictions, easements and other matters that burden said parcel of real estate and/or the improvements thereon, located on the southerly side of Pattison Avenue between 11th Street and Darien Street and extending southwardly to the Delaware 7 11/30/00 - STADIUM HEARINGS I-95 Expressway, Philadelphia, Pennsylvania. Bill No. 000730, an ordinance 4 authorizing the Commissioner of Public Property, on behalf of the City of Philadelphia, to acquire by amicable negotiations or by condemnation fee simple title to a certain parcel of real estate with the improvements situated thereon and any covenants, restrictions, easements and other matters that burden said parcel of real estate and/or the improvements thereon, located on the easterly side of Darien Street south of Pattison Avenue, Philadelphia, Pennsylvania, and to transfer that parcel to the Philadelphia Authority for Industrial Development in fee for nominal consideration. Bill No. 000731, an ordinance 17 authorizing the Commissioner of Public Property, on behalf of the City of Philadelphia, to acquire by amicable negotiations or by condemnation fee simple title to a certain parcel of real estate with the improvements situated thereon and any covenants, restrictions, easements and other matters that burden said parcel of real estate and/or the improvements thereon, located on the northeast corner of Pattison Avenue and Darien Street, 8 11/30/00 - STADIUM HEARINGS Philadelphia, Pennsylvania. Bill No.
000732, an ordinance 4 authorizing the Commissioner of Public Property, on behalf of the City of Philadelphia, to acquire by amicable negotiations or by condemnation fee simple title to a certain parcel of real estate with the improvements situated thereon and any covenants, restrictions, easements and other matters that burden said parcel of real estate and/or the improvements thereon, located on the northeast corner of Pattison Avenue and 10th Street, Philadelphia, Pennsylvania. Bill No. 000733, an ordinance 15 authorizing the Commissioner of Public Property, on behalf of the City of Philadelphia, to acquire by amicable negotiations or by condemnation fee simple title to a certain parcel of real estate with the improvements situated thereon and any covenants, restrictions, easements and other matters that burden said parcel of real estate and/or the improvements thereon, located on the easterly side of Darien Street, north of Pattison Avenue, Philadelphia, Pennsylvania.
Thank you. 9 11/30/00 - STADIUM HEARINGS Our first witness will be the Mayor. I believe he's on his way up. (Pause.)
Good morning. Thank you so much. Thank you very much. I actually have a few notes. First of all, my name is John Street. I'm a former member of the City Council of Philadelphia for years, 19 of the proudest years 13 of my life. I'm now the Mayor of the City of 14 Philadelphia, thanks to, I guess, a little luck and 15 a little hard work. And I'm absolutely delighted 16 and pleased to be here today to speak in favor of 17 the bills that are before you that have been 18 transmitted by the Administration, all of which are 19 calculated to put this City in a position to have two brand-new stadiums at a stadium district located in South Philadelphia. First of all, I'd like to thank a few people for helping bring us to this moment. I'd like to thank Governor Ridge for his support of this project in the very early days when there were some 10 11/30/00 - STADIUM HEARINGS people who believed that we either shouldn't do it or that no matter what the State did, it probably wouldn't happen anyway. Governor Ridge was very supportive, and we appreciate that. I'd like to thank the members of the Pennsylvania General Assembly. There are too many to name. But they, over years, have been very, very supportive, and I'd like to thank them at this time. Of course, I want to thank the Council President who, as usual, has been there both night and day, sometimes very late at night and very early in morning, helping bring us to this moment. Special thanks to Councilwoman Blondell Reynolds-Brown who sort of worked with us to create this concept of a Children's Fund, which I think is very, very important to what we're doing, and Councilman Clarke and Goode and others who have worked with us to make sure that we have a minority business and a women business program and a jobs program that I think we all will be proud of. Council President, I think this is a very special moment for us in this City, and I am enormously pleased and proud of the program that we have in front of us. This is a program that is good 11 11/30/00 - STADIUM HEARINGS for the people of this City. And although I will not go into great detail about all of it, I would like to highlight some of the things that I think are most important and things that I'd like to call to our attention. This is what I refer to as a deal that doesn't cost, but pays. There are some people who have speculated that if we do build stadiums, will there been a necessity for a real estate tax increase or any other kind of tax increase. And my position has been and continues to be that this deal not only will not cause us have to raise taxes, but this deal will help pay for the quality of services that we need to be delivering in our City because we do have to continue to fund public education, we have to continue to fund basic services, and we can never, ever do too much to improve the economy of our City and improve its tax base. This deal will allow us to have an additional $159 million to spend in the City's General Fund after it pays for itself. It will provide an additional $70 million of new revenue for the School District of Philadelphia. It will provide $60 million in a Children's Fund that will 12 11/30/00 - STADIUM HEARINGS provide desperately-needed services for the children of our City. And it will pay for a sports district, a special service district in our sports area, stadium area, that will help us monitor the area to the great benefit of people who live in South Philadelphia, around the district and to the general public. And I think that's very good news for the people of this City and the people of this region. But as life would have it, we have a choice to make here and, you know, most of us who are in public office today are responsible for making decisions on the basis of the information that we have and we make decisions on the basis of a situation that confronts us. And although we might wish we had a different situation, we don't.
We have a situation where -- and by the way, it was a very interesting tour that I took of the Veterans Stadium this morning. And I did it because I wanted to have the conditions of that facility fresh in my mind at the time I came to talk to you and came to make my comments about this proposal. And I have spoken to folks in the Recreation Department, the Managing Director, and if anybody wishes during the course of these hearings to take a peek at what we 13 11/30/00 - STADIUM HEARINGS saw today, we can make those arrangements. But this is a very significantly deteriorated facility that we need to take out of service as quickly as possible. But, you know, not only does this proposal have a great upside, there is a serious downside to be considered if for any reason we decide not to go forward. And not to go forward, I think, creates a lot of losers. We lose the $170 million that the Phillies are prepared to invest in the stadium. We lose the $310 million that the Eagles are prepared to invest. We will ultimately lose the $159 million that the -- the economic benefit to the City. We will lose all of the existing revenue that we are generating out of the Veterans Stadium. We will lose the $170 million in state money that the State has voted to put in the development of new stadiums. And I think we will lose the car rental tax. And I'd like to be very clear about this because there seems to be some confusion and I have asked some questions to try to get some clarifications. It is my understanding that when we asked the Pennsylvania General Assembly and Governor 14 11/30/00 - STADIUM HEARINGS to allow us to impose the car rental tax that our former Mayor made an absolute commitment both orally and otherwise that we would not use the car rental tax to repair the Veterans Stadium. That's the commitment that was made. And I think it will be hard for us to maintain credibility with the people who we asked to help us if we tell them we will do one thing and if we tell them we will not do another thing and then in the heat of doing what it is we do, we decide, oh, what the former Mayor said, the commitments that we made are not important and we are not going to keep them. I think that is a terrible way of doing business, and I think that if for any reason we do not choose to go forward with this proposal that we have to have serious reservations about whether or not we are going to be able to use the car rental tax to fund any kind of renovations at the Vet because I think we lose our credibility. This is a great opportunity. It's a great opportunity to fund the sports complex at the Veterans Stadium. But, you know, this is a huge, huge deal. And as is always the case when you have these deals, they require a lot of evaluation. And 15 11/30/00 - STADIUM HEARINGS I would be the last person that would want to discourage anyone in this Council from doing your job, and you should test the credibility of the assertions that are made by witnesses representing the Administration and the teams and others as they sit here and testify. You should ask any and all reasonable questions and you should demand reasonable answers. But I will tell you, the nature of this proposition is such that it is possible to nitpick it to death. There are an unlimited number of Dooms Day propositions that could be put on the table that could create in anyone's mind any kind of question that people want. And, whereas, I think you should test the credibility of everything that's said here, but at some point in time you have to draw a line in just how far we go in speculating about what bad could happen if we proceed with this project. And, you know, I believe in it and I think those people who testify will believe in it. And I think if we give it the good thorough investigation that you have been known to do, then all of us will be able to be comfortable.
Now, there's one issue that you will get to that I'd like to comment, and I'm going to 16 11/30/00 - STADIUM HEARINGS restrain myself and try not to cover everything that I know that you will cover in great detail with people who are prepared to ask and answer all kinds of questions, and that's this question of the funding gap. " There's probably a time when I was the only one in this City who believed it could happen. And I firmly believe that this can and will and should happen, but I cannot tell you that we will know without a doubt exactly how this funding gap will be met. I can tell you and I will fully support an amendment to make sure that it happens that the City will not pay. And we are working diligently to fill that gap, but I don't want anybody to believe that I think it is going to be possible before we finish these hearings to say "This is where every dime is coming from, this is how it's going to all happen," because I don't think we're going to be here. I 17 11/30/00 - STADIUM HEARINGS believe that we will be there in plenty of time to make a billion-dollar deal happen for all of the people of this City. And I guess what I'm asking you to do is just to have some small confidence that as between the teams and those of us who are working with them, we can make this happen and it doesn't have to in any way require any further commitment from the City and will not in any way enhance our risk. Now, as is always the case, this deal is going to have its nay-sayers. There are going to be people who will come in here and they're going to say all kinds of things. You know, as part of my preparation for all of this, I reflected on some of the other great projects that we have done in this City and I thought a lot about, you know, the consideration that we went through when we did the First Union Center. And there were people who said, "We should never be doing this. Why should the City be in it? Why should we be putting up money? Why should we give them a loan? " You know, there were some of us who 18 11/30/00 - STADIUM HEARINGS believe that this was an idea whose time has come and that this would be a great thing for this City. " And I remember the debate we went through when we talked about doing a convention center. There were people who said, "We should never do it. What are we doing? " Well, we're doing it because we have a City that has to have an economy engine. We have to be able to create jobs. We have to be able to provide opportunities for people. And by the way, there are a thousand people who currently work at the Veterans Stadium right now who, if we don't do something, and I say if we don't do something today, they're jobs are going to go away. They're jobs are going away because that facility is not going to be able to 19 11/30/00 - STADIUM HEARINGS exist in its current condition. We are not going to be able to put enough money in it to make anybody want to stay there any longer than is just absolutely necessary under the law. But I remember and I -- actually, a former colleague of ours, I read his comments with great interest, and it is always difficult for us to take the leap when it comes to doing these kinds of developments. You know, we're going to talk a lot more about it very shortly, but I wanted to call to your attention some of the yet-to-be-released economic impact information from the Republican National Convention. There was an overall economic impact of $350 million or the creation of almost 5,000 full-time jobs as a result of that convention coming here. There were more than 111,000 room nights were sold generating a total room revenue of almost $25 million. 8 million between July and August as compared -- over and above as compared to the same period in 1999, a growth of almost 30 percent. 6 percent increase 20 11/30/00 - STADIUM HEARINGS over the prior period.
There were 19,000 news articles that were written about that convention or 128 billion impressions of what was happening in this City, and the overwhelming majority of it was all positive. An evaluation on all of this was done and it would have estimated that it would cost us about 75 to 100 million dollars to buy that kind of publicity. And it was good for this City. You know, this is a good plan for this City. I think to be able to say that we're going to create the jobs that will be created. We're going to have a $60 million Children's Fund. We're going to be able to boost out economy. We're going to be able to create economic opportunity for minorities for women businesses and jobs for people in the neighborhoods. I think that's a wonderful opportunity. This proposal is good for our teams. Our teams will be able to be for the first time in years in decent facilities. I mean, if you take a tour -- and I don't know how familiar you are with it. Some of those facilities in that place are absolutely outrageous and risky. This proposal is good for the neighbors. 21 11/30/00 - STADIUM HEARINGS As a part and parcel of going down there this morning, I stopped and took another little piece of a tour of the residences just around the facility, and I had an opportunity to see just what those neighbors are going through. Under this proposal, the nearest residence to the Phillies facility will be over 400 yards away. I told one of the residents, I said, "You know, you're going to have to figure out what you're going to do without this. " I just think that this is going to be great for the South Philadelphia community that has had to endure some really, really horrible conditions down there. And the Council President and I have been meeting with them on a regular basis. As a matter, we were meeting with them last night, Council President, until what time?
Until midnight. And they are getting very comfortable with the plan and I think they're going to be in full support of it. So I think that this is great for the City of 22 11/30/00 - STADIUM HEARINGS Philadelphia. The other thing that is troubling me just a little bit is there are people who really want to say, Well -- and I was at a parade yesterday. They said, "Well, why aren't we putting this money in education?" Folks, we would love to be able to have this money to put in education, but if we don't do what we have to do to create this district, this money is going to go away. It's not like we are sitting here with a pile of money and we have a choice, are we going to put it into stadiums or are we going to put it into education. That's not the issue. The Phillies, the contribution from the state, the contribution from the Phillies, the tax revenue that we will capitalize to put in here, that money won't exist; it will not be available for education, it won't be available for libraries. And not only that, if we don't do something, there's going to be less money available for education and less money available for libraries and less money available to fund all basic City services that we hold so important. So this is a defining moment for us 23 11/30/00 - STADIUM HEARINGS because more than just people in this City are watching what we do, more than just people in this region. The country is watching, what is Philadelphia going to do. And I believe that -- I believe it is possible for us to set a standard here. It is possible for us to say to the world "We're not finished yet. Yes, we had a Republican National Convention; and yes, we have great facilities here in this City, but we are going to do more and we are going to do better for people in this City and this region." So I ask that as you grapple with some of the risk involved in all of this that we not get caught up in the Dooms Day propositions and that we look at what a great opportunity this can be for this City. You know, one of the folks at one of the press conferences talked about the possibility of getting the Good Will Games and getting the Olympics and getting some things here that could really distinguish this City in a very positive way. Folks, I think that this is a great opportunity for us. I know that you care about the City and you care about our prospects and our 24 11/30/00 - STADIUM HEARINGS opportunities. And I would respectfully ask that you favorably report and vote each of the bills that are in front of us because I think this is really a great opportunity for the City of Philadelphia. Thank you. (Applause.)
I believe you may. Thank you so much for coming up.
Our next witness will be Bill Hankowsky. (Witness comes forward.)
Bill, before you start your testimony, I would just like to say what we will be doing. You will testify. After your testimony, we will hear from Dr. Mark Rosentraub who is the professor and associate dean of the School of Public and Environmental Affairs in Indiana at Indiana University. Dr. Rosentraub will have to take the plane. So what we will do is hear 25 11/30/00 - STADIUM HEARINGS your testimony, then ask Dr. Rosentraub to testify and then we will get back to the Administration's testimony.
So you want me to go through my whole testimony and then we'll do questions after.
Good morning, Council President and members of City Council. I'm William Hankowsky, President of the Philadelphia Industrial Development Corporation, and I'm here today to testify in support of Bills No. 000721, 000722, 000723, 000724, 000725, 000229, 000230, 000231, 000231, 000232, and 000233 which allow for the construction of two new world-class sports facilities in the City of Philadelphia. These bills are the result of an intense effort by the City of Philadelphia and the Philadelphia Phillies and the Philadelphia Eagles to locate these new stadiums on sites that are neighborhood-sensitive and to craft a financial transaction that is sound and feasible. What I'd like to do this mornings is go through quickly the attached 18-page transaction summary and financial analysis to provide you with 11/30/00 - STADIUM HEARINGS an overview of the overall project and the financial consequences of proceeding or not proceeding with these new stadiums. My testimony includes this attachment and we'll also be using the power point presentation to put it up for Council as we as for the audience. Let me begin then with the first slide. Let me first talk about the legislative package that is before you, which includes the following ordinances: There are five ordinances, 000729, 000730, 000731, 000732 and 000733, which authorize the City to acquire the Jetro, Triple 7, Maggio Cheese, T-Warehouse and Acme Warehouse parcels in the South Philadelphia area. There are three ordinances that deal with the rezoning of the Naval Hospital and the newly acquired sports district which are the subject of a separate hearing of Council later, so I will not be talking about those further this morning. There are two ordinances that authorize the City to ground lease the Eagles and Phillies parcels to PAID and further authorizing PAID to construct the stadiums and lease them to and lease them back from City. These ordinances create the 27 11/30/00 - STADIUM HEARINGS financial structure that allows for the financing of the transaction, and these ordinances are subject to the attached term sheets that go with them which constrain what PAID can do in the leases between it and the teams. And those ordinances are 000721 and 000722.
It has been distributed, Councilman. And if you look at the screen I think you can follow what he's saying. This is the legislative package and Mr. Hankowsky was explaining that.
Thank you. There's on ordinance that authorizes PAID to apply to the State, the Commonwealth for 170 million in funding under their Capital Redevelopment Assistance 28 11/30/00 - STADIUM HEARINGS Program. That's 000725. And there are two ordinances required to authorize funding by the City for the land acquisition and they deal with amending the Capital Budget; they're 000723 and 000724. We will be submitting friendly amendments to those ordinances to lower the dollar amount simply to the amount necessary for the land acquisition. Then we execute the transaction. The City will buy five properties, the ones I listed earlier. We will then relocated Jetro to Acme, and the estimated cost of the acquisitions and the relocation is $95 million. This would expand the existing 125 acre sports district by 74 percent to 293 acres and increase the available parking to -- and I'd like to slightly amend this due to last evening's discussion, somewhere between 20,000 and 22,000 parking spaces. I think now is a correct number, which is roughly a 40 percent increase. The City will then ground lease the properties to PAID. PAID will own the new stadiums and lease them to and lease them back from the City. And the City's rent would become the obligation to make payments worth approximately $394 million on a 29 11/30/00 - STADIUM HEARINGS net present value basis, $304 million for bond proceeds and a net present value of $90 million for payments for a portion of the Eagles operation and maintenance cost to their facility. We would then have the teams begin to execute their responsibilities. The Phillies will perform site preparation and construct parking on the north or what some of us call the Vet lot, the Jetro area, the Triple-7 and Maggio properties utilizing 85 and a half million dollars of the bond proceeds and and a half million of the other 14 funding that we're currently working on that the 15 Mayor discussed earlier. 16 I want to point out here that we have 17 made it the responsibilities of the teams to do this 18 site work. They will get the sites as-is. They 19 will do the environmental remediation, the 20 demolition, the site work, and they will be 21 responsible for any cost overruns related to that. 22 The Phillies will then construct a new 23 baseball stadium using $89 million of City funds, 85 24 million of Commonwealth funds, and 172 million of 25 their own funds for a total stadium cost of $346 30 11/30/00 - STADIUM HEARINGS million. The Eagles will perform similar work. 7 million. The Eagles will construct their 9 football stadium using the state funds of 85 million 10 and 310 million of their own funds. 11 PAID will provide $10 million of the 12 bond proceeds to the Eagles for a one-time 13 contribution to a capital maintenance reserve for 14 the capital upkeep of the new the stadium. We will 15 then have no additional responsibilities to either 16 teams for capital expenditures for those stadiums. 17 Those are the responsibilities of the teams. 2 million. We'll retain 10 million of our bond proceeds to cover and contingencies, which might include, for example, a Board of View award on our 31 11/30/00 - STADIUM HEARINGS acquisition or should the site cost of the Navy Hospital work be greater than our current estimates. Both teams are responsible for the cost overruns on the stadium costs and on the site costs. I can't emphasize enough that the City is making firm, finite -- I think it's very consistent, Council President, with your opening comments that we are going to limit and cap what we're doing in this transaction. Both teams will then have full operational rights and responsibilities with respect to the stadiums. There will be 10 City and 10 Commonwealth-use days for each stadium. We would contribute 90 million towards the Eagles operation and maintenance costs in lieu of investing directly in their stadium.
They will be responsible for all additional costs O&M costs, and the Phillies would be responsible for all operation and maintenance costs. Both teams have agreed to fund a Children's Fund at a million dollars a team per year over the 30-year term of the lease or $60 million in total. Both teams have agreed to a special 32 11/30/00 - STADIUM HEARINGS service district to be formed in the South Philadelphia area with each team contributing $375,000 a year or a total of and a half million 5 over the 30 years. 6 We have clause that provides if in the 7 next five years if there's a sale of the franchise 8 that after certain deductions for outstanding debt 9 losses, et cetera, that should there be profit that 10 the City could participate in that and that that 11 would also go to the Children's Fund. 12 Both teams must submit MBE, WBE, DBE 13 plans. And I want to emphasize these need to be 14 meaningful and real, and I believe this is in the 15 category of one of the aspects of this transaction 16 that we realize we must have in front of Council as 17 a final document before you finally vote on this, 18 and we're working on that. 19 The City would then maintain the Vet for 20 the next three years at an estimated cost of 20 21 million. We talked about this for a couple hours 22 yesterday. Both teams will be obligated to play in Philadelphia for the next 30 years. It's actually 33 years because they'll play the 3 years remaining 33 11/30/00 - STADIUM HEARINGS in the vet and then start a new 30-year obligation, so well have these teams for 33 years. Let me talk a little bit about the financial analyst, which I gather will be the subject of much of the discussion over the next several days. What we have done is we engaged Arthur Anderson to do an analysis of the benefits that come from these new stadiums, and we've also looked at the risks of having the teams play out there lease terms at Veterans Stadium. We think that the benefits from this transaction could be summarized as follows: One, obviously, we retain the teams for the next 33 years. Number 2 is we obtain state-of-the-art facilities which allow us, for example, to retain the Army-Navy game, which we will lose without a new facility, and attract new events at our four facility sports complex which is unmatched in the United States. This is basically the point the Mayor made a few minutes ago. We don't know today what opportunities lie before Philadelphia that we could attract if we have facilities, if we invest in our hospitality infrastructure. We don't know if 34 11/30/00 - STADIUM HEARINGS there's a World Cup Game, a Pan-Am game or some type of NCAA championship. What we do know is that if we don't have world-class facilities we will not compete into 21st century in this business. We also leverage our investment to obtain significant team contributions to new stadium development, 172 million from the Phillies for the cost of their stadium, 302 million from the Eagles for the cost of their stadium, plus all of the capital and O&M costs that the teams make on top of our contributions. We end forever our operational and capital obligations at Veterans Stadium in 2004. You will no longer see in the Recreation Department the expenditure of General Fund dollars to maintain the Vet. You'll no longer see in the City Capital Budget the use of scares Capital Budget resources to repair the Vet. We create our Children's Fund of $60 million. We create our Sports Stadium Special District. We expand the complex. We create more parking. Again, that should probably read 20,000 to 35 11/30/00 - STADIUM HEARINGS 22,000 spaces. We capital our exposure, again, with the sole caveat of the potential Board of View awards on the land acquisition. We obtain, if you go forward with new stadiums, $159 million of revenue for use in the General Fund over the next 33 years. We obtain for the School District a net new amount of $70 million over the next 33 years of funds for the District.
And the teams end up with the stadiums. The new revenues remain competitive and remain here. There are risks which will happen if we don't proceed. And in a few minutes, I'm going to walk you through sort of the way we've looked at the down side of not proceeding. Let me talk about some of the very substantial risks that we face. One is we currently are talking about the need to spend some like $80 million to keep the Vet up over the next 10 years if we simply play out the remaining 10-year lease term. But suppose that number were different. Suppose it was either a determination by the City, a determination by an engineer because they found something, a 36 11/30/00 - STADIUM HEARINGS determination by a court that we should be spending another or $40 million to keep the Vet up. The 4 impact of having to spend that kind of money on the 5 General Fund over the 10 years will be a net hit of 6 50 to $100 million. 7 The Mayor mentioned the issue of whether 8 the vehicle rental tax would really be available to 9 us in the future if the legislature became so 10 annoyed that we were trying to use it not for new 11 stadiums but for repair that it was repealed. If it 12 were repealed, then the future world for the General 13 Fund would be down by $237 million. 14 If the teams that remain at the Vet, 15 it's difficult to understand how the Phillies would 16 be able without additional revenue to deal with 17 player salaries. The team would become less 18 competitive. A less competitive team would draw 19 less people. If you assume simply a 20 percent 20 decline in attendance by the Phillies, the General Fund would take a $12 million hit. We all know there's been much discussion about the revenues we'll receive when the skybox revenue flips to us. We have projected that historically about $4 million. The teams believe 37 11/30/00 - STADIUM HEARINGS it's more like a million and a half. Maybe we're right; maybe they're right. If they're right, it would have an impact on the General Fund of $26 million. What I have attached now, which is difficult to read on the power point because of the detail on the table, is in the attachment to my testimony are a series of tables that extract the relevant information in our analysis that I'd just briefly like to comment on versus putting it all in my new detail walking through it. The first table, Table 1 simply restates where we stand in terms of where we're getting the money and how we're using the money in the transaction, between us, the teams, and the Commonwealth for the stadiums, for the site costs, et cetera. As the Mayor indicated, we need to attain an additional $53 million to fund all of the activity that's involved here. We are working aggressively to do that. And what is absolutely clear and is categorical is that we're not going to increase our column, called the City column here, to make up for any shortfall in that number. 38 11/30/00 - STADIUM HEARINGS The next table, which is Table 2, takes a look at what happens to the City over the next 33 years if we build new stadiums. What we have done is looked at the projected new tax revenues of a football, projected new tax revenues of a baseball stadium, the use of the vehicle rental car tax. We have subtracted out the loss of tax revenue from the buildings that we're acquiring. We take those revenues, we pay for our obligations and 304 million in debt and the operation of maintenance payments to the Eagles and we then look at what happens to the General Fund, which is cumulatively every year positive and one year on an annual basis negative, but every other year is positive. And say that we can obtain somewhere in the neighborhood of $159 million. I really want to stress what this number is and what it is not. We have not counted in this number, we have not counted in this number, any out-of-stadium benefits.
To a degree a visiting team stays at a hotel and eats a meal in Philadelphia, to a degree of fan comes and stays at a hotel room to go to a game, those are called out-of-stadium benefits. Those are on top of this 39 11/30/00 - STADIUM HEARINGS benefit. We've not included any multipliers, meaning that you spend money and create jobs and spend up more money in the economy. We have, in fact, also downsized some of the assumptions that the teams have given us about what's going to happen in the building. 8 million. 5 million. So we've attempted to be realistic in what might happen. The result of which is there is an upside potential to the 159 million that is not showing here. There clearly is a downside potential because everything might not happen exactly as you plan it, as the Mayor indicated. But in the new world scenario, you have an opportunity you do have also the possibility of a downside exposure. The next table, which is Table 3, looks at what happens to the School District. The District is a significant beneficiary of the transaction because today whereas they get a single revenue source out of stadiums, which is the liquor-by-the-drink tax, in the future, they would 40 11/30/00 - STADIUM HEARINGS receive more of that. More of that is a function of more fan attendance, more consumption, more pricing. They will also receive new use and occupancy taxes. The would also receive a portion of the payment in lieu of taxes, so the result is about the sixth year of the transaction, the District begins to receive about two and a half million dollars a year in new revenue they're not receiving today. We then walk through a series of tables, starting with Table 4 that simply gives you the background behind the numbers I've just used. We first look at what happens in a football stadium, what the Eagles will generate, what other events at the Eagles stadium will generate. On Table 5 we even break down further the taxes you'll get from the Eagles by source. And here again I want to make a single point. You see a lot of columns here. The reason you see a lot of columns here is because stadiums, somewhat like hotels, are significant tax generators for the City of Philadelphia. And they're significant tax generators because every activity that happens in the stadium we tax. We tax the parking when you bring your car. We tax the ticket when you come in, 41 11/30/00 - STADIUM HEARINGS the admissions tax. We have a 1 percent sales tax on what you consume. We have a liquor-by-the-drink tax on what you drink. We tax the wages of the workers, of the coaches, of management, of the players, and even of the visiting players. The result is, and you're going to hear later, I gather, testimony about displacement effect economically, et cetera. This argument is very simple. These are the taxes the City of Philadelphia gets that come here, come to our treasury. I know it's kind of interesting to talk about what might happen if somebody doesn't go to a game and instead goes to a movie or goes out to dinner because it's interesting to talk about it if it happens in Cherry Hill or Valley Forge or Media. It doesn't get us any of these taxes. And in fact, somewhere in the neighborhood of 70 to 80 percent of these taxes are created by non-Philadelphians that come to events. Basically what we're doing is taxing outside spending that occurs in the City of Philadelphia. Table 6 shows the revenue streams from a tax perspective for the other events at the football stadium. Table 7 looks at what happens with the 42 11/30/00 - STADIUM HEARINGS Phillies in a baseball stadium in terms of tax revenue. Table again shows that in detail by 5 tax stream for Phillies stadium. 6 Table 9 is the set of assumptions used 7 in the Arthur Anderson analysis that goes through 8 how we've arrived at these numbers. Table is a table I'd really like the 10 Council to focus on. Table 10 is what happens if we don't build new stadiums.
Table 10 says assume that our teams play out the remaining 10 years at the Vet and let's look what might happen in this world. First, our assumption is that the Phillies will continue to simply kind of be where they are, not do any better, so that our tax revenues would basically be flat. You can assume that the Eagles would move their practice operation out of the City and take away wage taxes we collect today, so we subtract those out. We look at the revenues we get today from the Vet. We assume that we get the skybox revenue the way we think we will, not the way the teams think we might. We look at the expenses we spend today. Then we say to ourselves, well, as the Mayor indicated basically the teams in the City have 43 11/30/00 - STADIUM HEARINGS simply let the Vet go on the anticipation of new stadiums. No one's going to be able to do that in the future if they believe they're there for the next years and new stadiums are not a possible. 6 We believe that there would be a significant 7 increase in the expenses to operate the Vet that 8 would be required either as a practical matter or 9 even conceivably being forced on us in order to be 10 landlords in good standing and not expose ourselves to team being able to leave. Assume that that's simply a 50 percent impact on current expenses. We also know from the consultant report that look at capital status of the stadium that we need to spend at least another million six a year just to maintain elevators and escalators, transformers, electrical system, the HVAC systems in a way that would be prudent just to protect the 80 million that you're investing. This assumes that you keep the vehicle rental tax and then you spent only 80 million to fix the Vet and another to buy back the practice 22 facility. This says your best case for th General 23 Fund over the next 10 years is $78 million. The next table with the assumptions behind that, and let me take you to the last table, 44 11/30/00 - STADIUM HEARINGS Table 12. This table looks at what happens to that assumption of $78 million if anyone of the following contingencies might occur. Suppose it cost more to maintain the Vet another million in capital. 6 We'll lose $50 million of that benefit. If the 7 numbers actually 40 million more in capital, you 8 lose the entire benefit and in fact the General Fund 9 goes $23 million negative. If Phillies attendance 10 declines, you lose ear $12 million to the General 11 Fund. If the skybox situation goes against us, we'd 12 lose 26 million. And if you lost the vehicle rental 13 tax, you'd lose 237 million. If all of this 14 happened over the next 10 years, the General Fund 15 would have a $300 million negative impact over where 16 we are today. 17 I'm not here to tell you all of this 18 going to happen. I would hope none of it would 19 happen. All I'm saying is that the future world 20 without new stadiums is a world with no upside potential, none. And the only possibility you have in a future world without new stadiums is a downside potential at the Vet. It could be as catastrophic as a $300 million impact on the General Fund. Our position is very simple. The City 45 11/30/00 - STADIUM HEARINGS faces a choice between the future with new stadiums earning the possibilities of significant upside potential or a future without them and significant downside exposure. Let me close my comments with a few final remarks. First, I want to join the Mayor in thanking you, the Council President and all members of City Council for your patience and indulgence in dealing with this large transaction on such an expedited basis. Second, I want to emphasize what I consider to be the key provisions of the transactions that are before you. The City is absolutely capping its financial contribution at 304 million in bonded investment and a fixed Eagles O&M schedule with only one exception, Board of View awards on property acquisitions. The City is transferring the risk on this transaction to the teams.
The risk of cost overruns on site development and stadium construction, the risks of operation in capital upkeep of the new stadiums. We've created a Children's Fund and a special service district funded by the teams. We've obtain significant team contributions, the highest 46 11/30/00 - STADIUM HEARINGS in the NFL and one of the highest in major league baseball. We'll have new state-of-the-art facilities to compete nationally and internationally for the events. We'll retain our two teams for the next 33 years and we obtain new funds for the General Fund and the School District with significant upside potential. In closing, the option to building new stadiums is the preferred choice for the City versus the downside risk of having our teams remain in the Vet for the next 10 years. And we request your favorable consideration, and I'll come back later to answer question.
Councilman Clarke, I notice that your light is on. We're going to refrain from asking questions of the Administration at this time because Dr. Rosentraub must go back to Indiana.
You're light's on, keep it on so you will be considered first. 47 11/30/00 - STADIUM HEARINGS
Our next witness is Dr. Rosentraub. (Witness comes forward.)
Thank you very much. My name is Mark Rosentraub. I'm a professor and associate deen at the School of Public and Environmental Affairs in Indiana University. I have been involved in the study of Cities and professional sports now for more than years. 12 I've been a consultant to several cities, including 13 Los Angeles in their effort to retain the Los 14 Angeles Lakers and the Los Angeles Kings. I've 15 worked for the City Indianapolis. I've worked for 16 Buffalo's County that was involved with the Buffalo 17 Bills and several others. So I thank you for the 18 opportunity to review the proposals in my role as a 19 consultant to the Council. And I want to state two 20 points to start with and to develop these points for 21 you. 22 First of all, there's absolutely no 23 disagreement about the need for new stadiums. The 24 Mayor and the previous speaker both identified why 25 the City of Philadelphia needs to do it and that the 48 11/30/00 - STADIUM HEARINGS teams do actually need the potential to earn additional revenue to, in fact, remain competitive and to bring pennants and championships to Philadelphia. The question before the Council is not whether to build or not to build. The question is whether or not the existing partnership as proposed treats the taxpayers as fairly as it does the teams owner. And as I'll try to take you through in some detail, I have a report here that I have prepared and I would ask that it be circulated for members of the Council who have not received it, which does, in fact, document exactly my points about why the stadiums do need to be built because of the changing economics of professional sports, but it also carefully tries to take the Council through the finances of both Major League Baseball and the NFL, the financial positions of both the Eagles and the Phillies to indicate that the partnership that is before you today would actually make Philadelphia to provide three times the public support that has been provided to other teams by other cities who have built successful partnership with their team. Now, there's been a lot of discussion 49 11/30/00 - STADIUM HEARINGS about averages; is this a better deal than the average. And the problem, Madam President and members of the Council, is that when you think about the term average, what do you consider average? For example, there have been 31 facilities built across the last few years, from cities ranging in size from Green Bay, Wisconsin, which you probably know just recently approved a tax increase to redo Lambo Field, to cities like Nashville and now, of course, we have Los Angeles and Philadelphia. What I'll submit today and what is part of my proposal is that the Philadelphia market is so large that relative to when we use the term average, you should compare yourselves only to the deals done in Boston, Chicago, and San Francisco. It makes no 17 for you to compare yourself to Nashville or to Green Bay or to Milwaukie. In fact, if we added Green Bay and Milwaukie population and wealth together, they would be the size of one-half of the market in the Philadelphia region. So consequently, one might expect what Philadelphia needs to do and what Green Bay and Milwaukie needs to do is radically different. And that's the point that I really want to focus people attention on. 50 11/30/00 - STADIUM HEARINGS Again, it is not a question about whether or not you need to build new facilities; you do. It is not a question about whether or not a partnership should be formed; it should. It is question of how much tax money do you think is necessary to take from taxpayers of Philadelphia to increase the rates of return to the owners of the Phillies and the Eagles. Now, with those as my opening remarks, let me take you through a couple of points. The key issues when you look at what a community needs to do for its professional sports teams has to focus on the potential for profit that exist for those two teams.
3 million residents and 370 firms that employ more than 500 employees. Large firms are obviously quite critical for the fiscal success of professional sports teams because they are the primary consumers of luxury seating. And the need to build new facilities is, in fact, to satisfy that demand for luxury seating. Of all the markets that have built new facilities, Philadelphia will rank third to fourth in terms of both its size and the number of wealthy firms. 51 11/30/00 - STADIUM HEARINGS What this means, for example, when we talk about building a facility in Green Bay or in Milwaukie for the Bruins, there you might have about 50 to 75 that are as large as the 370 firms that are located in Philadelphia. As a result of selling luxury suites, the demand is both higher in Philadelphia and the price one could charge is also higher. One also has to look at the amount of money the owners have paid for their franchises because this is another important variable in terms of figuring out what is an appropriate element of return. One. Of the issues that I focussed on in my report for you to consider is that the Philadelphia Eagles --
Doctor, excuse me. I'm just being told that you're too close to the mike and it's not being carried properly. Thank you.
In my report I had asked the Council to take a look at the different purchase prices that owners have paid for their various franchises and to realize, for example, to 52 11/30/00 - STADIUM HEARINGS compare the City of Houston and Harris County did for the new Houston, Texas, franchise would have to be radically different from what Philadelphia needs to do because Mr. McNair in Houston paid $700 million for his franchise. Obviously, then, he needs a rate of return on that investment that would be drastically different from the ownership of the Philadelphia Eagles which paid $185 million for their franchise. If we assume just for the sake of argument that both owners should make 10 percent returns on their investment, Mr. 5. If you, in fact, develop a partnership which matched the one in Houston, you could potentially create an environment in which the Eagles would earn $70 million in profit or effectively create for themselves a 45 percent rate of return on their investment. I'm not suggesting that that's what this partnership does. But I need for you to keep that in mind as we go through these elements and we start talking what becomes important. Now, what I've broken our for you in the report is what will happen to the finances of both 53 11/30/00 - STADIUM HEARINGS the Eagles and the Phillies if new facilities are built and they perform at the levels which the previous speaker indicates we should consider they would perform. 4 million in excess revenue after they meet all of their obligations to pay the players, pay management, and deal with the construction and any cost overruns. million per year. percent annual return on the capital at risk for the Philadelphia Eagles. 1 million. This will yield no less than a percent 18 rate of return for the ownership of the Philadelphia 19 Phillies. 20 I want you, please, to keep these figures in mind because they will become critical as we go through a suggested alternative that I'd like you to consider which I want to underscore for everybody here only refers to how the new stadiums would be financed, not whether or not the facility 54 11/30/00 - STADIUM HEARINGS should be built. There's also been discussion this morning already about the issue of how much money the owners will, in fact, pay the players. I want to bring the Council's attention an article that appeared in all of the papers in morning, that the NFL is about to adopt new guidelines that if any team pays more than the salary cap, they will be fined by the league and will have to forfeit draft choices. This is absolutely critical for the Council to understand, because currently in the Veterans Stadium, the Philadelphia Eagles pay their players just $4 million below the legislated cap. In other words, if their revenues increased by $43 million they can only spend $4 million additional for players. If they would spend one dollar over that, they would be subject to the new penalties that the NFL has decided to impose on all teams. Some of you football fans may have recently followed the San Francisco 49ers' situation, and for violating the cap several years ago, they have not only been fined a certain amount of money, but they have now forfeited two draft choices in the third round. They are now talking about if teams violate 55 11/30/00 - STADIUM HEARINGS it after this year, it will be two draft choices in the very first round. So please understand that in terms of revenue you will create through your partnership for the Philadelphia Eagles, they cannot spend that money on the players. If they do, they risk both financial penalties as well as the loss of draft choices. When we turn our attention to the Philadelphia Phillies, and I would bring this up for your consideration as part of the partnership, the Philadelphia Phillies are the poorest performing team in their industry, Major League Baseball, not over the last few years, Madam President, but over the last century.
There is no guarantee that you have in the current partnership that if these revenues do materialize that they will in fact pay it to the players. And as I've spoken with members of the Council before, you need to be sure, based on the performance of the team in its own industry over the last 100 years, that you get a kind of commitment from this team and its ownership in writing about the revenue that it will invest to bring you a competitive team. As the previous speaking already indicated to you, if the Phillies 56 11/30/00 - STADIUM HEARINGS fail to compete, they will not bring you the attendance that is driving much of the economic model they're talking about. And again, this is a team with a 100-year track record of failing to perform in its industry. That's a very different situation than the Philadelphia Eagles, of course, who have not only brought championships to Philadelphia, but continue because of the NFL's requirements to spend an extraordinary amount of money for the playing talent. Let me focus with you for a minute now on what I consider average deals and public sector participation because there's been a little bit, I'm afraid, Madam President, of misinformation that's been brought to the Council in documents that I have reviewed. The three deals that are most comparable in terms market size for you to compare yourselves to would be the deal that the State of Massachusetts together with Foxboro and the support of the Boston City Council put together to retain the New England Patriots. Football fans will remember that the Patriots were thinking of moving to Connecticut before they partnership was put together. The 57 11/30/00 - STADIUM HEARINGS second deal is the deal that the State of Maryland put together in Southern Maryland to permit the Washington Redskins to build their new facility which is now the FedEx Complex. The third deal, of course, is the most recent one completed by the San Francisco Giants in partnership with the City and County of San Francisco. I want to under score for the Council that in none of these deals was more than $71 million of public money involved in the entire construction of the stadium, the building of the infrastructure, the acquiring of land, the clearing of the land, the site preparation of the land. Total public investment was $71 million in these three deals. The partnership that is proposed here for both teams would be at least three times that great. And what you should know is that Massachusetts, Foxboro, and Boston were able to secure a profitable deal accepted by Mr. Craft and the NFL to retain the Patriots on an amount of money that is less than what the State of Pennsylvania has already committed. You should also know that the San Francisco Giants this year appeared in the 58 11/30/00 - STADIUM HEARINGS championship playoffs, having one their division, having built a stadium where they not only assumed 100 percent of the responsibility for the capital construction, they assumed 100 percent of the responsibility for the operations and maintenance and had a player payroll, Madam President, that exceeded the Philadelphia Phillies. These factors are important to remember because you're asking taxpayers here to pay three times as much as the taxpayers have paid in other markets. I also detailed for the Council the deal that the Chicago White Sox retained in securing their new facility, Kominsky Park 2. If we index that deal to the current construction prices, the State of Illinois would have committed but 200 million towards the deal of the Chicago White Sox that is one-third less than the total public investment that is anticipated here. As you'll see in my recommendation to the Council, I would urge you to follow the model that the City of Chicago and State of Illinois did follow with regard to the Chicago White Sox. I am also aware that there is a new proposal circulating by the City Chicago involving 59 11/30/00 - STADIUM HEARINGS the Chicago Bears.
This may involve utilization of state money to build an entire new facility for the Chicago Bears. This would be a remodeling of their existing Soldiers Field. One version of the proposal has it that the City Chicago would not put any of their tax money into that it, that it will all come from the state share of the hotel tax. But we will have to wait and see, in fact, what that deal looks like as it is only now being submitted to the legislature in Illinois. The Mayor also made an important point that I would ask you to keep in mind. The Mayor ask for you to think about the impact of what you do and what message you generate for other cities. If in fact a large metropolitan market like Philadelphia, in fact, provides the level of tax support for this partnership has indicated, you will actually set back the fiscal health of all other cities in the United States, because this will become the new standard. You will have, in fact, undone the work that Boston, Massachusetts, and Foxboro did. You will undo the work that San Francisco City and San Francisco County did to protect their taxpayers, and I do well fear you may have undone some of the 60 11/30/00 - STADIUM HEARINGS efforts and success that Chicago has achieved in building affective partnerships for professional sports. Let me now talk a little bit about the return to the City of Philadelphia, and there's been great deal of discussion about that. There's been discussion, for example, about a Children's Fund that the teams will commit over time to a total absolute number of about $60 million. I want the Council to keep in mind that the return to the teams will be exactly times this commitment. While I 13 certainly applaud the need for this kind of 14 investment by the teams in their communities, 15 allowing them such a small investment in exchange 16 for a return that is 20 times that magnitude seems 17 to me to be a little bit unbalanced. 18 I want to also bring to Council's 19 attention to a point that was made by our last 20 speaker about sharing in the wealth from imputed or increased value of the team if the teams are sold. And I want to bring out three points from the current proposal for you to consider: One is the owners do not have to sell all of the team to get some benefit. In fact, your 61 11/30/00 - STADIUM HEARINGS share only takes effect if they sell controlling interest. So they would be able to sell minority shares and recoup a certain amount of return without invoking any of the penalties described in the clauses. Second of all, you should be reminded that this provision only exists five years after the proposals are signed or approximately three years of playing time in the new facilities. All the owners have to do is to avoid any penalties whatsoever is to complete the period of service, whether it's interpreted as three or five years, and then sell the team. Lastly, I will also tell you that in terms of definition of profit, the definition of profit is worded in such a way that the return that the City of Philadelphia could share in will be drastically different. The accountants will frame it such a way, I would predict, that the teams will be shown to be less than as profitable as they usually are. There are a series of tax revenue gains that have been discussed. I want to comment very briefly on them for you to put them in perspective. 62 11/30/00 - STADIUM HEARINGS While I do believe some of those returns will occur, they will not occur at the robust levels predicted. One, the Army-Navy game is only committed, as I understand it from documents to the Philadelphia area for three of every four years. If they would decide to stay, I think they would, one needs to adjust that. Second of all, there's a projection of attendance levels at soccer that we have not yet seen from Major League Soccer in any market across the United States. As a lover of soccer as well as basketball, I certainly hope those attendance levels happen.
But I have to report to you as your consultant they have not happened anywhere in the United States, outside of selected games in selected areas during selective seasons, not for annual averages. Attendance levels that are projected for the Phillies are wholly dependent their ability to field competitive teams. In the past, playing at Veterans Stadium when the team was competitive, they drew an excess three million people. However, the ownership has been extraordinarily reluctant to invest in the team, it is not fielding competitive 63 11/30/00 - STADIUM HEARINGS teams of late. If, in fact, they do not do that and you have no commitments that they will, you may not see those attendance levels. As the last speaker mentioned, there's an overestimation in my point on the substitution effects. I don't want to quibble about that because that's not issue you should really bog yourself down with. The key issue is what is the appropriate amount of money the teams ought to invest in these facilities given the rates of return they will earn. In terms of the financial report also that were introduced this morning by the Anderson Consulting Firm, please remember to read the letter itself Anderson transmitted with that document in which they did not endorse or review in any manner, shape, or form any of the assumptions and methodology. They were essentially given a set of numbers, discussed it with the teams, and ran those numbers out for you. They are not evaluating whether or not those numbers are valid and whether or not those conditions or the assumptions underpinning those numbers, in fact, have any validity. Now, let me get to what I would ask for 64 11/30/00 - STADIUM HEARINGS you to consider as a way to make this deal or this set of partnerships similar to those that Boston, Chicago, and San Francisco have been able to negotiate for their taxpayers. I would ask that you remove the support that the City is committed to for operations and management for the Philadelphia Eagles facilities. This will save taxpayers 90 million. I would ask that you remove the construction support, the additional construction for Philadelphia Phillies Stadium. 5. Essentially, what I am proposing to you today as a consultant to you is that if in fact you could reduce when we pass what has been submitted to you, simply removing those two items you will save taxpayers of Philadelphia $179,500,000. The partnership will still be twice as large as any public partnership negotiated by large market to date. So this will not put you behind the support that San Francisco's provided. It will not put you behind or even equal to the support that Massachusetts has provided. It will not put you equal to or behind the support that Maryland has provided for the Washington Redskins. 65 11/30/00 - STADIUM HEARINGS You will be providing twice as much support but still saving taxpayers $180 million. What will it mean for the teams if this was the proposal that you, in fact, agreed to today? 5 percent. 5 percent per year from what I project would be and a half percent if you go ahead with 10 the current proposal. 11 The Phillies return, in my view, may 12 well if they field a competitive team and if they 13 pay the players what they should pay as a large 14 market team, their rate of return would exceed 15 15 percent, and in my estimations would be as high as 16 18 percent. 17 Again, I just want to make sure the 18 Council is clear on what my recommendations are. 19 The need to build stadiums is there. Producing a 20 hundred $180 million of taxpayers commitments will 21 simply reduce the teams' profit levels to very 22 handsome and robust levels of 16 and a half percent 23 and at least 18 percent. There's been -- when these conversations always take place in communities, there's always a 66 11/30/00 - STADIUM HEARINGS fear tactic that's introduced about what happens if the City would fail to act. I do not urge you not to act.
I urge you to act and I urge you simply to follow the recommendations I make. But let me point out a few things that give you more time if you feel more time is, in fact, needed. One is, the team have leases. They are, in fact, contractually bound to play in Philadelphia for several more years. While it may be a need to repair the Vet and do things, there is time, in fact. These are not teams that can leave in the morning. For the Philadelphia Phillies, please understand there is no other market left in the continental United States that they could play in that would generate for them anyway near the profit they could earn if they stayed in Veterans Stadium and you did nothing. They can't move to Charlotte, even if Charlotte were to build them a stadium and hand them the keys. There simply is not enough money in the Charlotte economy to give them the same profit levels here. So there's no place else for them to move. The Eagles, in fact, could try to 67 11/30/00 - STADIUM HEARINGS relocate, but if you carefully review the provisions that the NFL has established itself governing the issue of movements of teams, neither of the conditions that would support such a move do exist. And while the Al Davis precedent does give some fear that they could still try to circumvent those, courts have shown now greater interest in looking at what the NFL does. And what I want to point out in terms of what those two elements are, fan support for the Philadelphia Eagles has robust for decades. You currently have an average attendance in excess of 65,000. That does not meet the NFL criteria of a community failing to support its team. Second of all, you do not meet the criteria of failing to negotiate in good faith for a new stadium. There is a proposal of partnership before you right now. I am urging you, in fact, to consider an amendment to that proposal, but that could not be considered evidence of a failure to negotiate in good faith because you as a Council could turn to any court, could turn to the NFL, could turn to the ownership of Philadelphia Eagles and say to them "We are prepared to offer you more money than was offer to the Washington Redskins or the New England Patriots 68 11/30/00 - STADIUM HEARINGS to maintain a presence in the City of Philadelphia. That is certainly negotiating in good faith. It has also been discussed, well, what happens if Philadelphia did nothing and the teams went to the suburbs? Madam President, I point out to you that in terms of the performance of teams, the only team to build a new stadium in a suburban location is the Texas Rangers. They are having the greatest difficulty selling luxury seating. The teams themselves have a vested interest of being near the consumers of luxury seating. And therefore, while it is conceivable that some suburb could make an offer that would dwarf what the City of Philadelphia might or could offer, the teams in the long run, simply put, cannot earn the revenue that they can earn in their locations by going to suburban locations. Lastly, I want to close by saying to you a few things. Build the facilities. They're needed. It's overdue. And much of the dreams and the hopes of the future of what you achieve in fact you may well achieve if these facilities exist. Form partnerships that treat your constituents, businesses, taxpayers, and unions as 69 11/30/00 - STADIUM HEARINGS well as you treat the teams owners. The current proposal does not do that. The current proposal treats the team owners much better than it treats the owners, the taxpayers, and the people who will ultimately be responsible for ensuring that financially these deals can be met. I also urge you to consider with your own attorneys the implications of entering into a deal when there is a shortfall of $54 million. I will not pretend to say that I understand Pennsylvania's laws or Philadelphia's own ordinances, but you already have, as the previous speaker noted to you, one downside liability.
You are responsible for acquiring the property and you do not know what the property will cost you. You, therefore, must consider the possibility of a contingency fund in case those costs exceed what's currently projected. That I would think would be a reasonable approach for you to take. You also have an unfunded liability currently of 54 million. You are entering, therefore, into a partnership in which you actually are not capped. You have some liabilities. I urge that you not add to those liabilities by providing 70 11/30/00 - STADIUM HEARINGS the team owners with rates of return that are exorbitant. I appreciate the opportunity to work with you.
Thank you very much, Doctor. Can we have an opportunity for some questions? I know you have to take a plane.
Thank you. Councilman Clarke, I know you wanted to be recognized. Do you want to recognize this witness or the City witnesses.
My question was originally for Mr. Hankowsky. I think there are other members that may have had some questions.
I can also stay through the early afternoon, so if you want to wait for questions, I'll be here.
Thank you, Madam President. Mr. Rosentraub, in your analysis you 71 11/30/00 - STADIUM HEARINGS discuss the disposable income of immediate markets as it relate to the construction of new stadiums. However, you ignore the amount of public finances versus team financing. Did you take into consideration that the Eagles contribution to the stadium is the greatest of any NFL team and that the Phillies are the third highest of any Major League Baseball team? Who is right, you or the teams? And you state that these deals involve far more public money than any other project across the country.
Councilman, I point out to you, the teams are wrong and there's no way to -- let me point out to the information they're giving you with regard simply to the deal here in Philadelphia. The information they are circulating, which is what I call misinformation, and I apologize I'm going to push back pretty hard on this, they are saying that the only public money in the deal is the $85 million from the State. Sir, that's patently absurd. You're buying land. You're dealing with infrastructure. You already said you're committing money. For them to report on a document that therefore the only public money and construction of the stadium is the $85 million from the State is, 72 11/30/00 - STADIUM HEARINGS simply put, a -- I don't know how you would define that as such, sir. No one in professional sports would define the cost of construction -- that would be as if you were to talk about the construction of your home and say it cost you nothing for the land. So in effect, just looking at that one piece of information on the table, we show you that this is misinformation. If you like afterwards, I will go through every single one of those deals, and I have the information here for you. I have it not from me, I have it from audited accounting firms that will show you exactly the total public commitment in every single deal. I can refer you to two other sources for that that will give you every single deal. This is simply wrong information.
Maybe you can stay around this weekend, go to up to Juniata Park with me, hope on the L and go down to the Eagles game.
I have another question for you. On , you breakdown the Phillies expenses and you have them in a fashion similar to Eagles expenses. You simply assume based 73 11/30/00 - STADIUM HEARINGS on Cleveland that the annual cost based on salaries and other teams expenses is 112 million. Could you break down those other expenses out for me in terms of dollars and how they sent to us? Can you do that this afternoon?
Absolutely. I've just summarized them here, but I can give you every single category. Let me also remind the Council where this comes from and why. The NFL and Major League Baseball are privately owned companies. They have no legal responsibility requirement and their privacy should be respected and protected and divulge some of these figures. Much of what people like me and other accounting firms and consultants work with is information from the Cleveland Indians because they were for a period of time publicly traded. As a result, each year they had to file 24 financial statements with the Security Exchange Commission which it give us a very good idea. The 74 11/30/00 - STADIUM HEARINGS only information that we actually have that is 100 percent accurate are the player salaries because the union does divulge those. So we know, in fact, what they pay their players. Everything else we're either getting from what they choose to release or based on the figures once released by the Cleveland Indians.
Okay, my next question, on you discuss the Phillies market size and the household income of the market related to your efforts to build a new stadiums. What I don't see there is a consideration of the teams' annual revenue and broadcast revenue. Did you consider that Philadelphia, we live in one of the wealthiest regions and the fifth largest Media market and the Phillies out of 30 teams in 18 revenue 13 out of 30 in broadcast revenue despite 19 your factors? Did you figure that in? 20
Yes, I did, and that's 21 what I was saying to you what I view what the 22 profitability potential of the Phillies is is that 23 baseball fans, like all consumers, and since I'm a 24 huge baseball fan I can tell you this, that when 25 teams win, more people watch. If in fact the 75 11/30/00 - STADIUM HEARINGS Phillies do as well as they should have done, and I pointed out that they're the worst performing team in Major League Baseball in the last century --
Did factor the Larry Bowa factor into that, too? (Laughter.)
Seriously. It's not a joke. We got a guy that was on the last championship team here in the '80s, he was a sparkplug, he was here, you know, he couldn't hit but he could field. He's probably going to be a great manager. The people are going to come see Larry Bowa. Did you factor that?
I track one loss attendance player payroll every year for every team, so the Bowa effect is in the models.
Do you factor also into that like young guys might want to play for a Larry Bowa as compared to someone else?
The great thing about statistics in sports is we can look at the bottom line, how many games did you win. And, yes, we've got it. And that's why I do believe the profits of the Phillies should be at about 18 to 20 percent. 76 11/30/00 - STADIUM HEARINGS
Can I assume you're saying that these intangibles, the Larry Bowa factor, as I call it, he can come here and light this team and we can see profits with this new stadium that even you -- you could admit it is possible, it isn't out of the realm. You know, we are dealing with something here that's emotional and a national pastime as opposed to numbers?
Again, Councilman, if that occurs, then the situation with the Phillies will be even better than projected. I'm giving you a very conservative approach on what the Phillies are so that you understand the magnitude of what that subsidy means.
A couple other questions. You talked New England, you talked about Washington. It's hard for a Philly guy like me who grew up in the and still lives in the City. When I go like to New England, it confuses me like I'm in Boston, I'm outside of Boston, they got a football team and Boston's City Council is paying for it but it's in Foxboro. You know, there's a lot of things into the factor, you know, we're the County of Philadelphia, the City of Philadelphia. Can you 77 11/30/00 - STADIUM HEARINGS actually compare our scenario with Foxboro which is not really Boston but it is. They let their police live out of the city; we don't do that. The same thing with Washington, D.C., and I saw Hankowsky make a little face there, you said that Texas is the only one building a suburban stadium. The new ones?
Right, the facilities that -- and the reason it's important to break that out is, you're correct --
The new ones tend to have the luxury seating. The Patriots now, of course, would be the exception in trying to do it. But the baseball teams, it's the Rangers that have had the problem. Go back to your question, though.
These are suburban stadiums, basically. Did take into --
Right, when you're dealing. 78 11/30/00 - STADIUM HEARINGS
Right. When we're dealing with football and you look at the placement, for example, of where the FedEx Redskins facility is, you're right in the sense it's not inside the inner city, but the key element is the market and what it will do. Football teams have a little more success at selling in more distant locations than do baseball teams because baseball, of course, you're selling 81 products. So you have a little bit more -- less risk in that regard. With baseball now we're pretty confident in telling you that if you put a baseball team in the suburbs, you're running some very high risks of meeting your revenue goals.
Let me ask you my final question. You talked a little bit about soccer. Do you know who Chris Albright is or Bobby Convey are? Did you ever hear of them names? I mean, this isn't a soccer quiz. Chris Albright and Bobby Convey are professional soccer players that play for the Philadelphia Metro Stars. Both of them were high school stars here. Bobby Convey is 16 years old. He plays professional soccer for the 79 11/30/00 - STADIUM HEARINGS Washington Metro Stars. Bobby Convey and Chris Albright will playing here for the Philadelphia whatever we're going to call them. I'm assuming that there's going to be a professional soccer team here. How can you count revenue that comes from the Bobby Convey factor and the Chris Albright factor?
Again what I advise you, simply, is to look at -- you and I may be strong soccer supporters. I've been a girls soccer coach for years, so I know that well and I've 12 analyzed the potential of soccer as an entity. I 13 hope it's successful, I really do. But the long run 14 data right now in terms of what you can charge does 15 not augur well currently. We have been trying, as you know, by hosting the World Cup here in the United States to get that extra kick up. It has not materialized to date. As you probably also know, the newest proposals from both the women's soccer leagues and the men's soccer leagues is to build and play in much smaller facilities. And one of the elements the Council would need to factor into those projections is the recommendations from the soccer associations themselves is that we probably need 80 11/30/00 - STADIUM HEARINGS venues under 30,000. You also are probably aware that the NCAA men's final four in soccer, it's still considered the premiere event. They tried for several years to hold it in Charlotte, play it at the home of the NFL franchise in a hope to attract 50, 60, 70,000. And I know you follow it as closely as I do. You know that they were less than halfway to their target goal and are now considering leaving Charlotte after this year to return to smaller venues. So I bring this information to the Council only to say that current market data doesn't sustain attendance levels in the long-run event magnitude.
And I wouldn't pretend to be an expert on any of these subjects. I know a little bit about a lot of things, okay? But what I'm out here with the soccer point is the Kensington factor, you know, that's stuff that you can't factor in to it; I can't. That was a big immigration thing and it was big and it happens here. That's my whole thing. I mean, I hope some day you can come back and tell us what's going on. 81 11/30/00 - STADIUM HEARINGS Thank you. Thank you very much.
Thank you. The Chair recognizes Councilman Goode.
It's good to finally meet as our consultant before you fly back out of town. Can I ask you first off, did you consult with any members of Council on what this review should include?
Did you consult with any members of Council on what this review should include?
No. Let me back up. When you say what it should include, the charge was to look at the partnerships.
So you would agree this is a very narrow analysis of a billion dollar 82 11/30/00 - STADIUM HEARINGS economic development project?
I looked at a $1 billion -- it's in excess of $1 billion proposal to create two partnerships.
Let me ask you why there is no public benefit analysis in terms of construction jobs, permanent jobs being created or other economic opportunities? Why is there no 16 public benefit analysis of a $1 billion economic development deal?
No, I'm asking a question. Why is there no public benefit analysis?
It's not a public benefit -- it's private benefit to construction I'm saying it exists.
I'm asking why is 83 11/30/00 - STADIUM HEARINGS there no public benefit analysis in terms of construction jobs, permanent jobs, other economic opportunities that will come from this deal? Why is that not included in this 16-page document?
Sir, I accept the fact that if you build the buildings, and I've recommended that be done, that those benefits will happen. What I'm -- Councilman, let me return, I'm not disagreeing. I'm agreeing that those benefits exist, and it would help, as I said, I think I started my presentation by saying the stadiums ought to be built and the jobs ought to be created. What I'm asking you to consider, and I would pose my question in this regard to the Council, is why should you, in fact, take taxpayer money to subsidize some of wealthiest people in our society, taxes that union members will have to pay, taxes that people who rent cars will have to pay.
My question was why is there no public benefit analysis. You didn't see a need for it. My next question is why is there no-- 84 11/30/00 - STADIUM HEARINGS
Please don't -- if you're going to ask me a question, sir, please let me answer it.
I answered the question by saying to you, point blank, that I started my presentation today by saying that I agree that the stadiums should be built, I agree that those things create jobs and those benefits. I asked you to focus on who should pay for those benefits, sir, not whether they exist or -- I'm not opposing the stadiums. I'm not opposing this.
Why is there no 19 allowances included here of participation goals for minority, women, disabled businesses? Did you look at participation goals in other cities in terms of what economic benefits those economically disadvantaged businesses might have? Did you even take the time to examine that?
I respect the 85 11/30/00 - STADIUM HEARINGS Constitution which requires that to be done. I would not think the City of Philadelphia would violate that. So that's not relevant to the proposal.
This is very relevant to the proposal. One last question. If we were to spend a billion dollars on the stadiums and 50 percent of the contracts related to those stadiums' construction went to economic disadvantaged businesses, minorities and women, would that change your analysis?
And 50 percent of those contracts went to minority and women businesses, would that change your analysis?
Thank you, Madam 86 11/30/00 - STADIUM HEARINGS President. Madam President, I just wanted to follow up on a question that Councilman Mariano asked with respects to the FedEx field and it was kind off minimized in terms of the response. On a daily basis we here wrestle with the issue about companies making that decision to build within the city limits or build outside the city limits in Montgomery County and other surrounding counties, and invariably they talked about the cost of doing business in the City of Philadelphia versus the outlying counties, and I think that your response kind of minimized the decisions that we have to make when we talk building the Eagles facility in the City of Philadelphia versus building it on the outskirts. When we talk about whether or not we would ge certain revenue associated with the facility being built in Montgomery County versus being built in the City of Philadelphia, I think you kind of minimized that and I don't just don't understand. Did you take that into account when you referenced that in your speech? I do believe that FedEx Field is in the suburbs.
It's in the suburbs, right. As I said, where I might quibble with what 87 11/30/00 - STADIUM HEARINGS the previous said in terms of the exact magnitude of what this extra spending would be, I'm not -- the point of my report to you was to say it would be fine if you wanted to accept it. I wouldn't. I would tell you to look at his estimates with caution. But again, we're off to and onto other elements which I know critical and important. So let me go back again and try to keep it, I think, on a much more narrow track. I agree that there will be tax benefits from building a stadium here and I think I've spoken directly to the fact in everything I've ever written that they would be in Center City, so we're not disagreeing there. I resent the fact that I don't consider coming out of an entire family out of unions that I'm being categorized as in some manner, shape or form as opposing the creation of union jobs. Nothing can be further from the truth.
I didn't characterize you that way, sir. I just asked about the economic benefits.
So I'm saying the economic benefits, while I think they're less, I'm willing to accept in terms of this report to you that there are there. But, Councilman, that still 88 11/30/00 - STADIUM HEARINGS doesn't get to the central point that if you are concerned about what businesses have to pay in taxes, if you pass this proposal, you are raising the tax bill of every business and every resident of the City of Philadelphia.
Sir, you can't make an analysis and not reference the fact that there are certain revenues associated with building this inside the City of Philadelphia versus Montgomery County. You were talking about a FedEx versus an Eagles facility.
Councilman, if I as not clear when I opened my presentation and if I wasn't clear in that section of the presentation where I told you that yes there will be economic benefit, there will be taxes, I'm agree with each of those points. I might disagree on the magnitude and I'm asking you to look at it cautiously.
You already have the 89 11/30/00 - STADIUM HEARINGS documents. I said to you Arthur Anderson did it. I am willing to state that I understand the figures --
I don't see the analysis on your behalf of what that is.
I'm accepting Arthur Anderson's analysis with a caveat which I reported to you, sir. That's still not the central issue before you today.
No, the central issue is whether or not you're going to tax --
Whether or not you're going to pass taxes that increase the rate of return to some of the most privileged members of our society while asking lower and middle income people to pay higher taxes and ask businesses in Philadelphia to pay higher taxes; that's the issue, not whether or the benefits exist, not whether or not jobs are going to be created. We want the jobs created. We want the facilities built.
Sir, you have 90 11/30/00 - STADIUM HEARINGS admitted that you haven't done an analysis on the stadium in the City of Philadelphia. What you're talking about is the City's contribution.
So how can you stand here and talk about the split-offs associated from the building of a stadium in the City of Philadelphia, i.e., taxes and new income individuals?
Sir, I analyzed the reports from Arthur Anderson. I analyzed the reports submitted to you by the Development Corporation. I saw their projections. I have told you that I am not here to contest them. I have told you that I would offer that you put caveats on them. I accept those benefits.
And you reference other stadiums that do not have the same environment that we do here in the City of Philadelphia. And that's very important in your testimony. I mean, you referenced those other stadiums in your analysis. And you talk about Philadelphia's contribution versus these other stadiums. 91 11/30/00 - STADIUM HEARINGS
Are you saying to me, sir, that you don't think the state of Maryland had any requirements what so ever about creating construction jobs and minority representation?
I don't know about that. Were they all union jobs? That's what I'm saying, I don't see that in your analysis. Were they all prevailing wage jobs?
Yes. To the same extent that the requirements you're placing on them, the construction in Maryland reflected it and the construction in San Francisco.
Were the requirements as it relates to where those jobs were and where they were coming from, who the participants were? Were there MBE, WBE requirements, were there city requirements, residency requirements?
In San Francisco the 92 11/30/00 - STADIUM HEARINGS answer is absolutely yes. I have to check and go back and look at all the exact documents in Maryland. I didn't look at that.
Sir, if you're going to use every stadium in the United States, you can pull one thing out of every stadium and obviously we can't meet the goals associated all of the stadiums in the United States.
What we're looking at are the stadiums in similar market sizes.
You're welcome. Councilwoman Tasco, your light is on. Do you want to be recognized?
The Chair will then recognize Councilman Nutter.
Thank you, Madam President. Dr. Rosentraub, let me try to understand the tail end of your testimony which was Item No. 6. I took from your testimony, I did hear you say that 93 11/30/00 - STADIUM HEARINGS you basically support having new stadiums but you have some concerns and, at least according to my reading of the testimony, it seems that the main point that you're trying to get across is on the financials of the deal and it seems to be in the middle paragraph in Item No. 6 on . Your statement talks about a different scenario with a savings to the City of the proposed $90 million in operating and maintenance cost, $10 million the one-time contribution to the Capital Fund, and the $89 million to the Phillies, and you end that paragraph saying, "My proposal is to reduce the burden on Philadelphia's taxpayers by $189 million." Now, does that represent, for the most part, your basic recommendation to the Council as to what, if anything, should be done with regard to this particular proposal?
And my question is, how did you arrive at the decision that those are the areas that either should be reduced or should be cut versus any other area.
By, again, looking at what governments trying to, again, generate the same 94 11/30/00 - STADIUM HEARINGS sense of benefits for jobs and things of that nature that I have been able to forge relative to building of new facilities. Again, I'm not trying, as I think was alluded to, pick deals around of the 31 new facilities built, but to focus on market sizes that are similar to Philadelphia. So the decision rule was what are the cities that are similar in regional size to Philadelphia, what did those communities do to create the same kind of benefits we're talking about here, and how much tax money do they have to invest in those partnerships.
And in those cities where you tried to make the straight-on comparison, did they have somewhat similar features in their deals to of the proposals that are in deal in front of us today?
Absolutely. The only part that is different here is with regard to the potential possibility of profit participation, but the clauses here, of course, extend that for a very short period of time.
The five-year cap on 95 11/30/00 - STADIUM HEARINGS that. That is a sizable difference in terms of what it could be avoided. But that's a different addition to these partnerships than most other communities have. The standard 30 years term of lease where the teams commit to stay for that period of time is similar. Job creation is similar. Minority projections are similar.
So, in essence, what you're saying is that rather than the City having an overall commitment of $394 million, it's the 304 plus the 90 in operating and maintenance that the City should seek to try to reduce that in your estimate by $189 million and have a commitment of $205 million; is that the essence of your proposal?
And what kind of deal if we stayed in that area in this hypothetical, what is your estimate of what kind of deal would be put together under that scenario and what does that do to any of the other projections that are part of the ordinances or term sheets that are in front of us from your perspective?
It would change nothing other than, of course, the team profit levels. 96 11/30/00 - STADIUM HEARINGS
Is your assumption that the $189 million that the City would not be spending would then come from the teams in their proportionate shares?
What are the other cities that you used to compare Philadelphia to and what is an appropriate comparable under these circumstances?
As I laid out on this tables, Philadelphia's market region is 7.3 million. That makes it the fourth or fifth largest media market in the US. The comparable cities that have built facilities at this time or have proposals underway would be the Boston market with the New England Patriots, the San Francisco market with the San Francisco Giants, and of course the Washington, D.C. area with a facility that's in southern Maryland.
Yes. And I've listed for you the market sizes of each of the others that have built facilities or have recently passed 97 11/30/00 - STADIUM HEARINGS legislation to build facilities.
Well, it appears that our players enjoyed playing in the Redskins' facility fairly well the other week there and we look forward to their continued success against the Redskins. Have you looked at -- in any of the other deals, were there any participants in terms of funding for any of the other deals across the country other than either the respective local government or county government or state government and the teams?
There have been in some communities philanthropic foundations that have participated in the building of facilities. There have also been corporate councils, groups of corporations and individual corporations that actually pledged a certain level of support for the building of certain facilities.
That wasn't necessarily anticipating that we might kind of have a bake sale with our foundation community. I was talking more about either investor groups or serious financial people who participate in deals at a 98 11/30/00 - STADIUM HEARINGS significant level.
There have been finance people like you're describing, financiers who have gotten involved in the building of facilities.
Councilman, are you finished with your line of questioning?
Thank you. The Chair recognizes Councilman DiCicco.
Thank you, Madam President. I have a few prepared questions, but I want to go back to a couple of the, what I think I heard correctly, remarks you made in responding to Councilman Clarke where you said that -- I know the issue here is how deep the public contribution may be towards and I understand that you fully do support building them it's just how do we get there and how much money is invested. But you made a comment a couple of times I think during that conversation that the taxpayers of the City will have an increase taxes. Do you know something I don't know because I haven't seen that any of the 99 11/30/00 - STADIUM HEARINGS reports submitted by the City or the teams? Where do you come up -- I mean, that's probably the most alarming statement that has been made this morning and probably will be made when the press is here and the public probably viewing what we're doing now that there is an increase in taxes to the residents.
There is a report that I believe was already submitted to the Council as was some of the documents that was shared with me on the analysis of the auto rental tax.
But auto rental tax is not really a tax increase to the residents. I mean, if someone chooses to go rent a car, then they would pay, but that's -- I mean we can argue how many citizens of Philadelphia rent cars versus people who travel to our City and our guests tourists. The burden would basically be on them, I think you would agree. But you consider that a tax increase to the residents?
Yes, when it affects somebody, for example, if their car is in an accident and they have to rent a car, a replacement car.
Most people have 100 11/30/00 - STADIUM HEARINGS insurance that cover that. But that's a rare -- that statement that we're increasing taxes for the residents of Philadelphia really kind of sends up a flag here that gets everybody on the edge of their chair, including me. I thought I was missing something. The numbers provided to that there will not be a tax increase accept for a tax on rental cars. I don't see any need for any taxes.
If you're going to define -- if all the numbers that were done, if we take all the economic projections that were done, as I said which I urge you to put some question on that, but let's assume for the sake of argument that all the projections from the previous speaker do come to pass. And if you're going to define an automobile income tax -- tax on the rental of cars as not being a tax paid by people in Philadelphia or if it, it's voluntarily and therefore doesn't represent an increase in taxes to them, if those are the two assumptions you're willing to make, then I think you can say that it has a potential to be revenue neutral.
I don't think it's an assumption; I think it's a fact. 101 11/30/00 - STADIUM HEARINGS (Applause.)
I make a choice to rent a car. It's my choice; no one's forcing me to. The tax collector is not sending me a bill at the end of the year saying, this is increase in your taxes. We're not there. I just wanted to make that clear before it's reported that there's something in here that maybe the public isn't being made aware of.
Let me respond a little bit in a sense in a court situation that if in fact the City of Philadelphia uses the voluntary tax, as you're calling it, and we can question whether it's voluntary --
It is voluntary. You don't have to rent a car. I didn't own a car for 13 years. I finally bought a car. I mean, you decide if you want a car. It's voluntarily, it is.
Let's accept for the sake of argument for you position, Councilman, it's 102 11/30/00 - STADIUM HEARINGS a voluntarily tax and if somebody wants to rent a car, they'll pay it; and if they don't want to rent a car, they won't pay it.
Let me ask you. Not to interrupt you. You come from Indiana?