COUNCIL OF THE CITY OF PHILADELPHIA2 COMMITTEE OF THE WHOLE3 Room 400, City Hall6 Philadelphia, Pennsylvania Friday, June 10, 20117 10:40 a.m. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA10 COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN W. WILSON GOODE, JR.11 COUNCILMAN BILL GREEN COUNCILMAN WILLIAM K. GREENLEE12 COUNCILMAN CURTIS JONES, JR. COUNCILMAN JACK KELLY13 COUNCILMAN JAMES KENNEY COUNCILWOMAN DONNA REED MILLER14 COUNCILMAN BRIAN J. O'NEILL COUNCILWOMAN MARIA D. QUINONES-SANCHEZ15 COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO, JR.16 COUNCILWOMAN MARIAN B. TASCO BILLS 110135, 110136, 110137, 110138, 110139,18 110140, 110477, 110478, 110479 RESOLUTION 11016119 - - -21 2
May2 we have order, please. I know we're3 running late. Thank you very much.4 This is a hearing of the5 Committee of the Whole, and I would ask6 Mr. McPherson to please read the number7 and titles of the bills that we will be8 considering.9 MR. McPHERSON: Bill No.10 110135, an ordinance to adopt a Capital11 Program for the six Fiscal Years 201212 through 2017 inclusive.13 Bill No. 110136, an ordinance14 to adopt a Fiscal 2012 Capital Budget.15 Bill No. 110137, an ordinance16 adopting the Operating Budget for Fiscal17 Year 2012.18 Bill No. 110138, an ordinance19 amending Chapter 19-1500 of The20 Philadelphia Code, entitled "Wage and Net21 Profits Tax," by revising certain taxes22 and making technical changes, all under23 certain terms and conditions.24 Bill No. 110139, an ordinance25 6/10/11 - WHOLE - 110135, ETC.1 amending Chapter 19-1800 of The2 Philadelphia Code, entitled "School Tax3 Authorization," by amending Section4 19-1806.5 Bill No. 110140, an ordinance6 amending Section 19-1801 of The7 Philadelphia Code, entitled8 "Authorization of Tax," to further9 authorize the Board of Education of the10 School District of Philadelphia to impose11 a tax on real estate within the City of12 Philadelphia.13 Bill No. 110477, an ordinance14 amending Section 19-1801 of The15 Philadelphia Code, entitled16 "Authorization of Tax," further17 authorizing the Board of Education of the18 School District of Philadelphia to impose19 a tax on real estate within the City of20 Philadelphia, and providing for a tax21 rate; all under certain terms and22 conditions.23 Bill No. 110478, an ordinance24 amending Chapter 19-1800 of The25 6/10/11 - WHOLE - 110135, ETC.1 Philadelphia Code, entitled "School Tax2 Authorization," by adding a new Section3 19-1807, entitled "Authorization of4 Sugar-Sweetened Beverage Tax," under5 certain terms and conditions.6 Bill No. 110479, an ordinance7 amending Section 19-1301 of The8 Philadelphia Code, entitled "Real Estate9 Taxes," by revising the real estate tax,10 under certain terms and conditions.11 Resolution No. 110161,12 providing for the approval of the Council13 of the City of Philadelphia of a Revised14 Five Year Financial Plan for the City of15 Philadelphia covering Fiscal Years 201216 through 2016. And today we will be17 concentrating testimony on Bill Nos.18 110477, 110478 and 110479, and our first19 witness is the School District of20 Philadelphia.21
I22 understand the Superintendent has to --23 she has another commitment, so we'd like24 to take her first.25 6/10/11 - WHOLE - 110135, ETC.1
Good morning,11 City Council President Anna Verna and12 City Council members. 20 To begin, I want to thank you21 for giving me and my staff the22 opportunity today to provide you with an23 update on how we're working to address24 our $629 million budget gap. 9 In addition, I want to thank10 Mayor Nutter's call for an Education11 Accountability Agreement and to say that12 we are grateful for the City's expressed13 concern and request for greater14 involvement. 1 requested by the Mayor. 7 Upon receipt of approval from8 the Pennsylvania State Department of Ed9 regarding the use of Title I funds, we10 are now planning to restore full-day11 kindergarten by redistributing Title I12 funding. 6 The ability to restore full-day7 kindergarten by redistributing Title I8 funds is good news. We've also, though,9 been working with SEPTA to arrive at a10 deal on student TransPasses. We are11 optimistic that we will be able to12 continue to provide our students with13 access to public transportation to and14 from school each day. 2 I want to reiterate that this3 School District has made consistent gains4 in the past eight years. 1 Please understand that the2 staff and I have agonized over these3 proposed cuts for months. We know that4 our children deserve the best educational5 opportunities possible if they are going6 to compete in tomorrow's world. It is7 with these thoughts in mind that we urge8 all of us - the District, City government9 officials and elected state10 representatives - to work together in11 true partnership. The truth is, members12 of City Council, the children of13 Philadelphia need you. They need you14 more than ever. 18 We realize that the decisions19 about how you grant us additional funding20 will require making tough choices, but21 Dr. 3 We are indeed in times of4 economic challenge, and we realize that5 any decision you make to grant this6 District additional funding will7 certainly involve controversy, but I want8 you to know that over 200,000 children9 and their families are counting on you to10 stand up for them while remembering the11 poignant words of Dr. 12 I could go on, but I won't. We13 all know the seriousness of these times14 for our District. As I said in my last15 address to you, a friend once told me16 that when children fail, it's a systems17 failure, a failure both inside and18 outside of the School District. 22 The budget cuts we face -- are23 faced with will do irreparable harm to24 many of our children. 1 plead with you to do no more harm by2 granting this District additional funds3 so that we can restore some of the most4 dire cuts. To this end, we, the School5 District of Philadelphia, respectfully6 request again from the City Council and7 the Mayor additional funding of 75 to 1008 million so that we can maintain some of9 the District's most important programs10 and initiatives. )18
Thank19 you.20 Mr. Archie, are you going to21 also testify?22
Very4 well.5 And, Mr. Masch, are you ready6 to testify?7
Madam President,8 the SRC Chair and the Superintendent have9 asked me to put on the record what the10 highest restoration priorities of the11 School District are and what our12 estimates of their costs are so it will13 be clear to this body and to the citizens14 of Philadelphia what cuts to the budget15 we could restore with additional funding.16 The Superintendent has already17 testified as to how we've managed since18 we were here last on May 24th to find a19 way to restore full-day kindergarten by20 making other cuts in Title I and through21 the loan arrangements we are negotiating22 with SEPTA. This still leaves us with23 deep and serious cuts to instructional24 programs and student services elsewhere25 14 6/10/11 - WHOLE - 110135, ETC.1 in the budget. We believe that we have2 reached the limit of the adjustments that3 we can make to the Title I budget and4 that we have cut as deeply as we5 prudently can in other areas of our6 operating budget without violating state7 and federal laws, without jeopardizing8 our ability to function as an entity or9 putting our most critical educational10 priorities at risk.11 When we appeared before you in12 May, we provided you with a priority list13 of the cuts in the current School14 District budget that we believe do the15 greatest harm to our instructional16 programs. These cuts still need to be17 addressed. Without additional funding,18 they will have to be implemented, and19 they include, first, bus transportation20 for regular education students --21 COUNCIL PRESIDENT VERNA:22 Excuse me. Mr. Masch, do you have a copy23 of your testimony?24
Yes. I'm sorry. I25 15 6/10/11 - WHOLE - 110135, ETC.1 didn't realize that it hadn't been -- can2 I ask that the...3 COUNCIL PRESIDENT VERNA:4 Sergeant-At-Arms will distribute them.5
I apologize, Madam6 President. Please tell me when you want7 me to proceed.8
Thank you,16 Madam Chair. Just maybe Mr. Masch could17 tell us. Is this reflective of the18 charts that you gave us yesterday and19 that were handed out in connection with20 Mr. Archie's letter to the Mayor21 yesterday or is this a different set of22 priorities?23
This is the same as24 the priority list that we reviewed25 16 6/10/11 - WHOLE - 110135, ETC.1 yesterday, that's correct.2
It's the6 same that you came into our meeting with7 yesterday?8
Yes. And we've9 tried in these comments to reflect some10 of the discussion that we've had, for11 instance, on alternative education.12
3 The second priority item is4 reduced class sizes. Without 21 million5 in additional funding, the School6 District will be required to increase the7 maximum class size by three students on8 average in every K to 3 classroom in the9 School District and in every 6th, 8th and10 9th grade classroom in our lowest11 performing schools. 618 million. 6 million in additional20 funding -- the School District will be21 unable to preserve contractor-provided22 accelerated programs as we -- in the23 alternative alternative education plan24 that we've presented to you. 1 funding would provide for over 1,2002 students in contractor-provided programs,3 assuming that we are unable to negotiate4 a reduction in the cost of operating5 those programs. 6 million14 would provide for 1,200 students. Futures program that the School District2 operates. City services supported5 currently by the School District budget:6 Without at least $11 million in7 additional funding, the School District8 will be unable to continue to support9 City-related activities currently10 included in the School District's budget,11 including school-based social services,12 property tax assessment, City use of13 District facilities for City recreational14 programs and other services. 16 School nurses: Without 317 million in additional funding, the School18 District will have to eliminate 41 school19 nurse positions and raise the ratio of20 nurses to students from where it is now,21 655 to 1, to 750 to 1. 1 School District will be required to2 eliminate its current after-school3 tutoring programs for 11,500 students4 that keep those students from falling5 behind in critical subjects. 68 million in additional funding,9 counselor-student ratios will have to go10 to 400 to 1. million in additional14 funding, the School District will be15 unable to provide K to schools with16 sufficient funds to support art and music17 program offerings in all grades in all18 schools. 1 There are also cuts to gifted programs,2 school police, instrumental music,3 English language learner programs,4 special education, athletics and more,5 all of which will deny critical services6 to our students and our schools. But you7 have asked us to set forth our highest8 priorities for restoration. 15 We want to note that despite16 inaccurate claims from some of our17 critics, School District spending has not18 been growing at inappropriate levels in19 recent years. 1 growth in the balance of the budget was2 actually lower than the 4 percent. The3 School District has had a balanced budget4 for three years and we have had modest5 surpluses for the past two. We were6 fortunate to receive additional stimulus7 funding over the past two years. These8 funds, which we knew were temporary and9 which could not be banked or saved,10 enabled us to invest in some very11 worthwhile programs that helped our12 students and contributed to our academic13 gains over the past two years. 16 Our budget crisis today has not17 been caused by the loss of stimulus funds18 and it has not been caused by excessive19 spending. Our crisis is a funding20 crisis. At present, unless this Council21 and the Pennsylvania General Assembly22 take some corrective action, our School23 District's revenues will decline next24 year by 15 percent, $400 million. 1 loss of funding from one year to the next2 is unprecedented. 4 The key point we want to make5 is that the School District was not6 caught unawares. We anticipated this7 budget gap. 2 But the School District, as you3 know, is legally obligated to maintain a4 balanced budget. If our funding is cut,5 our spending must be cut as well. 16 We have closed a significant17 portion of our budget gap in ways that18 did not adversely affect students and19 instructional programs, but given the20 size of our gap, we could not get all the21 way there without having to propose cuts22 that are deeper than they should be in23 many areas. 5
Thank6 you.7 The Chair recognizes Councilman8 Goode.9
Thank you,10 Madam President.11 Let me start off where I12 finished before. So how much money do13 you really want? You presented us with14 options, several options here. So what15 are you really asking for?16
But the 7519 to 110 million was for four items. You20 now have, I believe, nine items. So the21 list has changed.22
Councilman, this23 was exactly the same list we provided to24 you on May 24th. With what we have been25 26 6/10/11 - WHOLE - 110135, ETC.1 able to do with full-day kindergarten and2 student TransPasses --3
That's not4 true. I'm just going to stop you and I'm5 actually not going to direct my questions6 towards you today. Okay?7 To Chairman Archie and to Dr.8 Ackerman, let's talk about the Education9 Accountability Agreement. That agreement10 was between the Education Secretary, the11 Mayor and the School Reform Commission,12 none of which can approve funding at this13 point. That requires lawmakers, the14 state and local level. I am not clear on15 whether this list is a different list or16 not. I believe it to be a different17 list, because we discussed 75 to 11018 million for four items, one being19 full-day kindergarten, another being20 smaller class size, accelerated schools21 and transportation. There are a lot more22 things on this list, a couple taken off23 and then a number of things added. Is24 that correct?25 27 6/10/11 - WHOLE - 110135, ETC.1
Actually, when2 we were here before, we had a list of, I3 believe, $180 million.4
But I asked5 you to narrow it down, and you narrowed6 it down to four items that cost $75 to7 $110 million. We then took a couple of8 those items off the list. There have9 been other items added to the list. The10 list has expanded. I'm asking, is that11 correct?12
I'm going to17 ask his Administration that question when18 they come up, because the Mayor made a19 different request from us, both publicly20 through a letter and privately through21 conversations he's had with us. But in22 terms of the School Reform Commission23 itself and where we stand in terms of24 educational accountability and where we25 28 6/10/11 - WHOLE - 110135, ETC.1 move forward, if this is a new vision, if2 this is a new partnership, I'm wondering3 how far it's going to go. So I have four4 questions, and the way you answer these5 four questions will determine how I will6 vote in terms of how much money you will7 get.8 The first is, do you support9 the concept of an elected School Board?10
I'm talking13 to anyone who wants to answer the14 question.15
That's all I16 worked with before I came here, was17 elected School Boards, so...18
Do you22 support control of the School District23 returning to the City?24
Do you2 support control of the School District3 going back to the City?4
I know that5 current legislation which enacted the6 School Reform Commission, when in fact7 there is -- the School Reform Commission8 has the ability, once it determined that9 the School District is fiscally sound, to10 vote itself out of existence. So in the11 event that occurs, we would have no12 choice but to say, yes, we're in favor of13 that returning back to the nine-member14 School Board.15 We determine whether or not the16 School District has been fiscally sound.17 It was instituted in 1999 or 2001, the18 School Reform Commission, because the19 School District was determined by the20 Commonwealth of Pennsylvania to be a21 distressed school district, and22 consequently the School Reform Commission23 was imposed.24
It was25 30 6/10/11 - WHOLE - 110135, ETC.1 distressed. Four years ago it was facing2 financial distress again.3
We made a5 millage shift, and in the time since6 then, there have been balanced budgets7 and even surpluses, so --8
So it could11 have been returned back to the City then.12 So the question is, do you support13 returning control back to the City?14 That's the second of four questions.15
Okay. I'll18 move to the third question. Who should19 have taxing authority?20
Who should23 have taxing authority to provide funds to24 the School District? Should the School25 31 6/10/11 - WHOLE - 110135, ETC.1 Reform Commission have taxing authority?2
I mean, I'm not3 sure if -- in other jurisdictions, the4 school board does have -- the school5 district does have taxing authorities.6 I'd have to look at that, Councilman, to7 see whether or not that's been successful8 or unsuccessful.9
So the last10 question is, what should City Council's11 role be in public education?12
Under the current13 structure is that you grant us the14 ability to impose taxes. You in fact15 impose taxes to fund the School District.16 That's the role it has been historically17 in place.18
Well, no. Your24 role is to basically to participate in25 32 6/10/11 - WHOLE - 110135, ETC.1 the governance, making suggestions to the2 School District, pointing out our success3 or failures and how to basically to4 transform the School District. You have5 an oversight.6
We're not7 part of the Accountability Agreement,8 though.9
Yes, but the10 Accountability Agreement envisions that11 you would play an active role in it.12
So I believe13 that there were four items on the table14 last time we met and there were new items15 that have been put on the table. Who16 decided new items would be put on the17 table?18
I think there were19 more than just four items on the table at20 that time, but we were --21
-- when you25 33 6/10/11 - WHOLE - 110135, ETC.1 first came in. You reduced that list to2 four items.3
I think we4 prioritized that list. We didn't reduce5 that list. We said these are the four6 items that we consider of top priority.7
You've8 answered the questions to my9 satisfaction. I understand exactly what10 you're saying, that you want as much11 money as you can get.12 Thank you.13 (Applause.)14
Thank15 you.16 The Chair recognizes Councilman17 Jones.18
As we start23 to move this forward, I think one of the24 big issues is the irony I had this25 34 6/10/11 - WHOLE - 110135, ETC.1 morning, I helped my granddaughter on her2 way to her first graduation from a public3 charter school. I also had the4 responsibility of taking a look at and5 being the judge for an art program at6 Lamberton School, and the irony of it is7 is that the art teacher who helped the8 students design the banners that are9 going to go on Haverford Avenue in my10 district received their notice that she11 won't be there next year.12 It is my understanding that13 we're making serious choices about14 whether or not to have art or music.15 We're making serious choices about the16 priorities. I watched my colleagues17 yesterday struggle, I mean struggle,18 literally about tough decisions that they19 have to make. Clearly, what we want to20 know is out of these choices, which ones21 are you prioritizing and which ones are22 you saying that we can live without.23 We struggled privately in some24 of those choices about compromise. I25 35 6/10/11 - WHOLE - 110135, ETC.1 think it's time by way of the public to2 know these are the types of tough choices3 that we're making and here's where we4 make our stand. And so from you, I want5 some of the things that are the line in6 the sand, things we can live with, things7 we can live without. And some of those8 issues are how we administer summer9 school and how we deal with alternative10 schools.11 So I think we need to clearly12 start to begin that dialogue here so that13 at the end of the day, this body, as14 Councilman Goode alluded to, is going to15 be asked to do some of the heavy lifting,16 and some of my colleagues are going to17 have to go out and face their18 constituents about whether they choose to19 do real estate, sugar tax or combination20 of all of the above. So we really need21 to know what we are fighting about and22 for and where you stand by way of what23 those priorities are.24
Councilman, we25 36 6/10/11 - WHOLE - 110135, ETC.1 have put together this list of2 priorities. There were other lists,3 180 -- even more than that. We had more4 than $400 million worth of cuts. What5 we've put on this list are the items that6 we have heard either from you, members of7 Council, parents, who have been really8 clear of the kinds of programs that they9 have drawn the line in the sand, and the10 kinds of things that we believe will11 continue this District's positive trend12 upwards. We do not want to go backwards.13 So what we've put with the $10214 million is the absolute what we believe15 we need, what we've heard from the16 Councilmembers, what we've heard from the17 Mayor and, more than anything, what we've18 heard from parents. We've been in the19 public now for the last three months and20 we've had 18 different hearings, and21 parents have been really clear about22 things like reduced class sizes, school23 nurses, early childhood education. So24 what you have is a composite of the25 37 6/10/11 - WHOLE - 110135, ETC.1 listening sessions from you, the bigger2 public, more importantly the parents and3 what we as educators believe we4 absolutely need.5 Actually, if we were to look at6 the list of things that have been cut, I7 can name you other things that I think if8 we put back on the table are essential,9 but here we've given you our best10 thinking here.11
All right.12 So at the end of this day when we have to13 consider this, and I'll repeat my14 colleague Councilman Goode's question,15 what are you asking us for totally?16
That's what19 you say is the line in the sand? It's20 not the 125 million, it's the $10221 million and that is what --22
All right.25 38 6/10/11 - WHOLE - 110135, ETC.1 Thank you, Madam President.2 COUNCIL PRESIDENT VERNA:3 You're welcome.4 The Chair recognizes5 Councilwoman Blackwell.6
Thank7 you, Madam President.8 I would like to introduce the9 Minister of Education of Monrovia,10 Liberia who is with us today. They're on11 a weekend visit with Stan Straughter,12 Chairman of the Mayor's Commission of13 African and Caribbean Immigrant Affairs,14 and our group, and they will be part of15 the Odunde celebration.16 Certainly Minister Pangbai is17 here, and we ask him to stand and be18 recognized to --19 (Applause.)20
-- to21 consider our deliberations. And we will,22 as in other hearings, Dr. Ackerman, ask23 you to introduce the other members of the24 SRC, if you would.25 39 6/10/11 - WHOLE - 110135, ETC.1 Thank you.2
We have all four4 of our Commissioners - Commissioner5 Dworetzky, Commissioner Armbrister and6 Commissioner Irizarry. I'm sorry. Not7 in that order, but definitely goes this8 way.9
Can13 you tell us what the average class size14 is today?15
The average16 class size varies. In our empowerment17 schools -- those are our 110 schools that18 are our lowest performing schools. This19 year there are 110. There will be fewer20 next year. That's one of the cuts that21 we made. The average class size is22 anywhere between 23 and 20 students per23 class.24
And25 40 6/10/11 - WHOLE - 110135, ETC.1 you want that -- you're hoping to reduce2 that?3
I6 heard reduced class sizes. So what class7 sizes are --8
Well, our class9 sizes vary. We have from in our10 empowerment schools, because those are11 the schools with young people with the12 most challenges, is anywhere between 2013 and 23. In our traditional schools, it's14 anywhere between 24 to 26. In grades 615 to 7 and 8 and 9, I believe -- 6, 8 and 916 in empowerment schools, it is 20 to 23.17
But next year's18 budget would raise all of those.19 COUNCIL PRESIDENT VERNA:20 Mr. Masch, I can't hear you.21
He was just22 repeating what I said to you, that next23 year -- we're trying to maintain these24 class sizes for next year.25 41 6/10/11 - WHOLE - 110135, ETC.1
I2 know that we have heard that you were3 thinking of consolidating schools. Can4 you tell us what that process will be and5 when do you anticipate it to be6 completed?7
I'm going to let8 Dr. Nunery talk about the process and9 what we've done with our Master10 Facilities Plan. We anticipate that it11 will be a two-year process and there are,12 I believe, about 40 to 50 schools that13 are under consideration, but I'm going to14 let him talk more explicitly about the15 Master Facilities Plan.16 COUNCIL PRESIDENT VERNA:17 Please.18
The process we've23 gone through thus far is to gather24 information about all of the schools, the25 42 6/10/11 - WHOLE - 110135, ETC.1 facilities' conditions, to determine what2 kind of deferred maintenance it would be,3 how well utilized those buildings are,4 how full they are or not full, depending5 on the circumstance. We've looked at all6 of our annexes.7 Based on what we've learned and8 going out to the public and finding out9 what their priorities are in terms of10 programming and what other types of11 facilities enhancements they would like,12 we've determined a three-phased process.13 The first phase is underway. We're14 looking at those buildings that have15 already been closed and have been16 shuddered for some time. Based on the17 SRC's actions that we expect will come18 through on Monday, we'll have those19 buildings appraised, and then they'll be20 represented by brokers for sale.21 We hope to be able to use that22 momentum to go into the fall and look at23 the remaining buildings that we've24 examined that are underutilized or have25 43 6/10/11 - WHOLE - 110135, ETC.1 poor facilities conditions.2 We have a number of options3 that we can pursue - consolidating some4 buildings, changing grade configurations,5 looking at neighborhood or boundary6 changes based on the catchment areas of7 the school, closure of some buildings,8 removal of annexes and trying to get out9 of expensive leases. So what we've been10 presenting all along is that range of11 options. That will start in the fall.12 The first wave of schools would likely be13 affected in the spring of next year, and14 then the second wave would start in fall15 a year from now, so that you'd have a16 two-year process beginning with this fall17 of '11.18
You19 certainly can't list them at this point20 in time?21
No. No, we can't.22 I don't have them right in front of me23 anyway, but we'd certainly be glad to24 come back to Council to give you a sense25 44 6/10/11 - WHOLE - 110135, ETC.1 of what information we've collected,2 certainly.3 COUNCIL PRESIDENT VERNA:4 That's fine. Thank you.5 Now, how many schools have been6 closed for some time? Have you had an7 appraisal taken? Do you intend to sell8 them? Give us an update on that, please.9
There are six10 buildings that had already been closed.11 They've been shuddered. The process is12 to have them appraised. That's exactly13 what I was referring to. The SRC is14 going to hopefully approve a resolution15 to get those appraisers in to have them16 looked at for educational use or some17 type of other reuse. Hopefully they will18 be sold, or some other repurposing,19 depending on who shows up. In a20 difficult marketplace, it's hard to21 predict exactly what will happen. But22 that's the process for right now. That's23 what we're dealing with right now.24
When25 45 6/10/11 - WHOLE - 110135, ETC.1 do you think that would be completed?2 Because I know I have a vacant school in3 my district.4
And6 there have been developers who have been7 saying why doesn't the School District8 put out an RFP on this. I don't know why9 it's taking so long to go through this10 process.11
So, Madam12 President, the problem I think in the13 past was, there was no plan, and actually14 under Dr. Ackerman, this Facilities15 Master Plan finally has taken root. So16 they will be seeing RFPs issued by our17 offices very soon for their interest in18 either private development or educational19 use or community development use. We've20 got a tiering of potential uses.21 So we're sorry that it's taken22 so long to get that done, but I think23 instead of single one-by-one actions --24
They25 46 6/10/11 - WHOLE - 110135, ETC.1 would be all done at one time.2
That5 makes sense.6 Councilwoman Blackwell is7 saying you indicated this would be very8 soon. Does that mean it would be done by9 fall?10
Absolutely. In11 fact, during the summer, this is when the12 RFPs will be going out. The appraisals13 will begin very soon, within the next14 couple of weeks, if not sooner than that.15 So we'll have some good information on16 what the potential market values are.17 And then we'll go out to the public with18 RFPs so that they'll have a chance to19 indicate what their interests are in20 particular buildings. That's right.21
So at22 this point in time, you have no23 indication whatsoever as to what those24 six buildings would sell for?25 47 6/10/11 - WHOLE - 110135, ETC.1
That's correct. I2 think it would be a real speculation to3 do that, and we don't want to do that.4
Thank5 you.6 The Chair recognizes Councilman7 Green.8
Thank you,9 Madam Chair.10 I just want to make a comment11 briefly about the testimony. I was12 surprised that a lot of time was spent13 discussing how we got here and how14 essentially the School District has no15 accountability, it's not their fault16 that -- it's not at all their fault for17 the situation we're in today, and I just18 think that that strikes the wrong tone.19 It's a debate we've been having for two20 weeks, but at this point, especially21 given the, I thought, very positive22 meeting we had yesterday, I don't23 think -- we should stop wasting time on24 how we got here. The story has been25 48 6/10/11 - WHOLE - 110135, ETC.1 told. People have different versions of2 it, and it seems rather pointless to3 spend time on it.4 I am exercising great restraint5 and am very proud of myself for not6 getting into that discussion. So let's7 talk about the events of the past three8 weeks.9 It's also surprising to hear10 testimony that the District is very11 similar to the testimony we heard three12 weeks ago. Over the past three weeks, in13 the past at the suggestion of Council in14 part, the District demonstrated15 successful problem-solving. First, the16 District determined how to preserve17 full-day kindergarten by repurposing18 Title I funds. Yesterday afternoon you19 reviewed with several Councilmembers how20 the Title I funds were being reallocated,21 and I think most, if not all of us, came22 away from the meeting impressed by the23 choices made and generally supportive of24 the changes.25 49 6/10/11 - WHOLE - 110135, ETC.1 Second, the District has worked2 with SEPTA to put in place a mechanism3 for preserving the student TransPass4 program. Again, this shows a5 collaborative, which we discussed during6 the initial School District hearings, a7 collaborative problem-solving,8 working-together approach.9 The problem is now that we seem10 to be hearing from the District today11 something that I think was different from12 the impression we got in the room13 yesterday, and, that is, the universe of14 problem-solving has been exhausted and15 this is the bottom line. I don't share16 this pessimism. I think that there's17 additional problem-solving that we can18 do. And yesterday, for instance, we19 asked the District for specific data to20 help us solve some of these problems, and21 so I guess I'll start with some of that.22 For example, yesterday one of23 the questions I asked is, with respect to24 class size, how much it would cost to25 50 6/10/11 - WHOLE - 110135, ETC.1 keep class size the same for only2 empowerment schools.3 I can't imagine anybody is4 surprised by these questions.5
We're not surprised6 by it, and we agree that for this and7 the -- there is a list of questions that8 we received yesterday. We will give you9 detailed answers to those. We don't want10 to enter a number on the record that is11 incorrect, and we haven't finished the12 analysis yet.13
I14 understand, but it goes to the choices15 that we have to make in terms of how much16 resources to provide you, and some of us17 may completely agree that -- and I know18 some of us do -- that we have to reduce19 class sizes completely and provide the20 entire 16 million for K through 3.21 Others of us think we have to make22 choices even in that field in regard, and23 it's hard for me to sit here and even24 have a debate about providing additional25 51 6/10/11 - WHOLE - 110135, ETC.1 resources when I don't know how much I2 would want to provide given the answers3 to some of the questions that we had4 yesterday.5 If you just take a few of the6 items here so -- that's reduced class7 sizes, but we also asked what would be8 the average class size if we were to9 provide 8 million instead of 16 million10 for K through 3, for example. And I11 would like the answer to that question.12 Obviously the school could choose where13 to put those resources. So some schools14 where children are doing very well15 wouldn't have decreased class sizes,16 other schools would, but you'd be making17 a choice that is $8 million instead of18 $16 million.19 We also discussed -- I do have20 a question about City services supported21 by the School District. If we make the22 assumption, which is currently my23 position, that the resources should come24 from the City side and not by providing25 52 6/10/11 - WHOLE - 110135, ETC.1 the School District with its own taxing2 authority for any particular tax or by3 allowing an increase in millage on the4 School District side so that we can5 continue to maintain accountability, if6 the money is coming from the City, why7 does the School District want to keep in8 its budget the $11 million related to9 support City services? I mean, if we're10 providing the money anyway, do you for11 some reason want this as a line item in12 your budget?13
No. Councilman, we14 want to be clear. We agree with the15 position that you've taken. What we16 wanted to make clear for the record is,17 there is no funding in the School18 District budget to provide for these19 services. So one way or another, they20 will have to be funded, and right now21 they are, to my knowledge, not in the22 City budget nor in the School District23 budget. So right now we have a $924 million school-based social service25 53 6/10/11 - WHOLE - 110135, ETC.1 program and it was expanded during the2 stimulus. To maintain even a program at3 half the size for four and a half million4 would require additional funding. That5 funding had been in the City's budget6 until two years ago, and the City had7 directly run that program. In the past8 two years, the School District has9 undertaken the burden of taking on the10 program. We don't have a problem with it11 reverting back to being a City-operated12 program.13
And, again, we want16 to make clear for the record, if there is17 no additional funding provided, it's not18 in our budget anymore, so the program19 would be ended.20
Okay. So we21 discussed summer schools yesterday, and22 you were going to provide data on how23 many children attended for 16 days or24 more. Do you have that data? In other25 54 6/10/11 - WHOLE - 110135, ETC.1 words, the SLAM program report said that2 there was great improvement among3 students who attended 16 days or more,4 but it said the only statistic about5 attendance was that 40,000 students6 attended five days or more. And so we7 were going to look at that as a potential8 area for savings.9
The other12 thing we discussed is what would be the13 cost of just providing summer school for14 students who need it to -- essentially15 for credit recovery so that they can move16 on to the next grade as opposed to the17 SLAM program in its entirety. Do you18 have that data?19
I don't think --20 she's trying to get it. We don't know if21 it's here today or not. She's coming up.22 I'd like to, though, talk about23 what we talked about in the room just as24 we were talking about accelerated25 55 6/10/11 - WHOLE - 110135, ETC.1 schools. Last year, in the first year2 for some of the providers, last year was3 the first year that we had all-day summer4 school for as many children as we did.5 The research is clear that -- and we6 believe it's part of the reason we have7 had accelerated achievement and improved8 progress, academic progress, with young9 people.10 The research is clear that11 those young people who are engaged in12 learning over the summer do not regress13 backwards. But young people who take14 summer school for catching up, then15 you're still -- at that point, you're not16 going to improve or accelerate the growth17 for all children. You're just trying to18 help those kids who are already behind19 stay sort of at a level playing field.20 What we're trying to do in this21 district is, we have outlined in Imagine22 '24, is to see dramatic progress as we've23 seen over the last few years, not just24 steady progress. Because we know that if25 56 6/10/11 - WHOLE - 110135, ETC.1 we don't show dramatic progress, it will2 take this District and this City until3 the year 2123 to get all of our children4 to grade level. I'm not willing at this5 point -- this is one of those things that6 I say is an essential for getting these7 young people, all of these young people,8 closing this gap, is giving these young9 people who don't have the opportunity for10 summer learning an opportunity, not just11 for those kids who are behind, because12 usually the children who are failing are13 already behind, so they still don't catch14 up in summer school. So this is one of15 those --16
I'm19 sorry. The Chair recognizes Councilman20 Kenney for a point of information.21
Excuse me.22 I apologize for not being at that meeting23 yesterday. I had a prior commitment.24 Councilman Green raised the issue of25 57 6/10/11 - WHOLE - 110135, ETC.1 summer SLAM. Could you please explain to2 me what it is?3
Last year it was7 22 days. It was all day, and it was for8 any young person whether they had failed9 a class or not, whether they were on10 grade level or whether they were trying11 to advance.12
I'm sorry.17 When you fail a class, you have to take18 it in summer school. You're not talking19 about that?20
No. We're not21 talking just about that. That's what22 we've had in the past, and it was for23 young people who failed in high school to24 make up a class. But what we had as a25 58 6/10/11 - WHOLE - 110135, ETC.1 result of last year's summer SLAM was 7002 young people who were able not only to3 take classes that they failed but to4 catch up, get ahead and graduate.5
It cost8 approximately 39 million, and we've cut9 it this year to 23 million.10
I guess --11 again, I'm sorry to interrupt Councilman12 Green's line of questioning, but I guess13 it begs the question from me why 21 days14 at 24 million is more important than 18015 days of smaller class size. Because if16 you --17 (Applause.)18
And I'm not19 in any way discounting the progress20 that's made at these specially enhanced21 programs, but if I have a $21 million22 cut, which increases class sizes for 18023 days during the school year, and a24 program that enhances kids' opportunities25 59 6/10/11 - WHOLE - 110135, ETC.1 for 21 days in the summer, for me it's a2 no-brainer. I want to keep the class3 size.4
No, no, no.7 We all want to keep the class size, but8 if I can't sacrifice the 24 million for9 21 days as opposed to reduced class size10 for 180 days, how do I justify that?11 I mean, I would love to have12 three months of enhanced summer programs,13 but I also would not like to have 18014 days of increased class size in K to 3.15 So how does that balance?16
Well, I don't --17 for me, I'm not saying that class size is18 less important. You haven't heard me say19 that, and I won't say that, than summer20 school. I'm giving you an argument for21 summer school. But I guess we can22 debate, because I would say that the more23 we do to give these young people the24 opportunity they need and a strong25 60 6/10/11 - WHOLE - 110135, ETC.1 foundation for them while they're in the2 pre-K through 12th grade, the fewer3 dollars we will need --4
But I'm now7 talking about for me, we are trying to8 keep them -- we're about to spend $219 million for accelerated schools. I10 understand. That's how we got here,11 because we didn't have these kind of12 programs in place.13
But14 hypothetically if you don't get the tax15 revenue for the 21 million in class size,16 are you going to -- you would rather17 increase the class size for 180 days than18 get rid of the 21-day program?19
No. That was22 never -- I was just answering the23 question.24
So25 61 6/10/11 - WHOLE - 110135, ETC.1 hypothetically --2
-- if no5 one wants to vote for the sugar tax and6 real estate tax and you don't get this7 $21 million for class size, then there's8 a possibility you'll take the 24 million9 from the summer SLAM and keep the class10 size what it is? I'm not asking -- is it11 possible, or would you go ahead and12 reduce class size regardless?13
No. I mean, we14 certainly would -- if we had to make a15 choice and we didn't get this money or16 any of the other monies, we would have to17 make then even fewer -- I mean, we'd have18 fewer choices. I certainly -- we have on19 our list as, I think, the second most20 important thing class sizes. So I21 guess -- I'm not trying to argue for22 increased class sizes. I was trying to23 make an argument for summer school.24
But summer25 62 6/10/11 - WHOLE - 110135, ETC.1 SLAM and the 24 million is not on the2 list for a possible cut. It's not a3 priority list of cuts. So it's not being4 intended to be cut.5
Excuse me.6 Because it's in this year's budget for7 this year, we've already allocated those8 dollars.9
Well, first of all,14 we cut the program 24 million already.15 The other funding is --16
Excuse me.17 You cut it to 24 million. You didn't cut18 it 24 million, did you?19
Mr. Masch21 just said we cut the program 24 million22 already. You cut it to 24 million.23
We cut it to 2424 million.25 63 6/10/11 - WHOLE - 110135, ETC.1
Again, it2 was a very long point of information. I3 apologize, Councilman Green's line of4 questioning, but I still don't understand5 what the priorities are when there's 1806 days of increased class size on the table7 as opposed to a 21-day cut of an enhanced8 summer program, and the enhanced summer9 program is not on the cut list but the10 increased class size is. That's really11 my concern.12
Actually, we did16 preserve cuts even for class sizes. We17 did not take them to where they were two18 years ago.19
Again, I20 don't want to argue with you about it,21 because it's on the list. It's $2122 million and increased class size, which I23 think -- and I'm not an educator or24 professional, but it would seem to me25 64 6/10/11 - WHOLE - 110135, ETC.1 that the increased class size is much2 more detrimental to the long-term3 advancement of these children than a4 21-day summer enhancement program.5
No. I agree9 with you. Also, can I say something10 else, though? It's $12 million that's on11 the table. It's not 21 million. The12 rest of it is specifically grant money13 being used for that, and you cannot use14 those for lowering class sizes.15
So then why16 is the 21 million -- you know what, I'll17 go back. I apologize.18
I22 know I was following your line of23 questioning. I just don't know what the24 answer is at this point. Do you?25 65 6/10/11 - WHOLE - 110135, ETC.1
Thank you,7 Madam Chair.8 Thank you, Councilman Kenney.9 I appreciate everything you just said and10 you, frankly, covered the points that I11 was --12
No, no.15 That's fine -- that I was going to cover.16 I think there's a couple things. It's17 only 18 days, and the data that the18 School District has in their SLAM report19 says students who have attended 16 days20 or more show progress. We don't know the21 number of students that attended those22 number of days even, and so the only23 statistic we have is 40,000 appointed in24 five days.25 66 6/10/11 - WHOLE - 110135, ETC.1 So I'm not even having a policy2 debate on this issue. I think what the3 School District just heard loud and clear4 is that at least from Councilman Kenney's5 perspective -- well, I'll speak for6 myself. At least from my perspective, I7 agree with everything Councilman Kenney8 just said, so I won't belabor it.9
And so from12 my perspective, I'm not willing to13 provide additional resources for $2114 million of SLAM as opposed to smaller15 class sizes. So, I mean, I think from my16 perspective, that reduces -- your ask17 list is reduced by 21 million simply18 because I think you're making a bad19 choice.20 I will yield, Madam Chair. I21 have to --22
Well, we will23 still have to have summer school for24 19,000 children who are failing at a cost25 67 6/10/11 - WHOLE - 110135, ETC.1 of 13 million at least.2
Somebody gave5 them to me from the back. I don't have6 all of those numbers in my head.7 Somebody had to give them to me, sir.8
At a cost of11 approximately $13 million. If we just12 have it for summer school for failing13 students, 19,000, will cost approximately14 $13 million. That was one of the first15 questions you asked. Somebody had to get16 that information and bring it here.17
No. I18 appreciate that. So is that the same19 number of schools being open that were20 going to be open for the SLAM program?21
It would be25 68 6/10/11 - WHOLE - 110135, ETC.1 consolidating some of the school sites.2
And how much3 did summer school for those students cost4 before there was a SLAM program?5
About $136 million. So what we've done is expanded7 it another seven to include another8 20,000 children.9
Okay. So10 that's a savings compared to your11 proposal of about $11 million, $1212 million?13
About 9. I'm14 sorry. It's 13 million, so it's $815 million.16
Okay. Thank17 you very much.18 The promise academy spending,19 what is the total promise academy20 spending?21
Twenty-seven22 million dollars in increments to the23 budgets of the promise academy schools is24 what we estimate for next year.25 69 6/10/11 - WHOLE - 110135, ETC.1
I think we have4 that here. Hold on.5 We're going to have our budget6 staff see if we have that here. We do7 have that schedule, but we can take some8 other questions and then we'll enter it9 in the record once we have it.10
The point of11 that question is that -- and I'm reading12 from the notebook here. The figures13 provided by the District for each school14 shows student attendance in the Saturday15 programming range from a high of 6416 percent at Dunbar Elementary, which is17 the smallest with 170 students, to a low18 of 48 percent at University City High.19 For several of the schools, District data20 showed tremendous variation from month to21 month. At Clemente Middle School, 7122 percent of students attended the first23 Saturday session. By May, however, that24 figured had dropped to 41 percent. And25 70 6/10/11 - WHOLE - 110135, ETC.1 then there's a teacher who says, The kids2 who have been coming are the ones who are3 your better students, but it's kids who4 aren't there who need the extra help.5 I asked the same question about6 Saturday attendance that Councilman7 Kenney and I were getting into with8 respect to summer school. Is Saturday9 attendance, given these statistics, more10 important than smaller class sizes?11
Certainly. I12 mean, I don't know what I can say or we13 can say. Class sizes is a priority.14 It's number two, I believe. So if we had15 to make choices, that's going to be our16 priority, one of our priorities.17 I don't want to get into, you18 know, this, because we've tried to19 prioritize them. So obviously class20 sizes is important.21
But the22 question is, is it more important to you23 than SLAM and Saturday attendance? And24 if not, shouldn't it be?25 71 6/10/11 - WHOLE - 110135, ETC.1
Yes, but4 you're funding in your proposed budget5 SLAM and Saturday attendance at promise6 academies, and I'm suggesting that you7 de-fund that to pay for smaller class8 sizes.9
Well, we can10 de-fund certainly the -- your suggestion11 is noted.12
Okay. This13 is the process we engage in and, frankly,14 what we spoke about at the last session.15 We benefited during the recession in cuts16 from having the input of lots of17 stakeholders and not people just sort18 of -- well, so the City's budget benefits19 from involvement by the Controller, by20 PICA, by City Council making changes, and21 it's really kind of in that collaborative22 spirit that we're talking to you about23 what are obviously hard choices that none24 of us want to make. It's just a question25 72 6/10/11 - WHOLE - 110135, ETC.1 of what is going to be most efficacious2 and best for outcomes for kids.3 So that's all my questions for4 right now, Madam President.5
Thank6 you.7 The Chair recognizes Councilman8 Jones for a point of information.9
Point of10 information, and I'm learning as a11 freshman what a true point of information12 is. It is not a question, but a13 declarative statement, so I'm going to14 make one.15 Dr. Ackerman has to do the best16 job she can in making the points of what17 these alternative cuts/decisions actually18 mean in real terms of real students that19 go to real schools in our district.20 Granted -- and that's a hard job when21 you're facing us in an almost inquiring22 manner and every decision has a23 consequence to whether or not people vote24 for your budget. I get it. But you have25 73 6/10/11 - WHOLE - 110135, ETC.1 to say what these things mean, what a2 Saturday school means towards moving the3 dial in the right direction towards4 performance and what summer school,5 summer SLAM meant quantitatively towards6 moving those dials in the right7 direction. Because once -- you know, as8 Councilwoman Tasco always reminds us, we9 can act in haste and repent in our10 leisure, because summer SLAM also means11 that a kid isn't on a corner doing a bad12 thing or isn't in a place where they13 should not be for the summer since we14 don't often have jobs for them. So we15 have to account for those things and16 opportunity costs as well.17 So I can't tell her how to do18 her job, and I understand I wouldn't want19 to be in that seat being questioned by20 folk, but we have to say what it means to21 those kids.22 Thank you, Madam President.23
Thank you.24 (Applause.)25 74 6/10/11 - WHOLE - 110135, ETC.1
I too8 kind of want to reiterate some of what9 Councilman Green said. I think10 yesterday's and the discussions that11 we've had over the course of the last two12 weeks have been very productive in us13 understanding the tough decision14 processes that the School District has15 had to make.16 Notwithstanding that, I have to17 agree with Councilman Kenney that while18 we appreciate the priority order that has19 been established by the District, we're20 going to be asked to make and to do heavy21 lifting, and, therefore, we're going to22 have to make some of the adjustments in23 terms of priorities that are important24 for us if we're going to ask our voters25 75 6/10/11 - WHOLE - 110135, ETC.1 and our constituents to support us in2 this decision.3 And one of the things that4 concerns me is that some of the things5 that are not on the chopping block are6 things that are part of 2014, but things7 that we did not have two or three years8 ago and we were still making some9 progress. So this is about a bad choice10 versus a worse choice.11 In all cases -- and I think in12 defense of the Superintendent, I think13 she can defend every single thing on this14 table very eloquently. So we don't want15 to argue the points and the merits of16 this, and I don't want to put her in that17 situation, because I think every single18 thing in this is defensible.19 That said, I want to go through20 a similar exercise with alternative21 education, which we have been talking22 about for quite some time.23 (Applause.)24
And just25 76 6/10/11 - WHOLE - 110135, ETC.1 for the purposes of the record, because I2 think this is important that this be on3 the record, because it was a discussion4 that we had last year during the budget5 process and one where we continue to6 debate moving forward.7 In the year 2009 to 2010, how8 many slots in alternative education did9 we have in the District and how much did10 that cost us?11 (Witness approached witness12 table.)13
Good morning. I'm14 Benjamin Wright.15 The 2010 data cost us $19,00016 in accelerated schools -- $19 million in17 accelerated schools for a total of 2,30518 students.19
And then20 we increased those slots in 2010 to 201121 by how much?22
That was the23 increase. Maybe I didn't understand your24 question.25 77 6/10/11 - WHOLE - 110135, ETC.1
I wanted2 to show the chronology over the last3 three years between 2009-2010 and what4 we're proposing in 2011-12.5
In 2009 and 20106 was the first time we introduced those7 increased slots. So they were the same8 number of students. The difference is,9 we no longer dealt with slots, we dealt10 with students, the total number of11 students. So we went from slots numbers12 to students numbers. And 2009 and 201013 is the exact same numbers that we had put14 forth.15
And in19 2011 to 2012 -- and I know we've made20 some readjustments -- how much money do21 we have in alternative education for 201122 to 2012?23
In this25 78 6/10/11 - WHOLE - 110135, ETC.1 budget.2
Are you speaking3 of accelerated schools?4 COUNCILWOMAN SANCHEZ:5 Accelerated schools.6
Currently we had7 $8 million, roughly $8 million in the8 budget for accelerated schools.9
And how13 are you proposing to spend those $814 million?15
Our proposal had16 been different options for the students.17 And I think if you had a conversation --18 if you look at Option C that we submitted19 to you, three of those would be20 District-run schools and three of those21 would be contractor-provided schools.22
And so23 you're saying that in Option C -- let's24 talk about Option C in particular. You25 79 6/10/11 - WHOLE - 110135, ETC.1 would be going from 13 sites to four2 sites -- to six sites?3
No, because the4 providers have more than three sites.5 We're talking about providers, not sites.6
Okay.7 So your proposal is to do three providers8 at 1,200 slots and for the District to do9 1,200 slots, right?10
Yes, students,11 1,200 students for the providers and12 1,200 students for the District.13
You14 currently have a capacity of 180 in this15 year, right, District-managed?16
So you19 propose that you're going to go from the20 capacity of 180 to the capacity of 1,20021 in three months?22
At a24 cost of?25 80 6/10/11 - WHOLE - 110135, ETC.1
We have8 to average it out. That's how you9 contract with your providers, so -- my10 point that I'm trying to make is that11 we're going to go from $7,000 to $8,00012 per student to 2,200, which is what your13 proposal calls for, which is not14 possible.15
The cost per16 student in terms of the -- you have to17 remember that the District sites are18 supported by the Central Office. So it19 is possible. The provider sites are not20 supported by the Central Office. They do21 their own support stuff. So when you22 look at the cost per students, if you add23 it all together, it would be roughly24 $7,000 per student because of the support25 81 6/10/11 - WHOLE - 110135, ETC.1 that they receive from the Central Office2 as well as the support they receive from3 our Academic Division. So it may seem4 that it is not possible, but it is.5 The providers, the cost would6 roughly be $5,200.7
What we11 have been discussing -- and you haven't12 been part of these discussions,13 Mr. Wright, and, again, I appreciate the14 work that you currently do on your15 Hunting Park site. What we've been16 talking about is whatever restoration --17 and this is a deal-breaker for many of18 us. Whatever restoration we do will be19 based on our willingness to continue to20 support our provider sites for the next21 year until the School District, just like22 we ask our providers, can demonstrate23 capacity to do the other work. And I24 just want to make it clear, because I25 82 6/10/11 - WHOLE - 110135, ETC.1 keep hearing in today's testimony with2 Mr. Masch that the premise is that if we3 gave you $8.6 million, that would give us4 Option C, and that is still not5 acceptable.6
I think Mr. Masch7 was talking about a different option that8 you spoke of yesterday, but I can't speak9 for him, but $8 million would buy those10 providers at a different cost.11
So,14 Councilwoman, I guess I want to be clear,15 that what we talked about yesterday was16 my understanding, what was suggested or17 recommended by Councilmembers is that we18 keep the same number of providers, give19 them another year to meet performance20 targets and that they keep the same21 number of students, but we negotiate for22 a different cost per student.23
We24 agreed to that. The one part that I am25 83 6/10/11 - WHOLE - 110135, ETC.1 not agreeing to is the fact that you want2 to still continue to expand your sites,3 your capacity, that quickly.4 (Applause.)5
But we're not6 going to. I thought that's what we7 agreed to yesterday. We were going to8 reduce the number of sites that the9 District was going to increase next year10 and go back to the original provider11 list, include them all, and to negotiate12 with them at a lower cost per student.13
Okay.17 So can you for the record so that we're18 all clear, particularly my students --19 I'm trying to respond to the hysteria20 that is out for the students who21 participate in these programs, many who22 have now started expressing concern23 whether they will continue the programs24 in the summer because of all the25 84 6/10/11 - WHOLE - 110135, ETC.1 misinformation that's going out there.2 So let's use this as an opportunity to3 clarify for the record what we're talking4 about, because I want to make sure that5 what we're going to have -- assuming we6 do not give you any additional money,7 this 8.6, what is it that we're going to8 have in alternative education, in the9 accelerated schools?10
If we get no11 additional dollars, we would have -- we'd12 use the $8 million we were going to13 increase the number of school sites and14 we would renegotiate -- that's what we15 discussed yesterday. We would16 renegotiate with all of the providers for17 a different amount, not to exceed though18 the $16 million that we budgeted for.19
Okay.20 You lost me. If we only have $8 million,21 what are we getting?22
No. I25 85 6/10/11 - WHOLE - 110135, ETC.1 get that. So I want to go -- assume we2 give you no money. What is the plan?3
We would have to4 go with -- if you want us to go with all5 of the providers, the only way we can do6 that is if they accept or agree to a7 lower per student rate.8
But what9 I'm hearing here -- and this is the part10 that I want to clarify. Assuming we give11 you no money, there is still an12 administrative plan to bring all of that13 in-house. That's where I'm having the14 problem. I want to talk about getting15 you increased money, but I want to16 understand what the current budget allows17 you to do. And my understanding is that18 the plan is, assuming we didn't give you19 additional money, that this is going to20 be brought in-house.21
It allows us to22 keep three. We wouldn't have any23 additional sites. We'd just have three24 providers.25 86 6/10/11 - WHOLE - 110135, ETC.1
So if we2 only gave you what you have budgeted, you3 would have three providers at $8 million?4
Okay.6 Just for the record. Everybody clarified7 with that, so I don't keep getting my8 e-mails? For clarity.9
Yes. The10 problem -- I guess we want to be clear,11 though, that would require those three12 providers who we, again, identified13 because they met their performance14 targets, that would require for us to15 keep the number of students that they16 bring down the cost of their per-pupil17 expenditure.18
And we19 all agreed in our discussions that the20 three providers would not be sufficient,21 so then we talked about the additional22 money. So we have $8 million. The plan23 is -- I want to be clear on what Plan D24 is for me.25 87 6/10/11 - WHOLE - 110135, ETC.1 Plan D for me is, we have $82 million. We have three providers. We're3 at the $8.6 million. So where do we end4 up?5
This is my6 understanding from yesterday. We go back7 to the original provider list. Again,8 we'll still have to negotiate with each9 one of them to bring down the cost to10 keep the same amount of students that we11 had this year.12
So we13 would go back to the 2010-2011 provider14 list and try to keep the capacity at15 2,460. So we're going to -- I want to be16 clear. So we would be taking the 2,46017 slots at 20 million and trying to get it18 to 16 million. That's what we would be19 doing?20
That's25 88 6/10/11 - WHOLE - 110135, ETC.1 what I wanted for clarity purposes,2 because -- and I want to be clear. Let3 me say this, because in this, you got to4 be very clear.5 So I am very clear that we're6 moving in the direction that does not7 have the administration creating these8 regional sites in lieu of the provider9 system that we have?10
What we agreed11 to is that we would look -- for this12 year, that's what we would do. We would13 not expand. We'd go back to the original14 provider list, give them another year to15 prove themselves, give the District16 another year to prove itself with its one17 site before expanding.18
Okay.19 Thank you. Thank you so much. That20 clarifies. I just want to put that stuff21 on the record because I think it's22 important. I think, again, we've had23 very productive discussions internally,24 and I want to make sure that any movement25 89 6/10/11 - WHOLE - 110135, ETC.1 that we make over the next week, we're2 very clear about alternative education3 and our provider system.4 So that said, I just want to5 end on this, because I think both6 Councilman Green and Councilman Kenney7 mentioned this. When we're making these8 decisions -- and, again, I don't want to9 second-guess you in your decisions. I10 know that you're doing this with the best11 possibility, but I want to go to the12 renaissance and promise academy. What13 was our promise and renaissance budget in14 2010-2011?15
Councilwoman, as we16 noted, our budget for promise academies17 for this current year, FY10-11, with six18 schools was a $7.8 million budget, and as19 we had testified previously, our budget20 now adjusted for -- previously when we21 published the budget, it was 23.8 million22 for promise academies. Adding Martin23 Luther King High School to the promise24 academies instead of the renaissance25 90 6/10/11 - WHOLE - 110135, ETC.1 charters category leaves us with a2 promise academies budget of 26.9 million,3 and that is serving 14 schools.4
So if we11 kept just what we have this year, without12 the expansion of the promise academy13 side, how much money could we save?14
You mean if we15 don't have the new 11 promise academies?16
That is20 a huge ticket item and one that I am21 going to on the record strongly encourage22 the administration. Again, I have23 wonderful promise academies in my24 district, and as much as it pains me,25 91 6/10/11 - WHOLE - 110135, ETC.1 because I understand what we're trying to2 do, I think committing to something new3 versus keeping what we have and trying to4 sustain what we have is one of those5 decisions where we're going to have to6 respectfully disagree with you. I think7 that when we're talking about 1008 million, 150 million, you have line items9 like this one of $20 million for10 something new that under normal11 circumstances all of us want to support,12 but we can't. We have to make those13 tough decisions. Herein again lies an14 item that would pay for the smaller15 classroom size, that would pay for the16 transportation piece, that would pay for17 the nurses, that would pay for some of18 the early childhood. Those are some of19 the things that, quite frankly, have to20 be revisited. That's for me -- the art21 and music, the $7.7 million in art and22 music, the $7.6 million in counselors23 could be paid for by just this line item24 and one that I'm going to ask you on the25 92 6/10/11 - WHOLE - 110135, ETC.1 record to reconsider, as much as it pains2 me, because I've seen the progress of3 promise academies. Those are big ticket4 items.5
I thank you, I6 guess, again in defense of this. And I7 have to. I'm an educator. I'm not a8 politician. I'm here to educate these9 young people, and I want to see us have10 the best school system possible.11 When we cut programs like the12 promise academy where the schools have13 been failing young people, the very young14 people that we're attending to in the15 alternative schools came -- the lion's16 share came from the promise academies --17 then we will continue to see these young18 people in alternative schools, and I19 don't think that's where we want to go.20 I think we want to see the alternative21 schools work themselves out of business22 in this school system and in the City and23 that we provide young people with an24 opportunity to graduate.25 93 6/10/11 - WHOLE - 110135, ETC.1 So when we are doing this,2 we're actually going to pay a price on3 the other side and you'll see the4 alternative programs continue to go up5 and -- that's really hard, to turn these6 young people in their lives around.7
I8 completely agree with you, except in this9 regard, I'm not asking you to cut. I'm10 asking you not to add. And so that's the11 difference between this line item. I'm12 not asking you to cut anything. I'm13 saying we can simply not afford another14 $20 million for something new at the15 expense of cutting services that we16 currently have. And it's not a right or17 a wrong. It's just the choices we have18 to make. And so this is not a cut. This19 is -- you're adding $20 million in a new20 line item. And unfortunately we make21 these decisions in Council every single22 day when we talk about prisons, do we23 monitor them, do we do the intervention24 or the other ones. So this is one of25 94 6/10/11 - WHOLE - 110135, ETC.1 those line items that is very hard for me2 to again ask folks to pay more and do3 more for the School District on new line4 items versus existing line items.5
It's a new line6 item for sure, but it's a new line item7 intended to again --8
-- deal with11 some of the social issues that you're12 dealing with in your budget, dealing with13 some of the prisons issued. I mean,14 we're talking about 11 schools, and this15 is not given to the school system. This16 is given to 11 schools with young people17 who are in them. And so we're making a18 choice, but I can tell you that if we19 don't attend to these schools, you will20 see more of these young people and their21 families in social services. You will22 see more of them incarcerated. It is23 coming.24 (Applause.)25 95 6/10/11 - WHOLE - 110135, ETC.1
I have2 more questions, but I'll let some of my3 colleagues who haven't had an4 opportunity.5 Thank you, Madam President.6 COUNCIL PRESIDENT VERNA:7 Councilman Kenney, you would be next, but8 it was taken off because of your line of9 questioning.10
Thank you,14 Madam President.15 Good afternoon, School District16 officials. First I need to go on record17 along with my colleagues to say thank you18 for the offline discussions we've had and19 for the meeting I thought yesterday which20 was a real breakthrough for a number of21 us in helping us understand how you22 arrived at holding harmless the full-day23 kindergarten and the transportation24 issue.25 96 6/10/11 - WHOLE - 110135, ETC.1 Now, where I differ a little2 with my colleagues is that I believe3 there is some -- not some, but a lot of4 merit in arguing the educational choices5 that you're making, and my interest has6 been and will remain on reduced class7 sizes and early childhood and what all8 the research tells us in those two areas.9 So let me make sure I10 understand fully what we're saying about11 reduced class size. Currently in the12 system all young people in grades K to 313 are in reduced class sizes, correct?14
All of the young15 people in K through 3 are in, and then16 it's 6, 8 and 9.17
And the22 empowerment schools. And what we're23 trying to do as a result of today's24 discussions and ultimate vote is to hold25 97 6/10/11 - WHOLE - 110135, ETC.1 harmless reduced class size; is that2 correct?3
Now, put5 that on the shelf. Help me with grades 96 through 12. Is there research to support7 the notion -- and this is for my own8 understanding, because I was never at9 that level as an educator -- but reduced10 class size from 9 through 12 also yields11 stronger academic performance when you12 have reduced class size for high school13 students as well?14
The research is15 stronger at the early grades. That's16 where the body of the research is about17 class sizes, at grades kindergarten18 through 3rd grade, which is why we're19 trying to maintain it there. Six and 820 and 9 are all transitional grades, young21 people either transitioning from 5th22 grade to 6th grade, which means middle23 school if they're going to middle school.24 So that's a critical year, which is25 98 6/10/11 - WHOLE - 110135, ETC.1 another grade level that we believe2 deserves attention in terms of smaller3 class sizes. Eighth grade because4 they're getting ready to go to high5 school, 9th grade because they're coming6 into high school and they need more7 attention. But the vast body of research8 is about small class sizes and the value9 of it and the impact on student10 achievement at the lower grades.11
And I'll12 just add to that what we know also is13 that the early indicators of truancy14 start somewhere between 4th and 6th15 grade, because if a kid can't read, then16 they don't come to school, truancy kicks17 in, and they hit 9th grade and they never18 see the 12th grade door, because the19 fundamentals have not been put in place20 during those early school years.21 Twenty percent of the children22 in the early age groups are in preschool,23 and is it true that the Pennsylvania24 Accountability Block Grant also covered25 99 6/10/11 - WHOLE - 110135, ETC.1 pre-K?2
So in the4 new scenario you provided for us, does5 that grant cover pre-K as well or6 strictly kindergarten in the new7 scenario?8
Okay. All11 right, then. So should we get to 66.1,12 because the numbers have fluctuated, that13 would capture the early childhood14 potential cut as well, correct?15
All right,18 then. So that speaks to my principal19 interests, which were kindergarten,20 reduced class size and early childhood21 education.22 Thank you, Madam President.23 COUNCIL PRESIDENT VERNA:24 You're welcome.25 100 6/10/11 - WHOLE - 110135, ETC.1 The Chair recognizes2 Councilwoman Miller. Is she in the room?3 (No response.)4
We'll5 pass her.6 Councilwoman Tasco, you haven't7 been recognized.8
And I came9 in late on the summer school discussion10 about this summer and next summer and11 what's in the budget, is it for this year12 or next year. I just want a13 clarification on if the dollars are14 appropriated for this year, the program15 is in place for this year, could you take16 those dollars and not use them and use17 them for next year or use them -- I want18 a clarification. I'm not sure that that19 was clear.20
The dollars that21 are in the -- for summer, this year's22 summer school, have already been23 identified in our Title I grant24 application. We'd have to get25 101 6/10/11 - WHOLE - 110135, ETC.1 permission, I believe, to make that2 change, especially since we're about to3 put in another -- our new Title I grant4 application goes in at the end of this5 month, but we would have to cancel the6 SLAM program if we are able to do that,7 and I'm not sure, because $12.8 million8 that you see here came from Title I.9 Then we'd have to cancel this year's10 summer SLAM. It has nothing to do11 with -- SLAM is the summer program for --12 the summer program that we've had last13 year that had 40,000 young people.14
And what15 benefit was that for the record, why you16 had that program?17
Well, we had the18 program because, again, what I said is19 while we've been making progress, we've20 been making steady progress, we have to21 start making accelerated progress or it's22 going to take this city until the year23 2123 to get all of our children to grade24 level. So the summer program was put in25 102 6/10/11 - WHOLE - 110135, ETC.1 place to make sure that young people,2 whether they were behind, at grade level,3 didn't slide back, because even the young4 people at grade level slide backwards if5 they don't have the summer experience,6 and that means we have to try to catch up7 again.8 So this is important if you're9 looking at again accelerating student10 achievement for all children to have a11 summer program, not just for the kids who12 failed a class. We're trying to13 accelerate this, the achievement of these14 young people in this city. We're making15 progress, and we're happy about that, but16 it's still too slow. Just barely half of17 our young people are at grade level in18 reading and math, only half. And we were19 celebrating half, but we got a long20 way -- we have a long way to go. And so21 summer -- the summer program was put in22 place so that young people who from K to23 12 would still have the opportunity to24 have this, and the research is clear here25 103 6/10/11 - WHOLE - 110135, ETC.1 about regression in the summer, but also2 to give young people who are3 under-credited and need extra time to4 graduate, they were there so they could5 get credits to graduate. We actually6 graduated 700 young people. Before that,7 it's always been 100 or less.8 So it's proven its worth and9 it's a new -- it was the first time we've10 done it. I would ask -- again, I'm11 looking at what's going to move this12 school system and to produce young people13 who are ready to be productive citizens14 either in the world of work or they go on15 to college. And half, while we're16 celebrating it again, half of the young17 people at grade level is not good enough.18
Thank you.19 I'm just trying to figure out. So you're20 not sure you can use the money for that?21
We're not even22 sure we can do it, because it's been in23 this year's application that we were24 going to use these grant funds for summer25 104 6/10/11 - WHOLE - 110135, ETC.1 school. So this argument should probably2 be for next year as we rewrite the Title3 I application. But we can't -- when4 we're rewriting the Title I application,5 we're putting in full-day kindergarten.6 So that's why we're able to do it for7 next year. But we'd have to take it out8 for the summer of 2012 and we'd have to9 get permission not to -- to revise it for10 this year. We already have that in our11 Title I application that's been12 submitted.13
Thank19 you.20 Just for clarity purposes,21 Title I dollars are for children that fit22 a certain income, correct?23
However,25 105 6/10/11 - WHOLE - 110135, ETC.1 when you do full-day kindergarten, that's2 district-wide irregardless to income.3
Well, our Title4 I application is district-wide. We have5 so many young people and they're6 distributed throughout the City so that7 all of our schools just about are Title I8 schools.9
That was10 my next question. How many students do11 you currently have in public schools, how12 many are Title I eligible?13
So all of our14 students are -- all of our schools, as I15 said, are Title I. We have enough young16 people in poverty that all of our schools17 and students in those schools benefit18 from Title I dollars.19
Okay.20 That just helps me get a little bit more21 clear on why we're able to use Title I22 monies across the board.23
We estimate that 782 percent of all students in the3 Philadelphia public schools are low4 income, according to the federal5 definition.6 COUNCILWOMAN MILLER:7 Seventy-eight percent? Wow.8 With the extended-day program,9 now that's a part of the SES, correct?10
I guess I12 always thought that the state actually13 funded that program.14
Yeah. We offer a17 School District-run extended-day program.18 The federal government also requires that19 parents may access supplemental tutoring20 services, and we have to provide Title I21 dollars for that. So there are two22 different programs.23
So if a24 parent wants to access that program, that25 107 6/10/11 - WHOLE - 110135, ETC.1 has been cut? I understand that the2 School District portion has been cut.3
The School4 District-offered program was funded5 primarily from a state grant called the6 Educational Assistance Program Grant.7 That grant has been eliminated in its8 entirety by the Governor and we have --9 so we have eliminated that program,10 because we no longer have the funding for11 it.12
Excuse13 me. Point of information, please.14 Councilman Jones.15
Councilwoman16 Miller, just a question.17 Can you from the top -- there18 are two types of Title I money. One19 impacts food and other services like that20 for eligible young people. Can you give21 the definition of the two and then the22 funding sources of both.23
Well, there's only24 one -- we only get one Title I grant, but25 108 6/10/11 - WHOLE - 110135, ETC.1 the way we use the money, we allocate it2 in different ways. The larger portion of3 our funds -- and our Title I budget for4 next year is 246 million, and 115 million5 of that is allocated in school budgets by6 formula based on the number of low-income7 students in each school. There is, in8 addition to that, 18 and a half million9 that is set aside for non-public school10 programs. The rest is in these centrally11 administered programs, although they12 benefit kids in schools as well. So the13 SES program is an example of that, but14 that's one of several mandates we have.15 There are certain services we16 have to provide. We have to provide a17 certain minimum amount of professional18 development in order to ensure that we19 have highly qualified teachers. We have20 to provide a certain minimum amount of21 money to ensure parental involvement in22 schools, and we also have to make23 available funds if parents desire to24 purchase services from private providers25 109 6/10/11 - WHOLE - 110135, ETC.1 of tutoring. Then they have a right to2 access Title I money for that purpose.3
Our breakfast and8 lunch programs come out of the federal9 Child Nutrition Act. We receive about10 $80 million a year from the Department of11 Agriculture. Title I is funding from the12 Department of Education.13
Okay.16 Thank you.17 So just to make sure I heard18 you correct, the entire program has been19 eliminated, so even if a parent wants to20 use a private provider, that's no longer21 available?22
That is23 available still with Title I dollars,24 because we have to put some money aside25 110 6/10/11 - WHOLE - 110135, ETC.1 for that. But in addition, we had the2 District after-school program, too.3
I do8 understand now. Thank you.9 I want to talk or get more10 information on what City-related11 activities specifically will be12 eliminated, and I'm just going to give an13 example. The Marcus Foster pool, even14 though millions was put in through the15 field -- and I've said this before -- I16 still can't figure out why nothing was17 done with the pool. So the pool is18 not -- we can't use the pool. So we19 moved the program where they train the20 young people to swim to Pickett Middle21 School's pool, but it sounds like with22 this, this pool is going to shut down if23 we can't use --24
No. All of the25 111 6/10/11 - WHOLE - 110135, ETC.1 cuts that we're talking about are in the2 operating budget. The problem with that,3 with the Foster pool, is a capital repair4 problem and the lack of funds -- the lack5 of capital dollars to be able to make6 those repairs because they're so7 extensive.8 These are -- what we have9 identified is four things that are in the10 School District's budget this year that11 are not in the School District's budget12 next year, and they add up to 11 million.13 They are 4.5 million of funding for14 school-based social services, which is in15 our budget this year, is not in next16 year; 4.3 million for property tax17 assessment to add to the funds that are18 in the City budget to support before the19 Board of Revision of Taxes and now the20 new City Office of Property Assessment;21 $700,000 in the School District budget to22 support the City Controller's Office,23 which is in addition to the funds that24 you've appropriated for the City25 112 6/10/11 - WHOLE - 110135, ETC.1 Controller in the City budget; and about2 a million and a half of costs incurred3 through the City use of School District4 facilities for City recreation and5 department programs. That's the 116 million.7
Right.8 And out of the 1.5 million I assume would9 be the inability for us to now continue10 to use any of the indoor pools that's in11 school facilities, correct?12
Well, this million13 and a half is for programs that this year14 the City is in the schools, the schools15 are incurring the cost and the School16 District has been assuming the cost. In17 all other cases when someone -- when some18 organization outside the City uses the19 School District's facilities after hours,20 we calculate how much additional cost we21 incur, because the building engineer and22 custodians have to stay, they have to23 clean up the building, and we charge the24 user. We have not been doing that when25 113 6/10/11 - WHOLE - 110135, ETC.1 the City runs recreation programs in our2 buildings. They have not been paying.3 We've been incurring the cost in our4 budget. In this budget, we don't believe5 we can continue to do that.6
Okay. So7 I know you're trying not to say it, but8 it sounds like --9
Councilwoman, no10 facility is being cut off in terms of11 availability. The issue is for those12 programs being operated right now, will13 the City provide us with the funding if14 they want to continue to use the15 facilities, because we don't have the16 money in this budget to do it.17
Okay.18 But if the money is available, then the19 facilities are available irregardless to20 whether it's a pool or --21
As long as the22 facility is available and operating right23 now.24
Okay.25 114 6/10/11 - WHOLE - 110135, ETC.1 Thank you.2 Thank you, Madam President.3 Thank you.4
Thank10 you very much.11 Councilman Green.12 (No response.)13 COUNCILWOMAN BLACKWELL:14 Councilwoman Reynolds Brown.15
I need to16 make sure I understood what I think I17 heard around kindergarten, so forgive me18 for the same line of questioning, but I19 need to be able to report back to those20 of us who care about it.21 Kindergarten based on22 yesterday's discussion and this document23 has been taken care of under Title I?24
Early2 childhood education is a part of the ask3 today for whatever number we, Council,4 come up with to capture existing5 programs?6
Yes. They were7 both paid for with the state's8 Accountability Block Grant. We could put9 the monies into this, for full-day10 kindergarten, into this year's11 application, which is due the end of this12 month. So that's how it's taken care of13 for next year.14
Thank20 you very much.21 Does any other Councilperson22 want to be recognized in this batch of23 questions?24 (No response.)25 116 6/10/11 - WHOLE - 110135, ETC.1
Okay.2 Then I believe that our next panel3 consists of Rob Dubow. We hope that4 you'll remain for a little bit.5
If you see me6 leave, it's just I'm leaving town. So I7 will stay for as long as I can,8 Councilwoman.9
Thank10 you.11 I believe we have Rob Dubow and12 Lori Shorr coming.13 Thank you, everyone, for your14 patience.15 (Witnesses approached witness16 table.)17
Good18 afternoon. Thank you. Please identify19 yourself for the record and begin your20 testimony.21
Good morning,22 Councilwoman Blackwell and members of23 Council. I'm Rob Dubow, the Finance24 Director for the City. 17 As the Mayor stated in a letter18 to the School Reform Commission last19 weekend, there's no more important20 investment for the City than the21 education of our children. 2 That said, we are in agreement3 with many of you who have that -- issues4 that many of you raised both publicly and5 privately about the need to have greater6 fiscal and operational accountability7 from the District and greater8 transparency in the District's9 decision-making process. 18 The School Reform Commission19 responded with a letter expressing an20 intent to fully comply with the requests21 of the Mayor, and we have submitted that22 letter to the Chair. 1 priority list of programs and services in2 order of preference that it would choose3 to restore, depending on the level of4 additional funding at its disposal. 8 A second aspect of the required9 accountability measures is the10 Educational Accountability Agreement that11 the School Reform Commission entered into12 with the City and the Commonwealth to13 commit the District to a variety of14 measures to ensure greater cooperation15 and information-sharing. 14 A particularly significant15 component of that agreement is a16 requirement that the District annually17 prepare a five-year plan. 13 Lastly, before we turn to the14 specific proposals before you, I want to15 note that as part of the need for revenue16 enhancement for the District, the17 Administration is planning a modest18 increase in on-street parking rates19 already authorized in The Philadelphia20 Code. 10 So let me now turn to the11 revenue generation proposals in front of12 you. Bill No. 8 increase in taxpayers' real17 estate tax bills. The stated purpose of18 this proposal is to increase funding19 available for a grant to the School20 District. 23 A second proposal before you,24 Bill No. 4 That increase would be in the School5 District taxes. 8 Finally, Bill 110478 is the9 Administration's proposal to establish a10 two-cent-per-ounce sugar-sweetened11 beverage tax to be collected by the12 distributors of such beverages to13 Philadelphia retailers. 1 City. 14 In our view, this tax would be the least15 burdensome to Philadelphians as a whole16 and would be shared by visitors and17 non-Philadelphia residents who work here18 and who buy sugary drinks. We would19 expect some of the cost of this tax would20 be passed along to customers in the form21 of higher prices. But soda is a beverage22 of choice. If people are willing to pay23 more for their product, that's their24 decision. contrast to the proposal to raise2 property taxes.
Thank5 you, Mr. Dubow. I wanted to ask you a6 question with regard to and7 Parking Authority's collection of funds8 related to on-street parking. Have you9 identified those sites or are they as10 those referenced by the Mayor?11
Yes.14 We did contact the Mayor with regard to15 University City, and I will say that the16 last time those fees were raised, they17 were raised to the maximum allowed under18 the legislation. Therefore, to raise19 them again, I would have to introduce20 legislation for my district to allow that21 increase. So I'll ask you to check into22 that and report back to me.23
Yes. We'll check24 into that.25 127 6/10/11 - WHOLE - 110135, ETC.1
Thank2 you.3 COUNCIL PRESIDENT VERNA:4 Mr. Dubow, will the proposed soda tax5 only apply to products that are in liquid6 form?7
Well,10 what non-liquid products will be taxed?11 I mean, there are liquids that we buy and12 then sugar added to it.13
Yeah. The14 legislation delineates what would be15 taxed, and it's beverages. So there's no16 non-beverages.17
Well,18 if this tax were to be approved and it19 turned out that it had some unintended20 consequences, we could not change the law21 if the changes lowered the revenue22 estimates under Act 46; is that correct?23
I think we'd have24 to find a way to substitute additional25 128 6/10/11 - WHOLE - 110135, ETC.1 revenue for it, and we'd probably have to2 get -- well, let me actually, instead of3 playing lawyer, defer to the Law4 Department on that.5 (Witness approached witness6 table.)7
Good afternoon,8 Council President. Shelley Smith, City9 Solicitor.10 I heard part of the question11 about unintended consequences, but not12 the whole thing. Could you please repeat13 it for me.14
If15 this tax were to be approved and it16 turned out that it had some unintended17 consequences, we would not change the18 law -- we couldn't change the law if the19 changes lowered the revenue estimates20 under Act 46; is that correct?21
I'm not sure I22 precisely understand the question. Is23 the question whether if the tax was24 overturned somehow? Is that the essence25 129 6/10/11 - WHOLE - 110135, ETC.1 of your question?2
We3 couldn't change the law, could we? And4 if it were proven that the revenue5 estimates were lowered, how would that6 affect us under Act 46?7
You're saying if we8 collected less revenue than we9 anticipated?10 COUNCIL PRESIDENT VERNA:11 Right.12
We're required to13 maintain the tax and the rate, but we're14 not guaranteeing a level of revenue. So,15 for example, to give the property tax as16 an example, if assessments went down and17 the revenue went down, we're not required18 to make up that revenue. So we wouldn't19 be able to reduce -- if we impose the20 two-cent rate here, we couldn't reduce21 the rate later, but we're not responsible22 for guaranteeing the revenue amount.23
I'm24 sorry. Repeat your last sentence.25 130 6/10/11 - WHOLE - 110135, ETC.1
We're not2 responsible for guaranteeing the amount3 of revenue that's generated by a tax. We4 can't change the rate of the tax. We5 can't lower the rate of the tax, but if6 collections go down, we're not7 responsible or compensating for that.8
So an example, if14 one of the existing taxes goes down, like15 the use and occupancy tax, if we had16 lower collections, we're not responsible17 for compensating for that.18
Could21 you tell us what the rationale for the22 automatic yearly CPI adjustment and what23 other taxes the City imposes that has24 such an adjustment?25 131 6/10/11 - WHOLE - 110135, ETC.1
We don't have that2 in other taxes. The rationale is that as3 inflation goes up, we want revenues from4 the tax to go up with it. That's the5 rationale.6
Oh,7 okay. We just keep adding.8 Tell us, who will be9 responsible for the collection and10 enforcement of this tax?11
What14 are the estimated costs for collection15 and enforcement activities, and are they16 budgeted?17
I don't think that18 there's much of an impact. The Revenue19 Department thinks they can do it within20 their existing budget.21
They can do this24 within their existing budget.25 132 6/10/11 - WHOLE - 110135, ETC.1
Okay.5 If you say so, we'll believe you.6 What is the Administration's7 tax policy rationale for the8 implementation of this tax?9
Well, we prefer10 this tax to a broad-based tax because11 it's a more targeted tax and we think12 would not have as broad an impact as a13 property tax, and it's also an item14 that --15
There are a couple18 of reasons that we prefer this to a19 broad-based tax. One is that it's more20 targeted. Also, it's imposed on21 something that's a matter of choice.22 People could buy different beverages that23 are not sugar-sweetened.24
I'm25 133 6/10/11 - WHOLE - 110135, ETC.1 not a lawyer, but I do believe it's2 discriminatory. Would you say that it3 is?4
I'm going to avoid5 getting into a legal discussion with you.6
I think the City9 Solicitor is coming to respond to that.10 (Witness approached witness11 table.)12
Based on any -- I19 mean, do you have a belief that it's20 discriminatory based on any particular --21
Well,22 last year we were asked to raise this23 tax, the soda tax, and at that time, it24 wasn't a matter of the taxes but obesity.25 134 6/10/11 - WHOLE - 110135, ETC.1 Now we don't hear anything about the2 obesity issue. We're just hearing about3 this tax. And I don't know how this4 could ever be implemented. If it's5 sugar, it's sugar, and there are many6 other items that have sugar. So are we7 just saying, Oh, well, we're going to go8 back to soda? Well, how about so many9 other items that have a sugar content?10
To me that's not --14 from a legal perspective, that's not a15 discriminatory -- that's not an issue of16 discrimination in any way. Certainly17 classes of foods that contain sugar are18 not classifications that are suspect19 under the law such that they can't be20 treated differently. All the tax law21 requires is that there be a rational22 basis for a distinction, and there23 certainly is a rational distinction24 between sugar-containing beverages and25 135 6/10/11 - WHOLE - 110135, ETC.1 those that do not and between --2
Let3 me ask another question, if I may. If I4 were a member of this industry and this5 bill passed, do you think I would take it6 to court and do you think we would be7 involved in litigation for several years?8 And during that period of time, would you9 be able -- would we be able to collect10 the taxes?11
I think that, first12 of all, the fact that someone might13 threaten to sue us neither speaks to the14 actual legality of the issue over which15 they might sue us or the merit of the16 issue itself. So --17
But18 I'm sure they would find an attorney to19 think so.20
Philadelphia has24 more lawyers per capita than almost any25 136 6/10/11 - WHOLE - 110135, ETC.1 city in the country. So there's no2 question in my mind that anyone who wants3 to sue us about anything could find a4 lawyer to take the case.5 COUNCIL PRESIDENT VERNA:6 Certainly.7
I think based on8 the level of lobbying activity and legal9 activity that has surrounded the beverage10 industry in relation to this tax both11 here in Philadelphia and in other places,12 I think it's certainly more than possible13 that we might get sued, but I don't think14 that means that the tax would be15 overturned, and I don't think that16 necessarily means that the impact of the17 tax would be stayed while they figured it18 out. It's impossible to say that sitting19 here today. So I don't think -- but I20 believe the tax -- our opinion is that21 the tax is in fact legal, and so I think22 that ultimately --23
But24 that's your opinion. It may be the25 137 6/10/11 - WHOLE - 110135, ETC.1 Administration's opinion, but as I said,2 if you're a member of the industry,3 you're going to find an attorney who will4 take your case and --5
I'm sorry. I9 apologize. I thought you were finished.10 I apologize.11
And I12 just don't understand how we would be13 able to actually collect this tax while14 this particular case is under litigation.15 But you say it can be done?16
And I18 know you're an attorney and you would19 not -- I know you wouldn't -- lead us in20 the wrong direction.21
But I24 suspect that that's possible, and I'm not25 138 6/10/11 - WHOLE - 110135, ETC.1 a lawyer.2 Did you want to say something?3
Thank you,7 Madam President.8 I just wondered if there are9 any comments on uniformity issues under10 Pennsylvania law with respect to such a11 targeted tax, and then also under the12 Commerce Clause of the U.S. Constitution13 targeting a particular tax and stopping14 the free flow of commerce between states.15 It's an issue that's been raised by the16 Law Department with respect to17 legislation I have that is trying to18 protect Philadelphians or put19 Philadelphia first, and I just want to20 make sure we've done a thorough U.S.21 Commerce Clause analysis and Pennsylvania22 Uniformity Clause analysis. So that's my23 question.24
We have done a25 139 6/10/11 - WHOLE - 110135, ETC.1 Commerce Clause analysis. We have -- we2 would obviously continue to research that3 issue, but we think that -- the Commerce4 Clause issue is essentially whether or5 not it imposes an unreasonable burden on6 interstate commerce, and this tax is not7 so unreasonably burdensome, from our8 perspective, that it does that.9 Secondly, as to the uniformity10 issue, Pennsylvania courts have explained11 that the Legislature actually has12 discretion in matters of taxation, and as13 long as there's some legitimate14 distinction between the classes that15 provides a non-arbitrary and reasonable16 and just basis for difference in17 treatment, there won't be a Uniformity18 Clause problem. And as to the19 sugar-sweetened beverage tax, we think20 the distinction between sugar-sweetened21 beverages and non-sugar-sweetened22 beverages is a legitimate and fair23 distinction.24
Thank you.25 140 6/10/11 - WHOLE - 110135, ETC.1 So I think the point that the President2 was trying to make earlier, that it's not3 clear to this body that there is a4 distinction between orange juice which5 has sugar and a drink that where sugar is6 removed and then it is reconstituted, has7 sugar, from a Uniformity Clause8 perspective. It doesn't seem like -- it9 seems like we're taxing two drinks that10 sell sugar, one from a concentrate, one11 naturally or otherwise, and that that12 doesn't necessarily make -- I'm not13 trying to have the debate with you. I'm14 just trying to explain some of the15 concerns we have and get them on the16 record. It doesn't seem to be that much17 of a distinction.18 And then under the Commerce19 Clause, do you have any written opinion20 or memo regarding Commerce Clause21 analysis?22
And you25 141 6/10/11 - WHOLE - 110135, ETC.1 didn't do it internally. You didn't2 actually --3
There's no5 writing in the Law Department about a6 Commerce Clause?7
I don't want to say8 there's no writing, but I've had9 discussions. I have not seen a -- I10 haven't discussed a written document on11 the issue. I've had oral discussions12 about it.13
Who in the14 Law Department has done the research on15 the Commerce Clause analysis?16
Well, our Appeals17 and Legislation Unit would have done that18 research. If you would like an opinion19 on it, we're happy to give you one.20
I'm just21 asking. I'm trying to understand how22 much effort has been put into determining23 its legality.24 How about the Uniformity Clause25 142 6/10/11 - WHOLE - 110135, ETC.1 analysis, who did that?2
We issued an7 opinion to Councilman Jones who requested8 one and waived the privilege.9
Does that14 opinion include a Commerce Clause15 analysis?16
Okay.18 Thank you, Madam President.19 COUNCIL PRESIDENT VERNA:20 You're welcome.21 Mr. Dubow, what is the revenue22 estimate that this tax will generate and23 how was it calculated?24
It's estimated that25 143 6/10/11 - WHOLE - 110135, ETC.1 it would generate $80 million in --2
It's estimated it5 would generate $80 million for a full6 year and that it would generate $607 million this year, because it would not8 be in place for the full year. The9 estimate assumed that there would be10 about a 20 percent falloff in sales of11 sugary-sweetened beverages.12
And13 that's how you calculated that we would14 be generating 60 million?15
Could17 we have a copy of that calculation that18 you made?19
Thank22 you.23 The Chair recognizes Councilman24 Goode.25 144 6/10/11 - WHOLE - 110135, ETC.1
Thank you,2 Madam President.3 Good afternoon, Mr. Dubow.4
On of6 your testimony, you refer to the7 Administration's preferred method of8 revenue generation. Without getting into9 how you are going to generate the10 revenue, can we talk about how much11 revenue you expect to be generated from12 it in Fiscal Year '12?13
The question17 more specifically is, what is your total18 request from this Council in terms of19 your preferred revenue generation for20 Fiscal Year '12?21
For '12, it's22 really that $60 million. Locally we also23 include $6 million from the parking24 increase.25 145 6/10/11 - WHOLE - 110135, ETC.1
So your2 request to this Council is actually $66.13 million?4
Not the $1027 million that the School District8 mentioned?9
The School District10 gave a range of 75 to 110, but we get --11 if you look, that 60 million plus the 612 million from parking, plus the TransPass13 deal has about a $25 million benefit.14
I understand15 the Administration's math and what it16 adds up to. That's still separate from17 the School District's request today. The18 School District essentially requested --19 they can correct me if I'm wrong -- they20 requested us to raise $102 million in new21 revenue.22
Shouldn't25 146 6/10/11 - WHOLE - 110135, ETC.1 the Administration and the School2 District be on the same page at this3 point?4
Yeah. I think5 we're on the same page on the items that6 would be restored.7
I'm not sure8 we're on the same page with regard to9 that either, because Mike Masch gave us a10 list that had nine items. We originally11 were at four items.12
Actually had14 11 items when you count the full-day15 kindergarten and the other transportation16 costs.17
Right, but if you18 go to the list on , which is Option19 3(a), which is the two-cent sweetened20 sugar, and the School District's list of21 what they would restore, it starts with22 the $11 million that they assume we would23 pick up, then it has transportation,24 reduced class size, alternate education,25 147 6/10/11 - WHOLE - 110135, ETC.1 early childhood. That's consistent with2 what were our top priorities, although I3 think there's a little difference on how4 alternate education would be structured.5
They also6 include school nurses, extended-day7 programs, counselors, and art and music8 programs.9
Well, we had a list13 of our top priorities for what we wanted14 restored, and those are all here. We15 are --16
Let me end20 with this. I'll ask the question just21 one more time before I move to my second22 line of questioning. What is the23 Administration's request in terms of new24 revenue from this Council for Fiscal Year25 148 6/10/11 - WHOLE - 110135, ETC.1 '12?2
I'm talking13 about the dollar amount. What is the14 preferred request?15
Sixty million, plus16 the parking rate increase, 6.6, and then17 the TransPass deal, assuming that they18 get the equivalent of 25 million from19 that.20
I'm talking21 about new revenue you're asking from this22 Council. Is the number 66 million?23
Yes, but I just put24 that in context. That assumes25 149 6/10/11 - WHOLE - 110135, ETC.1 Accountability Block Grant comes back and2 the charter school funding is there,3 because if those items aren't in the4 state budget, it won't be possible to5 restore all these things, because this6 will be making --7
It also8 won't be possible to raise new revenue,9 unless we find out by that time.10
So your13 request is what? I'll ask it one more14 time.15
Let's move18 on, then. On the issue of accountability19 and transparency, in the Five Year Plan20 submitted to Council by the21 Administration, were there any new tax22 increases in the Five Year Plan?23
Were there25 150 6/10/11 - WHOLE - 110135, ETC.1 any tax reductions in the Five Year Plan?2
There are tax3 reductions in the out years of the Five4 Year Plan, yes.5
And what are6 those tax reductions in the out years of7 the Five Year Plan?8
The tax reductions9 in the wage tax and the business10 privilege tax.11
What are the12 projected fund balances over the five13 years?14
One second. Let me15 just get that out.16 You want it for each year?17
Yes. I have18 it in front of me, but I want it for the19 record.20
No. I understand.21 You usually do. I just want to grab the22 Plan, which I have in here somewhere.23 The fund balances in the Plan24 were 51 million in '12, 63 million in25 151 6/10/11 - WHOLE - 110135, ETC.1 '13, 69 million in '14, 42 million in '152 and 46 million in '16.3
And the drop4 in the last two years are tax reductions;5 is that correct?6
The drop in8 the last two years are tax reductions; is9 that correct?10
Well, I mean, the11 drop is the variety of kind of everything12 that's happened in the Plan, but there13 are tax reductions in the Plan that14 contribute to the change in the fund15 balance.16
But has the17 projected fund balance for Fiscal Year18 '12 changed? Is it still 51 million?19
Well, I think what20 I should do actually, we haven't updated21 those projections. We've updated '11,22 which was 13.5 million in the Plan that23 we've proposed back in March. It's now24 down to about 5 million.25 152 6/10/11 - WHOLE - 110135, ETC.1
Okay. Are2 tax collections up or down in Fiscal Year3 '11?4
Tax collections are5 slightly up. Local generated non-tax6 revenues are slightly down. And revenue7 from other governments are down.8
In terms of9 net revenue, are tax collections up or10 down?11
Nine percent? Did15 you say 9 percent? Total revenues are16 now --17
Total revenues are20 now projected to be thirty-nine21 twenty-eight. In the Five Year Plan they22 were projected to be thirty-nine23 thirty-three. So they're actually --24 they're slightly down.25 153 6/10/11 - WHOLE - 110135, ETC.1
I'm2 referring to tax revenue, not revenue3 from other governments.4
Yeah, revenue --5 oh, tax revenues, yes. Tax revenues are6 slightly up.7
How much? I8 know as of April it was up $174 million;9 is that correct? A hundred seventy-four10 million over Fiscal Year '10, not over11 projections.12
Oh, over Fiscal13 Year '10. I'm sorry. I was looking at14 projection.15
They're roughly21 actually consistent with projections,22 because some taxes are up and some are23 down. So we didn't change that from the24 Plan.25 154 6/10/11 - WHOLE - 110135, ETC.1
So what do2 you expect the fund balance for Fiscal3 Year '12 to be when adjusted?4
Well, probably not5 that much different from what's in the6 Plan. I mean, it will change slightly,7 but probably not that different.8
I don't think it11 would be higher. It may come down a12 little based on what's happening.13
So how much14 of a millage shift could the City afford15 in the Five Year Plan?16
Well, that's a17 broad answer. I think the first thing I18 would say is that the fund balances that19 are included in the Plan are much lower20 than what the Government Finance Officers21 Association recommends. They recommend22 that you have a fund balance that's at23 least 5 percent of your revenues. So24 from what they project, what they25 155 6/10/11 - WHOLE - 110135, ETC.1 recommend, we'd be looking more like at2 175 million in terms of a fund balance,3 and the reason they recommend that is4 because things go wrong during the year.5 You have a big snowstorm. The economy6 slows down like it's looking like it7 will. So fund balance --8
I understand9 that, but if your answer is going to be10 zero, that's fine, but last year you told11 us we were going to run out of cash12 because we didn't leave you enough of a13 fund balance. I believe we left you14 about 20 million.15
Well, we made -- we16 actually made changes to the budget to17 make sure that that didn't happen, and we18 had some cash conservation measures early19 in the year. So we did have some real20 cash constraints.21
Okay. So22 you believe with a $50 million fund23 balance in Fiscal Year '12, a $60 million24 fund balance in the two years and with a25 156 6/10/11 - WHOLE - 110135, ETC.1 fund balance healthy enough to restore2 tax reductions, there's no room for a3 millage shift at all?4
I think if we did a5 millage shift, we would kind of just be6 setting ourselves up to have to make more7 cuts in our General Fund, and I think8 that's the choice we would be making.9
But not10 necessarily. But you would make the cuts11 if you believe that you needed to?12
Yes. We would have13 to go back and make cuts, the kind of14 cuts I think that we laid out what they15 would look like in one of the documents16 we gave to Council.17
But if18 Council believed that we couldn't19 necessarily go to the 60 percent share20 that the School District got four years21 ago through my legislation but went to a22 59 percent share for the School District23 and added, let's say, roughly $25 to $3024 million, that that would create severe25 157 6/10/11 - WHOLE - 110135, ETC.1 cash flow problems.2
Well, probably by7 if you're talking, yeah, 25 to 30 by8 FY -- probably in FY12, definitely in9 FY13 we could have real severe problems10 and we'd have to figure out how to11 compensate for that.12
It would cut13 the fund balance in half for a few years.14
Well, no. It would15 be recurring. It wouldn't just cut it in16 half. So if you did 30 million, for17 example, by the end of '13, assuming18 everything else went right, you've gone19 from 63 million to 3 million on a $3 and20 a half billion budget. And then if21 anything else goes wrong, like we have22 another bad winter, we're negative.23
Okay. I get24 that. I also get the fact that the tax25 158 6/10/11 - WHOLE - 110135, ETC.1 revenue projections are very2 conservative. I'm not suggesting that a3 millage shift can absolutely be done4 without any cuts. I am suggesting that5 it is an option and that as we talk about6 options and we talk about leadership7 moments, that everything should be on the8 table.9
Right. It's a10 trade. You're going to trade whatever11 you're restoring in the School District12 most likely for cuts on the General Fund13 side.14
Thank you.15 Thank you, Madam President.16 COUNCIL PRESIDENT VERNA:17 You're welcome.18 The Chair recognizes Councilman19 Greenlee.20
Thank21 you, Madam President.22 Good afternoon, everyone.23
I just25 159 6/10/11 - WHOLE - 110135, ETC.1 want to get back on the sugar-sweetened2 beverage tax again. I have to say, I3 agree a lot with what the Council4 President said. I do have questions on5 the whole fairness of the tax, but,6 Ms. Smith, I don't want to get into a7 debate, because I'm not equipped to do8 that legally with you on the tax, but9 there is one thing --10
I always say that11 to her, too.12 COUNCILMAN GREENLEE:13 Absolutely.14 But there is one thing that15 kind of jumps out a little bit to me on16 your opinion to Councilman Jones. On17 , as you're talking about the sales18 tax question that Cozen O'Connor raises,19 you say, Most critically, there is no20 City intent that the tax will be borne by21 the consumer, nor is there any evident22 proof that it will be borne by the23 consumer. Yet Mr. Dubow's statement, he24 says we would expect that some of the25 160 6/10/11 - WHOLE - 110135, ETC.1 cost of this tax will be passed along to2 customers in the form of higher prices.3
Wait.5 And if people are willing to pay more for6 the product, that is their decision.7 It seems like a little8 contradiction there.9
As soon as I heard10 him say that, I knew this question was11 coming. I think that what we -- I think12 that we don't intend that the tax will13 necessarily be borne by the consumer. I14 think we recognize that the tax was15 likely to be borne as a result of market16 forces by the consumer, among other17 entities. It's also likely to be borne18 by the manufacturer, by the distributor,19 by the retailers as well. And the point20 is -- and by consumers of other retail21 products, to the extent that the cost of22 the tax is spread around within the23 retailers' business or, for that matter,24 the distributors' or manufacturers'25 161 6/10/11 - WHOLE - 110135, ETC.1 business.2 The point, though, is that how3 the market allocates the tax is not4 really the point. The incidence of the5 tax is the point, and the tax is clearly6 imposed at the distributor/retailer level7 of the chain. It's not a sale on retail8 purchases. It's not conditioned on9 retail purchase. It's not imposed on10 retail purchasers, and it's not measured11 by the price of the product. Those are12 all the factors that determine whether13 something is a sales tax. It is not any14 of those things. And the fact that it15 incidentally might be reflected in some16 additional cost to the consumer, which17 might incidentally be a desired result18 for the purpose of collecting the tax,19 doesn't mean that it is in fact a sales20 tax.21 And while -- may I just clarify22 my answer to Councilman Green on the23 issue that he raised about the opinion.24 You asked me -- Councilman Green asked25 162 6/10/11 - WHOLE - 110135, ETC.1 whether or not the opinion addressed the2 Commerce Clause issue. The opinion was3 actually a response to Councilman Jones'4 request that we respond to the Cozen and5 O'Connor opinion. The Cozen and O'Connor6 opinion does not raise a Commerce Clause7 issue. So the opinion does not contain a8 reference to the Commerce Clause9 argument, because they didn't even make10 it, probably because the tax does not11 treat Philadelphia businesses any12 differently. It doesn't make a13 distinction or impose a preference. So14 there's no Commerce Clause problem.15
I just wanted to18 take the opportunity while I was talking19 to make that clarification.20
I got21 you.22 I guess you do bring up another23 issue, and Council President touched on24 this too, is this whole kind of intent or25 163 6/10/11 - WHOLE - 110135, ETC.1 who is going to pay the tax, because I2 remember last time Dr. Schwarz sat there3 for a long time saying one of the big4 goals was to have people consume less5 soda because of health reasons. As the6 Council President said, it's not being7 discussed right now or not being used as8 an argument why we should have this. I9 guess that leads to another question, to10 a general question.11 What's the difference between12 this year and last year as far as the13 tax, Mr. Dubow, either substantive or14 philosophical, or whatever?15
Mechanically16 there's a difference in that it's applied17 on the transaction between the retailer18 and the distributor, and last year it was19 on the sale. I think that's kind of the20 key mechanical difference between this21 year and last year. And the purpose of22 the revenues is different between the two23 years, too. Last year the purpose was to24 help fund a City gap. This would be25 164 6/10/11 - WHOLE - 110135, ETC.1 dedicated to the School District.2
But there6 was that whole health issue last time,7 which is not apparently --8
I mean, we9 obviously still think that there would be10 health benefits if the consumption went11 down, but our main focus in asking for12 the tax this year is to provide revenue13 for the School District.14
Okay.15 Now, you said there would be a 20 percent16 falloff. What, from people drinking less17 soda?18
Sugary21 drinks. Was something factored in also22 about the fact that there would be23 less -- that people might be buying24 elsewhere?25 165 6/10/11 - WHOLE - 110135, ETC.1
Because,4 I mean, if you look at the cost, I would5 think a lot of people might choose to go6 across the line somewhere and buy the7 soda or sugared-sweetened beverages for8 significantly less price, right?9
Well,12 yeah. True. But, I mean, it's not real13 far to get across the county line or14 across the bridge.15 So that 20 percent falloff16 is --17
--20 included in that? Okay.21 I mean, just a quick statement,22 again, consistent with the Council23 President. I question the fairness of it24 just hitting like one section of an25 166 6/10/11 - WHOLE - 110135, ETC.1 issue, if you will, sugared-sweetened2 issue, if you will.3 And then, secondly, I think4 with all due respect, Ms. Smith, I think5 you make your argument, other people make6 their argument. I think to base helping7 the schools on something that's at least8 questionable, I think we could be putting9 ourselves in real trouble. Just my10 opinion.11
I don't think we12 think it's questionable. I think that's13 where we disagree. I don't -- we don't14 think it's questionable.15
It's questionable18 from an industry perspective, but from a19 legal perspective, we're very comfortable20 that the tax is -- we're very comfortable21 that the tax is defensible.22
There's23 other lawyers that are very comfortable24 it's not. That's why, in my opinion, it25 167 6/10/11 - WHOLE - 110135, ETC.1 makes it questionable.2
As I said, the City3 gets sued over lots of things. It4 doesn't mean the issues have merit.5
Okay.6 Well, there certainly seems to be enough7 of at least merit to make a question, but8 that's between us.9 (Applause.)10
Thank you.15 Solicitor Smith, I asked you16 for those opinions in anticipation of the17 possibility of a lawsuit. One thing I've18 learned as a freshman, that every time we19 pass something or propose something, some20 lawyer, some law firm benefits. Some21 consultants line up. We have bought22 summer homes based on the legislation23 that we have proposed.24
Summer homes for25 168 6/10/11 - WHOLE - 110135, ETC.1 other people, you mean?2
For other3 people. And I would say that to the4 credit of this body, we never make5 decisions based on the potential of a6 lawsuit. We make decisions based upon --7 (Applause.)8
-- the fact9 that it is either right or wrong. And10 I'll prove it to my colleagues and remind11 them about this process that we have.12 Yesterday we passed -- or this13 week we talked about the DROP amendment,14 and for sure there is a law firm and a15 lawyer somewhere lining up right now to16 challenge our rationale and theory.17 Would you agree, Counselor? Somewhere we18 are probably going to be sued at one19 point or another if we do nothing or20 something.21
Correct. So23 when we pass that or when we did24 courageously the sick days/healthy family25 169 6/10/11 - WHOLE - 110135, ETC.1 bill, did it have the potential to be2 sued from a business perspective?3
But we did6 it anyway. And when we courageously7 looked at the Florida gun ban loophole,8 we moved forward, knowing full well that9 the powers that be that protect the right10 to bear arms could come down bearing on11 us, didn't we?12
And have15 sued us, but we did it anyway. And we16 did those things because they were the17 right thing to do. So, Madam Solicitor,18 we have plenty of lawyers, don't we?19
Not that we21 look forward to lawsuits or challenge and22 not that I say that we should in fact23 pass this tax, but I'm saying whatever we24 choose to do as a body, don't let it be25 170 6/10/11 - WHOLE - 110135, ETC.1 afraid of lawsuits and lawyers, because2 God loves lawyers, because he made so3 many of them.4 (Applause.)5
Thank you.8 Could you explain two points,9 Mr. Dubow. We're dictating to the10 industry that they must buy product from11 an approved distributor. I understand12 the big supermarket chains doing that,13 but what would stop a mom-and-pop14 retailer from going to Wyndmoor to15 purchase their product from a distributor16 at those locations?17
I guess under the18 legislation, there would be penalties for19 not going through a licensed distributor20 that could lead up to suspension of their21 business privilege license.22
But that to23 me in itself is heavy-handed. If I have24 a store in Philadelphia and I want to go25 171 6/10/11 - WHOLE - 110135, ETC.1 to an authorized distributor that sells2 Pepsi Cola and Coke, how can you tell me3 I can't do that?4
An authorized5 distributor -- you mean authorized under6 this act?7
An8 authorized distributor of Coca-Cola or9 Pepsi Cola that's not in Philadelphia.10
They wouldn't have11 to be in Philadelphia. If they're a12 licensed distributor, they don't have to13 be in Philadelphia.14
So tell me15 then how are you going to tell an16 authorized distributor in Allentown to be17 cooperative with this tax process?18
If they want their19 product to be sold in Philadelphia,20 that's what we would expect, yes.21
But you're22 licensing -- or you're deciding who is23 authorized and not, correct?24
No. I think25 172 6/10/11 - WHOLE - 110135, ETC.1 anybody can be authorized. There's no --2
I can't4 figure how you're going to manage this.5 How are you going to manage a small store6 in one of our neighborhoods from going to7 an authorized distributor that they can8 buy product from and collect your tax?9
I mean, it's the10 same kind of enforcement we have to do on11 all of our taxes. We have to --12
There's no13 paper trail. Other taxes,14 liquor-by-the-drink, it's on a receipt.15 I just don't understand that part of it,16 and I think we need to figure out or have17 more conversation about that.18 The other is, could you explain19 for our record the tax on the syrup that20 is so popular today? The biggest bang21 for our buck when we go into a22 convenience store is the fountain soda.23 I understand the tax on that is going to24 be 18 percent. Could you explain how25 173 6/10/11 - WHOLE - 110135, ETC.1 that's going to work so we all2 understand?3
If you buy6 containers of syrup to make soda at the7 fountain in a Wawa, that's being taxed at8 18 percent, correct?9
Is that why11 you shifted -- why did you shift -- why12 is this bill different than it was a year13 ago? Is that one of the reasons, because14 you can capture -- what motivated you to15 make these changes?16
No. I mean, I17 think really it wasn't that. It was I18 think we had some more time to kind of19 look at it and think about how this would20 work in kind of the best way, and this21 was the result of that research.22
So one of23 the significant changes in the bill we're24 dealing with today is the fact that it's25 174 6/10/11 - WHOLE - 110135, ETC.1 being taxed at the wholesale level,2 correct?3
It's being -- yeah.4 It's the transaction between the retailer5 and distributor.6
So did I17 hear somebody say that you don't expect18 that to have an effect at the pump, that19 that tax is not going to change the price20 that the consumer pays? Did somebody --21
No. I said the22 opposite of that in my testimony. I said23 it would have some effect.24
And what I said was25 175 6/10/11 - WHOLE - 110135, ETC.1 we expect that it probably will -- the2 market will probably allocate the impact3 of it throughout the market of the4 distribution of the product, at the5 distributor level, at the -- just like6 other taxes are reflected throughout the7 course of our sort of -- hit the8 consumer, among other people, in lots of9 different ways, we expect that this tax10 likely will as well. But it won't only11 hit the consumer. It will hit the12 distributor, the retailer. It will hit13 in lots of places.14
So the fact15 is that -- and the President asked the16 question about other beverages or other17 mixes, let's say, that have sugar in18 them. If it's a powder that's sold in a19 container that has sugar in it, that is20 exempt because it's not liquid? Like21 some of the Gatorades and the Kool-Aid22 that is in a paper container.23 Again, we use the word24 unanticipated consequences. There's25 176 6/10/11 - WHOLE - 110135, ETC.1 still a lot of questions of what's in and2 what's out. So I think you really have3 to have a list of what's in and what's4 out.5
Well, there's a6 list in the ordinance actually. There's7 a description. There's the definition of8 a sugar-sweetened beverage in Section9 (1)(d), and then there's a list by10 example of what they include, and they11 include, but are not limited to, soda,12 non-100 percent fruit drink, sports13 drinks, which would get at the Gatorade,14 flavored water, energy drinks,15 pre-sweetened coffee or tea,16 non-alcoholic beverages intended to be17 mixed in an alcohol drink. So those are18 examples, and I think they do cover, for19 example, the Gatorade and the Kool-Aid.20
Not really.21 Is Kool-Aid on that list as a taxable22 item or non-taxable item?23
Non-100 percent24 fruit drinks. Any non-alcoholic25 177 6/10/11 - WHOLE - 110135, ETC.1 beverages which -- no. I guess because2 Kool-Aid is the powder.3
Councilman4 Green, if you have something to add, go5 ahead, please.6
Point of7 information.8 Thank you. The question that I9 think was on the table is, there are10 powders for Gatorade, there are powders11 for Kool-Aid, there are powders for iced12 tea, all that stuff, and that would be13 sold -- it is the same product when you14 add it to water and it would be sold not15 subject to the tax. And his question16 was, what impact does that have? I17 think. I don't know, but I just want to18 clarify.19
That is the24 question. Is it taxable or not?25 178 6/10/11 - WHOLE - 110135, ETC.1
My understanding is6 that the tax applies to liquid beverages,7 but I think liquid beverages are very8 clearly definable and the ordinance9 empowers the Department of Health to10 promulgate regulations that clarify, to11 the extent that a clarification is12 required. There is an enumerated list of13 examples that are not exclusive examples14 that provide, I think, guidance to15 someone who might, for example, be16 standing in front of a counter of17 beverages or selection of beverages and18 figuring that out, or the distributor who19 is distributing them.20 I don't think it's really as21 inscrutable as people might want to make22 it. I think it's -- I think it is fairly23 self-explanatory.24
But I think25 179 6/10/11 - WHOLE - 110135, ETC.1 again to end this, that we don't want an2 unintended consequence to be the people3 are going to pay more for purchases that4 they shouldn't be. If that product, a5 Nestle tea, is not intended to be taxed6 and it turns out that the distributor7 thinks it's something that should be8 taxed, that Mrs. Jones in the9 neighborhood is going to wind up paying10 more for it. I think it's got to be11 clear as a bell of what's in, what's out,12 and right now it is not.13
And that's the14 reason -- one of the things that the15 legislation includes is that the Health16 Department will put out regulations that17 will show exactly what is in and what18 isn't.19
But you want20 us to vote on something that we don't21 know what we're giving you authorization22 to include as a taxable item or not. I23 mean, that's not very -- I don't think24 that's a nice thing to ask us to do.25 180 6/10/11 - WHOLE - 110135, ETC.1
Well, I think2 that's why the legislation actually shows3 by category what's in and what's out and4 then shows a list of examples.5
And specifically6 with respect to powder as opposed to the7 liquid form of the beverage, to the8 extent that that's not clear, we can9 amend the bill to include powder.10
I think,11 again, you're asking me and my colleagues12 to be supportive of a new tax when we13 don't really know at the end of the day14 what's going to be taxable and what's not15 going to be taxable.16 And the other final statement17 is that you've taxed the syrup, that you18 can't drink the syrup, at least I19 wouldn't recommend it without it being20 mixed with something else. So that's a21 perfect example of you want to tax a22 beverage, but the syrup that makes the23 beverage isn't a beverage until you24 actually put it through a process.25 181 6/10/11 - WHOLE - 110135, ETC.1
Right, but 18 cents2 an ounce on syrup was calculated to be3 comparable to the two cents an ounce of4 liquid. So the point of the tax was to5 equate the two different concentrations6 of the sugar sweetening.7
Yes, but at8 the end of the day, in this bill, other9 than a beverage is being included in this10 tax. The syrup when it's a syrup isn't a11 beverage. It's a component, a part of a12 process. So you've added the syrup at 1813 percent, but it's not -- I don't know too14 many people that just drink straight Coke15 syrup.16
Correct, but that's17 not a lack of clarity. That's simply an18 additional factor in the tax and19 explicitly an additional factor that's20 taxable.21 So I understand you're raising22 sort of two issues. One is some lack of23 clarity with respect to things that fall24 into kind of a gray area that may not25 182 6/10/11 - WHOLE - 110135, ETC.1 explicitly be included here. One of them2 is powder. We're happy to address that.3 As I said, we can amend the bill, and4 we're happy to do that now if you'd like.5 With respect to the syrup,6 that's not a lack of clarity. That's7 just another taxable item in the category8 of sugar sweetening of beverages.9
Exactly.10 And, again, you have to understand that11 when we walk around this City, that the12 first thing people ask, they'll say, Is13 this going to be included in this new14 tax? And I'll say, Well, you know, to15 tell you the truth, I don't really know,16 but I bet you it is. And, again, clarity17 is very important here. And that Health18 Department piece troubles me a little19 bit, because if this ever does become a20 law, to have that open-ended part of it21 where the Health Department can add or22 take away troubles me a little bit.23
Well, I was just24 going to say, I think, as I said, I25 183 6/10/11 - WHOLE - 110135, ETC.1 don't -- I would hate for the2 determination about this issue to get3 stuck on issues that really don't exist4 so much. I think that the list -- the5 list that is provided in the ordinance by6 example is representative enough of the7 category of beverages that are taxable,8 that 90 percent of them are covered, and9 I think it's fairly clear, and I don't --10 so I don't think that whatever the Health11 Department needed to implement12 regulations to cover would be so broad a13 category of beverages that are not14 covered by this that they would be15 completely -- that people would be16 flummoxed by figuring out how to apply17 the tax to them. So I don't want18 people -- for the sake of the record, I19 don't want people to think that this20 issue is more complicated than it is. I21 understand that it has enough components22 that trouble people, but I don't want to23 create complications that don't exist or24 read into the ordinance more difficulties25 184 6/10/11 - WHOLE - 110135, ETC.1 than might already be there.2
-- six6 months from now, if you're fortunate7 enough to get this through -- you're8 fortunate. That doesn't mean that I'm9 for it or against it at the moment. But10 my point being is, we need to discuss --11 that's why we're here today.12
In the event14 there is something that we're missing or15 we haven't focused on, that we fix it16 now.17
Absolutely. And18 that's my point. That's why I'm saying19 for the record I don't want to -- I just20 want things that aren't -- I don't want21 to unnecessarily complicate it. We've22 got enough complications with it to not23 add more. So I just want to make clear24 what is and isn't a complication.25 185 6/10/11 - WHOLE - 110135, ETC.1
Thank you,6 Madam President.7 COUNCIL PRESIDENT VERNA:8 You're welcome.9 The Chair recognizes Councilman10 Green.11
Thank you,12 Madam Chair.13 I just have a few points on14 legal issues, not really -- you can feel15 free to respond to them. I guess the16 first is, I would add to my uniformity17 concern the fact that we're treating what18 is in the end an iced tea from powder and19 an iced tea from a different process of20 manufacture differently, et cetera, that21 applies to all powdered drinks like22 Gatorade, et cetera. I do think things23 like that are a problem. So I am asking24 you for an opinion dealing with those25 186 6/10/11 - WHOLE - 110135, ETC.1 issues and with the Commerce Clause2 issue, which I raised.3 The other thing is, could you4 explain this -- I think you testified5 that there is absolutely no concern that6 this is perfectly legal. I have before7 me proposed amendments, Section (5)(d),8 which reads, "In the event a court of9 competent jurisdiction rules in a10 decision from which no further appeal11 lies that a Licensed Distributor is not12 liable to the City for the tax, then the13 Dealer to which the Licensed Distributor14 supplied beverages being associated with15 such transaction shall be liable to the16 City for the tax."17
That doesn't mean25 187 6/10/11 - WHOLE - 110135, ETC.1 we think we'll lose one. That's just --2
I mean, if that was5 your implication, since that was the6 predicate statement.7
Well, it's8 an amendment introduced today -- well,9 not introduced yet. I guess somebody may10 introduce it on your behalf. I just11 wanted to make that point. That's all.12
And, again, it13 doesn't have anything to do with our14 evaluation of the soundness of the tax15 itself.16
No, no. I17 understand. I think the one point that18 was made in response to the President's19 question was, it is possible that the tax20 could be stayed, although you think21 unlikely, possible that the tax could be22 stayed while this goes through the23 courts, and I do want to provide the24 School District with additional25 188 6/10/11 - WHOLE - 110135, ETC.1 resources, and if that happens, we won't2 be doing that. And so there are other3 options on the table to do that; for4 example, Councilman Goode's millage shift5 proposal, Councilman Clarke's proposal to6 put money from the City side in a School7 District Accountability Grant fund type8 scenario. So that's all. At any rate,9 removes uncertainty.10 Given the events -- I said this11 to the District. I say it to you. I12 really think that with the District over13 the last couple days, we've had very14 productive dialogue and we've talked15 about the different choices for funding16 the schools. They have made some choices17 that I would say a majority of18 Councilpeople don't agree with with19 respect to things they are currently20 funding as compared to things that they21 are not funding, like, for example, the22 expanded SLAM program, the increase in --23
Point of24 information, Madam President.25 189 6/10/11 - WHOLE - 110135, ETC.1
Thank you.4 I am perplexed on how you can5 say majority about anything when it comes6 to --7
I'm not8 trying to speak for anybody else, Council9 Lady. I'm just trying to make a point.10
Well, you11 just speak for you.12 Thank you, Madam President.13
Fine.14 There were many questions from15 several Councilmembers this morning that16 implied that those of us who spoke on the17 issue agree that the summer SLAM funding18 at its full complement rather than19 children who need to just advance next20 grade, that the increase in the number of21 promise academies, which is a new22 spending item, not spending that was done23 last year, so nobody loses anything as a24 result of it, are funding choices that25 190 6/10/11 - WHOLE - 110135, ETC.1 are being made that we wouldn't make.2 When I add up all those things that were3 the process of discussion -- and I'll4 provide you with detail later -- it's5 about $40 million. And so what you're6 requesting is $66 million for the7 District, 6 of which are sort of within8 your own domain and control, 60 of which9 you want to raise taxes to provide. And10 I think we have a basic agreement on what11 the priorities are that everybody wants12 to fund or at least you and the School13 District do, although Councilman Goode14 pointed out some differences. So I just15 wanted to make sure I fully understood.16 I assume you're for restoring17 bus transportation, yellow bus service?18
Is there a20 possibility of us loaning them the $821 million sort of the way SEPTA has, which22 is what they'll be reimbursed from the23 state for -- $8 or $9 million roughly24 will be their state reimbursement for25 191 6/10/11 - WHOLE - 110135, ETC.1 yellow bus service, so that once they get2 reimbursed, they can give us that money3 back?4
Right. We don't5 think so. We looked at that. We don't6 think that would work. We heard you ask7 the question, so we wanted to look into8 it, and we don't think that works.9
And we can't10 do that through a vehicle like PIDC or11 somebody else?12
I don't think -- I13 think we found out we couldn't. We14 can --15
-- a20 definitive answer, and if we can't, why21 we can't use a vehicle like PIDC or to do22 a loan guaranty at a bank. Many of our23 local banks want bond business and other24 things.25 192 6/10/11 - WHOLE - 110135, ETC.1
Okay. So I3 bet if we're creative and collaborative,4 we can maybe find 8 million there.5 So it seems to me like we're6 getting awfully close to $50 million.7 Now, I'm not suggesting the8 Administration would make the same9 choices that we would make, but I just10 want to understand. Reduced class sizes,11 I assume --12
I want to make sure13 I'm understanding the basis of your14 question, is if we -- there are some15 things in the School District budget, if16 we cut those things, you're saying we17 would get closer?18
You're talking21 about shifting money within the School22 District budget?23
Within the24 School District budget.25 193 6/10/11 - WHOLE - 110135, ETC.1
Would you3 agree with the premise that between the4 City and State's $6.5 billion combined5 budget that we can probably find6 additional resources -- and it could be 27 million, it could be 10 million -- we8 could probably find additional resources9 without impacting any significant10 services being provided?11
Yeah. I think you16 would be surprised if I said sure.17 First, the School District18 budget assumes $57 million in charter19 school funding, and the list that we've20 put out also assumed that what the House21 republicans put in for the Accountability22 Block Grant will actually make it through23 the process. So we're actually counting24 on about $80 million that's not in the25 194 6/10/11 - WHOLE - 110135, ETC.1 Governor's budget. So we are assuming2 additional resources from the state.3
On the City side --5 let me finish, sorry. On the City side,6 I mean, I think given where our fund7 balances are and the uncertainties we8 face, I don't think that it would make9 sense to shift money from the City over10 to the District.11
Okay. I'm12 going to say this for the record rather13 than for the purpose of engaging in a14 colloquy.15
We received20 a letter last year from the Mayor that21 said -- or it could have been from you, I22 don't recall -- that said basically we23 need a $20 million fund balance in order24 to deal with any cash flow issues or25 195 6/10/11 - WHOLE - 110135, ETC.1 other things that may arise during the2 year.3 We have within the4 Administration's budget 4 million for the5 winter, which we didn't have last year,6 for example, and so there's more of a7 cushion available to Streets in the case8 of emergency. And so I guess it's my9 premise that we have 30 million in the10 year-end surplus to apply to the schools11 next year.12
I think the13 difference is that the money that we give14 to the District would be recurring. So15 it would be $30 million a year, which16 would mean that by the second -- by 2013,17 we'd have given $60 million and our $6318 million fund balance would be 3 million.19
But I'm24 going to challenge the premise. And,25 196 6/10/11 - WHOLE - 110135, ETC.1 that is, a bill passed the House two days2 ago that eliminated our3 maintenance-of-effort requirement for any4 funds that we pass this year in favor of5 the School District over to them. I6 understand that that will be well7 received in the Senate, so we are -- I'm8 working under the assumption that we're9 talking about a one-year obligation, and10 recognize that frankly given the state of11 the economy and the fact that it looks12 like things are leveling off and not13 growing or worse, we're going to be14 continuing to have these discussions,15 unfortunately, for the next few years and16 maybe even in the position of making hard17 choices again on the City side next year.18
I think that's19 absolutely right. Our challenge is that20 we have to have a plan that's consistent21 with current law. If current law changes22 while we're in the middle of these23 discussions, then I think it's a24 different discussion, but right now it's25 197 6/10/11 - WHOLE - 110135, ETC.1 a recurring obligation.2
Yes.5 The Chair recognizes Councilwoman Tasco6 for a point of information.7
The state8 did allow us to appropriate money to the9 School District without having to10 continue that appropriation. It does not11 take away the problem for the following12 years, right?13
So what we16 need to kind of look at is what we're17 doing from here forward.18
That's21 absolutely a true statement, and we do22 budgeting every year and we don't know23 what resources the state is going to24 provide next year or if the current25 198 6/10/11 - WHOLE - 110135, ETC.1 District budget is already built on2 shifting sands because of the 57 million3 Mr. Dubow already mentioned.4 Okay. I have no more questions5 for Mr. Dubow. Thank you.6
I apologize.12 I just wanted to ask about the CPI13 adjustment in the soda tax bill.14
What is the16 purpose of -- I mean, CPI can be 317 percent. We're about to maybe go under18 an inflationary period a lot of people19 say. It could be 15 percent.20
It's really to have21 the tax kind of keep up with inflation,22 so that in five, ten years, we're not23 back saying we'd like to increase it. I24 mean, that's the rationale.25 199 6/10/11 - WHOLE - 110135, ETC.1
Rather than2 having to come back to City Council and3 demonstrate that they've been accountable4 and need more money.5
Well, I mean,6 really it's to keep up with what's going7 on with prices.8
Thank10 you.11 Are there any other questions12 from members of the Committee?13 (No response.)14 COUNCIL PRESIDENT VERNA:15 Seeing none, thank you.16
At21 the request of the stenographer, we're22 going to have a 15-minute recess so we23 could all stretch our legs. We'll be24 back in 15 minutes.25 200 6/10/11 - WHOLE - 110135, ETC.1 Thank you.2 (Short recess.)3
We're4 now back in session. I would ask the5 Councilmembers to please come to the6 Chamber.7 (Pause.)8
Our9 next witness.10 MR. McPHERSON: Our next11 witness is Helen Gym.12 (No response.)13
Is14 Helen Gym here?15 (No response.)16 MR. McPHERSON: Anne Croisier.17 (Witness approached witness18 table.)19
Good20 afternoon. Please identify yourself for21 the record and proceed with your22 testimony.23
My name is Anne24 C. 3 Doctors at the Hospital of the University4 of Pennsylvania Medical Center are really5 concerned about children drinking soda6 and sugary drinks. 14 The African American population15 in Philadelphia is very large. All of my16 friends are African American. 18 About 20 or 30 years ago,19 people came down with diabetes in their20 50's or late 40's and serious21 complications would hit in their 70's or22 80's or late 60's. Now people are coming23 down with it, children, at the age of 14,24 13, 12, 11, 10, 9, 8. I thought everybody knew the4 serious complications that can result5 from diabetes. You can lose your arms, lose your legs,7 go blind, end up on kidney dialysis or8 need a kidney transplant. That could9 happen to those children. 12 I don't want to see the13 delivery truck drivers from the soda14 companies lose their jobs. We should15 encourage Coke and Pepsi to advertise16 Dasani, which Coke makes, and Aquafina,17 which Pepsi makes. And I believe it's18 either Dole or Tropicana, which one of19 them makes -- and it's really yummy,20 fruit juice blends. We should encourage21 soda companies to advertise and try to22 sell healthy drinks such as water, 10023 percent fruit juice, 100 percent fruit24 juice blends. 3 And also skim milk and non-fat4 milk is also important for little5 children to drink. 13 So should everyone in Philadelphia. 16 Soda is also full of sodium and17 harsh chemicals. These are bad for your18 health. Sodium is bad for blood pressure19 and heart health. We should definitely20 tax soda. 22 We should also tax coffee and23 energy drinks. I say except perhaps24 green tea. 1 weight. McDonald's coffee is mild and2 like the type you would have at home, but3 Dunkin Donuts and Starbucks coffee is4 really strong. That's really bad for5 your health. 8 We should tax all beverages9 except water, 100 percent fruit juice,10 100 percent fruit juice blends, skim milk11 and non-fat milk. People should want to12 eat healthy. I learned from working at13 Independence Blue Cross that 50 percent14 of health conditions can be prevented by15 proper diet and exercise. Who wants to16 come down with diabetes or have a heart17 attack or stroke? 20 My faith believes your body is God's21 temple. 22 Not everyone is a person of faith, but23 many people in Philadelphia are,24 especially African Americans. 1 faith should try to eat healthy and2 exercise, and even people who are not of3 faith should try to eat right and4 exercise for the sake of their health and5 well-being. And I think perhaps also we6 should tax all unhealthy foods. And it7 isn't just soda. 14 That's full of fat and full of sugar. We15 should tax -- and fried food is bad for16 your health, and so are white17 carbohydrates like white rice and white18 pasta. 20
Thank21 you so much for coming here to testify.22 Our next witness.23 MR. McPHERSON: Wrenton Wright.24 (Witness approached witness25 206 6/10/11 - WHOLE - 110135, ETC.1 table.)2
Good3 afternoon. Thank you for your patience.4 Please identify yourself for the record.5
Good afternoon,6 Madam President and Councilmembers. 12 I live, work, play and invest13 my time in Philadelphia. My son was14 educated here in the Philadelphia school15 system as well. 3 What the sugar beverage excise4 tax purports to do is predictably raise5 supposedly needed funds. It won't. What6 this tax does do is raise two cents per7 ounce on a grocery product sold in this8 City and consumed daily in tens of9 thousands of homes and outlets across the10 City and beyond. 1 per gallon. 67. 66, and that's all14 before any likely retail markup. 6 Consumers make many choices. What7 consumer will pay double for a product8 that they can get for half that price a9 short walk, drive or just five minutes10 away? So, for instance, the pricing in11 Philadelphia that we showed you is going12 to in some cases double. 7 With about 35 percent of the8 industry sales occurring in small stores9 in the City, why would the owners, these10 small entrepreneurs, buy their 15 or 2011 cases a week at double the price from the12 Philadelphia manufacturer when they could13 easily drive ten minutes or so to a14 Costco or a Walmart, which are authorized15 distributors outside the City, stock up16 there and save? 20 Initially our hard-working, tax-paying21 employees who sell and distribute in the22 City, like those at Pepsi at the23 Roosevelt Boulevard. Who else does it24 hurt? 1 grocery firms unable to spread the2 taxpaying in sales over outside the City3 locations. And not to mention our union4 workers, who we have supporting us today5 through their representation that you'll6 hear from later. It also hurts7 restaurant owners, families without cars8 and those who have to walk to shop. 13 It will harm firms and neighborhoods in14 the process if enacted. Has anyone15 thought about the likely regular 816 percent sales tax lost on our existing17 sales? 1 commission loss and jobs when the sales2 downsize occurs? 6 It will also have a perverse7 incentive to "game" the system. And by8 gaming the system, I mean having a white9 fleet of trucks that are non-branded and10 non-union workers dropping off our11 products to cash-selected stores that12 will be untaxed from nearby counties. In13 the end, the consumer will shift to avoid14 the tax, buying outside the City. Sales15 in the City will decline, and retailers16 and others will be hurt, and the City17 loses. 4 Finally I ask, more than5 likely -- finally I state, more than6 likely I will see each of you7 Councilmembers with our union employees8 of the two Pepsi facilities in the City,9 perhaps with some of our customers and10 other negatively affected suppliers11 during the next weeks in meeting and12 outreach. 15 I recommend you read the16 various signs posted throughout the room17 on the actual cost of this outrageous tax18 idea and the full impact it will have19 upon stores, producers, unions, bodegas20 and other lawful wage-paying employers in21 the City. 24
Thank25 214 6/10/11 - WHOLE - 110135, ETC.1 you very much. We appreciate your2 testimony.3 (Applause.)4
Thank5 you.6 MR. McPHERSON: Our next7 witness, Mary Louise Butler and Jack8 Barry.9 (No response.)10
I'm11 sorry. Councilman Green, did you want to12 be recognized?13
Yes.17 COUNCIL PRESIDENT VERNA:18 Mr. Wright, do you mind coming back to19 the witness table, please.20
Thank you,23 Mr. Wright. Without getting into I think24 what the impact on sales or anything else25 215 6/10/11 - WHOLE - 110135, ETC.1 was, Baltimore imposed a per-soda,2 per-bottle or per-can tax of two cents --3
-- on5 sugared-sweetened beverage? And what was6 the reaction of Pepsi when that happened?7
We literally had8 to close facilities due to that impact.9 So it was job losses, plus also obviously10 sales declines. The sales declines11 preceded the job losses.12
I don't know that15 number exactly.16 We lost 77 jobs in Baltimore17 because of that.18
Thank24 you.25 216 6/10/11 - WHOLE - 110135, ETC.1 Our next witness.2 MR. McPHERSON: Is Mary Louise3 Butler and Jack Barry here?4
I'm5 sorry, Mr. Wright. I wasn't paying6 attention.7 Councilman Jones.8
Thank you.9 What was your gross receipts10 pre that per-can tax in Baltimore?11
I don't have that12 information. Let me see if someone does.13
What was the14 gross receipts upon the decision to close15 those facilities in Baltimore?16
Thank you.23 MR. McPHERSON: Again, is24 Ms. Butler and Jack Barry here?25 217 6/10/11 - WHOLE - 110135, ETC.1 (No response.)2 MR. McPHERSON: Joel Naroff.3 (Witness approached witness4 table.)5
Good6 afternoon. Welcome. Please identify7 yourself for the record.8
Yes. My name is9 Joel Naroff. 15 Previously I stated my16 skepticism about the revenue-raising17 abilities of this tax, as well as the18 negative message that imposing this tax19 could send to the broader business20 community. 22 First, I'd like to make it23 clear that this tax will indeed fall on24 the retail marketplace. 1 being charged to the wholesaler, if you2 understand that -- this tax could raise3 wholesale costs by an amount equal to the4 value of the product, and the wholesaler5 only makes a margin. Even if they make6 20 percent, they'd still have to pass a7 minimum of 80 percent through just to8 break even. More than likely, they will9 pass 100 percent of the tax through to10 the retailer. So this tax will fall11 entirely on the consumer. 1 For larger retailers, the added2 costs, as has been suggested, could3 theoretically be spread across a wide4 variety of products, not just beverages,5 or across geographies. 13 As a result of that, stores14 such as even the stores and chains will15 likely wind up what we call price16 discriminating; that is, they'll charge17 different prices in different stores18 where it's feasible, and they'll make19 every attempt to do that in order to20 recoup those prices. 1 example of that, that was a reduction in2 demand that came from a relatively small3 increase in price. 6 Small and midsized retailers7 who depend upon sugared drinks for a8 significant portion of their revenue9 could not absorb the increase in these10 taxes. If they did so, they'd basically11 cut sharply into their earnings. 14 Since the bodegas of the City tend to15 service the less affluent neighborhoods,16 the tax is likely to hurt the poorest17 residents. 1 business. Their earnings are reduced2 either by forcing them to reduce sales or3 to accept some of the higher taxes. 9 But it's not just retailers who10 would be harmed. All the tax would have11 to be passed through by vending machine12 operators. 21 A meal can be profitable if just a soft22 drink is purchased. 2 The outside level of the tax3 would also create major marketing4 problems. A restaurant will no longer be5 able to afford free refills. 7 Finally, there are those8 restaurants that use dispensers of soft9 drinks. That portion of the market could10 disappear, as the cost would be11 uncontrollable, forcing many firms to12 change their mode of operation. 18 The City is proposing a tax19 that could sharply raise prices, and20 large increases in costs are what catch21 consumers' attention and cause large22 changes in purchasing behavior. 2 Basically the greatest impacts3 would result from the typical edge effect4 where sharp geographic price5 differentials are created. 11 With such a large tax,12 enforcement becomes a major issue,13 especially for the smaller stores. 1 who operate in the City which will be2 winners and which will be losers. A3 selective taxing program has to raise4 real questions about future tax actions5 in the minds of current businessowners as6 well as firms considering locating in7 Philadelphia. 12 Nevertheless, instead of further13 complicating an already Byzantine tax14 structure, if your solution is to15 increase taxes, you should look towards16 ways that are more broader based, which17 are also more efficient than specific18 taxes. This is not -- this tax is not19 likely to raise the expected revenue,20 which may be why the estimates cannot be21 guaranteed. 2
Thank3 you very much.4 Are there any questions from5 members of the Committee?6 The Chair recognizes Councilman7 Green.8
Thank you.9 I think I'm about to ask an10 economist questions to which you can give11 simple answers.12
So I just14 wanted to follow up some of the threads15 of your testimony like about, for16 example, if there's a McDonald's on one17 side of City Line Avenue and a Wendy's on18 the other side of City Line Avenue or a19 cheese steak place like Larry's Cheese20 Steaks on one side of City Line Avenue21 and a Wendy's across the street on the22 other side of City Line Avenue, where are23 people going to shop who want a soda with24 their meal?25 226 6/10/11 - WHOLE - 110135, ETC.1
Well, that's2 reasonably clear, but being an economist,3 it's never totally clear. Obviously the4 McDonald's in the City of Philadelphia5 would be under intense pressure to absorb6 as much of the tax as they possibly7 could. But if you keep in mind that they8 probably cannot sell very much of that9 product given the enormity of the tax --10 the problem is the size of the tax --11 that more than likely they would be12 priced out of that market, because13 anybody who would want a drink with their14 meal would not patronize the15 Philadelphia-based fast food restaurant.16
Right. What17 are the margins of a typical fast food18 restaurant, for example; do you know?19
I am not certain.20 I can give you a guess, but even if21 you -- even if you took like 20 percent22 or 25 percent --23
It's less24 than that, yeah.25 227 6/10/11 - WHOLE - 110135, ETC.1
And a large4 portion of the product they sell is5 sugared-sweetened beverages.6
So you're9 basically making a lot of businesses that10 are near the City line, whether they be a11 supermarket where there's another12 supermarket within a few miles, whether13 they be a fast food store when there's14 another fast food place within a few15 miles, whether they be a 7-Eleven inside16 the City limits and a Wawa just out,17 you're making all of those businesses18 that have great profits from19 sugared-sweetened beverages marginal or20 no longer profitable.21
That's exactly the22 point, and there's two things. The edge23 effect is real, because, again, the price24 increase is likely to be extremely large.25 228 6/10/11 - WHOLE - 110135, ETC.1 But it is also, as I pointed out, an2 issue for family restaurants even within3 the middle of the City. The beverage is4 a very, very high return.5
No. I6 understand. You may be making7 restaurants whose typical margins I8 think, according to the Restaurant9 Association, are below 10 percent, like 610 percent in the City of Philadelphia.11 You're making them marginal or not12 profitable.13
As long as they18 comply with the law, which gets to the19 avoidance issue.20
And so when21 this is a situation you're faced with,22 going out of business or not having any23 profit for all your effort or very little24 profit, your choice is likely to be to25 229 6/10/11 - WHOLE - 110135, ETC.1 not comply with the law. Would you2 agree?3
Well, obviously it4 depends on the restaurant. If you're a5 chain or a franchise -- if you're a6 franchise, then you're going to look for7 any way. If you're a chain, you probably8 go through your distributor. But more9 than likely, you're going to look for any10 way to do it.11 But I think what's important12 given Mr. Dubow's testimony is that it's13 limiting the suppliers. For smaller14 restaurants, for pizza places, for15 bodegas, if they want to go to a Kmart in16 Delaware County and buy 20 cases of soda,17 because that's the way they would want to18 do it because they could get it for $2 a19 12-pack, you're limiting their legal20 ability to really lower their costs or21 minimize their costs of operation,22 because now you're forcing them into a23 certain supplier. So essentially what24 you're also doing is limiting the ability25 230 6/10/11 - WHOLE - 110135, ETC.1 of a purveyor of a beverage to find the2 lowest cost supplier possible.3
I just4 wanted to make the point that when you5 concentrate a tax on a single industry or6 product like this, the jobs that will be7 lost -- and I don't think we're talking8 about if jobs are lost. The jobs that9 will be lost are not just jobs of people10 who drive the soda or the people who work11 at the bottling plant, but also in12 neighborhood restaurants, in 7-Elevens,13 in McDonald's, in a lot of businesses14 that were profitable that are now15 becoming marginal.16
That's exactly17 right, and that's why I started off by18 making it clear that this tax falls on19 the retailer. It is not on the20 wholesaler. The wholesaler may collect21 it, but, again, because of the size of22 the tax and given profit margins of23 wholesalers, all of that tax is going to24 be passed through to the retailer. So it25 231 6/10/11 - WHOLE - 110135, ETC.1 becomes a retail issue, and the2 retailers, whether it's a store or a3 restaurant or --4
Or it won't5 be passed through because the business6 won't exist.7
That's right. And8 there will be -- well, what will happen9 is that the wholesaler will lose all its10 sales, and I think that that was the11 point from the Pepsi representative.12
So how13 many -- I mean, we're talking thousands14 of jobs, aren't we?15
Well, I don't have16 an estimate of that. I can't tell you17 how many it is, but I don't think it will18 be insignificant.19
Thank21 you.22 The Chair recognizes Councilman23 Jones.24
Thank you,25 232 6/10/11 - WHOLE - 110135, ETC.1 Madam President.2 Just as a point of3 clarification, my colleague asked you if4 there was a Larry's on the City Avenue5 side and some other brand name across the6 street, which one would survive, and I'm7 going to give you the answer. It is8 Larry's, because it's the unique cheese9 steak restaurant in my district. But on10 your point --11
But Larry's may12 not if they have to pay the -- if they're13 in Philadelphia and they can't sell the14 sugared products, or they have to spread15 it across all their beverages and,16 therefore, the margin on all of their17 sales goes down significantly.18
But if we19 look at the Starbucks example on City20 Avenue, there were two Starbucks on the21 Bala Cynwyd side, which arguably has less22 operating costs than the Philadelphia23 side, the two on the suburban side.24 Actually, one reduced hours and the other25 233 6/10/11 - WHOLE - 110135, ETC.1 closed altogether and the City side2 Starbucks were successful and in fact are3 three still open. And one of the reasons4 when we dug beyond the layer of cost5 differential between City and suburban6 was more of factors of traffic patterns7 and other things that were impeding the8 other success of those.9 So for us to overdramatize what10 the cause and effect are, it's slightly11 an exaggeration to the point of the cause12 you're trying to represent, which I agree13 you should do.14 But one other thing, when you15 mentioned the Baltimore example -- I'm16 going to ask you the same question I17 asked the previous person that testified.18 What was the gross receipts in Baltimore19 before the tax and then after the tax20 that resulted in the closing of the21 factory? What were the gross receipts?22 What were those impacts?23
I don't have gross24 receipts. What I was told was that25 234 6/10/11 - WHOLE - 110135, ETC.1 sales -- and I wasn't told whether it was2 units or gross receipts -- were reduced3 by double-digit amounts.4
It was 10 to 147 percent was the number that I was told,8 but I can't claim the accuracy of that.9
We can't10 claim the accuracy of that number. I11 think it is vital, vital in the12 determination of what cause and effect13 this will have. And as serious14 legislators that have to contemplate that15 and as an economist, this isn't a16 guesstimate. This is an exact science of17 math, and we need to know what cause and18 effect per unit, per can pre and post and19 the decision that led them to close.20
Clearly, there are24 other factors that go into closings of25 235 6/10/11 - WHOLE - 110135, ETC.1 any stores, but as economists and as the2 Councilman knows, if you hold the other3 factors constant and you have everything4 else the same, the difference -- and5 that's the only way you can start with an6 analysis -- the difference in the costs7 would be significant between the8 City-based store and the suburban-based9 store, and that's really ultimately the10 issue. And whether it's a Larry's or11 it's a store in the supermarket chain,12 supermarket chains will price the13 profitability of an individual store14 according to the cost of that store, and15 as we know, supermarket chains do shut16 down individual stores and individual17 locations, and the cost factor is a key18 element of it. It's not the only element19 of it, but if you have a marginal store,20 you have --21
I'm not22 minimizing -- let me say this to you. I23 don't want to give the impression that24 I'm not sensitive to the plight of25 236 6/10/11 - WHOLE - 110135, ETC.1 business or sensitive to the edge effect2 or insensitive to the plight of smaller3 inner City stores, but when you make4 assertions, we need the exact numbers and5 when -- because what we are talking about6 is the difference between whether we make7 a decision or not.8
Just to identify17 myself, my name is Bob Brockway and I'm18 President of the Honickman operations,19 Canada Dry operations and Pepsi operation20 in South Jersey. Part of my21 responsibility is the Canada Dry22 operation in the City of Baltimore, the23 State of Maryland, so I can testify based24 on a firsthand knowledge of the Canada25 237 6/10/11 - WHOLE - 110135, ETC.1 Dry sales gross receipts over the period2 of time that the two-cent container tax3 has been imposed in the City of4 Baltimore.5 Very specifically, our sales6 volume in the city has gone down 19.37 percent, and outside of the city limits8 of Baltimore our sales volume has gone9 down 2.3 percent.10
That's correct.17 Where we sell the exact same products to18 very similar stores, our sales have gone19 down 2 percent. Inside the City of20 Baltimore, that 19.3 percent represents21 over $500,000 in gross receipts reduction22 over a ten-month period.23
If I24 understand you correctly, both in your25 238 6/10/11 - WHOLE - 110135, ETC.1 urban stores and in your suburban stores,2 both of your sales went down in both?3
They did. They4 did. The industry in total is down about5 5 percent in the Baltimore/Washington6 major market.7
Is it simply8 to say and would I be incorrect in saying9 that the disposable income in your10 suburban areas is greater than the11 disposable income in your urban areas?12
I don't have13 exact numbers, but I would say14 intuitively, yes.15
So16 intuitively the suburban areas have a17 little more money than the urban areas,18 correct?19
Thank you,22 Madam President.23 COUNCIL PRESIDENT VERNA:24 You're welcome.25 239 6/10/11 - WHOLE - 110135, ETC.1 Any further questions?2 (No response.)3
Thank4 you very much. We appreciate your -- I'm5 sorry. Councilman Green.6
I'm sorry.7 For Mr. Naroff, if the impact8 of a two cents a can or I guess it would9 be 48 cents a case in Baltimore was a 1910 percent drop in sales, what could be11 anticipated -- would your guess that it12 would be in excess of 19 percent?13
I would have to14 guess that was the case. I haven't seen15 the city's estimates of a 20 percent16 decline. Most of the elasticity17 estimates, the estimates of price18 sensitivity, on the previous studies were19 done on small price increases similar to20 what you saw in Baltimore and they came21 out with a percentage decline such as 2022 percent. My guess is that since we're23 doing a number that's something like 1224 times that amount, you'll probably have a25 240 6/10/11 - WHOLE - 110135, ETC.1 lot more than 20 percent. Again, as an2 economist, I hate to give you a number3 when I don't have the estimates, but I4 would be surprised if it's less than 305 percent.6
At least 3011 percent? So we wouldn't collect 6012 million; we'd collect 40 --13
I would be14 surprised if you collected that full15 amount, if the pricing as it looks like16 it would likely appear would be the case,17 in combination with avoidance and18 everything else that would be involved.19
Thank22 you.23 Again I will ask, any further24 questions from members of the Committee?25 241 6/10/11 - WHOLE - 110135, ETC.1 (No response.)2 COUNCIL PRESIDENT VERNA:3 Seeing none, thank you again.4 MR. McPHERSON: Next witness,5 Christine Carlson.6 (Witness approached witness7 table.)8
Good afternoon,11 Councilwoman Verna.12 COUNCIL PRESIDENT VERNA:13 Please identify yourself for the record14 and proceed with your testimony.15
My name is16 Christine Carlson. I'm a parent of17 Philadelphia public school children.18 Congratulations on your19 retirement. I've been a longtime20 constituent of yours, and we're sorry to21 see you go.22
But we wish you25 242 6/10/11 - WHOLE - 110135, ETC.1 luck.2
I feel a little5 bit out of order here because I'm not6 going to talk anything about the soda7 industry or the soda tax or make any8 recommendation as to what taxes or City9 Council should pass or not pass. 18 I know that there are a lot of19 people who are saying that the School20 District of Philadelphia does not deserve21 another dime. 1 understand why some would voice that2 opinion. 6 It's the City's children that need the7 funding, and they deserve it. 13 I am here as a representative14 of the parent leadership of Center City's15 four elementary schools - Bache-Martin,16 Greenfield, McCall and Meredith. We17 earnestly support strong public schools18 throughout Philadelphia, but as parents19 who have chosen to stay in the City as20 our children reach school age, we21 particularly value the four Center City22 public schools. 7 We are committed to8 Philadelphia and we're committed to9 public education. Our families are one10 of the major reasons why the population11 of Philadelphia has finally begun to12 grow. 18 At last week's School Reform19 Commission meeting, I argued that we must20 close the budget gap by focusing on21 quality and we must enforce22 accountability. 1 that's terrific. As parents, we are2 behind you 100 percent on this. 7 Earlier this morning you8 heard -- you got a list of suggestions9 from the School District. You heard10 suggestions from other members of11 Council. So that's already been12 discussed. But there is another way as13 well. Mr. 15 The way to do this -- part of16 the way to do this, to make sure that the17 money goes to the schools, is to make the18 District restore the 29 percent cuts made19 to the school discretionary funds. 1 operating budget of each school. 14 These funds are even more15 crucial for principals who have been in16 even greater need to supplement17 curriculum now that the District has18 eliminated art and music. 14
Just18 a moment, please.19 The Chair recognizes Councilman20 Green.21
Thank you22 very much for your testimony. Do you23 have any idea how much that funding is24 for the --25 248 6/10/11 - WHOLE - 110135, ETC.1
The cut was $612 million. That's my understanding from3 Parents United.4
No, no. The7 discretionary funds, the 29 percent cut8 equals $61 million.9
Wow. Okay.10 And so I just find it interesting. Your11 testimony is that you'd rather see us12 restore that than the other things under13 discussion?14
Not necessarily15 the other things under discussion, but I16 agree with the points that you brought17 up, that the priorities that the District18 has put forth are not necessarily my19 priorities, but as far as keeping20 teachers and class size and a21 well-rounded curriculum, the22 discretionary funds are very important.23 It sounds deceiving, the word24 "discretionary," you think you might25 249 6/10/11 - WHOLE - 110135, ETC.1 throw a party with the money, but the2 teachers are using -- the principals are3 using these funds to buy teachers.4
Okay. So5 part of the problem that we're solving --6 and there may just be a difference in the7 way in what everybody is calling8 everything, but we are told by the9 District that it costs $21 million for10 them to keep class sizes the same size11 they are in K through, I think, 9th12 grade. And so that's that, and I assume13 that's your highest priority item for the14 discretionary funds?15
So if we are17 able to provide them with some resources,18 which I certainly want to do but not by19 raising taxes, and I think the money is20 there to do, we -- I'm sorry; I got in21 trouble for this earlier. I as a22 Councilperson believe that I would insist23 upon that smaller class size be a part of24 that equation.25 250 6/10/11 - WHOLE - 110135, ETC.1 So I hope that we are able to2 get the District to agree to that if we3 provide additional funds, and I want4 thank you for your testimony.5
Thank you. I6 agree. The reason I'm bringing up the7 discretionary funds is, I was feeling8 that there was starting to be resistance9 against the School District's management10 of the money, and if there's a concern11 about any money that Council will give to12 the School District, one way to consider13 doing this is if you gave it through the14 these funds, then you would be allowing15 the principals to make the choices that16 they need for their schools.17
Thank18 you, Christine. We appreciate your19 coming in to testify.20 MR. McPHERSON: Our next21 witness is Al Taubenberger.22 (Witness approached witness23 table.)24
Thank you,4 Madam Chair, Madam President, members of5 the Committee, City Council people. I'm6 the President of the Northeast7 Philadelphia Chamber of Commerce. 11 I'm opposed to the tax on12 sugar-sweetened beverages because13 Philadelphia can't afford it. It would14 result in the elimination of thousands of15 family-sustaining jobs. 17 I am opposed to the sugar tax18 because it will cost this City at least19 1,000 jobs in the beverage industry alone20 and countless others in the food service21 industry. 23 This tax is a bad idea based24 purely on emotion. 1 logic. It's bad public policy. Is it2 our goal to make it easier for businesses3 to open in neighboring New Jersey and4 Delaware? 11 Adding another tax to City businesses in12 a city and a state that already has some13 of the highest taxes in the nation14 achieve neither goal. 17 The question becomes, where do18 we draw the line? Do we levy an added19 tax on doughnuts because they are also20 sugar-sweetened? We've seen this idea21 before, and it was defeated. The first22 time we saw it, it was distinguished as a23 health initiative. How do we afford this? The answer is, we3 can't. The City of Philadelphia, it's very close6 to 12 percent. 15 Moreover, even if this is16 adopted as law, it is certain to be17 challenged in court. If it is struck18 down, then what do we do? Where do we19 come up with the money we committed to be20 spending? 1 It doesn't take a rocket scientist to2 know that higher taxes on soda will mean3 less soda sold, and less soda sold means4 less jobs. 8 Most of the members of the Greater9 Northeast Philadelphia Chamber of10 Commerce are small businesses. The ones11 in the beverage industry and the food12 service industry have told me firsthand13 that this tax will cost jobs. 14 Because higher taxes will drive customers15 away from local businesses into16 surrounding suburbs to do their shopping,17 negatively impacting grocery and18 convenience store owners and their19 employees. 1 school system, as are my children. My2 wife is a public school teacher who has3 taken leave to care for her ailing4 parents. I have great respect for the5 mission, and as Chamber of Commerce6 President, I have always supported their7 needs. My opposition today is not to the8 public schools. 13
Thank14 you.15 The Chair recognizes Councilman16 Goode.17
Thank you,18 Madam President.19 Mr. Taubenberger, have you20 lobbied your republican colleagues in21 Harrisburg to restore education cuts?22
And what was25 256 6/10/11 - WHOLE - 110135, ETC.1 their response?2
Well, unless3 you've seen anything different in the4 papers, I guess they don't want to5 listen.6
Any14 other questions from members of the15 Committee?16 (No response.)17
Thank18 you again.19 MR. McPHERSON: Our next20 witness --21 COUNCIL PRESIDENT VERNA:22 Before we call upon our next witness, we23 just received a letter from the Greater24 Philadelphia Chamber of Commerce. A copy25 257 6/10/11 - WHOLE - 110135, ETC.1 has been distributed to everyone. They2 indicate that they are -- they cannot3 support an increase in real estate taxes4 again this year. So I thought everybody5 would be interested in that. But they6 are silent on the soda tax.7 All right. Our next witness.8 MR. McPHERSON: Yarelis9 Feliciano.10 (Witness approached witness11 table.)12
Good14 afternoon. Welcome. Please identify15 yourself for the record.16
My name is Ryan17 Rivers speaking on behalf of Yarelis18 Feliciano.19
My name is Yarelis22 Feliciano. I am a senior at El Centro23 High School. I used to go to Frankford24 High School. At Frankford I used to get25 258 6/10/11 - WHOLE - 110135, ETC.1 into a lot of fights. I was always known2 as a troublemaker.3 What brought me to El Centro4 was a friend. She told me about the5 school, and it sounded too good to be6 true. I went for an interview, and it7 was just what I was looking for at El8 Centro.9 At El Centro, I have the10 opportunity to be who I am. I had the11 opportunity to prepare for my future.12 Being at El Centro opened my eyes to the13 real world and I had to start taking14 things seriously. I feel at home when I15 come to El Centro.16 I never thought that I would17 have the chance to get my high school18 diploma being a teen mom, and not having19 the right parent support that I needed20 made my dreams go downhill. But my21 teachers did not let that happen. My22 advisor was there for me all the way, and23 I was -- and I always had someone to talk24 to about my problems.25 259 6/10/11 - WHOLE - 110135, ETC.1 Seeing my daughter grow made me2 realize that I had to get my act3 together, so I did. I am so proud of the4 person who I have become. If you would5 see me about three years ago, you would6 not want to be around me. I was cocky7 and I thought I knew it all. I thought I8 was better than everybody else.9 Coming to El Centro, I got the10 benefit to go to Community College in the11 summer and I took it up -- I took it12 up -- I took up intro to law, in which I13 received three college credits from them.14 During the summer they helped me get a15 summer job, which I am currently16 employed. I got the opportunity to work17 for my CDA, Childhood Development18 Associate certificate, and get CPR19 certified, so in the future, I can open20 my own daycare or work with kids.21 I got so many opportunities22 being here at El Centro that if I name23 them all, I would be here for days. If24 El Centro closes, it will be a25 260 6/10/11 - WHOLE - 110135, ETC.1 devastating moment.2 I graduate this year, class of3 2011. You are probably thinking, well,4 if she's graduating, why does she care?5 Why is she here? I care because I want6 others to succeed the same way I did. I7 want others to get the high school8 diploma, because tomorrow is not9 promised.10 I am here at this very moment11 because I'm please asking that you do not12 close El Centro. If you have to close13 some schools down because of the budget,14 I understand, but can you please keep El15 Centro open, because in our school, we16 are family and that's our second home.17 We don't often find places like that. So18 if you can please give more money to the19 School District to help save alternative20 schools and accelerated schools, we will21 appreciate it.22 Please don't take away our23 education. Is it okay to raise the tax24 on soda? Because I want my education25 261 6/10/11 - WHOLE - 110135, ETC.1 more, because a mind is a terrible thing2 to waste. So if you're waiting for3 someone permission, you have mine and all4 my fellow classmates at El Centro.5 Thank you for your time.6
Thank7 you.8 (Applause.)9 COUNCIL PRESIDENT VERNA:10 Excuse me, sir. Would you come back.11 The Chair recognizes Councilman12 Jones.13
I just want14 to thank you for coming down and letting15 us know, reminding us, if you will, of16 what this debate is all about. And my17 colleague is reluctant to use "we," but18 I'm going to take some latitude and say I19 know we all in this Chamber care about20 your future education. The only thing21 we're debating is not you. The debate is22 about how we help you, and I think I can23 say "we" in that regard, all 17 members.24 I want you to know we take25 262 6/10/11 - WHOLE - 110135, ETC.1 these deliberations seriously. We take2 these discussions seriously, because we3 know at some point you're going to take4 care of us, God willing, and so we want5 you to be prepared to do that.6
I just want11 to commend you for coming here and12 testifying. I've seen you speak. I13 think you spoke at a Youth United for14 Change press conference the other15 morning. You're very eloquent and16 passionate about your school. And I went17 to the SRC meeting where many students18 from El Centro were there. It is clear19 that they're doing a great job based on20 the students and the effort and21 everything that's going on.22 So I just want to thank you for23 coming in and testifying and let you know24 that Councilwoman Quinones-Sanchez had a25 263 6/10/11 - WHOLE - 110135, ETC.1 very detailed conversation with the2 School District this morning on the issue3 of accelerated schools, and we certainly4 are fighting on City Council -- or I am5 fighting on City Council. I'll say we6 also. We're fighting on City Council to7 make sure that your and all the other8 accelerated schools maintain their9 funding.10 So thank you for coming in.11 It's important that you shared your voice12 with us. It's very helpful to get -- it13 helps us make the case for your funding,14 so thank you.15
Thank20 you.21 MR. McPHERSON: Our next22 witness --23
We24 agree. Thank you again.25 264 6/10/11 - WHOLE - 110135, ETC.1 MR. McPHERSON: -- Isabel2 Rodriguez.3 (No response.)4
Is5 Isabel Rodriguez here?6 (No response.)7 MR. McPHERSON: Shelly Yanoff.8 (Witness approached witness9 table.)10
Good11 afternoon. You too have been very12 patient.13
I do, and here17 they are.18 Before I launch into it, I want19 to just say I think it is 28 to 30 years20 that I have been coming here and arguing21 for more support for kids, and much of22 the time you've responded, and I wanted23 to note that a lot of this conversation24 and some of the very questions -- and,25 265 6/10/11 - WHOLE - 110135, ETC.1 Council President Verna, you will2 remember when you all passed the3 across-the-bar liquor tax, some4 colleagues who were always, always for5 the people were convinced that it would6 be bad and that taverns would close and7 that it wouldn't yield more than $4 to $58 million. Well, it's up to 46 and the9 taverns didn't close.10 So I think we have to learn11 lots of different things. There are lots12 of disparate facts around, and I just13 wanted to remind us all that we've been14 through some of these before.15 But I wanted to then bring, if16 I could, my testimony.17 I am Shelly Yanoff --18
Excuse19 me, Ms. Yanoff. A lot of small clubs did20 close, and they closed because it was21 when Atlantic City opened and casino22 gambling took place. But it is not true23 that a lot of neighborhood bars and clubs24 did not close, because they did.25 266 6/10/11 - WHOLE - 110135, ETC.1
10 At any rate, I am the Director11 of the region's major child advocacy12 organization. 21 We're not talking about a22 little impact here. We're thinking about23 laying off -- and those 1,500 teachers24 did get layoff notices this week. 1 impact at least 45,000 kids, 45,000 kids'2 lives. 7 We're talking about the loss of8 work, of opportunity, of hope for growth9 and change, the City becoming not the10 City of Brotherly Love and Sisterly11 Affection but of loss. 1 worried about taxes and how to keep up,2 but we have to. To people who still want3 to believe in the City and to not shatter4 the dreams of the five, ten-year-old or5 15-year-old who began to believe at last,6 who did not want to see any more scenes7 of kids weeping because a teacher had to8 tell the kids she won't be back in the9 fall. This happened a lot in this last10 week. 16 Unless you act and the state17 follows, we will be the city that looked18 at evidence and nonetheless threw success19 out, because 32 cents a day was too much20 in property tax to help kids succeed over21 the years. 13 Would people who feel they have14 no skin in the game because their kids15 are not in our schools really consider16 what happens when education closes down17 in a city still think they have no skin18 in the game? 20 To those who feel they don't21 want to do something because they fear a22 lawsuit, think of the history of doing23 the right thing being challenged by the24 threat of a lawsuit. 9 This isn't an easy decision,10 but you need to take it. 13 We agree that money needs to be14 spent on what works. 17 Rehire those yellow buses. Save lives18 and lawsuits. Keep the programs and19 class sizes and counselors and arts and20 music. They work. 2 Insist that our schools get better, and3 stand ready to work for them and support4 them. You, Council, have the power to do5 it. 6
Thank7 you.8 The Chair recognizes Councilman9 Green.10 (Applause.)11
Thank you12 for your 28 to 30 years of advocacy on13 behalf of Philadelphia's children.14
Many of the16 children you have helped have grown up17 and gone to college and had kids of their18 own and here you are working for them.19 I appreciate your testimony. I20 just -- and we agree on the premise that21 we need to do something to help the22 schools, and so I want to make that23 clear, but from your perspective, it24 doesn't matter where the money comes from25 272 6/10/11 - WHOLE - 110135, ETC.1 as long as the City provides the2 resources to the schools; is that3 correct?4
Thank9 you.10 The Chair recognizes11 Councilwoman Brown.12
I too join13 the chorus of saying a huge thank you for14 your unwavering support on behalf of our15 city's children. In the 20, 25 years16 that you've been on this journey as a17 champion, can you think of any time in18 your experience where the City has faced19 or the School District has faced this20 type of picture with regards to funding?21
No. I think in my22 lifetime and in many of our lifetimes,23 there's not been the kind of economic24 tsunami that we're in. So the City25 273 6/10/11 - WHOLE - 110135, ETC.1 itself, when the School District faced2 problems, the City could find easier ways3 to make up for it. And so I don't think4 I've ever seen -- I know I have never5 seen that.6 I also think, though, that over7 the course of this time, there have8 always been incredible challenges, and9 what is so frightening about this10 particular time is, we have finally11 discovered how to do things for a lot of12 kids that we didn't know how to do, and13 we're finally seeing progress in lots of14 different places, and it's just all15 subject to being lost.16 I got some e-mails yesterday of17 people describing their schools and18 teachers just getting notices and19 counselors getting notices and lots of20 people getting notices that they won't be21 back, and it's really just very moving to22 think about that was once a safe and23 valued profession and there was security24 there, and kids would go there and25 274 6/10/11 - WHOLE - 110135, ETC.1 parents would go and drop their kids off2 at schools and know that they would be3 okay, and that's just -- we're entering4 into a very perilous time.5 So I don't. I begin by saying6 these are not easy times. These are not7 easy decisions. But the kids of this8 City and the City's future need you.9
And to10 your next-to-last paragraph on the second11 page, I believe the good news is that12 myself -- I don't want to step into where13 I went earlier today with my colleague --14 fully understand, get it, the notion and15 the urgency around figuring out how we16 preserve kindergarten and preschool17 programs, because all the data is too18 compelling. And the record should note19 that in the last Administration, it was20 actually David L. Cohen who led a study21 amongst business leaders, who also needed22 to know or discovered that when we make23 the investment during those early school24 years, we get a better, stronger yield of25 275 6/10/11 - WHOLE - 110135, ETC.1 a young person on the back end.2 So that needs to be noted for3 the record, that indeed there are members4 of the business community who fully5 understand the value of kindergarten and6 pre-K.7
Thank you. And I8 do know that, but I also -- earlier when9 we discussed the earlier City Council10 hearing on the School District budget, we11 urged that at this time it's not easy for12 either the business community or John and13 Jane Q public or you all to make a14 decision. So we urged, okay, the Chamber15 of Commerce, raise some dollars, you take16 both the summer jobs and the summer17 programs and take that off the School18 District's plate and take -- all of you,19 let's figure out a way that SEPTA takes20 responsibility for the transportation to21 schools. So we knock it down, so it22 becomes more possible to move, and that23 the Accountability Block Grant may come24 in and that could do full-day25 276 6/10/11 - WHOLE - 110135, ETC.1 kindergarten and then we could move and2 we make the nut smaller, and then we just3 have to act to do something about the4 nut.5
Yes. And6 to reaffirm the questions stated by7 Councilman Bill Green, at the end of the8 day -- let me not speak for you.9 What that ultimate formula10 looks like, what that blend of solutions11 looks like is less important than us12 simply figuring it out on how we fill the13 gap, correct?14
Right, as long as15 we don't step back on the progress that16 we've begun to make with kids.17
Thank you,25 277 6/10/11 - WHOLE - 110135, ETC.1 Madam President. I'll be brief.2 Ms. Yanoff, I actually have a3 follow-up to a response you just made to4 Councilwoman Reynolds Brown. Did you say5 that past fiscal crises were easier to6 manage because the School District was7 under the City's control?8
No. No. Because9 the City did have -- it never has a whole10 lot of extra dollars, but the City, it11 felt, wasn't as tight as it is now.12 Three years ago or four years ago when13 you did the switch, increased, that was14 very important and it saved a lot of15 programs, and we're very, very grateful.16 What I meant was the economic situation17 in the world, in the country, in the18 state, in the City is just worse than it19 was and it's been in our life.20
What I21 thought I heard you say -- I won't put22 words in your mouth -- is that there's23 never been an economic tsunami like this24 we've experienced and in the past the25 278 6/10/11 - WHOLE - 110135, ETC.1 School District was in the City's2 control, so there were some things that3 we could manage.4
No. No. That may5 be in the future, but it's not in the6 past.7
Well, it8 sparked me to ask you the same questions9 that I asked the School District, which10 is, one, do you support the concept of an11 elected School Board?12
I think that the13 management system that the Home Rule14 Charter developed in 1950 is no longer15 sensible for us. I definitely think that16 the City should have more control, and so17 I certainly am more than open to thinking18 seriously about an elected School Board.19 I don't think it makes a lot of sense for20 the taxing authority not to have real21 control over how it's spent.22
That's where23 I'm going, so I'll just ask a series of24 questions. Should control be given back25 279 6/10/11 - WHOLE - 110135, ETC.1 to the City? Should the School Board be2 elected? Who should be the taxing3 authority? And what should City4 Council's role be?5
I think I would6 love to join you on a commission that you7 establish to come up with the answers to8 those questions. I think that I am9 interested in those questions and in that10 governance question, but I don't think11 that I should give a flip answer to a12 very serious question.13
Thank18 you.19 MR. McPHERSON: Our next20 witness --21
Yes, Madam24 President. I have no additional25 280 6/10/11 - WHOLE - 110135, ETC.1 questions for Ms. Shelly Yanoff. I am2 curious to know, is the Chamber still in3 the room?4
Is the7 Chamber of Commerce still represented8 this afternoon?9
No.10 They just sent the letter. They sent the11 letter which was distributed to everyone.12
I was just13 reading it. Okay. All right, then.14 Thank you.15
Thank16 you.17 Our next witness.18 MR. McPHERSON: Angel Ocasio.19 (Witness approached witness20 table.)21
Good afternoon.24 My name is Angel Ocasio and I attend El25 281 6/10/11 - WHOLE - 110135, ETC.1 Centro de Estudiante.2 I started at El Centro on3 January 31st, 2011. Before I came to El4 Centro, I was attending Mariana Bracetti5 Academy Charter School, but I got kicked6 out and eventually had nowhere else to7 go. I was out of school for about a8 month and a half, because I nor my family9 wanted me to go to Frankford High School.10 So while I was out of school, my mother11 and grandmother found this school for me12 and told me to sign up. I did, and I13 thought this school would be like a14 regular public high school, but as I was15 going through the semester in El Centro,16 I was surprised at the things I was17 doing. One reason why is because I was18 not being disrespectful. I was actually19 doing my work. I was growing into a20 student that I wanted to be in MBA.21 I love El Centro because I have22 freedom, like choosing projects I am23 interested in, but at the same time, I24 have responsibilities that I have to25 282 6/10/11 - WHOLE - 110135, ETC.1 handle by myself. Also I like El Centro2 because of the Real-World Learning and3 Learning-to-Internship programs they have4 for different categories that a student5 would like to get into.6 Since being in the school, the7 things I am most proud of is everything,8 as my music with the hip-hop rolo and my9 grades, all these things that I have10 become in this school that I had not done11 in MBA.12 I feel as though if you close13 El Centro, I will feel left out in the14 cold, feel like I have failed to try to15 help the school. Without this school, I16 don't know what will my future be. So I17 am asking the City Council to please not18 close El Centro and please give more19 fundings to El Centro and all the other20 13 alternative and accelerated schools21 that are open. So can you please help?22 Thank you.23
Thank24 you very much.25 283 6/10/11 - WHOLE - 110135, ETC.1 (Applause.)2
Thank3 you.4 Our next witness.5 MR. McPHERSON: Our next6 witness, David Sculick.7
I thank you for16 the time today to speak in support of the17 urgent need to help the School District18 and the soda tax and the need for19 sustainable District support urgently. 1 Chairman of the Judith B. Sculick2 Memorial Foundation for At-Risk Youth. 18 Unfortunately, the forces of19 this world - political, religious,20 financial and otherwise - constantly21 divide us. 5 Everyone in this room knows full well6 that a 50 percent dropout rate is7 unacceptable. 15 If time permitted, I would16 share my personal story about how my life17 was changed forever when my beloved18 mother, Judith Sculick, was killed in an19 auto accident caused by at-risk youth20 acting recklessly. These problems are21 real, and we as one great city must help22 the District, the students and our next23 generation. 8 Harrisburg's recent actions9 have the potential to destroy us or we10 can come together as a city and do what11 we have to do and now. 13 Ackerman, Benjamin Wright, the14 Philadelphia Youth Network, Shelly Yanoff15 and many other stakeholders develop a16 system of both transition schools for17 disciplinary issues and small, intimate,18 nurturing accelerated schools to provide19 thousands and thousands of students on20 our streets who have dropped out with an21 option to return, secure their diploma22 and move on to vocational or higher23 education. 4 As an example, DVHS Southwest, a dropout5 recovery school, maintained one of the6 highest attendance rates in the District,7 85 percent, all from students who8 previously dropped out. In one year,9 almost 500 young people who would10 otherwise be on the streets, hopeless,11 now have hope. 15 Without the soda tax or other16 sustainable revenue, these schools may17 have to close. 19 Do I like taxes? No. Does20 anyone like taxes? No. 22 The federal government provides23 tax incentives to encourage24 homeownership, creating a win-win. 2 Finally, what I have witnessed3 today is that we are represented by a4 Mayor and Council with insightful and5 progressive thinking. 12 We should discourage our citizens from13 their use, and I understand the arguments14 of our opponents, lose jobs, scare, no15 change. Let people make their own16 decisions. 1 easily overcome any other excuse. 7 I am here to plead with you to8 support the soda tax, since it is a9 choice to buy more expensive soda versus10 cheaper or healthier options. Help this11 city. Keep the alternative education12 options that are working so well open for13 future and current students. Without14 your help, DVHS Southwest and many other15 dropout recovery schools around the City16 will close. The students served therein17 will undoubtedly be back on the street,18 hopeless and left with no future. We can19 avoid this. We must avoid this. 4
I'm a great10 admirer of yours, and I'm pleased to hear11 your testimony today. In the end, what12 you care about is that the children have13 the resources they need to go to the14 accelerated schools, to have early15 childhood education, to have yellow bus16 service? That's your goal, right?17
So the19 means, as long as we meet that goal, you20 would be indifferent about?21
Thank24 you. Thank you very much, sir.25 291 6/10/11 - WHOLE - 110135, ETC.1 Our next witness.2 MR. McPHERSON: Dorcus Laney.3
And4 our next witness will be Joe Bright.5 Please approach the witness6 table.7 So if Mr. Bright is here, maybe8 he could just come closer to the witness9 table.10 (Witness approached witness11 table.)12
Good13 afternoon. Please identify yourself for14 the record.15
Good afternoon. I16 am Dorcus J. Laney. I'm the ombudsman at17 John Wister Elementary School in18 Germantown, and I thank you for the19 opportunity to bear witness today, Madam20 Chairperson, Madam President, and to all21 Councilmembers.22 The weather is playing havoc23 with my postnasal drip.24
We25 292 6/10/11 - WHOLE - 110135, ETC.1 all have that problem.2
First and foremost,7 I'd like to say that I and a parent with8 me represent what we're talking about9 today, what the cuts mean and will mean.10 I am the -- I will not have my job come11 June 30th as the ombudsman at John12 Wister. I want to share with you what13 being at John Wister for the past three14 years has meant.15 Although John Wister met AYP16 prior to my coming, it made successive17 AYP for two years. That is tremendous.18 My children -- because I greet most of19 them every morning, because I sit at the20 front desk, speak to parents, have the21 children come in, say, Good morning,22 Mrs. Laney, give me hugs, making sure23 that I'm okay. Those are good things for24 me. I'm a social worker by training. So25 293 6/10/11 - WHOLE - 110135, ETC.1 I know all about children, what it takes2 to make them happy, and it doesn't take a3 whole lot.4 We have been fortunate to be5 able to provide music, physical6 education, special reading advances for7 the children, and those things are going8 to be lost because of the draconian cuts9 that are being proposed. I'm happy to10 say that last Friday, I was with Dr.11 Ackerman when she made the announcement12 that the dollars from Title I could be13 used for our kindergarten for all day.14 That's tremendous, because at my school,15 we also have Bright Futures. We have16 from pre-K up to the 6th grade.17 I'm also proud to say that I am18 the mother of a graduate of your School19 District through Masterman. My daughter20 graduated from college and is well on her21 way maintaining herself as a wonderful22 adult, making sure that she's giving back23 to society.24 I want to say to you that since25 294 6/10/11 - WHOLE - 110135, ETC.1 the Governor made that decision to put2 forward his budget which cuts our3 education funds, my parents have been4 just beside themselves. However, they5 have supported all that we have attempted6 to do, by speaking with legislators in7 Harrisburg, going on bus trips, doing8 rallies here locally, writing letters,9 making phone calls. Those are wonderful10 things.11 But today I especially hope12 that this Chamber will indeed provide13 funds to the public school system,14 because it's a glorious system, a system15 that we can ill afford to have chopped up16 in little bits and pieces, and the17 children will not benefit from what the18 outcome of all of this will be.19 I want to thank you for this20 opportunity for hearing what I have to21 say. I want to thank my parent for22 coming with me, for supporting me. This23 has been an education for both of us, and24 I pray that all of this that has been25 295 6/10/11 - WHOLE - 110135, ETC.1 said here today -- and there has been a2 lot -- will be to the benefit of our3 children.4 I thank you.5
Thank6 you very much.7 COUNCILWOMAN BLACKWELL:8 Ms. Laney, I wanted to remark that I9 visited Longstreth School in my district10 just last week in Southwest Philly, and11 Linda Miller is your counterpart there.12
And14 she too was doing a wonderful job.15 Obviously it wasn't our idea. We didn't16 pick cuts, and we understand how17 important the parent ombudsmen are or the18 school ombudsmen, and we thank you for19 your service, and we are sorry.20
Thank22 you again.23 Mr. Bright, I believe you're24 our next witness.25 296 6/10/11 - WHOLE - 110135, ETC.1
Madam President,2 I'm Joe Bright with the law firm Cozen3 O'Connor. I'm a tax lawyer. I was asked4 to look at this proposed bill and offer5 my view whether it is lawful. 14 It is true that nominally it is15 not imposed on the consumer as is the16 sales tax. It is imposed on the licensed17 distributor. written. So what's the effect here? The4 ordinance states that the licensed5 distributor is required to itemize the6 tax in a sale to a dealer. Why should7 that be? The licensed distributor does8 not have to certify that it paid its9 federal income tax, state income tax,10 city business privilege tax, use and11 occupancy, anything. 13 Why? The reason is obvious. 17 You've heard the testimony of18 Mr. 20 You've heard the economic testimony which21 confirmed that. Even Solicitor Shelley22 Smith said, Well, the market may mix it23 up a little bit. 1 The bottom line is, this tax is2 going to be imposed as a one-time charge3 down the distribution chain on the4 consumer, and that duplicates the sales5 tax. 15 Why? In Pennsylvania if the General16 Assembly occupies a particular field in17 legislation, it preempts other18 legislation in that field. 20 That's essentially what's happened in21 Pennsylvania. There's one sales tax, and22 Philadelphia is authorized to impose23 essentially the same sales tax with very24 minor differences. 1 General Assembly said you can do in sales2 tax. This is a sales tax. There's no3 question about it. 9 In addition, I think that10 Council President and Councilman Green11 hit the nail on the head as to12 uniformity. I do not see a legitimate13 distinction between taxing14 sugar-sweetened beverages as described in15 the ordinance and other things that have16 sugar in them or indeed any other17 products. 19 Several of the witnesses here,20 particularly the young people, gave21 moving testimony on the importance of22 education. 1 straight. Don't pass a bill that has got2 serious problems and is likely to be3 struck down by the courts of this4 Commonwealth. And no matter how lawyers5 do on that, the fact is, you don't have6 the money. 9 COUNCIL PRESIDENT VERNA:10 Mr. 12
I14 guess I'd like to ask you a question that15 I asked the City Solicitor. If the16 industry were to go to court and17 litigation lasted for a period of time,18 would they still be able to collect this19 tax?20
They would collect21 the tax unless a court prohibited it.22 Whatever lawyer might be hired/retained23 to attack it, should City Council pass24 the tax, they will ask for several25 301 6/10/11 - WHOLE - 110135, ETC.1 things, and one of them will be an2 injunction, and they will surely also ask3 for a refund of all taxes if they don't4 get the injunction. So one way or5 another, you're short the money if they6 win.7
Thank8 you.9 Any questions from members of10 the Committee?11 (No response.)12
Thank13 you again, Mr. Bright.14 MR. McPHERSON: Our next15 witness is Danny Grace.16 (Witness approached witness17 table.)18
Once again, we are23 here. Councilmembers, good afternoon.24 Madam President, I have25 302 6/10/11 - WHOLE - 110135, ETC.1 testimony on behalf of my members, and I2 also have testimony from my sister local3 in Baltimore to the effects of what4 happened to them in the City of5 Baltimore.6 Teamsters Local 830 is honored7 to stand with people from all walks of8 life in our firm opposition to the Nutter9 Administration's second wrong-headed10 attempt to slap a sugar-sweetened11 beverage tax on the overtaxed citizens of12 Philadelphia. One year ago, this13 coalition and a vast majority of14 Philadelphians made it clear to the Mayor15 and City Council that we had no taste16 whatsoever for this burdensome,17 regressive tax. One year later, nothing18 has changed and our resolve remains19 strong.20 If passed into law, the21 sugar-sweetened beverage tax will more22 than double the price of people's23 favorite sugar-sweetened beverage. Many24 retailers have already signaled that they25 303 6/10/11 - WHOLE - 110135, ETC.1 won't create a separate pricing category2 for all sugar-sweetened beverages, but3 will simply apply the tax to all4 beverages, including diet sodas and other5 beverages.6 With all due respect, the7 Nutter Administration has exhibited a8 lack of understanding of the economic9 consequences of this tax. If this10 ill-considered tax is passed, the cost of11 all sugar-sweetened drinks will double.12 People will stop buying the products or13 drive to the suburbs to purchase them.14 City stores will stop stocking them.15 Black markets will arise, and soda16 companies will move fewer products. And17 don't be surprised if City retailers18 apply the tax across the board on all19 beverages, sugar-sweetened or diet, to20 simplify their bookkeeping. Many people21 will lose their jobs.22 Beverage industry statistics23 prove that when soda prices rise 1024 percent, sales drop a corresponding 8 to25 304 6/10/11 - WHOLE - 110135, ETC.1 9 percent. Reduction in soda sales mean2 job losses. As many as 2,000 local jobs3 could be lost. There are thousands of4 family-sustaining middle-class5 Philadelphia jobs in the beverage6 production, supply, distribution, sales7 and retailing which depend on a healthy8 beverage industry.9 These job losses will also10 impact supermarket employees, convenience11 store workers and small businessowners12 who sell soda in their stores or13 restaurants. The loss of these jobs will14 only further erode the City's tax base,15 and how can that possibly help the City16 or the School District? It is yet17 another unfair tax burden that will18 disproportionately hurt hard-working19 middle-class families and the working20 poor of this City. Far too many21 Philadelphians are already struggling to22 make ends meet in this terrible economy.23 The so-called soda tax is also24 discriminatory. Taxing one product and25 305 6/10/11 - WHOLE - 110135, ETC.1 one industry to the exclusion of numerous2 items containing similar sugar-based3 ingredients is simply unfair.4 And what precedent would be set5 if this outrageous tax is imposed? What6 would stop the Mayor from taxing other7 foods that are perceived to be less than8 healthy, such as ice cream, candy,9 cookies, popsicles, doughnuts or other10 high sugar foods? This is a slippery11 slope towards a Big Brother society in12 which the government tells you what you13 should eat, drink, watch and think. No14 thank you.15 We Philadelphians are already16 burdened with among the highest taxation17 rates in the country. The soda tax would18 be an additional financial burden on19 families already struggling to make ends20 meet. It does not work for21 Philadelphia's residents or our workers.22 Thank you.23
Thank24 you.25 306 6/10/11 - WHOLE - 110135, ETC.1 (Applause.)2
For9 the record, rather than we wait for10 copies.11
This letter is from12 Teamsters Local Union No. 570.13 Dear Mayor Nutter, you're14 kidding yourself if you think passing a15 tax on beverages in Philadelphia won't16 impact jobs. Last year in Baltimore, a17 two-cent tax on beverage containers was18 imposed and shortly thereafter 7719 good-paying jobs in the beverage industry20 were gone. The tax in Philadelphia is a21 much steeper proposal at two cents per22 ounce on sugar-sweetened beverages. If23 77 jobs were lost in Baltimore partially24 because of a smaller tax, what do you25 307 6/10/11 - WHOLE - 110135, ETC.1 think will happen in Philadelphia? And2 why are lawmakers signaling out the3 beverage industry?4 Taxing beverages is a very bad5 idea that will fail workers and their6 families, just like it failed us in7 Baltimore. We are very concerned for our8 colleagues who work for beverage9 distributors in Philadelphia. They are10 already seeing a shortage of work for11 their members. During these challenging12 economic times, the last thing we should13 be doing is causing jobs to be cut.14 The tax will make Philadelphia15 beverage companies and retailers less16 competitive and will hurt sales,17 ultimately costing jobs. Customers will18 drive away from the City's local19 businesses into the surrounding suburbs20 to do their grocery shopping just like21 they did in Baltimore. Less demand for a22 product means less production, shipping23 and stocking. In other words, it means24 less jobs. We will stand hand in hand on25 308 6/10/11 - WHOLE - 110135, ETC.1 the issue with our fellow Teamsters in2 Philadelphia and the companies that we3 represent.4 Drive 100 miles down the road5 and visit us in Baltimore. We'll take6 you on a tour of the shut-down7 manufacturing and distribution8 facilities, and we will show you where9 the jobs used to be.10 Best wishes, Sean Cedenio,11 Teamsters Local Union 570.12
Thank13 you. Thank you very much.14 Are there questions from15 members of the Committee of Mr. Grace?16 (No response.)17
Thank18 you again, sir. We appreciate --19 Councilman Green.20 Mr. Grace, I'm sorry.21
Thank you.22 I just wanted to thank you for23 coming in. I don't have any questions24 for you. Your testimony was clear and25 309 6/10/11 - WHOLE - 110135, ETC.1 compelling, and I hope we can save your2 jobs.3
Thank5 you.6 MR. McPHERSON: Our next7 witness is Judy Grillo.8 (Witness approached witness9 table.)10
Good11 afternoon. Welcome. Please identify12 yourself for the record.13
My name is Judy14 Grillo. I am an owner/operator of two15 Auntie Anne's in the City of16 Philadelphia, and I think maybe I'm the17 only small businessowner today that18 you've heard from. So I look forward to19 having the opportunity to speak to you20 today.21 As I said, I own two Auntie22 Anne's in the City of Philadelphia, and I23 have to tell you, I love doing business24 here. Thank you for that privilege. I25 310 6/10/11 - WHOLE - 110135, ETC.1 really enjoy the City of Philadelphia.2 And I've really come to appreciate the3 team members that work for me as well.4 Because of that, I strongly oppose the5 tax, because I do believe it's going to6 affect my ability to give them hours and7 pay increases in the future.8 Just as an example, you've9 heard a lot of financial figures, but10 I'll just make it a little bit more real.11 A glass of lemonade will go up 72 cents12 for a glass. That's how much this tax is13 going to affect the price. A glass of14 soda will go up almost 50 cents. That is15 a significant amount of money that I'll16 have to pass on to the consumer. I do17 believe that the result of that will be18 that the consumer will no longer purchase19 as many of those products and my revenue20 will decrease.21 Right now the products that22 you're talking about taxing are about 2323 percent of my total revenue. The impact24 of losing a portion of 23 percent are25 311 6/10/11 - WHOLE - 110135, ETC.1 going to affect my ability to provide2 jobs to employees.3 Let me tell you about some of4 the employees that I do have. I have a5 lot of single moms. They enjoy the6 flexible schedule that I can provide7 them. They're part time, and they love8 the clean environment that we provide,9 the fun environment that we provide.10 They would be affected. I would have to11 reduce hours if my revenue decreased.12 I also hire disabled folks,13 and, again, if I don't have the revenue,14 I can't provide the hours. It would be15 very difficult to provide the flexibility16 for these team members that I do have.17 So, again, I do oppose this18 tax, and I hope that you will vote19 against it.20
I21 really enjoyed your testimony. I think22 it gave us a true light as to what a23 small business can be affected by this,24 and we certainly appreciate your25 312 6/10/11 - WHOLE - 110135, ETC.1 patience. You've been sitting here2 practically all day. I personally want3 to thank you.4
Our6 next witness.7 MR. McPHERSON: Danilo Burgos,8 and it will be followed by Frank Maimone.9 (Witness approached witness10 table.)11
Good afternoon,12 Madam Chair and members of the Committee.13 My name is Danilo Burgos. I am President14 of Philadelphia Dominican Grocers15 Association. The Philadelphia Dominican16 Grocers Association provides17 representation, education, leadership,18 community outreach, buying power and19 support to our members in order to20 improve their quality of life and21 facilitate prosperity in their22 neighborhoods that they serve.23 The Philadelphia Dominican24 Grocers Association serves all25 313 6/10/11 - WHOLE - 110135, ETC.1 independent Latino retailers.2 Philadelphia Dominican Grocers3 Association strongly believes that4 independent retailers are the cornerstone5 of the entrepreneurial spirit. This6 innovative spirit and drive comes from7 many family-operated independent8 businesses we proudly represent.9 Philadelphia Dominican Grocer Association10 does everything it can to help11 family-owned independent retailers.12 Taxing soft drinks, juice13 drinks and other non-alcoholic beverages14 will do little to make a dent in the15 City's budget deficit, let alone serve as16 a funding mechanism for the City school17 system.18 We are small business19 operators, and any tax which impact us20 not only impacts our customers, but it21 makes it more difficult for us to do22 business as well.23 This tax means we will have to24 pay more for the products we sell to our25 314 6/10/11 - WHOLE - 110135, ETC.1 consumers. The choices that leaves me to2 buy my products from another cheaper3 supplier outside of Philadelphia or to4 pass those costs along to my customers5 are both bad for the City.6 Many consumers rely heavily on7 stores like ours to provide them with8 their basic food staples and refreshment9 beverages that they enjoy. A beverage10 tax will increase cost to retailers and11 consumers. Independent retailers across12 the City will endure severe economic13 hardship from a discriminatory tax on14 soft drinks and other beverages.15 Consumers can't afford yet another tax,16 particularly a discriminatory one.17 The majority of people don't18 want a tax on their juice drinks, soda19 and teas. Philadelphians don't want20 government in their grocery cart or21 kitchen. Families are already struggling22 in this difficult economy. There could23 not be a worse time to ask them to pay24 more for the price they consume by25 315 6/10/11 - WHOLE - 110135, ETC.1 raising grocery prices. If we as2 Philadelphians really want to have a3 significant effect on School District's4 financial problems, then we need to look5 at comprehensive solutions that will have6 a meaningful and lasting impact, not7 simplistic approaches targeting one8 portion of the items in our grocery cart9 for additional taxation.10 On behalf of our Philadelphia11 independent retailers, thank you for the12 opportunity to express our concerns about13 causing unnecessary harm to our industry14 and not truly fixing the School15 District's underlying financial problem.16
Thank17 you very much.18 Are there any questions from19 members of the Committee?20 (No response.)21
Our25 316 6/10/11 - WHOLE - 110135, ETC.1 next witness.2 MR. McPHERSON: Our next three3 witnesses are Frank Maimone, Wan Woo and4 Jonathan Kirch.5 (Witnesses approached witness6 table.)7 COUNCIL PRESIDENT VERNA:8 Gentlemen, good afternoon. Please9 identify yourself for the record.10
My name is Wan D.11 Woo. I'm representing of the Korean12 Grocery Association, about 500 members in13 the Philadelphia city small business14 place.15
My name is Cheung16 Ling (ph). I'm the Chairman of Korean17 American Grocers Association.18 On behalf of Korean Grocers19 Association, we are against the20 Mr. Mayor's soda taxes, because it's21 going to hurt the small business, which22 is eventually a lot of small business is23 going to get hurt. For example, two24 cents an ounce, which means, let's say,25 317 6/10/11 - WHOLE - 110135, ETC.1 20 ounce soda, which is most people2 grabbing from the small business, that3 means 40 cents more than right now. In4 Center City, the average is $1.50, $1.755 bottle of soda, which means it's going up6 to more than $2. Would you pay more than7 $2 for grabbing one 20-ounce sodas? Not8 like it used to be. It's going to hurt9 our businesses.10 Most of the small11 businessowners in Philadelphia is part of12 your revenue to increase the taxes. If13 they gone, how you going to raise the14 taxes?15 You may get taxes for the sodas16 from the Mayor's soda taxes, it's going17 to increase the revenue, but apparently18 it's going to reduce the sales volume,19 which means you go down again. So this20 is not the proper way to raise the money.21 That would be temporary.22 So I have to ask you, Mr. Mayor23 and City Council members, you have to24 think again, which is the better way.25 318 6/10/11 - WHOLE - 110135, ETC.1 I don't think anybody against2 to raise the money to give the School3 District. There's no question about it.4 But how? How, is the question. This is5 not a proper way to do it for long term.6 This is my opinion.7
I'm going to say -- I10 do have couple of words for the Mayor.11
This taxes really14 going to be hurt for our -- I mean, our15 Korean Grocery Association. Also it's16 going to be hurt on the consumers and17 it's going to be manufacturers, because18 this will be all chain reactions, because19 the Mayor is going to raise the taxes to20 one of the manufacturer, but it end up to21 be coming to the consumer to pay every22 dimes, pennies. But right now it's23 all -- taxes is so high from everything,24 high for the property taxes, high for the25 319 6/10/11 - WHOLE - 110135, ETC.1 gas. Right now gases are so high. And2 there is -- even like for the3 Philadelphia sales tax is 8 percent, it's4 higher than the surrounding area. Now5 you going to be adding to the two more6 cents at the bottom of taxes. It's going7 to be really hurting to the community and8 the small business like ours, and that9 makes the manufacturers going to be10 struggling, and then somehow the11 manufacturers who were delivering to the12 City, maybe they losing jobs from cutting13 down the hours or so. It really going to14 be hurt.15 Also, they are -- I mean, this16 City is really lot of history area. We17 have business in Center City and we saw a18 lot of tourists coming in. These people19 going to remember a whole bunch of stuff20 in this (unintelligible) in Philadelphia,21 but also they going to be remember as the22 highest taxes, beverage tax.23 So I don't think it's not24 really going to be a good idea for right25 320 6/10/11 - WHOLE - 110135, ETC.1 now to be raising two cents per ounce for2 tax. So rethink about this, to your3 Mayor and the Councilmembers, about this4 situation until, I don't know, economics5 may be better. Then we might really be6 able to pay a little bit more, but right7 now everybody is really struggling. So8 really think about this again for that.9 Thank you.10
Thank11 you very much for coming in to testify.12 Thank you.13 I would ask Mr. McPherson to14 please read the names that were called15 earlier and that did not respond.16 MR. McPHERSON: Helen Gym.17 (No response.)18 MR. McPHERSON: Mary Louis19 Butler and Jack Barry.20 (No response.)21 MR. McPHERSON: Isabel22 Rodriguez.23 (No response.)24 MR. McPHERSON: Frank Maimone.25 321 6/10/11 - WHOLE - 110135, ETC.1 (No response.)2 MR. McPHERSON: And Jonathan3 Kirch.4 (No response.)5
Karen6 Brown.7 MR. McPHERSON: Oh, Karen8 Brown. I'm sorry.9 (No response.)10
Okay.11 The Chair recognizes Councilman Green.12
Thank you,13 Madam Chair. I want to offer an14 amendment to Bill No. 110137, which will15 result in savings from the City budget of16 about $15 million compared to what has17 been presented to us by the18 Administration. It includes the concept19 of an Accountability Grant fund in City20 Council's budget to provide resources for21 the School District.22 We have heard from the School23 District itself, parents, Ms. Yanoff,24 Mr. Sculick and a number of other people25 322 6/10/11 - WHOLE - 110135, ETC.1 who testified that where the resources2 come from for schools and for children3 are not as important as getting the4 resources. This, combined with a $305 million increase or -- combined with $306 million from the year-end fund balance7 that Mr. Dubow testified would be 518 million roughly this year, that would9 allow the City to provide a $45 million10 grant roughly to the School District, in11 addition to the parking tax, which is $612 million.13 And we heard testimony today14 from the School District about a number15 of items where we don't all agree on16 priorities, but that could potentially17 result in $40 million of shifted18 priorities within the School District,19 for a total of $90 million being made20 available, without increasing taxes, for21 the priorities that are on the list the22 School District presented to us today,23 which totaled $102 million.24 So I offer this amendment. I'm25 323 6/10/11 - WHOLE - 110135, ETC.1 not asking for any action on it today.2 Thank you, Madam President.3
Thank4 you. We accept your amendments, which5 will be considered at a later date.6 Is there anyone else to testify7 on the bills before us?8 (No response.)9 COUNCIL PRESIDENT VERNA:10 Seeing no one, this hearing will be11 recessed until Thursday, June the 16th at12 10:00 a.m. -- oh, I'm sorry. I forgot we13 have Council sessions on Thursday. So we14 will recess this until 9 o'clock Thursday15 morning.16 Thank you all very much.17 You've all been extremely patient.18 (Committee of the Whole19 recessed at 4:15 p.m.)20 - - -21 22 23 24 25 324 1 CERTIFICATE2 I HEREBY CERTIFY that the3 proceedings, evidence and objections are4 contained fully and accurately in the5 stenographic notes taken by me upon the6 foregoing matter on June 10, 2011, and that7 this is a true and correct transcript of same.8 9 --------------------13 MICHELE L. MURPHY14 RPR-Notary Public15 (The foregoing certification of this19 transcript does not apply to any reproduction20 of the same by any means, unless under the21 direct control and/or supervision of the22 certifying reporter.)23