COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING BEFORE THE COMMITTEE ON FINANCE - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, September 23, 1997 10:20 a.m. - - - BILL 970515 - An Ordinance constituting the Third Supplemental Ordinance to the General Water & Wastewater Revenue Bond Ordinance of 1989 BILL 970517 - An Ordinance amending Section 19-203 of the Philadelphia Code entitled "Payroll Deductions." - - - PRESENT: COUNCILWOMAN ANNA CIBOTTI VERNA, Chair COUNCILWOMAN JANNIE BLACKWELL COUNCILWOMAN HAPPY FERNANDEZ COUNCILMAN JAMES F. KENNEY COUNCILMAN BRIAN J. O'NEILL COUNCILMAN ANGEL ORTIZ - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center Plaza, Suite 600 Philadelphia, PA 19103 (215) 561-2220 I N D E X BILL 970517 PAGE Lynda Orfanelli, Deputy Director, Department of Finance--------------------------------- Philip M. Harris, Vice-President, Benefits Plus Consulting Group--------------------------- Norma Romero Mitchell, President, Benefits Plus Consulting Group--------------------------- BILL 970515 Karen Yancey, Deputy City Treasurer------------ Kumar Kishinchand, Commissioner, Philadelphia Water Department--------------------------- Michael Nadol, Deputy Commissioner, Philadelphia Water Department--------------------------- - - - Public Meeting-------------------------------- 56 - - - 3 BILL NO. 970517 P R O C E E D I N G S CHAIRWOMAN VERNA: Good morning. This is the Committee on Finance Public Hearing. I would ask the clerk to please read Bill No. 970517.
Bill No. 970517, An Ordinance amending Section 19-203 of the Philadelphia Code, entitled "Payroll Deductions," by authorizing payroll deductions for certain benefits, including deductions payable to Colonial Life & Accident Insurance Company, represented by Benefits Consulting Group, Incorporated, under certain terms and conditions. CHAIRWOMAN VERNA: Do we have anybody to testify on this bill? Please approach the witness table, identify yourself, and proceed with your testimony.
My name is Lynda Orfanelli. I am Deputy Director of Finance, and I am here testifying in support of Bill No. 21 970517, which would amend the Philadelphia Code pertaining to payroll deductions. Also with me today are Norma Romero Mitchell and Phil Harris from Benefits Plus, and Glenn Maykish from Colonial Life. 4 BILL NO. 970517 So if you have any questions about this payroll deduction, you can direct those questions to these people. The Colonial Life & Accident Insurance Company will provide disability health benefits to bargaining unit members of District Council 47. I also want to mention that Bob McAllister from District Council 47 is here, and they had requested that the city put this payroll deduction into place earlier this year. Section 19-203 of the Philadelphia Code, as approved by City Council, authorizes the Director of Finance to deduct from salaries such sums as employees may request. The authorization is made voluntarily and can be cancelled at any time by the employees. Currently there are institutions 20 that are listed in the code. 21 We are ready for questions now. CHAIRWOMAN VERNA: Can you tell the Committee what costs are associated with providing the payroll deductions for city employees?
You mean the city 5 BILL NO. 970517 costs? CHAIRWOMAN VERNA: Yes.
We provide this service as a normal course of our activities. We do payroll deductions for many profit and nonprofit organizations. We have never actually taken the per-cost basis. It varies from each organization, depending on the number of deductions and how complicated they are. We are planning to look into this in the future to see whether there is any reason to attach a cost to the companies that are requesting these deductions. It seems that over the years the number of deductions have increased. But we are more mechanized now. And because of computers, if anything, the cost has gone down, not up. CHAIRWOMAN VERNA: Great. And the city is fully in support of this?
Yes, we are. CHAIRWOMAN VERNA: Fine. Any questions from members of the Committee? 6 BILL NO. 970517 The Chair recognizes Councilwoman Fernandez.
Hi. Could you just tell me, what would an employee pay? Do they have options of how much they have deducted, or is it based on a percentage of their pay? Or what financial investment does this, you know, mean for the employee?
I think this is a question for Colonial Life. CHAIRWOMAN VERNA: Excuse me. Please identify yourself for the record.
Yes. My name is Philip Harris. I am vice-president of Benefits Plus Consulting Group. And to answer Councilwoman's question, the product is priced based on sex and the amount of coverage that the individual wants. So it is totally flexible and can be custom designed around the accumulated number of sick days, whether they may have 7 sick days or up to 180 sick days.
Thank you. CHAIRWOMAN VERNA: Do we have any 7 BILL NO. 970517 other questions from members of the Committee? Anyone else to testify on this bill?
Yes, I would like to say something. CHAIRWOMAN VERNA: Please identify yourself for the record.
My name is Norma Romero Mitchell. I am President of Benefits Plus Consulting Group, and it is my distinct pleasure to appear before this Committee this morning. Our company, Benefits Plus Consulting Group, is an independent female and minority-owned benefits and financial consulting firm located in 121 South Broad Street, Philadelphia, PA. And we have been authorized by Colonial Life & Accident to offer their voluntary products and to represent them at this hearing. AFSCME District Council 47's Board of Trustees selected Benefits Plus Consulting Group and Colonial Life & Accident in May 1997 to serve their voluntary disability insurance needs. D.C. 47 empowered a benefits committee to conduct a comprehensive proposal review 8 BILL NO. 970517 and benefit analysis that took almost two years to complete. Benefits Plus Consulting Group was selected. We are proud to appear before you today and thank you for the opportunity to serve District Council 47 and its dedicated employees. We urge this Committee to pass Bill 9 No. 970517, authorizing payroll deductions for certain benefits, including deductions payable to Colonial Life & Accident Insurance Company as represented by our firm. This is a voluntary program which offers D.C. 47 members the opportunity to protect against unfortunate accidents, illnesses, and perils of life, as well as provide financial support for mothers during maternity leave. This program will allow employees to protect their family's financial security. If the Committee on Finance has any further questions, we will be glad to answer them. Thank you. CHAIRWOMAN VERNA: Thank you. Any questions from members of the Committee? 9 BILL NO. 970515 Thank you all very much. Do we have anyone else to testify on this bill?
No one else. CHAIRWOMAN VERNA: Thank you. Seeing none, the clerk will please read the next bill.
Bill No. 970515, An Ordinance constituting the Third Supplemental Ordinance to the General Water and Wastewater Revenue Bond Ordinance of 1989 as supplemented; authorizing the Bond Committee, or a majority of them, to issue and sell either at public or private sale in one or more series or subseries, Water and Wastewater Revenue Bonds of the City of Philadelphia; Authorizing approval of the form or forms of bonds providing that the bonds shall bear interest at a prescribed fixed rate or rates or at variable rates which may be payable in different modes; And authorizing agreements to provide credit enhancement or payment of liquidity sources or swap payments for the bonds and certain other 10 BILL NO. 970515 actions. CHAIRWOMAN VERNA: The Treasurer is out of town; however, I understand that the Deputy City Treasurer will be testifying. And while they are coming up to the table, I would like the record to reflect that we do have a quorum. To my left is Councilman O'Neill, Councilman Ortiz, Councilwoman Blackwell. To my right, Councilwoman Fernandez and Councilman Kenney. Thank you. Good morning. I am sorry you were kept waiting. Please identify yourself for the record and proceed with your testimony.
Good morning. My name is Karen Yancey. I am the Deputy City Treasurer. I am here to present the testimony of Thomas Queenan, City Treasurer. With me today is Kumar Kishinchand, Water Commissioner of the Philadelphia Water Department, and Michael Nadol, Deputy Commissioner. The purpose of the Bill No. 970515 is to authorize an ordinance constituting the Third Supplemental Ordinance to the General Water and 11 BILL NO. 970515 Wastewater Revenue Bond Ordinance of 1989. The aggregate amount will not exceed $390 million, excluding original issue discount. The bonds will be issued in two series: A 1997-A which is a fixed portion, and a 1997-B which is a variable portion. Both series will be insured, and, therefore, will have a rating of AAA. As required by the -- CHAIRWOMAN VERNA: Excuse me. Would you mind pulling the microphone closer to you. We are having some difficulty hearing you.
As required by the First Class City Revenue Bond Act, the restated General Water and Wastewater Revenue Bond Ordinance of 1989, the Finance Director of the city has transmitted his financial report with respect to the water and waterwaste systems. We would also like to offer some amendments to the ordinance. And I can do that now, or, if you would like, we can continue on with the testimony. And the Commissioner and the Deputy will speak, and I can offer those later. CHAIRWOMAN VERNA: Why don't we hear 12 BILL NO. 970515 from the Commissioner first, and then we could consider the amendments.
Okay. COMMISSIONER KUMAR KISHINCHAND: Good morning, Chairwoman Verna -- CHAIRWOMAN VERNA: Good morning. COMMISSIONER KISHINCHAND: -- and members of Finance Committee. I am here before you to testify regarding Bill No. 970515, to authorize new issuance of Water and Wastewater Revenue Bonds. As Miss Yancey has already introduced Michael Nadol, Deputy Water Commissioner in charge of Finance in this Administration is with me to help me answer any questions that you might have. The purpose of this ordinance is, essentially, to authorize us to raise some capital dollars. As you know, we have a construction account which provides funds for our capital improvement programs, for new water and sewer mains, and wastewater treatment facilities, biosolids, recycling center, et cetera. The last time that we went to the market was back in 1993. Those funds are almost 13 BILL NO. 970515 exhausted right now. We have been replenishing those funds with internally generated revenues on an annual basis at the rate of approximately $15 million. However, we are now in a position where we need to raise some more capital to continue this particular program. The amount of money that we will be going for will carry us through for approximately a three-year period of time. I believe you have my written testimony. If you would like, I can either read through it or answer any questions that you would prefer to ask. CHAIRWOMAN VERNA: I believe everyone was submitted a copy of the Commissioner's testimony. Do you want him to read it for the record, or do you want him to simply abbreviate what he sent us?
Fine. CHAIRWOMAN VERNA: Everybody has a copy, Commissioner. So if you could simply abbreviate it, we would appreciate it. 14 BILL NO. 970515 COMMISSIONER KISHINCHAND: Fine. I have already gone through, essentially, what I meant to say in the testimony -- it is a very short testimony -- for raising those funds. I am ready to answer any questions that you have. CHAIRWOMAN VERNA: I guess this question would be for the Treasurer. In your testimony, you state that a portion of the bonds will be fixed-rate bonds in denominations of $5,000. What is the purpose of this small denomination, and what investors would take advantage of this denomination?
To the best of my knowledge, the reason for the denomination size of $5,000 is so that individuals, retail individuals, can purchase these bonds. And I do believe that institutional investors do buy the bonds. There is a lot of participation from the City of Philadelphia residents, as well. CHAIRWOMAN VERNA: What are the conditions under which the bonds will be issued? 15 BILL NO. 970515 For example, what interest rates do you anticipate the city will pay? Do you know at this point in time?
We don't know; depending on the market. But given current market conditions, I would say approximately 5 to 6 percent. CHAIRWOMAN VERNA: You did say that you had some amendments. And I believe the bill 11 indicates that this bond issue is for $350 million; is that correct?
Yes, that's correct. CHAIRWOMAN VERNA: However, I believe in the proposed amendments, as you presented it to us this morning, you are referring to $390 million.
Right. At the time -- CHAIRWOMAN VERNA: Is that going to be amended? Are we talking about more or less? Which figure are we dealing with, 350 or 390?
Councilwoman, good morning. I am Michael Nadol, Deputy Water Commissioner. We have been working closely with the Treasurer's office on the structure of this deal. We had originally included, and would 16 BILL NO. 970515 propose continuing to include, the figure of $390 million just to give us greater flexibility in the event that changing market conditions would enable us to capture any additional savings by refinancing any older debt. And having a slightly larger cap gives us the flexibility to incorporate some refinancing if market conditions would make that appear to be beneficial for our ratepayers. At this point we don't foresee that as a likelihood, given current market conditions. But it is flexibility that we would propose to maintain. CHAIRWOMAN VERNA: We are having a difficult time hearing your testimony because of the window being open, I guess. And I would ask that you would speak more closely into the mike. According to the engineering report, the Water Department has adequately met the rate covenant for existing bonds. Are there any circumstances that you foresee that might endanger meeting the rate covenant for existing bonds and/or this proposed sale? 17 BILL NO. 970515 Can the Treasurer answer?
I would defer that to the Commissioner of the Water Department, if I may. CHAIRWOMAN VERNA: Please, Commissioner. COMMISSIONER KISHINCHAND: Chairwoman, I don't see any circumstance under the current conditions, under the current obligations that the Water Department has, that we would ever violate that bond covenant. We have not violated the bond covenant in the years that the Rendell Administration has been here. We don't, in fact, anticipate even raising the rates to make sure that the rate covenants are not violated. CHAIRWOMAN VERNA: Commissioner, I believe this Council has indicated on more than one occasion our desire to see water laterals included in capital repairs. How can you come to this Committee with a $390 million bond issue and not include laterals in the funding stream? This particular ordinance requests 18 BILL NO. 970515 only replenishment of the funds for spending on the capital program. As you know, the Council and the Mayor authorizes and reviews and modifies the capital program on an annual basis. So to the extent that any additional obligations are placed upon the Water Department, the program will need to be modified and priorities established. But this particular ordinance will only replenish the construction account to make the cash available for any and all of the programs that the Council authorizes. CHAIRWOMAN VERNA: Commissioner, does the money in question include the new automatic meter reading? COMMISSIONER KISHINCHAND: That's correct, it does include -- actually, we have a budget which authorizes us to spend a certain amount of dollars on automatic meter reading. Part of the money that we are going to be raising through this bond, through the issuance of these bonds, is going to be utilized for those automatic meters that we will purchase. 19 BILL NO. 970515 CHAIRWOMAN VERNA: I noted you started the automatic meter reading installation, I guess, about two weeks ago. Is that proving to be successful? Are you able to get into the homes and do the replacement in an orderly fashion and expeditiously? COMMISSIONER KISHINCHAND: The reports that I have been getting have been very positive. They are ramping up the rates. In fact, every day they do more and more. I am not too clear as to how many, the numbers, what the numbers are, that they have installed. Perhaps Michael Nadol might be able to brief you. He has been keeping a little closer touch on it. CHAIRWOMAN VERNA: Very well.
I, unfortunately, do not have precise numbers. But in less than two weeks of installation, we have already installed over 2,000 meters. CHAIRWOMAN VERNA: Really?
And the rate is 20 BILL NO. 970515 increasing every day. We have since, during this first roughly ten-day period, we have added in additional installation efforts by city employees, which are also helping to increase the installation totals. And our contractor is planning to add a second shift of employees represented by the plumbers' union beginning within the next week or two, which will further increase the daily rate. So we're very pleased with the start that we're off to. Of course, there is a long way to go. But it does seem to be off to a successful beginning. CHAIRWOMAN VERNA: Do you still anticipate that it will take approximately three years to do the entire city?
Our installation program anticipates a two-year total installation pace. After ten days, we are still on track. CHAIRWOMAN VERNA: That's wonderful. Commissioner, on of the engineering report it is indicated that a decrease in the electrical power budget is anticipated for 1998 because of a decrease in water delivery. 21 BILL NO. 970515 What factors are leading to that decrease in water delivery, and should we be concerned? COMMISSIONER KISHINCHAND: Essentially, I think what we have noticed is that the water consumption, the metered water, has been going down. It could be partly because of the decline in population. To some degree it is because of conservation purposes. And, also, we have been replacing the water mains, we have been looking at doing enhanced leak detection programs to abate those leaks. So talking pumping costs, to put it into the system, are going to continue to decrease as we continue to tighten up our system. CHAIRWOMAN VERNA: And at the conclusion of that we can see a decrease in the water rates? Okay. Joke. COMMISSIONER KISHINCHAND: No comment at this point. CHAIRWOMAN VERNA: Commissioner, one of the primary problems, as I see it, from the engineering report is the amount of unmetered 22 BILL NO. 970515 water. Over 100 million gallons of water per day delivered through the distribution system is unmetered. While a portion of that water is used for authorized purposes, a large amount is lost through illegal hydrant use and theft of water. Do we have any way of identifying exactly how much in unmetered water is used for authorized purposes? COMMISSIONER KISHINCHAND: We have taken a guess at it. It is a calculated guess as to how much is being utilized. At this juncture our estimate is that through leaky pipes and leaky service lines, you probably are losing about 10 percent of the water. The other 23 percent is for fire-fighting purposes, the unauthorized use of hydrants, the construction permits that we give out for contractors, street cleaning, and similar such functions. For instance, when we replace a water main, we flush that out, so we use a hydrant, and we don't meter that water. So those are it. But in terms of the infrastructure 23 BILL NO. 970515 leaks, our estimate is about 10 percent. But then that's only an estimate at this point. CHAIRWOMAN VERNA: And I believe that I read that, what is it, percent of the city's 6 hydrants are now locked? 7 COMMISSIONER KISHINCHAND: That's 8 correct. We started this program of putting locks 9 that cannot be tampered. Or if they are tampered, 10 only one of them can be. It is called a center 11 compression lock. 12 And that can be opened with a device 13 which has to stay on that hydrant for that to 14 continue to work. 15 That particular lock has been 16 defeated. I think there are a lot of ingenious 17 people around, and they have been able to defeat 18 it. 19 But they cannot turn multiple 20 hydrants on with that one device because it has to 21 stay on the lock itself for it to continue to 22 function. 23 CHAIRWOMAN VERNA: Thank you. 24 Commissioner, I note that the 25 wholesale wastewater service is provided to ten 24 BILL NO. 970515 suburban customers on a contractual basis. And that in recent years, six of the largest customers have entered into long-term contracts with the Water Department. These contracts have terms of up to 30 to 35 years, and require that five of the six customers make front-end capital contributions toward the cost of providing wastewater service to the particular customer. Has the author of the engineering report done any cost analysis to determine if the city is recouping a sufficient amount of money to cover all of the costs associated with the delivery of this service?
Councilwoman, the simple answer is yes. And, in addition, we recoup a 10 percent management fee on the newer of the contracts that have been negotiated. It is very much to the city's benefit to use whatever reserve capacity we may have in our system and spread our fixed costs across a larger customer base. It has the ultimate effect of lowering the need for cost increases for our city 25 BILL NO. 970515 customers. In fact, we have additional reserve capacity on the drinking water side of our operation that we hope to be able to market more successfully to additional suburban customers. That kind of contracting helps us keep our overall costs to Philadelphians down. CHAIRWOMAN VERNA: Thank you. Commissioner, of the engineering report shows that the total cost of the Water Department's Capital Improvement Program for 1998 through 2003 is a total of $737.5 million. Since this bond issue is proposed to be only about 350 million, how will the rest of the program be funded? When do you anticipate having to come back to Council for authorization for another bond issue, if you will, in fact, have to do that? COMMISSIONER KISHINCHAND: We expect this amount of money that we are raising this time around, with this particular bond issuance, to take us through about three years. And for the rest, we will need to come back to you for authorization for additional BILL NO. 970515 money. And, as I indicated, on an annual basis we do contribute some money to the construction account from our revenues that we generate on an annual basis. So that sort of takes the pressure off of continuing to increase our debt service. CHAIRWOMAN VERNA: Do we have any questions from members of the committee? The Chair recognizes Councilwoman Fernandez.
Thank you, Madam Chair. Could I just preface my remarks by saying, more than ever I appreciate the clean and safe drinking water of the City of Philadelphia, after coming back from a visit to a European country this summer and getting, I think they call it, giardia, which is nasty. So I do appreciate having healthy, clean water here and the good job you do in terms of management. COMMISSIONER KISHINCHAND: Thank you.
Just a couple of questions. 27 BILL NO. 970515 One, Councilwoman Verna had raised this question of the discrepancy between the 350 million versus the 390 million. And I can understand why you would like some flexibility to maybe go up to 390 if it is, you know, a great market. But the Black & Beech report stated that there is the revenue stream to cover the bond issue up to 350. They didn't talk about 390. So how would you deal with that if you, in fact, went to the 390? COMMISSIONER KISHINCHAND: The additional $40 million, as Michael Nadol indicated, was to give us flexibility to refinance our existing debt, existing debt that may have a higher interest rate than the market may very well get down to. And in the event that the market forces allow us to refinance some of that debt and lower our debt service, we wanted to have that flexibility available as we were going into the market.
Okay. My second question was just following up on the AMR. The installations, are they occurring 28 BILL NO. 970515 on weekends and evenings to accommodate working people, employed people?
We began our first weekend installations this past Saturday. At this point there are no Sunday installations, but we are doing Saturday installations. We, as part of ramping up, have not yet added a second evening shift. But that's planned for, hopefully, before the end of the month. There will be a shift that during this season, with the longer daylight hours, will perform installations up until 8:00 p.m. So we are trying our best to accommodate those concerns.
And then probably like next spring and summer it would be good, you can go even later, right, when it is light out, more daylight hours.
The third question was regarding, you know, the no projected rate increase through the year 2000. But I think in some of the backup 29 BILL NO. 970515 material it notes that you, what, may be requesting a rate increase of 3 percent in 2000, 8 percent 2001, 8 percent 2002, 3 percent 2003? Could you clarify for the record, is that your best estimate at this point, or do you foresee that in order to pay for the expenses that you already see? And then what procedure would be gone through to see if, in fact, those, I would sort of say, steep increases really will be needed? COMMISSIONER KISHINCHAND: At this juncture our operations, as we see them, project that we would have a revenue requirement of about 3 percent in the year 2000. But, as you know, over the years we have continued to streamline our operations and cut costs. And, in fact, our last rate increase was supposed to last us only for about three years, and we have not had a rate increase since July of '95. So we have been successful in cutting costs and absorbing a number of additional programs, mandated, some of them mandated, programs within the revenue stream that we have been getting. We continue to put pressure on 30 BILL NO. 970515 ourselves to continue to cut costs. And we expect that that 3 percent revenue requirement that's projected in this bond report will disappear by the time we get there.
Well, I think, again, for the record, I think it would be very important to continue to manage very carefully and save money wherever possible. Because having lower utility rates, including water, is very important for us in terms of being competitive economically for commercial establishments, and even for residential customers. COMMISSIONER KISHINCHAND: Yes. I couldn't -- I'm sorry.
And, obviously, whoever the City Council is and the Administration is at that point, you know, I think we need to be responsible not to sock them with that kind of burden. Because I have seen those two 8 percents. I think it a bit much. COMMISSIONER KISHINCHAND: Well, I couldn't agree with you more that we ought to continue to put pressures on ourselves to continue 31 BILL NO. 970515 to contain costs and reduce costs where we can. We have introduced automation in order to reduce those costs in a number of places. In fact, in terms of becoming competitive in this region, we are the lowest water rate, I think, in this region. Our suburban customers are paying twice as much as the Philadelphia residents right now. And, as I said, we will not be coming to you with a rate increase in the next several years. Whereas, if you read the newspapers, you will find that some of the suburban water companies have been requesting rate increases in double digits right now. So I think we are very competitive, but that does not mean that we ought to relax at all. We need to continue to cut costs.
I think an area probably you concentrate a lot on, but I'm not sure we in Council have, is continuing to look at ways to reduce wastewater and also stormwater runoff, in terms of both environmental reasons and 32 BILL NO. 970515 then saving money in terms of processing. So I think that's an area where I think we need to be probably more vigilant. Probably you are, but I'm not sure how much we in Council pay much attention to those issues. COMMISSIONER KISHINCHAND: We will keep you informed if there is anything you can do to enhance that. We will do that. CHAIRWOMAN VERNA: Commissioner -- I am sorry, Jim, if I may. If in fact the water rates are increased by or percent in the year 2000, you would never raise the service charge, would you? COMMISSIONER KISHINCHAND: These particular revenue projections show an overall rate increase of 3 percent, which may very well -- which would include the service charge. However, we expect that, in the short period of time, we will be coming to you for an authorization on another ordinance that would permit us to reallocate stormwater charges. Right now the stormwater charges are based on the size of the meter a person has. But the reallocation process that we will be coming to 33 BILL NO. 970515 you for approval on is going to, in fact, mitigate that as far as the homeowner is concerned, the redistribution. As you know, parking lots pay very little in terms of stormwater charges. So by redistributing this, reallocating the cost, the homeowner actually may very well benefit from it. But we will be coming back to you with more detail on that issue. CHAIRWOMAN VERNA: The Councilwoman is asking, when do you anticipate coming back to Council on that issue? COMMISSIONER KISHINCHAND: We are hoping we can come back to you on that this fall, once we get everything in place. CHAIRWOMAN VERNA: I asked about the service charge only because many of the senior citizens I know often approach me once they receive their water bill. They live alone, and their complaint is consistently that they are paying more in service charges than they are for the actual use of water. How do you answer to a senior who tells you something like that? 34 BILL NO. 970515 COMMISSIONER KISHINCHAND: When we come back to you for authorization for this reallocation of the stormwater charges, we will actually, in the bill, be separating out the stormwater charges. The service charge on the wastewater side includes the stormwater collection, disposal and treatment, transportation. And that's a very large number. Because the stormwater pipes tend to be very, very huge in order to take that heavy rainfall away and prevent flooding. So that capital costs of those pipes, et cetera, is very high. But when we come back to you, when we come up with a new billing system -- and we are working on that new billing system, also -- we will be separating out the stormwater charge from the other service charge, which includes meter reading, it includes customer service, and all billing-related functions, which is much smaller than the total service charges. CHAIRWOMAN VERNA: Thank you. The Chair recognizes Councilman Kenney. 35 BILL NO. 970515
Thank you, Madam Chair. On that issue, Commissioner, is the possible reallocation of the stormwater charge a function of the square footage of the area that is draining? For example, it occurs to me that in a residential row house in Philadelphia, the roof area is a certain predictable square footage that runs off into the storm drains. A parking lot, for example, would have a much greater area that is running off, as would a commercial business that has a larger square footage, with more downspouts and more actual water coming off its property. Is that the direction that you are going in, trying to make it a more fair system? COMMISSIONER KISHINCHAND: That's correct. It includes not only the square footage of the property, but also includes the permeability. For instance, somebody living in an area where they have, perhaps, a house on a property which has no paving on it, that's going to absorb most of the water. 36 BILL NO. 970515 So there will be actually a formula that will calculate how much of that surface area is draining completely directly into the sewers, how much of it is absorbing some of it.
So if you had a lot with a lot of ground around it, for example, you would be experiencing a lesser charge, potentially, than those who have a building that covers most of the area that you own? COMMISSIONER KISHINCHAND: Right. The formula is going to be such that it will incorporate into it the square footage, plus the permeability factor in it.
I did just want to clarify, to help us determine what a more fair and more equitable system would be, we had convened a Community Advisory Committee that included representatives of different typical customer classes, community groups, environmental groups, City Council technical staff, a number of different stake-holders to help us determine what a better system would be. 37 BILL NO. 970515 On the specific point that you were just raising, for simplicity, to make this a little bit more manageable -- because, as you can, I'm sure, imagine, this would be a very complex new system to administer -- the committee's recommendation that we will be bringing to Council for consideration would involve categorizing three different types of residential customers, row home, detached, and twin, and sort of rounding off the very nominal differences. So we wouldn't be out there with a tape measurer on every homeowner's property looking at whether they paved over part of their lawn to add a driveway. It would be somewhat simplified by customer class. But the overall effect would be absolutely --
But I'm talking more relative to residential customers, versus a large-surface parking lot, for example.
Okay. In regards to stormwater collection and storm flood relief, on 38 BILL NO. 970515 the five-year Capital Plan, Items 147, 148, and 148A talk about replacement of sewers and other type of storm-flooded relief in areas that experience flooding during major storms. Does this include the replacement, the continuing replacement, of corner storm inlets that have, in many of the older neighborhoods in the city, collapsed and create horrendous problems in all seasons with the collection of large puddles of water at corners, intersections where children are crossing to go to school? I know in South Philadelphia, for example, the crossing guards complain incessantly about, after a storm, it is very difficult and very dangerous to cross children at street corners, people can't get across. And part of what I have understood from your office, in complaining about it and asking for service, is that a lot of these corner storm inlets have collapsed because of age. And you have been through the process of replacing them, as I understand. Is that included in any of these items, the continuing replacement of corner inlets? 39 BILL NO. 970515 COMMISSIONER KISHINCHAND: The corner inlets generally are in the operating budget as far as replacement is concerned, unless we are putting in a new sewer, which would be on the capital program, we are replacing a new sewer, and then we would replace that.
Why would a determination be made that the replacement of what seems to be an asset with a reasonable life span is included in the operating budget and not the capital, especially when it affects people in their homes so regularly? COMMISSIONER KISHINCHAND: Perhaps I misspoke. It is actually rehabilitation. For instance, if you already have a storm inlet that's in reasonably good condition, but perhaps a pipe has broken, pipe connecting the storm inlet to the sewer, which is lateral, essentially, if that's broken, we would go in under operating conditions, as a routine maintenance process, do that. And, generally, a number of the storm inlets that you have heard about that may be defective generally turn out to be similar. 40 BILL NO. 970515 But, you know, if it is completely destroyed and they are putting in a new sewer main, we would replace it on a capital program.
It is my experience, though, through constituent requests that we can go out and clean an inlet a half a dozen times a year. But it is obvious that because the inlet is in a collapsed state, all the cleaning in the world isn't going to make a difference. COMMISSIONER KISHINCHAND: Correct.
And while I understand that routine type of maintenance and inlet cleaning makes sense from an operating standpoint, from my perspective these inlets are either salvageable or unsalvagable. And if they are unsalvageable, and are not related to a total sewer replacement project, should be replaced and probably should be replaced out of capital dollars, not out of operating. I mean, certainly you are the expert on both the financing and the actual work. But it seems to me that if the asset with a definite life can no longer be used, it should be replaced, and it 41 BILL NO. 970515 seems to me to be a reasonable capital item. COMMISSIONER KISHINCHAND: Yes, it could be. We can take a look at that and see if there is a way of structuring a contract where we can get a contractor who does only replacement of defective -- I shouldn't say defective; collapsed inlets on a citywide basis.
Do we have a list of expected replacement sewer inlets, stormwater inlets, throughout the city? Do we highlight it or identify what's getting replaced this year, next year, and for three years out? COMMISSIONER KISHINCHAND: No. We are, in fact, right now developing a computerized program on these inlets to keep track of which ones are giving us the most trouble, so we can prioritize them for replacement purposes.
Could you send me or the Chair, or send to me through the Chair or to me directly, a list of those locations? Because I am curious as to what the pattern is -- I would suspect that the pattern is, 42 BILL NO. 970515 the older the neighborhood, the worse the problem is. And that relates to my next question, which is, the ability to create a stormwater inlet cover that precludes the use of the inlet as a trash can. I think people sometimes put a soda bottle down the stormwater drain, thinking that they are doing something good by not throwing it in the street. But, as you know, we constantly need to clean these out. And I am wondering whether or not there is a design that makes more sense to keep us from having to clean these inlets as much as we do because people are placing newspapers, bottles, cans, whatever. COMMISSIONER KISHINCHAND: I will ask our design people to take a look at it. I know that they probably have gone through, you know, this process of looking at what else they can do to preclude dumping of trash and what-have-you through the inlets. Because it is a burden on us; it definitely is. And it costs us not only in terms of 43 BILL NO. 970515 cleaning them up, but then paying tipping fees and putting it in a landfill, and that sort of thing. So it certainly will pay to go over that and take another look at it and see if there is a better design.
And, finally, what is the rate, what is the amount, of uncollected water charges out there? Like the other utilities in the city, the Gas Works and even the private utilities like the Electric Company, do we have a number that's either both residential and commercial that we recognize as uncollectable? And what is the number of shutoffs that we do in a given year based on nonpayment? COMMISSIONER KISHINCHAND: Our receivables are in excess of $150 million, but that doesn't mean that they are uncollectable. Some of it is current billing. Many of it is collectable. I'm not quite sure if we have the number for you today on what one would consider uncollectable.
And do we have a program or do we permit continuing agreements to be 44 BILL NO. 970515 made and broken? What is our policy when it comes to the number of agreements you can make and not fulfill, and then come back and make again? All of that information that relates to delinquencies, shutoffs, shutoff policy, you know, the amounts of money that are both separated commercially and residentially, and what our policies are in that regard.
Madam Chair, Councilman Kenney, just for information, the Transportation & Public Utilities Committee is reconvening hearings this fall looking at that issue of delinquencies and policies to deal with that. Not only in the Water Department, but with PGW and the Electric Company. So there will be a full hearing. And I hope, we would love to have you be there. Because it is a very important, serious issue. Some progress has been made, and I think the three utilities can learn from each other.
The issue for me is that people, I was going to add, who consistently 45 BILL NO. 970515 follow the rules and pay their bills, I want to ensure they are not paying, as we do with auto insurance, gas bills, and every other bill that people who pay by the rules pay for, that we're not carrying people who either should be shut off or should be paying. COMMISSIONER KISHINCHAND: We have, of course, strengthened our shutoff program. And, in fact, the Water Revenue Bureau, which, as you know, is responsible for the collection and the policies surrounding that, they have, in fact, started the reinspection program of shutoff. That reinspection program has shown us that approximately 33 percent of these properties that are shut off have turned themselves on in some fashion or another. And in that case we go in and put special locks on them, et cetera. There was a time we used to pour concrete in there to shut that.
Have we ever considered doing something with the District Attorney's Office to have people arrested? I mean, to me, stealing my water is as much as stealing my 46 BILL NO. 970515 car. And, again, I am not being critical of you. Because I understand within the framework where you work and because of the technical nature of your business, you look for things to do that will preclude this long term. But when somebody is stealing water, it is the same as stealing someone's property. And why shouldn't those people be arrested and prosecuted as any other thief would be? I think it sends a message different than the message we have been sending, which is, basically, well, you know, if you can get away with it, you can get away with it, and somebody else will carry you for it. And I don't think the Water Department has had as bad a reputation -- and not to pick on the Gas Works, but for years the Gas 20 Works has had, basically, a representation that, come in, make an agreement, break the agreement, make another one, break it, just keep on making them and breaking them. And I know they have tightened up on their end. And the Water Department has not had 47 BILL NO. 970515 that bad of a reputation. But it is annoying for people who do follow the rules, that others do not. And I would like to get a basic idea from your perspective what your arrearages are, what's uncollectable, who has been turning themselves back on, that whole gamut of theft of services and why we don't prosecute those people as the petty criminals that they are. COMMISSIONER KISHINCHAND: I couldn't agree with you more. In fact, I did write the District Attorney's Office to see if they would make that a priority and offer to fund a position in that office to go forward with that. I'm sorry. CHAIRWOMAN VERNA: I'm sorry. I think the very first question that was asked, Commissioner, is, what is your policy as far as delinquents are concerned? COMMISSIONER KISHINCHAND: The policy is to shut them off after due notice. CHAIRWOMAN VERNA: I beg your pardon? COMMISSIONER KISHINCHAND: To shut off the water supply after they have been given due 48 BILL NO. 970515 notice. And the due notice is that they get two notices after they are delinquent for 30 days -- because it is a monthly billing system -- and then on the 91st day, I believe, they become eligible for shutoff. And that is the policy.
How long after eligibility, on average, are they shut off, if you know? And if you don't, if you can get it. COMMISSIONER KISHINCHAND: I'm sorry, I don't. I don't have those numbers.
And how many agreements are you permitted to make once you have gotten the shutoff notice and you go in and you make a deal, you pay so much money up front, and then you get on a payment plan and you break that plan, how many of those deals can you make before you are actually shut off? COMMISSIONER KISHINCHAND: I'm not sure what Revenue Bureau policy is, but I will find that out. And, if I may, I can send that information to you.
Thank you very much. 49 BILL NO. 970515 CHAIRWOMAN VERNA: Thank you. The Chair recognizes Councilwoman Blackwell.
Thank you, Madam Chair. Certainly during these trying times, not so much for the Water Department, but especially in private industry, so many companies have customers blame one another, when the excessive profits go to the parent company. And water is a common denominator. If people don't have water, they are part of the homeless population. You can't stay in. Even if you live without light and live without heat, if you don't have water, then you are a homeless person. So my attitude is never one that we need to try to route them off and shut them off for any utility. Because times are hard. And I remember days when we only paid a water bill maybe twice a year. So people are suffering. But I asked the Chair to speak to ask, when Councilman Kenney was talking about laterals, I thought about the problems we have in so many of our neighborhoods -- although the Water 50 BILL NO. 970515 Department is working every place, and I see them a lot -- about 46th and Market. I mention it every year during budget recess because there, you know, we have some corners, as you know, in the city where we don't even know if we have a sewer inlet. And maybe it is just the street and the curb have gotten so bad, there isn't. But that consistently, between 46th and 44th has been a flooded area since I have been in office, and before. So I know it means that there has to be something major underneath, because it is not as small as a sewer inlet cleaning. It probably is some reconstruction. There is probably some reconstruction effort needed, so that we don't have that massive flood under the El tracks and going both ways. But it is just a rough area. And I don't know if this would take that into consideration, or if that area is being considered. COMMISSIONER KISHINCHAND: 46th and Market? We will take a look at it and see if, in 51 BILL NO. 970515 fact, there is an infrastructure problem there.
Thank you. CHAIRWOMAN VERNA: The Chair recognizes Councilman Kenney.
I just have one suggestion that I neglected to make on the issue of shutoffs. And maybe you can discuss this with the Water Revenue people. And I made this suggestion to the Gas Works. Because we license or allow cable TV companies in the city to service a certain area, perhaps we could have access to cable TV subscriber lists, match with those with those in arrears, and shut them off first. Because if your priority is your cable television and not your water or your utility bills, I really have very little sympathy. And I think maybe that would give us a good idea as to where people's priorities are. Because they know, for all intents and purposes, the city is really not going to do anything about it. I have had circumstances in the past where we have had drug houses and other kinds of problems where every utility that the city has any 52 BILL NO. 970515 involvement with is in major arrears, except for the Electric Company. Because the Electric Company comes out with two burly men and turns off your electric. And if you turn it back on, they will be back again. And I think that's part of the problem, is that we aren't expected to do anything. And I think if we start doing it, we will shock some of the people who can afford to pay. And I think that no one in this Council, including myself, will begrudge anyone who is truly in need because of employment or dislocation or serious illness a helping hand and enough time to do what needs to be done to keep their home in order. But when it comes to people who simply know we are not going to do anything about it, I think those are the ones we need to go after. COMMISSIONER KISHINCHAND: No. I agree with you. In fact, I think as far as people who can't afford to pay, we have programs that help them. We have loan programs, we have payment 53 BILL NO. 970515 agreements, et cetera, and we work with them very closely. Those who do not pay, I couldn't agree with you more. And I am hoping that once our automatic meter reading program is in place, we will then be able to detect the theft of water much more readily than we are able to right now. And, hopefully, we will reinforce the efforts.
Thank you. CHAIRWOMAN VERNA: Thank you. Any other questions from members of the Committee? Miss Yancey, would you please read the amendments that you are proposing?
Yes. Has everyone received a copy? CHAIRWOMAN VERNA: Does everybody have a copy? Everyone has a copy.
Okay. Section 1, Authorization, Scope and Purpose, beginning with Line 6, "City's General Water and Wastewater Revenue Bond," that sentence should read, "City's amended 54 BILL NO. 970515 and restated General Water and Wastewater Revenue Bond." The next line, "Ordinance of 1989," open paren, "Bill No. 544," close paren, "approved June 24, 1993," we'd like to insert there, open paren, "the," quote, "general ordinance," end quote, close paren. We're still within Section 1. Last sentence, Line 10, from Lines 10, 11, and 12, those last three lines should be deleted. So, therefore, the sentence prior to that should read, "1993, and a second supplemental ordinance," open paren, "Bill 14 No. 771," close paren, "approved May 9, 1994," period. Second paragraph of Section 1, last sentence currently reads, "Such determinations shall be deemed a further amendment and supplement to the general ordinance." We would like that sentence to read, "Such determinations shall be deemed a supplement to this supplemental ordinance," period. CHAIRWOMAN VERNA: I believe on there is one more?
On the pink copy that was provided by the Chief Clerk's Office, that correction has been made. CHAIRWOMAN VERNA: That was a typo?
It was a typo, yes. CHAIRWOMAN VERNA: Okay. Thank you. Do we have anyone else to testify on this bill? Thank you very much. COMMISSIONER KISHINCHAND: Thank you very much. CHAIRWOMAN VERNA: This concludes the Public Hearing of the Finance Committee. (Public Hearing adjourned at 11:20 a.m.) - - - 56 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING of the COMMITTEE ON FINANCE - - - TUESDAY, SEPTEMBER 23, 1997 - - - Public Meeting conducted by the Committee on Finance, held in Room 400, City Hall, Philadelphia, Pennsylvania, on the above date, to consider action on the following bills: BILLS 970517, 970515 - - - PRESENT: COUNCILWOMAN ANNA CIBOTTI VERNA, Chair COUNCILWOMAN JANNIE BLACKWELL COUNCILWOMAN HAPPY FERNANDEZ COUNCILMAN JAMES F. KENNEY COUNCIL PRESIDENT JOHN STREET - - - 57 PUBLIC MEETING CHAIRWOMAN VERNA: We will now go into our public meeting. The Chair recognizes Councilwoman Fernandez regarding Bill No. 970517.
Madam Chair, I move that this Committee report out Bill No. 8 970517 with a favorable recommendation. (Duly seconded.) CHAIRWOMAN VERNA: Properly moved and seconded that Bill No. 970517 be reported out of Committee with a favorable recommendation. All in favor will signify by saying aye. The motion is so carried. The Chair recognizes Councilman Kenney regarding the amendment on Bill No. 970515.
I move that Bill 19 No. 970515 be amended as read into the record by the Deputy Treasurer. (Duly seconded.) CHAIRWOMAN VERNA: All in favor will signify by saying aye. The motion is so carried. The Chair recognizes Councilwoman 58 PUBLIC MEETING Blackwell regarding Bill No. 970515.
I move that Bill 970515 be reported out of this Committee as amended with a favorable recommendation. (Duly seconded.) CHAIRWOMAN VERNA: Properly moved and seconded that Bill No. 970515 be reported out of Committee with a favorable recommendation as amended. All in favor will signify by saying aye. The motion is so carried. And the Chairwoman thanks Councilman Street for coming in for this motion.
Thank you. (Public meeting adjourned at 11:25 a.m.) 59 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Tuesday, September 23, 1997, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COMMITTEE ON FINANCE _____________________________________ DEBRA A. WHITEHEAD, RPR