COUNCIL OF THE CITY OF PHILADELPHIA2 COMMITTEE OF THE WHOLE3 Room 400, City Hall5 Philadelphia, Pennsylvania Wednesday, March 23, 20116 2:00 p.m. PRESENT:8 COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL9 COUNCILMAN DARRELL CLARKE COUNCILMAN W. WILSON GOODE, JR.10 COUNCILMAN BILL GREEN COUNCILMAN CURTIS JONES, JR.11 COUNCILMAN JACK KELLY COUNCILMAN JAMES KENNEY12 COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN MARIA D. QUINONES-SANCHEZ13 COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO, JR.14 COUNCILWOMAN MARIAN B. TASCO 15 BILL 110135 - An Ordinance to adopt a Capital16 Budget for the six Fiscal Years 2012-2017 inclusive.17 BILL 110136 - An Ordinance to adopt a Fiscal18 2012 Capital Budget. 19 BILL 110137 - An Ordinance adopting the Operating Budget for Fiscal Year 2012.20 BILL 110138 - An Ordinance amending Chapter21 19-1500 of The Philadelphia Code, entitled "Wage and Net Profits Tax," by revising22 certain tax rates... 23 - - -24 25 2 1
We're2 finally getting started.3 This is a continued public4 hearing of the Committee of the Whole.5 I would ask Mr. McPherson to6 please read the bills before us.7 MR. McPHERSON: Bill No.8 110135, an Ordinance to adopt a Capital9 Program for the six Fiscal Years 201210 through 2017 inclusive.11 Bill No. 110136, an Ordinance12 to adopt a Fiscal 2012 Capital Budget.13 Bill No. 110137, an Ordinance14 adopting the Operating Budget for Fiscal15 Year 2012.16 And Bill No. 110138, an17 Ordinance amending Chapter 19-1500 of The18 Philadelphia Code, entitled "Wage and Net19 Profits Tax," by revising certain tax20 rates and making technical changes, all21 under certain terms and conditions.22 And today we will only be23 taking testimony on Bills 110135 and24 110136.25 3 3/23/11 - WHOLE - BILL 100135, ETC.1
Thank2 you.3 Do we have someone here from4 the Administration to testify?5 (Witnesses approached witness6 table.)7
Good8 afternoon. I'm sorry that you were kept9 waiting. However, we have other10 business.11 Would you please identify12 yourself for the record and proceed with13 your testimony.14
Yes. Good15 afternoon, Council President Verna and16 members of City Council. My name is Gary17 Jastrzab. I am the Executive Director of18 the City Planning Commission. I am here19 today to present --20 COUNCIL PRESIDENT VERNA:21 Excuse me, Gary. Would you lower your22 microphone and pull it closer to you.23
Thank25 4 3/23/11 - WHOLE - BILL 100135, ETC.1 you.2
10 The Philadelphia Home Rule11 Charter directs the City Planning12 Commission to prepare and submit to the13 Mayor a Recommended Capital Program and14 Budget. As you know, the Recommended15 Capital Program is a proposed six-year16 plan for investing in the City's physical17 and technology infrastructure, community18 facilities and public buildings. 1 Finance Department's Office of Budget and2 Program Evaluation, the Department of3 Public Property, Managing Director's4 Office and City operating departments to5 prepare the Recommended Capital Program6 and Budget. 13 As in years past, the14 availability of City tax-supported,15 general obligation bond funding for16 capital projects depends upon two17 factors: the debt limit imposed upon the18 City by the Pennsylvania Constitution and19 the City's financial capacity to service20 debt on borrowed funds. 1 program for critically needed public2 improvements. "5 Throughout the process of6 developing the Recommended Budget and7 Program, we follow several important8 principles. 5 Projects that help Philadelphia6 become one of the safest cities in7 America increase safety from crime,8 emergencies and accidents at home,9 school, in the neighborhood and at work10 and play. S. Army18 facilities for Police use. 1 improvements, roof replacements and2 mechanical/electrical/plumbing3 improvements at 27 fire stations. 1 improvements and renovations. 1 and other infrastructure improvements2 help to enable access to work and other3 destinations for Philadelphia's4 population. 15 I'm happy to address any questions that16 you may have. 22
Thank23 you very much.24 The proposed Capital Program25 16 3/23/11 - WHOLE - BILL 100135, ETC.1 contains $100 million in new general2 obligation bonds and $240.1 million in3 carry-forward City tax-supported loan4 funds. Can someone explain what years5 the carry-forward funds are from?6
I can do that.7 Rebecca Rhynhart, Budget Director. Good8 afternoon.9
So the 24012 million -- the biggest piece of that is13 from the last two years, for Fiscal '1114 and Fiscal '10. About 130 million of the15 240 million is from the last two years.16 You probably recall the Fiscal '1017 authorization didn't become available18 until actually last spring because of the19 delay in passing that authorization,20 actually having it go to the voters. And21 then the Fiscal '11 loan authorization22 just became available after the November23 election. So that was about 130 million24 of this. And then I can go through how25 17 3/23/11 - WHOLE - BILL 100135, ETC.1 much is from each year if you want me to2 do that now or I can provide that to you.3
How4 long would it take you to give it to us5 now?6
So Fiscal '11 is10 91.9 million. Fiscal '10 is 41.911 million. 2009 is 31.7. 2008 is 20.1.12 2007 is 11.3. 2006 is 14.5. And then it13 gets smaller. I can keep going. 2005 is14 8.0. 2004 is 6.3. And then every other15 year is around million -- million or16 less.17
Maybe18 you could tell us why it takes so long to19 spend capital monies.20
Sure. I think21 that capital projects -- they're not one22 year in nature. So capital projects23 are --24
We're25 18 3/23/11 - WHOLE - BILL 100135, ETC.1 going back to, I think you said, '07.2 That money is carrying forward from '07.3
Right. There's4 probably --5 COUNCIL PRESIDENT VERNA:6 There's a problem.7
Maybe I'll ask8 Gary Knappick, if he's available, to9 join.10 I think from some of the prior11 years, there might be specific delays on12 that. I would like to say before Gary13 joins us that the length of time to14 complete a capital project is something15 that we share your concern in speeding16 that up and we are working towards how to17 speed that up. So that is something that18 we are working towards. But perhaps Gary19 can shed some light.20 (Witness approached witness21 table.)22 DEPUTY COMMISSIONER KNAPPICK:23 Good afternoon, Council President. Gary24 Knappick, Deputy Commissioner of Public25 19 3/23/11 - WHOLE - BILL 100135, ETC.1 Property.2
Good3 afternoon.4 DEPUTY COMMISSIONER KNAPPICK:5 The process of public works bidding,6 there are four sub-phases in moving7 forward with a public works project.8 Each one of them has sub-phases. There's9 about 15 of them, and they can span due10 to licensing requirements and purchasing11 requirements anywhere between -- the12 minimum duration of about 59 weeks to13 about 249 weeks.14 We're looking at a system right15 now that we're going to put in place,16 which is a public works requirement17 system. It's called Job Order18 Contracting. Last Tuesday we received a19 proposal for consulting services on it.20 That would reduce that requirement or21 those requirements to between 20 weeks22 and 156 weeks on the bigger projects,23 between a third and half the time.24 COUNCIL PRESIDENT VERNA:25 20 3/23/11 - WHOLE - BILL 100135, ETC.1 Councilman Rizzo for a point of2 information.3
Thank you,4 Madam President.5 I think we've asked this6 question before, Madam President, and I'm7 following up on you.8 I have information that a9 number of bridge reconstruction10 improvements has been carried forward11 dating back from Fiscal Year '99. That's12 well beyond what you just stated.13 DEPUTY COMMISSIONER KNAPPICK:14 I couldn't speak to that --15
I don't know18 that specific information, but we are19 thinking -- do you want to see if they20 have the information.21
Sure. We do22 have, I believe, representatives from the23 Streets Department who could answer24 specific questions about that, but bridge25 21 3/23/11 - WHOLE - BILL 100135, ETC.1 projects are particularly difficult and2 very time consuming because they involve3 the cooperation of other entities, mainly4 the railroads, Amtrak in particular,5 which results in many delays. They have6 to make accommodations for their7 electrical lines that go under the8 bridges.9
We're17 talking about carry forward and we're18 talking about Fiscal Year '99. So I19 would like somebody to comment on why20 that carry forward, which the President21 pointed out and I believe is22 unacceptable.23
I mean,24 sometimes it's --25 22 3/23/11 - WHOLE - BILL 100135, ETC.1
Why don't we ask2 the department to come up to explain it.3 (Witness approached witness4 table.)5 DEPUTY COMMISSIONER BUCKLEY:6 Good afternoon. My name is Steven7 Buckley. I'm Deputy Commissioner for8 Transportation at the Streets Department.9 Councilman, I do hear your10 concern. I guess the original11 carry-forward dollars that are included12 in the Capital Budget is a snapshot in13 time that I believe is taken in October14 and November. Since then, the Streets15 Department has spent down all of its16 dollars prior to FY2007. So those17 dollars don't exist anymore. They've18 been encumbered this year.19
That's good20 to hear, especially when it's a bridge.21 Thank you.22 Thank you, Madam President.23 COUNCIL PRESIDENT VERNA:24 You're welcome.25 23 3/23/11 - WHOLE - BILL 100135, ETC.1 Doesn't the delay in spending2 capital funds actually increase the cost3 of the various projects?4
-- of the cost?8 DEPUTY COMMISSIONER KNAPPICK:9 Gary Knappick again, Council President.10 In some cases, that does happen11 due to escalation. Depends on the times.12 Recently the trend has been to lower the13 cost because of the job market.14 Currently I think we're seeing a trend15 where a lot of the materials are going up16 in price because of the situation in17 China and their buying.18
Well,19 I think we keep talking about this, but I20 think there's a time when we've got to do21 something about it.22 What steps are the23 Administration taking for spending this24 money in a more timely fashion?25 24 3/23/11 - WHOLE - BILL 100135, ETC.1 DEPUTY COMMISSIONER KNAPPICK:2 One of the initiatives that we just put3 in place, as I alluded to a few minutes4 ago, is Job Order Contracting. What that5 is is a requirements-based contracting6 system that's tailored to specific type7 of projects, so that we can move the8 projects without the administrative9 delays we normally have. What happens10 is, it's put out for a bid. It's a very11 voluminous bid document with12 specifications, and it's basically unit13 priced for the type of projects we14 typically do. So that we can move the15 projects that we have now in small to16 medium range, I'm going to say between17 the 50,000 and 700,000 range, very18 quickly. It will reduce the timeframes19 by about a third.20 It's already bid. It's bid on21 the basis of a factor in the public works22 bidding process.23
We're also24 looking at the internal steps taken in25 25 3/23/11 - WHOLE - BILL 100135, ETC.1 the capital works process to see if2 anything can be shortened or done in a3 more efficient manner. We're also4 working with Law on that, so -- to see5 what's actually required by Law and what6 might be a way to shorten that process.7 So we're doing both of these8 things at the same time, because we share9 your concern about the speed of our10 spend. We're spending about between 511 and 6 million a month, but it could be12 more. So we're working on that.13
Can14 someone give us the specific police15 stations that will be renovated with16 these capital dollars, and when do you17 expect these projects to be completed?18
Police stations,19 was that your question? I'm sorry. The20 specific police stations?21
The22 specific police stations that will be23 renovated.24
I can identify25 26 3/23/11 - WHOLE - BILL 100135, ETC.1 the specific stations by district. This2 is for the budget year, and we're3 recommending funding for roof4 replacements for the 3rd and 4th Police5 District, the 7th Police District, the6 16th Police District, the 35th Police7 District, the 39th, the 18th and the8 26th.9 For mechanical, electrical and10 plumbing renovations, there again, the11 35th District will be treated, the 17th,12 the 39th and the Police Academy facility.13 Various site work will be done14 at the Police Administration building.15 There are two major projects16 that involve new or substantially17 reconstructed facilities. One of those18 is a new SWAT/bomb/K9 facility along19 State Road at the Police Academy. We20 also are going to be receiving from the21 federal government two former U.S. Army22 Reserve facilities, one on Wissahickon23 Avenue, the other on Woodhaven Avenue,24 that will be converted to police25 27 3/23/11 - WHOLE - BILL 100135, ETC.1 operational facilities. And those are2 the police stations that are recommended3 for treatment in the budget year.4
There I might7 like to have some help from Gary.8 DEPUTY COMMISSIONER KNAPPICK:9 I'd like to give you an exact answer on10 that. We probably won't have Job Order11 Contracting in place until, I'm going to12 say, the beginning of next year, the end13 of this calendar year, at which point14 we'll be able to start implementing that.15 A lot of those projects are roof-related16 projects. We should be able to spend17 down that money within a year after that.18
The21 Chair recognizes Councilman Green for a22 point of information.23
Thank you,24 Madam Chair.25 28 3/23/11 - WHOLE - BILL 100135, ETC.1 I'm holding a document from the2 2009 budget requests that City Council3 made where we specifically asked when the4 money was going to be spent. If you5 recall in 2007, PICA produced a report6 that showed critical life-safety, health,7 other issues that should be addressed.8 They called them, I think, Class A items.9 This is a response from Public Property10 about when the projects would be let and11 undertaken. The police12 mechanical/electrical/plumbing13 improvements that you just mentioned, we14 were told in May of '09 that the first15 construction bid package is scheduled for16 January 2010, with the last from March17 2010, and the completion of all18 construction work will be July 2011. Now19 you're telling us that it's not even20 going to be let until next year.21 Roof replacement, Fire/Police,22 which you just mentioned, we were told23 that the bid packages would be done by24 August 2009, and construction and25 29 3/23/11 - WHOLE - BILL 100135, ETC.1 completion of all work would be done by2 June 2010. And these are issues raised3 by PICA that are extremely critical4 repairs that should have been done. We5 raised this during the budget in 2008.6 In 2009 we asked for specifics about when7 it would happen. You assured us it would8 happen. And now I guess you're9 reassuring us that it will happen on the10 dates that you're saying now.11 I mean, it's really -- when you12 tell us things that -- you're asking us13 to appropriate money for Capital Budget14 for things that you tell us are going to15 get done. You assure us that you agree16 they're priorities and then you don't do17 them.18
Well, in terms19 of the roof repairs and the police -- I20 mean, the items we have in the '1221 Recommended Budget are not ones that were22 in budget from years ago, so they're23 different.24
So is this25 30 3/23/11 - WHOLE - BILL 100135, ETC.1 work all done?2 DEPUTY COMMISSIONER KNAPPICK:3 No. I can give you --4
We can look at5 it and check it.6 DEPUTY COMMISSIONER KNAPPICK:7 It's not complete all of it, Councilman8 Green. I can give you a little summary9 of that right now, if you'd like.10
I don't want11 to take time doing it now, but, I mean,12 if you could just -- really what I'd like13 for the Capital Budget is where there are14 things like this, a similar statement of15 when it will be done by, when the bid16 packages will be let so that there's17 something that we can hold you18 accountable to next year when you come19 and ask for more money. I mean, it20 raises the bigger issue of why we're21 increasing the City's borrowing capacity22 to borrow money for things that we know23 we won't do for three, four or five years24 from now.25 31 3/23/11 - WHOLE - BILL 100135, ETC.1 Let's not have unrealistic2 things in the Capital Budget. Let's3 borrow less money from Wall Street.4 Let's improve our credit rating and worry5 about it next year or the year after when6 we're actually going to spend it as7 opposed to just going ahead and borrowing8 a hundred million more dollars that we're9 not going to spend for five years.10
To clarify what11 we actually do, we go -- we're coming to12 you now for approval on what's listed in13 the Recommended Capital Budget. We won't14 start any work on those until those are15 approved by you.16 There's four main steps.17 There's pre-design, design, bid and18 construction. The bulk of the cost of19 that project might not be for a year or20 two years down the road, because these21 capital projects, even if done at the22 faster possible, take more than one year.23 We don't issue -- we don't go to the24 market and issue the bonds until we need25 32 3/23/11 - WHOLE - BILL 100135, ETC.1 the cash. So we're not issuing the bonds2 right now. You're giving us the approval3 to -- if you give us hopefully this4 approval, we will start these projects,5 but we won't go to the market on this6 right away until we need the cash.7
But why8 should we approve new capital spending9 when there's seven, eight years of10 backlog? Why don't we just say focus on11 what you haven't done and come back next12 year? Why wouldn't that make sense? And13 then everybody could be focused on what14 we haven't done.15
In20 addition to that, what happens, I found,21 in the past in trying to early on when I22 came on Council to expand rec centers, we23 would put the amount in the budget we24 needed, but by the time we got to the25 33 3/23/11 - WHOLE - BILL 100135, ETC.1 point, the price had gone up, and each2 year we had to keep going back.3 So are you putting enough money4 in the Capital Program so that when you5 get to the project, you have enough6 money? Because you may -- the cost now7 is calculated based on what the cost is8 today, but five years from now, the cost9 is higher, and then you have to sort of10 analyze or figure out if you have enough11 money to pay for the project. Is that12 taken into consideration, increase in13 cost?14 DEPUTY COMMISSIONER KNAPPICK:15 We try to do that. We attempt to do it,16 but the actual estimating process isn't17 an exact science. We kind of look at a18 project and, based on our experience, we19 kind of give it our best guesstimate on20 what it's going to cost. The estimate is21 done on the basis of experience. And22 when we enter a project like a new23 building, we begin with a programming24 phase, and that programming phase usually25 34 3/23/11 - WHOLE - BILL 100135, ETC.1 starts out with a wish list from the user2 agency and then we narrow that into a3 needs list, at which point it somehow has4 to marry with the budget, and in some5 cases it does, in some cases it doesn't.6
Well, it7 took ten years to expand Finley Rec8 Center, because each year Councilman9 White put money into the budget. They10 would put the bid out, and by the time11 the bid came back, it was overbid. The12 next year he had to put additional money13 in the budget. So that cycle kept going,14 until we figured out how to prevent that15 by just appropriating all the money to16 one project to get it done.17
I think Gary18 might have said this, but there is a19 cushion built in. That's obviously what20 we don't want to happen, so that is21 something that you look at, we look at.22 Right?23 DEPUTY COMMISSIONER KNAPPICK:24 Yeah. Depending on the level we give it25 35 3/23/11 - WHOLE - BILL 100135, ETC.1 and how much pencil we put to paper and2 how many things we investigate in3 developing an estimate really -- just4 example as being the SWAT/bomb facility,5 which is out for design. We started6 with -- that involves the PICA funding, 57 million of the PICA funding. The8 original programming on that was done for9 a 17,000-square-foot facility. When we10 finally started putting pencil to paper11 and trying to site it out at the Police12 Academy, we found that the K9 building13 had to be ripped down, and that was one14 of the ones that was cited in the PICA15 report. So we ended up integrating that,16 moving site fixtures around and the17 project expanded quite a bit into a --18 what I originally estimated at 7 and a19 half million went up to 12, and we're in20 the process of backing that down into 1021 and a half right now.22
Thank you,23 Madam President.24 Thank you, Councilman.25 36 3/23/11 - WHOLE - BILL 100135, ETC.1
If I can say2 something on Councilman Green's point of3 why do we have to pass a Capital Budget4 at all. I mean, if we were to not have a5 Capital Budget this year, we wouldn't be6 able to start on paving the streets that7 are in the Capital Budget this year or8 fixing the roof repairs at the police and9 fire and rec stations and doing a variety10 of things that are really essential to11 the City's upkeep of the basic12 infrastructure.13 So there's various stages, as I14 mentioned, of the Capital -- of the spend15 process. So we would be halting the16 beginning stage of that for these17 projects. So we would be delaying the18 continuation of the capital spend.19
I don't20 agree with the premise that we can't do21 planning and we can't do all the work22 that has to be done prior to the23 borrowing. Obviously I would never24 suggest not borrowing to pave streets,25 37 3/23/11 - WHOLE - BILL 100135, ETC.1 but a lot of the stuff in here is clearly2 years away. Why increase our debt limit3 now when we know our rating has been4 lowered by Wall Street when we know we5 don't have to now? We could do the6 planning phases. We can do the other7 stuff that has to be done in the8 background without approval, and when9 you're ready to go to the project next10 year, we'll add that to the limit.11 That's all I'm suggesting.12
Well, I think13 that what we're asking for now is your14 approval to start on the -- to start to15 spend on these projects. You wouldn't16 want --17
You have the22 money. You have 241 -- what you're23 saying then is, you don't have the cash24 in the bank; that is, the $241 million of25 38 3/23/11 - WHOLE - BILL 100135, ETC.1 carry forward, because we've spent it on2 other things, because if --3
There's $2418 million that we haven't spent that we've9 already appropriated and approved that's10 part of capital plans.11
When we approve16 the Capital Budget, that isn't cash in17 the bank. We then have to go out to18 market. There is a timing mismatch,19 because we wait -- it's about a20 two-year -- up to a two-year lag between21 when we go out to market. We don't want22 to enter into any type of contract for23 work on these projects without Council's24 approval. That's why we're here, to get25 39 3/23/11 - WHOLE - BILL 100135, ETC.1 your approval, but it could be in -- it2 is two years from now when we actually go3 to market and borrow the money. We're4 not going to go to market and borrow the5 money after the Capital Budget is passed.6
Okay. So7 what are you going to borrow the money8 for this year and actually get done this9 year?10
What are you13 going to borrow for this year? And of14 the 241 that's carryover, how much have15 we borrowed?16
This year we are17 about to borrow for the '09 and '1018 authorizations.19
So of the20 241 that is backlogged, how much have we21 borrowed?22
Well, we haven't23 borrowed -- let me just think about24 this -- the '09, '10 or '11. So we25 40 3/23/11 - WHOLE - BILL 100135, ETC.1 haven't borrowed about 150 million of it.2
Right. And5 that's about to get borrowed within the6 next month, the '09 and '10.7
So within17 two years from now, we will have spent18 down the entire amount we're borrowing19 now?20
Within three21 years we will definitely spend that down,22 yes.23
Then why24 borrow it?25 41 3/23/11 - WHOLE - BILL 100135, ETC.1
Yeah. If we3 don't need to spend it this year, why4 borrow it this year? Why not borrow it5 in the year before we need to spend it so6 that we don't increase our debt limit?7 Why borrow '09 and '10 now? Why not8 borrow what we are actually going to9 spend next year from '09 and '10 rather10 than increasing our debt by $150 million?11
I think -- that12 is actually what we do. What we do is,13 we look at our cash levels in the capital14 fund, and when it gets to a low point, we15 borrow to replenish that fund.16
Yeah. Okay.17 But you're telling me that some of it18 will not be spent even two years from19 now. So why borrow it now?20 How much of the 150 you're21 going to borrow will be spent by the end22 of Fiscal 2012?23
I can't answer24 that right off the top of my head. We25 42 3/23/11 - WHOLE - BILL 100135, ETC.1 could get that to you, but it's a2 significant amount.3
Well, I4 think we should know that before we5 authorize this, how much you're going to6 spend of what you borrow in Fiscal 2012,7 how much in Fiscal 2013, so that we can8 actually borrow less, have less debt9 service, which is more money available10 for the General Fund. This whole11 strategy doesn't seem to make sense to12 me.13
Perhaps I'm not14 being clear. So maybe it would make more15 sense to talk to you -- to meet about it.16 But, I mean, we definitely watch the cash17 and only borrow when we need the cash.18 So I'd be happy to provide you what our19 capital fund looks like and when our20 borrowing plan is to explain that, but I21 think that your concern is addressed in22 what we do already. It just might need23 some --24
Well, I'm25 43 3/23/11 - WHOLE - BILL 100135, ETC.1 not sure. How much have you borrowed2 that you haven't spent?3
Well, how much4 have we borrowed that we haven't spent?5 We're getting down now -- we watch it on6 a monthly basis, so I don't know the7 exact number right now, but it's getting8 to be on the lower side. So I can't give9 an exact number, but it is getting lower.10 That's why we plan another borrowing.11
Okay. So12 based on the testimony you just gave,13 we're going to borrow the 150 this14 year --15
Wait. This is16 for 100 million. This Capital Budget is17 100 million.18
Right, but19 the Fiscal '09 and '10 we're going to20 borrow this year?21
We'll spend it25 44 3/23/11 - WHOLE - BILL 100135, ETC.1 over the next few years.2
There's a5 certain economy of scale of issuing -- we6 normally issue every two years. So you7 could argue about issuing every year8 versus every two years and the cost of9 the bond counsel and other fees.10
This might11 be a perfect opportunity to do a small12 issuance with a non-underwritten13 offering, basically auctioning the note14 for our Capital Plan to see how that15 works rather than issuing a big16 underwritten offering just to --17
No. I'm20 forgetting the term for when there's sort21 of an auction for the offering rather22 than a firm underwritten offering.23
You mean a24 competitive bid?25 45 3/23/11 - WHOLE - BILL 100135, ETC.1
Competitive2 bid. Thank you. I mean, it seems to me3 like this is an opportunity to test4 competitive bidding in the market for the5 City of Philadelphia to borrow a smaller6 amount for just what we're going to spend7 next year. I don't know why we want to8 pay debt service for a year when we're9 not going to spend the money.10
We are looking at11 doing that for our Tran this year, and12 we're in consult with our underwriters13 and financial advisors to see whether14 that makes sense and whether they think15 that we're ready to do that in the16 market. But we agree with you that if we17 can get to doing competitive bidding,18 that makes sense.19
And why are20 we borrowing money we know we're not21 going to spend next year?22
We are not. I23 think what Rebecca was trying to say is,24 we borrow based on our cash needs. So we25 46 3/23/11 - WHOLE - BILL 100135, ETC.1 monitor our cash. When the cash looks2 like it's going to run out, that's when3 we borrow, and not before. What you4 would approve in the Capital Budget is5 not directly related to what we would6 borrow this year. It's an authorization7 to start spending.8
I understand9 that. So we were talking about what's10 going --11
Let me just try to12 finish.13 And so we don't borrow based on14 this authorization. We borrow based on15 our pace of spending and what we think16 we'll spend over the period for which17 we're borrowing.18
And that was19 my exact question, which is -- I was told20 we were borrowing '09 and '10 this year.21 The appropriation that we gave in '09 and22 '10 for the borrowing ability we gave for23 '09 and '10 this year. My question is,24 will we spend all of that this year, and,25 47 3/23/11 - WHOLE - BILL 100135, ETC.1 if not, why borrow all of that?2
There is -- if3 you issue smaller amounts every year,4 there is the added cost -- the added5 issuance costs of issuing. So there's6 costs of -- there's costs for bond7 counsel and underwriters and various8 other costs that make it efficient, and9 it is common practice to issue what you10 can spend over a two- or even a11 three-year period. That is pretty12 common, because of the cost of actually13 bringing a deal to --14
I'm really15 not trying to be difficult, but I don't16 know of a business that would borrow17 money three years before it's going to18 spend it and pay interest on it for three19 years before it was going to spend it.20 And so what I'm suggesting is maybe going21 to competitive bids for smaller amounts,22 which costs a lot less money than firm23 underwritten offerings, would be the way24 for us to go to determine whether or not25 48 3/23/11 - WHOLE - BILL 100135, ETC.1 we can save on interest expense and other2 things. So, yeah, I'm happy to take this3 conversation offline.4
I have many6 more questions and I'm going to have to7 miss them, so I'll try to address my8 specific department capital items when9 the departments come up, because10 unfortunately I have another appointment11 today.12 So thank you very much for your13 testimony.14
I16 have several more questions, but I think17 it would be very unfair to my colleagues.18 So at this point, I'd like to recognize19 Councilman Goode.20
Thank you,21 Madam President.22 Good afternoon. Mr. Jastrzab,23 in the last page of your testimony -- I'm24 paraphrasing -- you say, I hope that this25 49 3/23/11 - WHOLE - BILL 100135, ETC.1 sampling demonstrates how the Fiscal Year2 2012-2017 Recommended Capital Program3 seeks to make strategic, targeted4 investments in Philadelphia5 infrastructure using our limited6 resources for the greatest public7 benefit.8 What do you mean by "greatest9 public benefit"?10
To serve -- to11 allow the City operating departments to12 serve the public, to perform their13 Charter-mandated responsibilities, as14 well as their other operational15 responsibilities; for example, the16 Recreation Department where we're17 repairing or replacing a roof on a18 recreation center because it's beyond its19 useful life. This Capital Budget and20 Program represents a recommendation to21 replace that roof so that that recreation22 center can continue operation, serving23 residents of the City.24
Are there25 50 3/23/11 - WHOLE - BILL 100135, ETC.1 business and workforce diversity goals2 set for capital projects?3
I think they7 would be different for Public Property8 and then the various other departments9 that run their own capital, so --10
I understand11 that, but my question is, we will spend12 about $9 billion. You're asking us to13 approve several different bills that are14 separate from the Operating Budget.15 There's the Capital Budget. There's the16 Capital Plan. The Capital Plan is for $917 billion. Should there or should there18 not be diversity goals set for that $919 billion?20
There should be.21 There should be, and there is. So we22 should just walk through it for you.23
I would24 actually prefer before we take any voting25 51 3/23/11 - WHOLE - BILL 100135, ETC.1 on the Five Year Capital Plan that you2 submit diversity goals to say how the $93 billion is going to be spent, what4 opportunities are going to exist. And I5 would like you to submit that to the6 Chair. And if we don't receive it, I,7 for one, will be voting no.8
We will9 definitely give that to you. We have it,10 and I think even -- we do have them if11 you want.12 DEPUTY COMMISSIONER KNAPPICK:13 Councilman, we attempt to meet the14 Mayor's goals and we've been successful15 in exceeding those goals in our16 contracting, both in the public works --17
So you're18 telling me it's 2.25 billion?19 DEPUTY COMMISSIONER KNAPPICK:20 Pardon me?21
Are you22 telling me there's 2.25 billion?23 DEPUTY COMMISSIONER KNAPPICK:24 I don't quite understand the question on25 52 3/23/11 - WHOLE - BILL 100135, ETC.1 the 2.25 billion.2
That's 253 percent.4 DEPUTY COMMISSIONER KNAPPICK:5 Oh, I can answer to what was spent last6 year --7
If it's not8 2.25 billion, then give me a figure in9 the billions.10
If you want it11 broken down for the whole five year, we12 could get it for you. Gary was going to13 speak about Public Property, how they did14 last year, if you were interested.15
I'm not16 interested in that. I'm interested in17 how much of the $9 billion is going to18 disadvantaged businesses.19
We'll get that20 to you, then.21 COUNCILMAN GOODE:22 Mr. Jastrzab, what is the Planning23 Commission's diversity goal for this24 fiscal year?25 53 3/23/11 - WHOLE - BILL 100135, ETC.1
Our goal is,2 considering our Operating Budget, 253 percent.4
Yes. For Fiscal7 Year '11, the year we're in now, our8 goal -- our achievement has been 319 percent.10
We have23 contracts in place in our Operating24 Budget that --25 54 3/23/11 - WHOLE - BILL 100135, ETC.1
Yes, we are.4 Yes, we are. And we have in past years5 as well.6
We're meeting it9 through the contracts that we issue, most10 often for planning studies, by having --11
I'm asking12 you specifically what you've done to13 date. Is that that hard?14
No. I'm trying,15 Councilman, I'm trying to answer your16 question.17
We received23 several grants. We've been very24 aggressive in going after grants, and the25 55 3/23/11 - WHOLE - BILL 100135, ETC.1 kind of grants that we receive, we are2 able to contract out with planning,3 architectural firms and other firms that4 help us with planning studies.5
What is the6 total amount that's been contracted and7 what's the total amount that's going to8 disadvantaged businesses?9
Then you12 don't know. And so you shouldn't say13 that you're meeting your goal.14
Well, I know15 that based on the preparation we've done16 for our Operating Budget, our achievement17 of those goals for the year we're in now18 based on --19
I have those20 numbers right here. It says zero21 percent. So I'll move on.22
If it's25 56 3/23/11 - WHOLE - BILL 100135, ETC.1 wrong, we'll deal with it later.2
What is a4 typical capital project and what skill5 set is required for business and6 workforce participation?7
That's probably8 something that Gary should answer.9 DEPUTY COMMISSIONER KNAPPICK:10 I would say a typical capital project11 involves professional services first.12 We've been able to bring in -- our13 numbers are -- I can give you a decent14 number.15
A typical16 capital project is professional services?17 DEPUTY COMMISSIONER KNAPPICK:18 No. It begins with professional services19 and then it moves out into the workforce.20
I said21 what's a typical capital project. Let's22 take curbs and sidewalks, for example.23 Under this plan, the Five Year Plan, how24 much will we spend on curbs and25 57 3/23/11 - WHOLE - BILL 100135, ETC.1 sidewalks?2 DEPUTY COMMISSIONER KNAPPICK:3 I don't know that, Councilman.4
Can you5 forward that information to the Chair?6 Also I'd like a formal response in terms7 of what skill set is required in terms of8 business and workforce participation to9 do curbs and sidewalks. I want to know10 what type of businesses you need, what11 type of workforce skill sets you need12 before we can actually have a talk about13 whether there should be more diversity in14 terms of that simplest of work, curbs and15 sidewalks. That's why I asked what a16 typical capital project is.17 Let me ask this question, which18 I'm sure you do know. Are we contracting19 curbs and sidewalk work out to20 non-Philadelphia firms?21 DEPUTY COMMISSIONER KNAPPICK:22 From our side in the Public Property23 side, the only curbs and sidewalk work24 really that comes into play is when we're25 58 3/23/11 - WHOLE - BILL 100135, ETC.1 doing rec centers and possibly some of2 Fairmount Park. So that might be3 something that --4
Are we5 contracting that work out to6 non-Philadelphia firms?7 DEPUTY COMMISSIONER KNAPPICK:8 The public works bidding procedures are9 such that there is a local business10 preference and it goes to the lowest11 competitive bid.12
Okay. Are13 we contracting that work out to14 non-Philadelphia firms?15 DEPUTY COMMISSIONER KNAPPICK:16 There are some firms that are17 non-Philadelphia. I don't have specifics18 on that, but I'm sure there are.19
Why are we20 contracting that work out to21 non-Philadelphia firms? It's curbs and22 sidewalk work.23
I think what24 Gary is saying is that we give a25 59 3/23/11 - WHOLE - BILL 100135, ETC.1 preference for local business, but we do2 have it open for all to get the lowest3 cost. So we give a preference to local4 bidders, but --5
I thoroughly6 understand that, but we've made the point7 in other hearings that that may be8 financially shrewd but economically9 stupid.10
Yes.16 The Chair recognizes Councilwoman Brown17 for a point of information.18
We're at19 the early first lap of budget hearings20 and we're not going to be accepting the21 practice where Procurement is called to22 answer questions of department heads,23 because it goes to the prevailing,24 consistent, pervasive question we've25 60 3/23/11 - WHOLE - BILL 100135, ETC.1 asked every year, at what point does2 leadership in the departments make it3 plain and make it clear that the City's4 priority, bias -- and I will say bias --5 should be towards Philadelphia firms,6 particularly in instances where we're7 talking about a non-skilled opportunity.8
I think,9 Councilwoman, we do give a local10 Philadelphia preference.11
You've said12 that. I think it's stupid to contract13 out work that can be done by Philadelphia14 businesses and workers. It continues to15 put us at an economic disadvantage. Even16 if you're weighing some fiscal concerns,17 I'm not sure that the economic advantages18 toward trying to keep the dollars within19 Philadelphia with Philadelphia businesses20 and workers doesn't outweigh whatever21 concerns you have.22 If the problem is the rules and23 the laws on the books, that's what we're24 here for, but as we're here talking about25 61 3/23/11 - WHOLE - BILL 100135, ETC.1 a $9 billion Capital Plan, the next2 question I'll ask before I ask my last3 question is simply, even if you're4 contracting out to non-Philadelphia5 firms, do you require them to use6 Philadelphia workers?7 DEPUTY COMMISSIONER KNAPPICK:8 No. That's not a requirement of a9 contract.10
Why wouldn't11 we require them to use Philadelphia12 workers?13 DEPUTY COMMISSIONER KNAPPICK:14 It's just not a requirement that's in the15 laws that we work under. I don't know16 that for any other reason than that.17
Whatever we18 need to work out, we need to work out.19 We can't assume that certain things20 aren't legal and can't be handled through21 amending current rules and procedures we22 have, even if it takes Charter changes.23 Some things we may be preempted by;24 others we are not.25 62 3/23/11 - WHOLE - BILL 100135, ETC.1 The last question I'm going to2 ask for the record, which I want a3 written response to through the Chair for4 this Council, is how much of the $95 billion plan will go to Philadelphia6 businesses and workers as well. That's a7 fair question if you're asking me to8 approve a $9 billion plan.9 Thank you, Madam Chair.10
Thank11 you.12 The Chair recognizes Councilman13 Jones.14
Thank you,15 Madam President.16 I'm going to start this part of17 the hearing with what I started18 yesterday, which is Resolution No.19 100848, which requires an analysis of how20 we bid out versus doing work internally21 by way of procurement opportunities22 inclusive of capital projects. It is23 important because of what my colleagues24 have said, because there are benefits to25 63 3/23/11 - WHOLE - BILL 100135, ETC.1 the City of Philadelphia. And I know we2 have to navigate the legalities of it and3 how we actually implement it, but there4 is a cost effectiveness to this.5 Now, each year -- and I've6 learned something. I usually get upset7 when people say point of information that8 isn't really a point of information but9 it's questions, but Bill highlighted a10 lot of, Bill Green, Councilman Green,11 highlighted a lot of the concerns that we12 all share, that we had a $2 billion13 stimulus package that we received from14 the federal government that was on the15 record yesterday, and it was contracts16 that we put out. Over this plan, we're17 looking at a $9 billion capital project18 over six years. Isn't that your19 testimony?20
Yes. That's22 more stimulus than could be stimulated by23 the federal government that we control24 locally. It does not make sense that we25 64 3/23/11 - WHOLE - BILL 100135, ETC.1 don't hasten to that.2 Now, from what I've heard and3 my procurement background is, the problem4 is not you. The problem is the traffic5 cop controlling the departments and6 moving those projects forward to go to7 bid to be moved on, and we have to fix8 that. We have to fix that so that people9 that are sitting in union halls, people10 that are sitting in barber shops actually11 get job opportunities over capital12 dollars, that we don't have to wait for13 Congress, we don't care who is the14 President, we won't care who the Governor15 is, that we control.16 So what you hear from my17 colleagues is a consistent clarion cry.18 I don't care what district you're from.19 You want people from your district to20 work, and we have that within our21 control. And so it's not going to be22 good enough -- we're in the beginning,23 which is a good thing, so you can go back24 in the huddle, figure out how you can25 65 3/23/11 - WHOLE - BILL 100135, ETC.1 respond to some of the concerns of this2 body.3 We really need to take a look4 at how we're doing this, whether it's5 beefing up the Procurement Commissioners6 so that they can do some of that kind of7 prodding of cattle or projects that we8 need along, because we're borrowing9 money, maybe -- and I heard that we're10 not asking for cash too quickly, so it's11 not interest, I get that part, but there12 are people sitting waiting for these13 projects to help improve their lives but14 also contract opportunities.15 Now, the way this information16 is presented, I see categories, Streets,17 Police, Parks and Rec, Public Property,18 but as a District Councilperson, what19 street, what parking situation so that I20 can have a better sense and explain it to21 the 155,000 people I represent? Is there22 relief coming for the pothole that they23 have to navigate every day?24 So the way you present this25 66 3/23/11 - WHOLE - BILL 100135, ETC.1 information to me is important as well.2 So in the 4th District, you mentioned the3 39th Police District. So now I know that4 they're going to seek some relief. But5 in the dialogue and exchange that we will6 have, I know that the 19th District has a7 dangerous situation with a gas pump that8 has gone unaddressed since I've been9 elected. And so I'd like to know at what10 point in the continuum of construction11 they're going to actually get a pump.12 So when you present this13 information for a District Councilperson,14 it would be helpful in the 7th, in the15 9th District to know when these things16 are going to occur.17
So, I mean19 just at the beginning of this, these20 things present a problem for us to even21 begin to consider whether this is a good22 Capital Budget or a bad one for the 4th23 District. So I need the information24 massaged in a different way.25 67 3/23/11 - WHOLE - BILL 100135, ETC.1
Councilman, we4 can -- when we prepare the Capital5 Program and Budget, we're doing it with6 an eye towards crafting an ordinance that7 we can transmit to you for introduction8 in this body. But we can also take the9 data that we've generated about those10 projects and sort them by Council11 district, and I'd be happy to provide to12 the Chair a list of all projects by13 Council district. We will do that for14 you.15
In addition,16 I'm going to reference Resolution No.17 100848. Every department that we go --18 that I go through, that I question, you19 hear the questions about employment, you20 hear the questions about female and21 minority participation, but also I want22 to know that my department heads are23 analyzing whether or not it's better to24 bid out this project or to do -- or find25 68 3/23/11 - WHOLE - BILL 100135, ETC.1 a way to work with Public Property or2 Recreation or to do it internally.3 Because if we're looking for quarters in4 the couch to try to keep fire stations5 open, we're going to also charge you with6 that kind of scrutiny, analysis to7 provide us good information about good8 decisions that we're making with our9 appropriations.10 So it's the beginning of the11 process. We have time now, whether12 through the Operating Budget or the13 Capital Budget, to kind of get that14 information massaged in a way that it15 becomes useful information to the people16 in this room.17 Thank you, Madam Chair.18
The19 Chair recognizes Councilwoman Blackwell.20
Thank21 you, Madam President.22 I have a question for23 Mr. Dubow.24
Is25 69 3/23/11 - WHOLE - BILL 100135, ETC.1 Mr. Dubow in the room?2 I believe he's out of the room3 making a phone call.4