COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE OF THE WHOLE - - - Room 696, City Hall Philadelphia, Pennsylvania May 6, 2003 2:15 p.m. - - - BILL 030242 - an Ordinance providing for the contingent exemption, abatement or credit of certain taxes within specified geographic area, including by amending Bill No. 970788-A (approved December..... BILL 030252 - an Ordinance removing the Properties known generally as the Brewerytown Development from the Philadelphia Keystone Opportunity Zone, subject to the request and consent of the owners of said.... - - - PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILMAN MICHAEL A. NUTTER COUNCILMAN FRANK DICICCO COUNCILMAN DARRELL L. CLARKE COUNCILMAN DAVID COHEN COUNCILMAN ANGEL ORTIZ COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN JAMES F. KENNEY COUNCILMAN FRANK RIZZO COUNCILWOMAN JANNIE L. BLACKWELL COUNCILWOMAN MARIAN B. TASCO COUNCILMAN RICHARD T. MARIANO V A R A L L O Incorporated Litigation Support Services 1835 Market Street, Suite 600 Philadelphia, PA 19103 215.561.2220 215.567.2670 2 I N D E X BILL 030242 James J. Cuorato, City Representative, Director of Commerce................ BILL 030252 James J. Cuorato, City Representative, Director of Commerce................ 49 3 5/6/03 - Committee of the Whole - Bill 030242
We are going to recess the public meeting on City Streets for a few more minutes to go into the Committee of the Whole. There is an additional amendment that will be offered to the Bill 000682 that is being prepared as we speak. It shouldn't take all that long, but in the interest of time, we'll go into the Committee of the Whole. Thank you, Madam President.
Good afternoon, everyone. This is the public hearing of the Committee of the Whole regarding Bill Nos. 030242 and 030252. I would ask Mr. McPherson to please read the title of the bills.
Bill No. 030242, an Ordinance providing for the contingent exemption, abatement or credit of certain taxes within specified geographic areas, including by amending Bill No. 970788-A (approved December 30, 1998), relating to the boundaries of the Keystone Opportunity Zone, and by amending Bill No. 010092 (approved February 28, 2001), relating to the boundaries of the Keystone Opportunity Expansion Zone, and by amending Chapter 19-3200 of The 4 5/6/03 - Committee of the Whole - Bill 030242 Philadelphia Code, entitled Keystone Opportunity Zone, by providing for a Keystone Opportunity Improvement Zone, and by amending certain effective dates, all under certain terms and conditions. Bill No. 030252, an Ordinance removing the Properties known generally as the Brewerytown Development from the Philadelphia Keystone Opportunity Zone, subject to the request and consent of the owners of said Properties, under certain terms and conditions.
Thank you. Mr. Cuorato, would you please take the witness table. Good afternoon. Please identify yourself for the record and proceed with your testimony.
Good afternoon, Madam President, members of City Council. My name is James Cuorato. I'm a City Representative and Director of Commerce for the City of Philadelphia. With me is Vince Dougherty, Keystone Opportunity Zone Program administrator for the Commerce Department. Madam President, I actually have 5 5/6/03 - Committee of the Whole - Bill 030242 testimony on both bills. The longer testimony is for 030242, which establishes the Keystone Opportunity Improvement Zones, and then I have a shorter statement on 030252, which removes one area from the KOZ. So with your permission, I will proceed with my testimony on Bill 030242.
Please do. Has your testimony been circulated to members of the Committee?
I believe it is being circulated right now, Madam President.
Thank you. And Mr. Cuorato, would the map there indicate what is definitely under a KOZ presently and what you're proposing? Is that what the map will do?
Yes, Madam President. We can get you a reduced copy, Councilman.
The noise 6 5/6/03 - Committee of the Whole - Bill 030242 level is really much too high. Please proceed.
I'm sorry, Madam President. Councilman Ortiz asked me if we would be able to provide reduced copies of this map for him, and we certainly will do that for both him and other members of City Council.
Bill 030242 would authorize the designation of three Keystone Opportunity Improvements Zones in the City and also authorize the City to add additional parcels throughout the City to the existing Keystone Opportunity Zones or KOZs. Briefly by way of background, in the closing days of the fall session of 2002, the state legislature passed Senate Bill 1478. This bill 19 amended the Keystone Opportunity Zone Program by first authorizing the creation of Keystone Opportunity Improvement Zones; second, allowing for the addition of properties to exist in Keystone Opportunity Zones; and, third, creating a mechanism for removing properties from the KOZ. Keystone Opportunity Improvement Zones, 7 5/6/03 - Committee of the Whole - Bill 030242 simply put, are another round of KOZs. The benefits, the regulations and procedures are the same as the KOZ. The tax benefits in the KOIZs will begin on January 1, 2004 and will last for years. 6 The intent of the KOIZ is to grant KOZ 7 benefits to specific areas that had potential 8 projects in the pipeline that would have a 9 substantial and immediate impact. 10 What is different about the KOIZs is the 11 process by which they were designated. The law 12 stated that KOIZs could only be designated by the 13 Governor by way of executive order. Furthermore, 14 the designation had to be made by December 31, 2002, 15 effectively making the choice of areas the decision of Governor Schweiker. While local governments were encouraged to submit recommendations for inclusion, the final decision rested solely with the Governor. Once designated by the Governor, the local taxing bodies would need to pass legislation approving the designation and authorizing the required local tax exemptions and abatements under the KOZ program. If the local taxing bodies fail to pass the required legislation and/or the local KOZ 8 5/6/03 - Committee of the Whole - Bill 030242 administrator fails to submit the required application by June 1, 2003, the KOIZ will not go into effect. On December 31, 2002, Governor Schweiker officially designated KOIZs statewide, three of 7 which are in Philadelphia. 6 acre site in Byberry East, portions of 9 the University City area, including the 30th Street 10 Post Office complex, the City-owned portions of the 11 Civic Center complex, Amtrak's 30th Street rail yard and vacant land owned by the University City Science Center and 385 acres of vacant property in the Philadelphia Naval Business Center. 2100 Kubach Road is the former Conrail Control Center for the East Coast. Since the breakup of Conrail, this property has sat vacant and available. The special construction and security systems in the building limit the reuse of the facility. One potential user that has come forward is Vanguard Group. In the aftermath of September 11th, this Malvern-based financial services company is looking for a secured data center. This building would be a good fit for Vanguard. 9 5/6/03 - Committee of the Whole - Bill 030242 The KOIZ benefits are critical to make this project work for Vanguard. This project will lead to an investment by Vanguard of $5 to $10 million in leasehold improvements in the property and $80 million for computer and telecommunications systems. Vanguard projects that 50 new jobs for the City of Philadelphia will be created immediately, with the expectation of an additional 150 jobs being added incrementally over the next few years. We have been trying for a number of years to attract this nationally renowned company to Philadelphia, and the KOIZ designation finally gives us the opportunity. In the University City Science Center KOIZ, there are four significant reasons for supporting KOIZ designation. First, the properties designated for KOIZ are already designated KOZ. As a result, the KOIZ effectively resets the KOZ clock to allow for development.
Second, inclusion of the Civic Center and the University City Science Center parcels, as well as others in this KOIZ, are critical to the City's strategy to develop, grow and attract 10 5/6/03 - Committee of the Whole - Bill 030242 high-tech and biotech companies to the City. This area is the hub for such development. We need to have the tools such as KOZ in place to compete for high-tech and biotech companies. Third, as you all know, the planned move of the main postal distribution center from the 30th Street facility has been postponed by the Postal Service. As a result, when the post office finally vacates the building, the benefits of the current KOZ will have nearly expired. The redevelopment of the massive 30th Street Post Office complex is critical to the continued development of Center City and the University City area. The KOIZ benefits are vital to the redevelopment. Finally, the redevelopment of the Amtrak rail yard is extremely important to the City. The first phase of the redevelopment, the new parking garage, is underway. The second phase, the proposed Cira Center, would not be finished until the fall of 2006, leaving only four years of KOZ benefits left to attract tenants. KOIZ designation is very important to spurring development at this challenging site. The last KOIZ area designated by the 11 5/6/03 - Committee of the Whole - Bill 030242 Governor is 385 acres at the Philadelphia Naval Business Center. This area is already designated as KOZ. Like the Post Office complex and some other KOZ sites throughout the City, issues beyond our control have prevented development of the sites from occurring in a timely fashion. As a result, by the time new construction can occur, six or seven years of the original KOZ benefits will have lapsed, leaving little KOZ incentives left to attract new investment and new businesses. The KOIZ designation will reset the KOZ clock allowing time for development to occur. The second issue that this bill 15 addresses is the addition of properties to the existing KOZs. Senate Bill 1478 allows additions to the zone subject to the same qualifications as the original zones. For example, the added properties must be contiguous to existing KOZ; the total acreage of the zone cannot exceed the original limits; the property must meet the vacant underutilized tax-delinquent defective criteria; and, finally, the added properties expire at the same time as the KOZ in which it is placed. The properties we are proposing to add 12 5/6/03 - Committee of the Whole - Bill 030242 to the program can be placed into two categories: Cleanup of existing sites or new sites. Cleanup sites are generally sites that were not included in the original KOZ or KOEZ because they were occupied by an operating business or were an occupied home or in some cases, they were just overlooked. They are often the missing teeth in a block that is otherwise KOZ or are sites that abut a KOZ parcel that by adding them to the KOZ enlarges the original KOZ site making it a more attractive development parcel. These sites clean up these issues. The City or one of its delegate agencies, such as the Redevelopment Authority or PIDC, has or will have by the end of 2003 acquired every site in this category except one. The total KOZ cost to the City under this category is the real estate taxes on the one privately owned property at 1711 West Allegheny Avenue, and that is $1,963 per year. The new sites are, as the name suggests, properties that are in the KOZ areas and make sense to add to the KOZ program. They complement the economic development efforts we are undertaking in the areas where they are located. Most of the sites 13 5/6/03 - Committee of the Whole - Bill 030242 are located in the old industrial areas of Allegheny West, Hunting Park West and American Street. The largest of these sites is the Budd Company complex on Hunting Park Avenue.
As I am sure you know, after years of struggling to survive, Budd has announced that it will close its Philadelphia manufacturing facility this September. The Budd closing will create a major void in what is otherwise a strong industrial area of the City. Since most of the Budd buildings are old and functionally obsolete, there is limited reuse of the buildings without significant investment. Vacant industrial properties would have negative impact on the area and the surrounding companies such as Tastykake, Pep Boys and Penn Fishing Reel. The total lost revenue to the City for all of the properties in this legislation as they now stand, both KOIZ and additions to existing KOZs, is approximately $770,000. A preliminary analysis based on proposed projects in just the KOIZ areas shows a potential $11 million wage tax income from construction and an annual $18 million wage tax income once the properties are fully developed and occupied. 14 5/6/03 - Committee of the Whole - Bill 030242 We note in our KOZ Annual Report to you that the KOZ program has been extremely successful. To date, 92 companies have moved into or expanded into the KOZ, investing over $200 million in new construction, rehabilitation of buildings and the purchase of machinery and equipment. 2700 jobs have been created and an additional 1750 jobs have been retained. The KOZ successes are across the board, in our industrial parks, in our old industrial neighborhoods, in our high-tech areas and in the Philadelphia Naval Business Center. The companies include startups, city expansions and companies moving into the City. They are in the manufacturing sector, the service sector, the high-tech sector and the distribution sector. They are large; they are small; and they are every size in between. The Keystone Opportunity Zone Program is one of the most effective economic development tools that we have ever had at our disposal. It enables us to target certain undeveloped or underdeveloped areas for new investment without putting a strain on the City's General Fund. Because of the great success of the KOZ 15 5/6/03 - Committee of the Whole - Bill 030242 in its first four years and because of the great opportunities offered by the parcels that we propose adding to the KOZ program, I would respectfully request your favorable consideration of Bill 030242. Finally, I would also respectfully request that the rules of Council be suspended to allow for first reading at the next session of Council. Again, we have a June 1st deadline to submit our application to the state, so this waiver would be very helpful in enabling us to meet that deadline. Thank you for your attention, and I'd be glad to answer any questions that members of Council may have.
Thank you very much. The Chair recognizes Councilman Mariano.
Thank you, Madam Chairwoman. I would like at this time to take the opportunity to leave to take care of business up in my council district and vote yes for this bill and any other bills and for all the amendments to the Committee today. 16 5/6/03 - Committee of the Whole - Bill 030242
Thank you. The Chair recognizes Councilwoman Tasco.
Madam President, I do have to leave on Council business. I'd like to be recorded as voting aye on this bill and any other bills and amendments.
Thank you. Leave will be granted. Mr. Cuorato, for the record, would you please explain the differences between a Keystone Opportunity Zone, a Keystone Opportunity Expansion Zone and a Keystone Opportunity Improvement Zone?
I would be glad to do that, Madam President. I will tell you, I have trouble keeping track of them myself.
Well, I think it should be very clear on the record, if you don't mind.
The concept is basically state authorization by which cities can designate 17 5/6/03 - Committee of the Whole - Bill 030242 certain areas as tax-free zones; that is, businesses that move into these areas pay no state or city business taxes for a period of years. The first round of these zone designations were simply designated Keystone Opportunity Zones, KOZs for short. The City designated such zones, went through the City 9 Council approval process, and we were operating with 10 12 KOZs. 11 The legislature in Harrisburg then came 12 back and basically wanted to provide a mechanism for cities to add additional areas and a longer period of time for those tax exemptions. The Keystone Opportunity Zone benefits expire in 2010. When the legislature passed the bill enabling cities to add new zones, that period of time during which no taxes are paid extended to 2013. The second round, just to differentiate them from the first round, the second round was called Keystone Opportunity Expansion Zones. The City added eight additional zones for a total of 20. So we had 12 KOZs and eight KOEZs. The third round, which just occurred right at the end of 2002, set some new rules. Same 18 5/6/03 - Committee of the Whole - Bill 030242 basic concept, no city or state business taxes paid for a period of years, but it set the time frame at years, beginning January 1st, 2004 and extending 5 to 2019. 6 So we now had a third set of zones that 7 would be designated, but the mechanism by which 8 these zones were established was different from the 9 first two. The first two, KOZs and KOEZs, were up 10 to the City to designate based on certain criteria, 11 which we did. For the third round, the KOIZs, which 12 encompassed the 15-year period, they could only be 13 designated by the Governor by executive order, which 14 then Governor Schweiker did in December of 2002. 15 The Governor designated three areas in Philadelphia, and those are the three that we are bringing to City Council today for its consideration and approval. We do support all three of those being added as KOIZs. So we're in a situation now, Madam President, where it can be a little confusing. We do the best job we can to explain the differences to the businesses that we deal with, but depending on which area that you move into, your tax benefits could last either through 2010, 2013 or 2019. 19 5/6/03 - Committee of the Whole - Bill 030242 And I know it's a convoluted explanation. I did the best I could.
Were there limitations on the size of the zones?
How about on the KOZ? I know at one point in time there were limitations.
Madam President, I'll ask Mr. Dougherty to respond to that question.
Good afternoon, Madam Chair. My name is Vincent Dougherty. I am the KOZ administrator for the Commerce Department. The original Keystone Opportunity Zone allowed for a maximum of 2500 acres in the KOZ, citywide or zonewide. KOEZs allowed for 1500 additional acres in the KOEZ, and the KOIZ had no 22 limitations in the state legislation.
Mr. Cuorato, what is the administration's position with regard to including existing business in a Keystone Zone? You 20 5/6/03 - Committee of the Whole - Bill 030242 state in your executive summary that 1831 West Allegheny Avenue is a potential new site due to the fact that the property is surrounded by KOZ properties and, therefore, at a competitive disadvantage as far as leasing is concerned. Are there any other properties that have similar circumstances that you are not proposing to include in the KOZ?
Madam President, we looked hard and long at numerous properties for inclusion, and, actually, the list of properties that were on our original list for consideration of inclusion is much, much longer than the properties that we're here recommending to you today. We tried to be very prudent in only looking at properties that were vacant, underused, underutilized and, frankly, needed this designation in order to have a chance at being developed. So I believe I can say the answer to your question is that any property that we've included on our list was the result of our belief, the administration's belief, that it was quite possibly the only way we could have these properties developed in the time frame within the next five to 21 5/6/03 - Committee of the Whole - Bill 030242 ten years.
What is the administration's position with KOZ and residential development?
We do not support KOZ designation for any residential development, and, in fact, Madam President, the companion bill before consideration by the Committee of the Whole today, Bill 030252, actually asks for authorization to remove a property from the KOZ specifically because it is designated for residential development.
Would you describe the procedure that was used in selecting the new sites that you are proposing in Section 3 of your summary?
Yes. Madam President, what we did was look at existing areas, and, again, I'll refer back to my testimony. We looked at existing KOZ or KOEZ areas to see what had changed over the last four or five years and if there was a basis for, in some cases, making a development parcel larger and more attractive. Again, referring to my testimony, if they complemented existing economic development 22 5/6/03 - Committee of the Whole - Bill 030242 efforts that were undertaken in certain areas, most of the sites that are in Section 3 are concentrated in Allegheny West, Hunting Park West and American Street. And, again, the example that I cited I think gets to the heart of what we were trying to accomplish here, which is the Budd Company. Back when we designated KOZs and KOEZs, the Budd Company was operating, and I actually had gone out to meet with them and had every expectation they would continue to operate. Things changed. The company ended up going out of business here in Philadelphia, and that property, in our judgment, would not be developable without the incentive of a KOZ. So this legislation gives us the opportunity to give a KOZ designation and make it more attractive and I think give it a good chance to be redeveloped.
Mr. Cuorato, did you consult with the District Councilperson to ask if they wanted any other site added to this ordinance?
We did, Madam Chair. Primarily through the efforts of Mr. Dougherty, we 23 5/6/03 - Committee of the Whole - Bill 030242 touched base with every member of City Council, every District Councilperson, in some cases some members of Council-at-large, I believe, either the Council member directly or their staff person. And we also distributed the executive summary to which you referred at least a week or ten days or so ago just to make sure that everyone had a chance to review the list of properties.
What is the total projected revenue loss to the City and School District over the next years by including these 13 properties? 14
Madam Chair, the lost 15 revenue from all of the properties that we are proposing in this legislation, including the new KOIZs in addition to the existing KOZs, right now is approximately $770,000.
$770,000. About $445,000 of that, by our estimate, is money that would go to the School District.
Yes, Madam President, that 24 5/6/03 - Committee of the Whole - Bill 030242 is correct. And, again, I would just note in my testimony strictly from a cost benefit analysis, our projections are that with this tax-free designation, the projects that will be generated will produce in the KOIZ areas alone potentially $11 million in wage tax and $18 million annually in wage tax once the properties are fully developed. So we are foregoing less than a million dollars in revenue from the existing properties because most of them are vacant, nearly all of them are vacant properties right now. Our expectation and our hope is that with this designation, we will be able to attract development, and we do have a good track record of doing that, and that will lead to projects and new jobs and new wage taxes.
Mr. Cuorato, isn't that a million dollars per year? Is that what it amounts to, about $15 million?
Yes, Madam President. It's $770,000 in today's dollars for this year. So, yes, it would be -- it wouldn't be 770,000 for the full 15 years, because the 770,000 includes properties that are in the KOIZs, which would run 25 5/6/03 - Committee of the Whole - Bill 030242 for 15 years, but also properties that are being added to KOZs and KOEZs, which in some cases would be either until 2010 or until 2013.
What is the administration's -- I'm sorry. Councilman Nutter has a point of information. Councilman Nutter.
Thank you, Madam President. Mr. Cuorato, I thought that the President's question was actually a two-part question. One, the President asked about a 15-year schedule, which actually you have to incorporate the 770 per year for the 15. But, I mean, if this works right, the number would actually be much greater in terms of anticipated revenues which will not be realized as a result of development. Now, when we do TIFs, for instance, you usually give us a full schedule of the anticipated revenues generated and then a separate schedule with the revenues that will not either come to the City or the School District because they've usually been diverted to deal with the TIF loan or something like that. 5/6/03 - Committee of the Whole - Bill 030242 So you may not be able to predict with absolute certainty about all of these sites, but there is some anticipated development at some of these sites. And so do you have a schedule that shows tax revenues abated or forgiven City and School District as the sites are developed? I thought that was the real question.
Right. And, again, with what we're proposing, the properties we're proposing to add today, our judgment is that without KOZ designation, it will be very difficult for these properties to be developed, and it's hard for me --
-- to go through this list and make judgments as to which properties would be developed if we took no action. If we took no 24 action --
I understand. Let 27 5/6/03 - Committee of the Whole - Bill 030242 me make sure we're not going down the wrong path. I'm in full support of the concept here. I'm just trying to make sure that the question that was asked, or the one I thought that was asked, gets an appropriate answer. I believe that we should do this. I believe that we should get the development. The question was on the tax side, and if at the moment you don't have the full schedule by zone or by project that lays out what the anticipated -- if this project happens, it will generate X amount of dollars in city tax, state tax, all of the other taxes, most of which will be forgiven as a part of the zone, but I think we're trying to put some context as to what does this all mean. And if there are not those kinds of schedules available at the moment, I can understand that. You don't have to defend kind of the "but for" conversation. We don't have to have that. That wasn't my point of information. It was an add-on to the question that was asked by the Council President. We can go into that further in my own round of questioning, but thank you. Thank you, Madam President. 28 5/6/03 - Committee of the Whole - Bill 030242
Mr. Cuorato, I only have two more questions, or maybe three. Would the $770,000 per year be reflected in the five-year plan?
I don't know, Madam President, and I can certainly get you an answer quickly on that.
Thank you. What is the administration's economic development strategy and how are the KOZ areas integrated into your strategy?
Our overall economic development strategy is multi-faceted, but I would put at the top of our list of priorities neighborhood economic development. And the Keystone Opportunity Zone Program fits in perfectly with the strategy, because it enables us to provide what I believe is the most powerful economic development incentive that I've seen in my career and target it specifically to neighborhoods that we are looking to get developed that otherwise I don't think -- where otherwise I don't think development would occur. And, again, I would point to the neighborhoods that we are targeting with the 29 5/6/03 - Committee of the Whole - Bill 030242 additions to the KOZs, which are Allegheny West, Hunting Park and American Street. These are neighborhoods where we've made some progress, but the potential for additional development to really build those neighborhoods up is there, and what we need to do to get over the top is to have an economic development tool like the KOZ in place. If we are able to pass this legislation, I believe it will greatly enhance our efforts to market properties in these neighborhoods. And, otherwise, I don't think we would see the type of development that we will with the KOZ.
Now, recently we had public hearings regarding the land value tax, and they talked about the benefits and how that would spur development. I don't know that we heard the administration's position on this concept. What is your concept? If we had land value tax, would we still need the KOZ and the KOIZ and the KOEZ? What is your position on that?
Well, this program provides us with an extremely effective tool to market properties to businesses. It is aimed solely 30 5/6/03 - Committee of the Whole - Bill 030242 at business attraction and retention. It does not really -- I mean, I don't necessarily bring the land value tax issue into this discussion. And I understand your question. My position would be that the KOZ program should stand on its own merits, and what it does is give us a very valuable tool to market properties in underdeveloped areas to businesses. I don't know that the land value tax would come up in discussions with businesses. What they're concerned about, quite frankly, is their cost of doing business in Philadelphia, and this program is aimed directly at that, because it gives us the ability, for instance, in a KOIZ to try to bring a new business into an area and they will pay no city or state business taxes for 15 years. That's an extremely powerful incentive. That's what this program is aimed at.
Thank you. The Chair recognizes Councilman Cohen.
Thank you, Madam President. Tell me, is an apartment building a residential or a business opportunity? 31 5/6/03 - Committee of the Whole - Bill 030242
I'm sorry, Councilman. Could you repeat the question, please?
Is an apartment house, say a complex of apartments, which is 9 vacant, which has been vacant for many years and if 10 it were brought back to life, it would be very 11 healthy for a community, is that considered a 12 business or a residential property? 13
Single or multi-family 17 housing or rental apartment units or condominiums 18 are residential, we consider residential. 19
Even though the 20 people are taxed as businesses? The ownership is 21 taxed as a business, isn't it? 22
Because I think that 24 can do more for economic development in many 25 neighborhoods than almost anything else. 32 5/6/03 - Committee of the Whole - Bill 030242 I'm thinking of an apartment building at 16th and Grange, which has about apartments, a 4 beautiful building that's been empty for 10 or 15 5 years. Fortunately, it's still maintained in the 6 sense that it hasn't completely been destroyed, but 7 it threatens the neighborhood because it does 8 attract trash, and people are worried about what 9 might happen at some point later on. 10 What would prevent that from being 11 considered a business? Because suppose there was an 12 ownership that wanted to acquire it. And it would 13 appear to me there's no way it's ever going to be 14 developed under current requirements, but if 15 something can be done on the tax laws, maybe it 16 could be. 17 Why would that not be considered a 18 business? 19
Is there anything 21 that requires the description of it to be maintained 22 as residential, or would that be within your ability 23 to make a decision citywide? 24
We tried every 33 5/6/03 - Committee of the Whole - Bill 030242 conceivable way to get that property covered.
And, Councilman, I understand completely. There are many examples of situations where we would like nothing better than to see residential buildings developed. I think with the whole issue of residential development, we just had to establish a policy that we would not include any residential units in the Keystone Opportunity Zone because the people who lived in those units would not pay wage taxes, and it really does get to a fairness issue in that certain people would not be paying wage taxes while their neighbors literally next door or across the street would. So it really was an issue of fairness.
Actually, we do, except we've tried to take the same approach in not including into the KOZs or any of the new zones any existing businesses for that reason. What we have proposed are vacant buildings or vacant properties from which no wage taxes are now being generated. We didn't want to 34 5/6/03 - Committee of the Whole - Bill 030242 put businesses in a situation where -- we did, Councilman, believe me, we got a number of requests from existing businesses who said, you know, we're in a bad area, we need the area to be built up, can you include us in the zone, but it really got down to a fairness issue and we had to tell them we just can't do it.
But your example seems to me not to be appropriate because the existing businesses are operating businesses and, therefore, I would say the comparison would be with operating apartment houses. This is not an apartment house that's operating. No one could say that they were hurt by this building being brought back to life. I don't understand why, if we have the power, why we can't change the definition and select places. Why can't we expand the zone? Because, otherwise, what you do is, you have no other means of revitalizing these buildings as business enterprises. A big apartment house is a business enterprise. The only way this place will ever be successfully rehabilitated would be if the investment required to provide market-based or even 35 5/6/03 - Committee of the Whole - Bill 030242 subsidized rentals if somehow or other there was a means of dealing with that. I would like to urge you and the City to rethink it. There are other areas that are not fair and we've decided to go ahead with them. Councilman DiCicco has introduced a number of bills which provide for wealthy people the ability to acquire apartments, and we reached a conclusion that that was good. And, of course, there's some people that say, How come so-and-so makes more money than I do, but pays much less taxes on their habitation? Well, we do it because you can't be perfect in formulating the policy, and you've got to have priorities. It seems to me the priority ought to be find a way of utilizing these buildings, because, first, there's a big residential need for it, but it's a business, and we ought to use every tool available to restore them. And you would strengthen neighborhoods, you'd help NTI, you'd have all kinds of impacts. So I would just urge the City to rethink it. You can't always have an absolute element of fairness, because with the standard we're using is how to revitalize the City, not just how to produce 36 5/6/03 - Committee of the Whole - Bill 030242 the fair assistant. Is there anything in the state law that prevents it?
Now, with respect to businesses, there's a property in the 8th Councilmanic District at Broad and Godfrey that's been around for years now as an empty supermarket. The building grew in such disrepair that it's been demolished finally. It seems to me to make no sense why the City, unless there are political reasons for it, why the City has not been able to develop that. It's been to the attention of the Commerce Department and the PIDC for a number of years, but we note no real action.
Councilman, the specific building that you're referring to is not contiguous to an existing zone. What we tried to do in crafting this 37 5/6/03 - Committee of the Whole - Bill 030242 bill and this list of properties was include as many properties as we could that met our criteria, but we also had to abide by state guidelines, and one of those guidelines is that if you're going to add a building or a property, it has to be contiguous to an existing zone, and that building is not.
No. I understand that, but aren't there other tools? So it seems to me that the City gets fixated on one approach, and the approach here is through cause and ignores other opportunities.
Mr. Cuorato, I know it's been quite a while that Councilman Cohen has been bringing up this very issue. I think it would really be very helpful if you and someone from your staff and maybe someone from PIDC, or whoever, can give the Councilman some suggestions as to how this problem can be addressed. I think it would be very help. Because I think it's well over two years that he's been talking about this.
Thank you. Councilman Cohen, do you have any other 38 5/6/03 - Committee of the Whole - Bill 030242 questions, sir?
Thank you, Madam Chair. Mr. Cuorato, just to get back to the one point that we were discussing earlier. I guess what I would be asking for is similar to -- I'm looking at your testimony. I'm not sure what page it is, but it's third from the back. Similar to the calculations that you did, it makes reference to the preliminary analysis based on proposed projects in just the KOIZ area shows potential $11 million wage tax income from construction and an annual $18 million wage tax income once the properties are fully developed and occupied. I'm assuming that some model was used to arrive at those particular figures and, therefore, based on that same model, we should be able to figure out what the annual tax revenues that would be generated from these various developments, and 39 5/6/03 - Committee of the Whole - Bill 030242 then based on the KOIZ incentives, we would then be able to figure out what the split is between the City and the School District taxes, for instance, that are, in essence, being forgiven. That's the kind of schedule I was talking about, and any other expansion zones somewhat with a similar analysis. Again, somewhat similar -- exactly the model that you've used on TIF legislation when we get the revenue projections, as well as the tax proceeds.
Councilman, if I understand your question, you would want us to make assumptions that -- you want us to make some assumptions about certain developments occurring and what taxes would have been paid if the designation were not there?
In the KOIZs, we gave some estimates because there's a little bit more certainty. There are only three of them. One we know will be the Vanguard project, so we were able to make some assumptions about that. The second is the Navy yard. We were able to make some assumptions about that, and the third is the Post 40 5/6/03 - Committee of the Whole - Bill 030242 Office complex in University City and the Cira Center, so we were able to make some reasonable assumptions about that. For some of the properties in the neighborhoods, it's going to be a little more difficult because we don't know what types of businesses we'll attract.
And, of course, the real unknown out there is the business privilege tax, because it's hard to do that. Having said that, we certainly will take a crack at trying to come up with those estimates.
Okay. Or at least the whole real estate tax issue, and we know exactly what the City/School District split is, but just take a look at it, if you will.
Your testimony and we've certainly talked and put on the record that we did have an opportunity to talk about Budd, and I'm pleased about that. If you could show me, and I'm assuming it's in 030242, I know with the KOIZ sites or I guess what you're calling subzones. Is that 41 5/6/03 - Committee of the Whole - Bill 030242 Kubach Road, Naval business and West Philadelphia subzones? Where would I find in the bill, for instance, the Budd location? Because I don't see it presently.
Councilman, there's attachments to this bill, exhibits which should be part of the bill. They were submitted with the bill, to the best of my knowledge.
The attachments should have been submitted as part of the bill when it was introduced, so I can't speak to that. I can get you copies, but, quite, frankly, Councilman, --
Are you saying they were introduced as a part of the bill?
I would have expected them to be. They should have been sent over with the legislation, so I can't speak to what happened afterwards.
Well, okay, but let's slow down for a second. If they're supposed 42 5/6/03 - Committee of the Whole - Bill 030242 to be attachments to the bills, then we need the attachments, because I don't think the bill makes any reference that I can see very quickly to an attachment. And if we do have attachments, we need to amend them in. I see on of the bill we talk about the subzones, more specifically defined in the attached Exhibit C1, C2, C3. I don't have any attachments.
Councilman, I have a copy of the bill as it was sent over and it does have the attachment with all of the properties listed by parcel ID number. So I guess --
I can greatly appreciate that. I've got a pink. It's got four pages. It makes no reference to an attachment, and there are no attachments on the back of the bill. I just want to make sure that we get this right.
Mr. Cuorato, are you referring to your executive summary?
No, Madam President. I have a copy of the bill that we sent over to the Mayor's office, and it's the four pages that Councilman Nutter referred to, but it also has the 43 5/6/03 - Committee of the Whole - Bill 030242 exhibits with all of the properties listed. And, frankly, I don't know why that attachment is not part of the pink copy. I guess I would ask --
Do you know if the attachments were -- I don't want to use the same word. Do you know if the attachments were attached to the bill that was actually introduced, and are they referenced?
Are the attachments just the Exhibit C1, C2 and C3 or are there more? For instance, the Budd issue, is that a separate attachment? Is that C4 or some other designation?
They're all here. They're all here, Councilman. Exhibit C1 is the Kubach Road property. Exhibit C2 is the Philadelphia Naval Business Center. They're all here, and they should have been introduced as part of the -- they should have been introduced as an attachment when the ordinance 23 was introduced, and I'm just at a loss to explain why they were not.
Well, let me ask 44 5/6/03 - Committee of the Whole - Bill 030242 this question. I mean, we'll get to the bottom of what happened to the attachments, but, again, for instance, with regard to the Budd site, how is it being attached to this bill? What's the section 6 that would deal with that particular attachment? The reason I'm asking that question is, normally when you have attachments, there's a reference in a particular section anticipating those attachments and it will say "in accordance with Attachment A," so you know to look for something. I don't see a section in the bill at the moment that would accommodate an attachment or makes any reference to an attachment other than the KOIZs, which is on and there's a reference for each one to C1, C2 and C3. Other than that, the bill 17 does not appear to be written in a fashion to accommodate attachments in the first place.
Councilman, in Sections and of the bill, there are references to amending exhibits to prior ordinances which approved KOZs, Bill No. 980788-A which references amendments to exhibits, all as set forth in Exhibit A hereto. And then Section 2 references Bill 010092, which amends Exhibits 1, 2 and 8, all as set forth in Exhibit B 45 5/6/03 - Committee of the Whole - Bill 030242 hereto.
So the references to the attachments are all here. Again, I just don't know why the attachments aren't. They apparently are in the clerk's office, I am told. The attachments are in the clerk's office, but why they're not attached to the pink copy, I don't know.
Let me suggest a couple things. One, it would at least be my more personal request, I'm not speaking on behalf of the Council, but if we find ourselves in this kind of situation where we're amending a previous bill, for instance, 980788-A, which is almost two and a half years ago, Section 1 is saying that we're amending that bill by amending Exhibits 1, 2, 5, 7, 9 and 11. Now, I don't know about you, but I tend not to keep all of my exhibits by my bedside. So it would be helpful, I think, if we had those attachments and could then see what Exhibit A is amending. I'm not trying to make the bills any bigger than they are, but it would probably just speed up the process. And then the same for Section 25 2. 46 5/6/03 - Committee of the Whole - Bill 030242 But I think lastly, notwithstanding the fact that the exhibits are in the clerk's office, the bill says that they are in Exhibit A hereto. I think that means the exhibits have to be attached to this bill. I do not believe that we meet the standard just by having them in the clerk's office. I'm not trying to be technical here with you. I want to be safe. I want to be careful. So if we have the exhibits, we can get our hands on the exhibits, it would certainly be my strong suggestion, I'll wait the ruling of the Chair on this kind of matter, but it would be my strong suggestion that we actually amend the bill and attach the attachments. Because if the attachments are there, I wouldn't then have to ask you where's the Budd Company. At the moment, I don't have anything here.
Again, Councilman, the attachments are right here. I don't have an explanation as to why they are not included in the bill.
Let's see if we can get some copies, put them all around, and then everyone will have them, and then I don't have to torture you.
Would the sergeant-at-arms please get the materials from Mr. Cuorato and make enough copies for each Council member, please. Councilman Nutter, I understand that copies are being prepared and sent up by the chief clerk's office.
That will be great, Madam President. I'm sorry for the -- sorry.
Councilman, if I could just make one other statement. Thank you for pointing this out to us, because we certainly did not want to be in a position where the bill was technically flawed. We have a June 1st deadline and we're very anxious to meet that. I would also point out that the attachments that will be incorporated into the ordinance with Council's approval are listed by parcel ID number, so it might be a little bit hard 48 5/6/03 - Committee of the Whole - Bill 030242 for you to find the Budd Company on here because it's listed as a parcel ID number. However, the list of properties by parcel ID number that are contained in the attachments matches up exactly with the executive summary that you received, which lists all of the properties and describes them and has their address.
Thank you. And, lastly, the documents that are being copied, do they also incorporate the exhibits that are referenced on that are specific to the KOIZ? There's a specific reference to Exhibits C1, C2 and C3.
So at the moment, we don't have those and they would not have been attached; is that the --
Yes. The attachments are, Exhibit A are additions to existing KOZs; Exhibit B are additions to existing KOEZs; and Exhibit C represents the new KOIZs.
Got you. All right. So at that point, we'll have all the attachments, we can move them in where they need to be moved? 49 5/6/03 - Committee of the Whole - Bill 030242
Thank you. Are there any other questions from members of the Committee? (No response.)
Mr. Cuorato, would you please check about the five-year plan also?
Madam President, I also had a short statement on Bill 030252. Did you want me to read that?
Bill No. 030252 would authorize the removal of properties within the Brewerytown Development area from the Keystone Opportunity Zone. The removal is subject to the consent of the property owners. 50 5/6/03 - Committee of the Whole - Bill 030252 As mentioned in my previous testimony, the state legislature recently passed Senate Bill 4 1478 creating a mechanism for the removal of properties from the KOZ. That mechanism requires that a formal request from the City, including a City Council ordinance and the binding consent of the owner and anyone having an equitable interest in the property, be submitted to Harrisburg. Since the production of the first KOZ legislation in 1998, it has been the City's policy to exclude residential uses from sites designated within the KOZ. Some buildings and areas that at the time of KOZ designation looked like good candidates for commercial or industrial development never were developed for such uses. In some cases, however, there has been strong interest expressed in residential development of the sites. This placed the City in a difficult situation. We wanted to spur investment and new development in many of these areas, but our policy prevented us from supporting residential development. Fortunately, Senate Bill 23 1478 has given us the ability to preserve our policy while supporting residential development. In this particular case, Westrum 51 5/6/03 - Committee of the Whole - Bill 030252 Development has proposed converting much of the area generally bounded by 31st Street, 33rd Street, Girard Avenue and Oxford Street into market rate housing. This area is zoned industrial and much of it is designated KOZ. This bill will allow us, with the owner's consent, to remove the properties from the KOZ clearing the way for the Brewerytown residential development to proceed. I believe that over the next few years we will be before this Committee on a number of occasions seeking approval to remove additional properties from the KOZ for similar projects. Since this bill actually puts properties back on the tax roll and since the Brewerytown development is a very positive development for an area that has been desolate for years and since this development will further the goal of the Mayor as well as City Council to retain and grow the population in the City of Philadelphia, I would respectfully request your favorable consideration of Bill 030252. Finally, as with the previous bill, I would also request respectfully that the rules of Council be suspended to allow for first reading at 52 5/6/03 - Committee of the Whole - Bill 030252 the next session of Council. Thank you.
Thank you. Are there any questions from members of Committee? Seeing none, are there any other witnesses to testify on either bill? (No response.)
The Committee will stand in recess until Thursday, May 8th at 10:00 a.m. Do you have a problem?
Is there a problem with our continuing it until Thursday, May the 8th? 53 5/6/03 - Committee of the Whole - Bill 030252
It's two days from now. We have to make the amendments, attach the exhibits.
And at the present moment, we don't have a quorum and I don't know that we'd find one. And we want to know the impact from --
Madam President, Mr. Cuorato I think is also concerned about his schedule. I think we've pretty much taken all of the testimony. We know what the exhibits are, and with every respect to him, I don't necessarily know that we need him if he's concerned about his schedule. But I think he's also concerned about the timing of what's going on with his bill. What the President has laid out is the Committee would convene on Thursday morning, we'll move the exhibits, go into the public meeting, adopt them, get the bill out, I'm assuming with the suspension of the rules. You'll still get a first reading on Thursday, and the bill will be ready for a vote next Thursday, the 15th. 54 5/6/03 - Committee of the Whole - Bill 030252
-- 030252, there is also reference to an exhibit which lists the properties that would be removed from the KOZ. And given the misunderstanding we had with the previous bill, I want to make sure that this exhibit is attached.
We're checking with the chief clerk's office. They will make copies of that, too.
Mr. Cuorato, is that just the one reference that says Exhibit A?
Yes, 55 5/6/03 - Committee of the Whole - Bill 030252 Councilman Nutter.
Mr. Cuorato has handed up the additional Exhibit A for Bill 030252. We'll need the same copies, but as it appears, we're probably not going to take action -- Madam President, I would just note for the record I believe that there are actually nine members here.
There are now nine members in the room. Madam President --
No. Madam President, the second Exhibit A for Bill 252 is now being copied. The first set of exhibits of A, B and C for Bill 242 I believe are now being distributed. We'll have 252's Exhibit A in a second. Mr. Cuorato, since you're here and what at least started me down this path was the search for the Budd Company. Can you just tell me where I'd find that?
We have copies that have just come up from the chief clerk's 56 5/6/03 - Committee of the Whole - Bill 030252 office.
Councilman, in Exhibit A, it's Exhibit-7, Hunting Park. It's Exhibit-7 to Exhibit A, Hunting Park.
We're withdrawing the recess until Thursday, May the 8th since we have nine members now. Do we still have nine members? They seem to be coming and going. I wish all of the Council members would please stay in the chambers so that we can conduct business.
We got nine. Councilwoman Reynolds Brown is over there.
Are there any other witnesses that would like to be heard? Seeing none, this will conclude the public hearing of the Committee of the Whole. We will now go into our public meeting, and the Chair recognizes Councilman Nutter regarding Bill No. 25 030242. 57 5/6/03 - Committee of the Whole - Bill 030252
Thank you, Madam Chair. We're in the public meeting now?
Thank you. Madam Chair, there was a set of exhibits that are stapled, a multi-page pack, Exhibit A, Exhibit B and Exhibit C, which go with Bill 030242. I'd move the adoption of those amendments into the proper sections of the bill. (Motion seconded.)
It has been moved and seconded that the amendments all be approved. All in favor will indicate by saying aye. MEMBERS: Aye.
The ayes have it. The motion carries. And the Chair once again recognizes Councilman Nutter.
Thank you, Madam Chair. I move that Bill 030242 as amended be reported out of this Committee with a favorable 58 5/6/03 - Committee of the Whole - Bill 030252 recommendation, a further recommendation that the rules of Council be suspended so as to permit first reading at our next session. (Motion seconded.)
It has been moved and properly seconded that Bill No. 030242 as amended be reported out of Committee with a favorable recommendation. Also, a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. All in favor will indicate by saying aye. MEMBERS: Aye.
The ayes have it and the motion carries. The Chair recognizes Councilwoman Blackwell regarding Bill No. 030252.
Thank you, Madam President. I move that Bill 030252 be reported --
I'm sorry. That's Councilman Clarke's bill. 59 5/6/03 - Committee of the Whole - Bill 030252
Thank you, Madam President. Madam President, I make a motion that Exhibit A be listed as an amendment to Bill No. 10 030252. (Motion seconded.)
It has been moved and seconded that the amendments be adopted. All in favor will signify by saying aye. MEMBERS: Aye.
The ayes have it. The motion carries. Again, the Chair recognizes Councilman Clarke.
Thank you, Madam President. I move that Bill No. 030252 as amended be reported out of Committee with a favorable 60 5/6/03 - Committee of the Whole - Bill 030252 recommendation and a request for suspension of the rules. (Motion seconded.)
It has been moved and seconded that Bill No. 030252 as amended be reported out of Committee with a favorable recommendation. Also, a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. All in favor will indicate by saying aye. MEMBERS: Aye.
The ayes have it. The motion carries. And this concludes our public meeting. Thank you all very much. (Committee of the Whole adjourned at 3:40 p.m.) - - - 61 CERTIFICATE I HEREBY CERTIFY that the proceedings, evidence and objections are contained fully and accurately in the stenographic notes taken by me upon the foregoing matter on May 6, 2003, and that this is a true and correct transcript of same. ______________________________ MICHELE L. MURPHY RPR-Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)