COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE OF THE WHOLE Room 400, City Hall Philadelphia, Pennsylvania Tuesday, November 26, 2024 10:18 a.m. PRESENT: COUNCIL PRESIDENT KENYATTA JOHNSON COUNCILWOMAN NINA AHMAD COUNCILWOMAN CINDY BASS COUNCILWOMAN KENDRA BROOKS COUNCILMAN MICHAEL DRISCOLL COUNCILWOMAN JAMIE GAUTHIER COUNCILMAN JIM HARRITY COUNCILMAN CURTIS J. JONES, JR. COUNCILWOMAN RUE LANDAU COUNCILWOMAN QUETCY M. LOZADA COUNCILMAN ANTHONY PHILLIPS COUNCILMAN MARK SQUILLA COUNCILMAN ISAIAH THOMAS COUNCILMAN JEFFREY YOUNG, JR. BILLS: 240963, 240964, 240966, 240967, 240968, 240969, 240970, 240971, 240972, 240973 - - -
Good morning, everyone. This is the public Committee of the Whole regarding Bill Nos. 240963, 240964, 240966, 240967, 240968, 240969, 240970, 240971, 240972 and 240973. I want to thank all of you for being here today. But before calling the roll, I would like to announce that we have translation services available for anyone present at today's hearing, if needed. Please go to the table to my left. Services are being offered in Mandarin and Cantonese. Mr. Christmas, will you please take the roll.
Present. A quorum of the Committee is present and this hearing is now called to order. Mr. Christmas, will you please read the titles of the bills.
L. 465, No. 11 113, as amended, and authorizing the Director of Finance and other offices of the City to execute documents and do all things necessary to carry out the intent of this ordinance. And Bill No. 240964, authorizing the City of Philadelphia to organize an authority to be known as The Arena Services District Authority, pursuant to the terms of the Pennsylvania Municipality Authorities Act, all under certain terms and conditions. P. (the "76ers"), or another entity affiliated with the 76ers, under which ArenaCo or other 76ers related entity would sublease the Arena Site and cause an arena to be constructed on it, including a multi-purpose sports and entertainment facility and ancillary, accessory, and related amenities, improvements, and infrastructure (the "Arena") and agree to other related conditions; (5) upon the expiration or termination of the Sublease or other circumstances set forth in the Sublease, convey fee simple title to the Arena Site to PAID for disposition to ArenaCo; (6) grant, accept, amend, relocate and extinguish easements, agreements, conditions, covenants and restrictions encumbering or benefiting the Arena Site and any City owned property adjacent to the Arena Site for the benefit of the Arena Site to facilitate construction and operation of the Arena; (7) enter into a direct operating covenants agreement among the 76ers, PAID and the City, under which the 76ers agree to play substantially all of their regular season and playoff home games in the Arena; and (8) take all actions necessary and appropriate to accomplish the intent and purpose of this Ordinance; all under certain terms and conditions. Bill No. 240967, authorizing and approving the execution and delivery of a Service Agreement between the City of Philadelphia and the Philadelphia Authority for Industrial Development relating to the provision by the Philadelphia Authority for Industrial Development of certain project-related services to promote, among other things, the growth and expansion of business, commerce and tourism within the City of Philadelphia in connection with the development of a multi-purpose sports and entertainment facility, including an arena to accommodate National Basketball Association games, and family entertainment, community, retail and other uses; authorizing and approving the obligation of the City of Philadelphia to pay in full when due the Service Fee and other amounts payable under the Service Agreement and covenanting to make necessary appropriations for such purposes; and authorizing City officials to take necessary or appropriate actions to accomplish the intent and purpose of the ordinance, all under certain terms and conditions. Bill No. 240968, authorizing the revision of lines and grades on a portion of City Plan No. 307 by striking from the City Plan and vacating Filbert Street from 10th Street to 11th Street, under certain terms and conditions. Bill No. 240969, authorizing the revision of lines and grades on a portion of City Plan No. 307 by striking from the City Plan and vacating certain aerial portions of 10th Street between Market Street and Filbert Street, under certain terms and conditions. Bill No. 240970, authorizing CBL Arena, LLC. and its successor(s) in interest to construct, own, and maintain various right of way encroachments in the vicinity of 1001-19 Market Street, 1025 Market Street and 1001-25 Filbert Street, Philadelphia, PA 19107, under certain terms and conditions. Bill No. 240971, amending Title of the Philadelphia Code, entitled Zoning and Planning, by amending certain definitions relating to signs; creating an "Arena Area" within the "/CTR, Center City Overlay District" overlay; and making related changes, including a master plan requirement and changes to accessory sign controls; all in connection with zoning rules for a proposed arena in Center City; and approving a master plan for the Arena Area; all under certain terms and conditions.
Bill No. 240972, amending Title 14 of the Philadelphia Code, entitled "Zoning and Planning," by revising certain provisions of section 14-906, entitled "Market Street East Sign Regulations," all under certain terms and conditions. Bill No. 240973, approving the amendment of a neighborhood improvement district in the area generally bounded by, and including, 11th Street to the West, Filbert Street to the North, 8th Street to the East and Market Street to the South, with the exception of certain condominium units at 801 Market Street Condominium not included in the District, known as the Gallery Neighborhood Improvement District, to remove certain portions of such property generally bounded by Filbert Street on the north, 10th Street on the east, 11th Street on the west, and Market Street on the south from such District in accordance with the provisions of the Community and Economic Improvement Act, and under certain terms and conditions.
Thank you very much, Mr. Christmas. Before we get started, we just want to tell everyone we welcome you here today to speak on the proposed legislation regarding the proposed arena. We just want everyone irregardless if you are for or against this project to be respectful of all testimony and public comments from all of the individuals who are here today. We also have working with us to our left the Office of Civil Affairs, our Sheriff's Office as well as Philadelphia Police Department that will be working with us throughout this process, but we also expect for this to continue being a very spirited and lively discussion for a critical project that we are proposing in front of us today. I want to also acknowledge the presence of members Councilmember Bass, Majority Whip Thomas, Councilmember Squilla, the author of the legislation, and Councilmember Dr. Nina Ahmad. Mr. Christmas, will you please call the first panel.
Sabrina Maynard, Budget Director of the City of Philadelphia. (Witnesses approached Witness table.)
First and foremost, thank you. I want to congratulate you on your promotion.
And just state your name and title for the -- your new title for the record. Please begin your testimony.
Good morning. My name is Sabrina Maynard. I'm the City's Budget Director. I'm joined by Sam Rhoads from PIDC. Good morning, Council President Johnson and members of the Committee. We are here this morning to testify in support of Bill No. 12 240963, which amends the existing Gallery at Market East Tax Increment Financing or TIF District. The TIF District was created by Bill No. 150380, which was approved in June of 2015 to support renovations of the former Gallery now known as the Fashion District. Those renovations have been completed and the TIF District is operating as a retail mall with mixed office uses as contemplated. This amendment would remove the 1000 block of Market Street from the existing TIF District and leave the remaining portion of the district from 8th to 10th Streets between Market and Filbert intact and continuing to operate as a retail mall with mixed office uses. The amendment to the TIF is requested to facilitate development of a new arena to support home games for the Philadelphia 76ers and this will only take effect if the Arena project moves forward. Removing the 1000 block of Market Street from the TIF would mean that tax revenues from the block would no longer flow to the developer of the Fashion District to pay debt service on the bonds they issued to fund the Fashion District project. The parcel that would be removed from the TIF would be subject to negotiated PILOT and U&O payments. With respect to procedural requirements of the Commonwealth TIF statute, this hearing is taking place within 30 days of public notice and with both the City Council and School District having approved resolutions agreeing to participate in the amendment should it be approved by this ordinance of City Council. In closing, this requested amendment is a procedural companion to the several ordinances required to facilitate the proposed new arena for the Sixers and will only be effective if the Arena project moves forward. We respectfully request that you favorably vote Ordinance 21 No. 240963 out of Committee today and we are happy to take your questions.
Thank you very much. The Chair also recognizes the presence of Minority Leader Kendra Brooks. In your testimony you stated that removing the 1,000 block of Market Street from the TIF will result in tax revenues from this block no longer being directed to the developer of the Fashion District to service the debt on the bonds issue for the project. Could you clarify how much revenue would be diverted from the development as a result of moving this parcel?
Yes. My name is Sam Rhoads with PIDC. And the estimate through 2035 through the remaining term of the district is $3.4 million. The developer can expect to receive about 40.4 million under what we call the build scenario if the arena does go forward, and they would have received about $43.8 million by our projections if it does not move forward.
Once the proposed Arena parcel is removed from the TIF, the parcel will then generate revenue for the City. Could you outline a timeline for when revenues from this parcel will begin to flow to the City, and specifically will a PILOT and U&O agreements take effect? When will they take effect?
The PILOT will take effect, is estimated to take effect in 2033 under the state statute. It takes effect upon the land transferring into the public ownership, which is estimated to be in 2028 when the Sixers have completed the demolition. If they move forward, at that time it would move into the public ownership, the PILOT would take effect. Under the terms of the PILOT, under the state statute for the first five years to allow for that demolition and construction period, there would be no payments under the PILOT, and they would commence in 2033.
Is that the same for the U&O agreement as well?
The U&O payment would start immediately upon the occupancy of the arena.
Could you also detail the other types of revenue the City is expected to receive during the demolition, construction, operational phases of the arena?
Correct. Yeah, so those through 2035 again through the remaining term of the TIF District the City can expect to receive a net of $69.3 million -
Oh. Yeah, I'm sorry. That number includes all of the other types of revenue. So Liquor-by-the-Drink tax, which would go to the School District, in addition to the U&O, the PILOT. There's the amusement tax on tickets and all of the sales taxes related to the sale of merchandise and so on. We also included the estimate of parking taxes related to folks who would attend.
Okay. Thank you very much. The Chair recognizes Councilmember Curtis Jones.
Thank you, Mr. President. Good morning. Is it true that the primary economic development organizations in the city of Philadelphia are PIDC --
Could you speak into the microphone please for the stenographer?
Thank you, Mr. President. Is it true, is it safe to say that the two primary economic development organizations in the city of Philadelphia are PIDC and the Commerce Department?
If that is being true, what is the plan for Market Street East outside of the arena but dealing with the adjacent properties and what is the vacancy rate between Macy's and that site?
No, between -- on the other side of the southern side of the street from maybe 10th Street to Macy's?
Sure. Where we've calculated the vacancy rates are on the south side of Market Street, which I think is consistent with your question, from 9th Street through the 1100 block, and that is roughly I want to say 50 percent. I have to confirm with those numbers, but there's a high level of vacancy if you walk those blocks. And if you saw the presentation that our Director of Planning and Development Jesse Lawrence provided, there's a significant amount of boarded-up facilities there. And then the other point I wanted to make with the Gallery is that it's currently got 20 percent vacancy, so it's also experiencing a high level of vacancy in its current state.
So it's safe to say that that particular portion, commercial portion of our city, is pretty bad off. Is that --
I understand the technical term. Yes, it is not thriving currently.
So whether we approve this arena or not, what would be the -- and I go with the or not as well because everybody that is against this arena has yet to tell me what we do if we don't develop that site and how does that assist, spur development on the south side of Market? Is there a plan?
Yes. So a couple of things. One is that I believe that this arena provides the opportunity to develop Market Street and there's a couple of elements to that. One is that if you recall within the CBA agreement, there's an allocation to provide for a master plan which is called for under our community impact statement. It's for the City to put together a master plan and exercise both around Chinatown and Market East. In addition, I would highlight that unlike prior investments, public investments into Market East, including specifically the Gallery, in this case the developers of the arena likewise have those south side properties under agreement, so we have a unique opportunity to develop that collectively.
Can I have a point of information, Mr. Rhoads. I just want to ask, and I know the master plan is a part of the CBA, but I know there's also several different roundtables that the Mayor is convening. So even if there wasn't an arena, there would still be a master plan developed for East Market Street, I would think, that at least would come out of some of these roundtables that talk about the revitalization of Center City as well as I would think the vision of the Planning Department will be thinking proactively regarding this particular part of Center City; is that correct?
Yes, that's correct. And I think with the arena that creates an anchor around which, then you have some energy to plan off of and to redevelop that area.
Thank you. Chair recognizes Councilman Curtis Jones for his time.
Thank you for that, Mr. President. Whatever the decision of this body I would encourage us to bring to that roundtable discussion, SEPTA, and a security plan for that same area. And why do I say that? The other day several brave parents turned in their children from that attack. I was thinking of Councilwoman Bass about what do you do when the shooter lives with you. And we have to have a cohesive plan that includes SEPTA, that makes it safe, clean, reliable but also that we take control of our footprint downtown. We have been in discussions with several schools, which will not be named because they recently have been beset with these gatherings outside with young people fighting each other, attacking each other with these meetups. So whoever you're working with have to include those components. Whether or not it's a Sixers arena or whether it is a new rendition of retail, all of those components have to be in that plan. Thank you, Mr. President.
We agree with you completely. And while the arena is still many years off, we're already in discussions with both the Sixers and SEPTA and the Police Department around ensuring the cleanliness and safety of the area.
Just one real quick question. Macy's, what are we planning for Macy's?
I do not have -- speaking as PIDC, I do not at this point have anything on my desk in terms of a request for funding or anything like that with Macy's. So we would have to talk with the owner at this point. They have not reached out to us for any assistance, but we would be happy to talk with them.
Thank you, Councilmember Jones. The Chair recognizes Councilmember Jamie Gauthier. The Chair recognizes Councilmember Jamie --
Thank you, Council President. Good morning and congratulations, Ms. Maynard, on your appointment. Back in 2015 the Gallery became the Fashion District and the City saw it as an opportunity to "save Market East" with more jobs, shopping and reactivating the corridor. The Fashion District back then is what we are being promised that the arena will do today. Although this particular piece of legislation can be viewed as a procedural matter required by the Commonwealth, I do think that we can learn a lot from looking at how the City has approached economic development at Market East in the past, and perhaps consider how we can do better. Many of us were not in office when the current TIF was created, so let's start with why this TIF was originally put in place. During the initial presentation some of the promises made by the developer were, one, that they would pay $1.6 million to the School District annually; second, that they would generate $94 million in tax revenues via Use and Occupancy and Liquor-by-the-Drink taxes over 20 years; third, that this would result in a projected $1.4 million annual increase for the District in 2036, and last "thousands of jobs". How would you compare the Fashion District's performance against the original projections? For example, are there reports showing the value of diverted taxes for each year through 2024? Do we have a comparison of jobs projected versus jobs created?
Thank you, Councilwoman. When the TIF was created in 2015, there were a number of primary goals there. One is to keep in mind that at that point it was under public ownership, largely the Redevelopment Authority. And so, there's a number of goals that were I would have said did not meet the public eye and there are a number of goals that did meet the public eye. So one was that the City at that point had virtually unlimited liability exposure for maintaining the core and shell of that facility. So one of the things that we did with that TIF is that we were able to cap and limit the City's exposure for the Gallery, so that was one issue. Secondly, we were able to do that while maintaining the public access to SEPTA and other public transit facilities so we were able to maintain that. And then thirdly, we were able to put -- we were able to achieve what did meet the public eye as we were able to achieve or facilitate the reinvestment in that Gallery. So keeping in mind that typical malls get reinvested in, in terms of tiles, lighting and so on and so forth every three to five years, that mall had not been reinvested in, in over years due 21 to the complicated public-private 22 investment. 23 So there's a number of 24 different motives in creating the TIF, only one of which was the reinvestment. With respect to their performance and your specific questions on the tax revenue projections, the City and the School District have continued to obtain the base level values of tax revenues that were projected in 2015. The growth in those tax revenues was, in fact, under what the projections were, and of course there's a number of factors in that. One of course is COVID. Another of course is I'll call tectonic shift in retail and store retail across the country of which the Gallery was certainly part of that trend. So the growth projections are certainly under what they were originally.
Okay. What criteria do we use to determine if a TIF is successful from the point of view of the City and are there public reporting requirements that TIF districts must comply with?
Sure. The success -- whether or not it's a success depends on the specific goals, the public policy goals and objectives of the TIF. And primarily keep in mind that TIFs are put in place for pieces of property that are either blighted or underperforming. So generally speaking, it's receiving the investment of the construction itself, which we can check that box. We did in fact receive that over $300 million investment and the construction jobs that come with it. Secondly, we get a rejuvenated facility and we certainly were able to obtain that. And then as I mentioned before, we had other multiple sort of priorities there in terms of the public ownership and capping the City's exposure, all of which we were able to obtain.
Okay. Lastly, I would say given, you know, you noted some of the seismic shifts around how people shop now, COVID. There will always be seismic shifts. Given that, is it up to us to accept the projections and the numbers that developers put forward in considering these tax incentives or is there any change that we should make to our process? And that's the end of my questions.
Okay. Thank you very much. The answer to that is that the owner of the Fashion District is Macerich. Macerich is one of the largest operators of malls in the country. And so, they're very focused, as is the whole retail world on performance. When we do these projections, they go through a series of I'll call it filters in order to represent what we think is our best guess. And I'll be clear, these are estimates. We spell out in the original project plan in 2015, as we do here, all of our assumptions for the public to see. They represent input from the owner themselves so they are in the business of projecting forward what they think sales and other revenues will be, so we look at those numbers. We look at them vis-à-vis industry standards and also vis-à-vis information that the City of Philadelphia and the Revenue Department and so on have. So we're able to put them through a series of filters, I'll call them, to before we arrive at the numbers that we put in front of you. And in all cases we do try to be very conservative.
Thank you, colleague. Point of information from Councilmember Squilla. Then Chair recognizes Councilmember Bass.
Thank you. Thank you, Mr. Chair. One other point of information. If you remember when we did the TIF, one of the main things in 2015 was to alleviate the City of the maintenance obligations that we have, which was millions and millions of dollars, to try to keep that Gallery operating because it was under PRA Redevelopment Authority's hand, so it really -- not only the cost and taxes that they would be generating but the cost to the City that we had to constantly try to fix that and we weren't a great landlord, per se, and it would take us forever to fix things and do things. And so, that was another reason why to really alleviate the City of the burden and having the private company then own it and then be responsible for the repairs. And sometimes that isn't seen as part of why we did the TIF.
Correct, definitely under the tip of the iceberg. But we shifted the responsibility for all of the infrastructure to the private sector --
Thank you, Councilman. Chair recognizes Councilmember Bass.
Thank you, Mr. Chairman. And thank you, Councilman Squilla, for the clarification. And it's important information to put on the table. I just had really a couple of quick, very quick questions and I wanted to just say that from Councilman Jones' line of questioning about the amount of vacancy. And I know he used to run a little organization, PCDC, the other PCDC that used to do commercial development throughout the entire city so I know he knows a little something about this. But can you talk about -- and I know, Sam, you've been here for a minute. Can you talk about the price tag? How much have we invested in Market East over the years? You could give it in the last few years or the last years, but can you give us some sense of how much has the City of Philadelphia invested in Market East thus far?
You ask all 7 the tough questions. The short 8 answer would be I'll have to get 9 back to you on that. 10
But to illustrate it, the City if you think about the publicly-owned investments there along Market East, you have a number of course federally-owned properties. With respect to the City, the primary exposure really has been around the Gallery, which goes all the way back to the late '70s with the decline and suburbanization of the department stores, all of which had their headquarters and flagship stores there, the collapse of the transit system, the combination of the old Reading and Pennsylvania Railroads into SEPTA, putting that underground. So I'm going to say billions and billions if you think all the way back to what Philadelphia has done to completely make over a period of 50 years what its Center City looks like. And regardless of various thoughts or opinions on the Gallery, I personally view it as something that's very successful in the sense that it is a retail center that sits on top of the transportation network of Philadelphia and brings people in from all neighborhoods to do their shopping there. So very substantial investment over time.
Well, I can tell you that -- and it's funny because I heard Mayor Parker speaking about this yesterday, and I have a similar story, when she talked about what a big deal it was back in the late '70s and early '80s to come downtown and to go to the Gallery. It was a big deal. It was a big deal in our family as well. And as someone who went to high school in Center City, we were in and out of the Gallery all of the time and it was packed and it was successful. It was very successful. And, listen, shopping habits changed, people changed where they want to shop, how they want to shop. And so, I think that the Gallery actually succumbed to trends and changes that way. But I just really wanted to illustrate that we've made quite an investment in Market East. And so, we're at a pivotal moment. I don't think that the answer is to stop making investments in Market East. I think that we have to look at what we've already invested and build upon that investment so that we can make that part of the City, that part of downtown Philadelphia as successful as it possibly could be. And I also want to follow up on something else that Councilman Jones mentioned earlier, which was that I haven't heard anything in terms of an alternative plan like what's the opposite plan if it's not the arena, if it's not 76 Place, then what is it? You know, help us help you, but I'm not hearing that. And so, I just wanted to ask those questions about the investment that we made thus far. But I'll come back around for more questions. Thank you, Mr. Chairman.
Thank you. Chair recognizes Councilmember Brooks followed by Councilmember Jones.
Thank you so much. So I have a question about the proposed Arena Services District and the CBA. The Arena Services District is financed by 8 million in the CBA. If this passes 9 today, does it lock us out of the 10 $50 million discussion around a CBA? 11
That 12 question might be better put to the 13 next panel. We're specifically 14 focused on the Tax Increment Financing District.
Chair recognizes Councilmember Squilla for a point of information.
So this doesn't deal with the term sheet, doesn't deal with the CBA. All it does is remove the portion of that one block of the Fashion District from the TIF. That's all this does. It just removes it from the TIF. That's it. If the casino -- casino, if the Arena legislation doesn't pass, this goes away. All this does is removes them from the TIF because it takes them out of the benefits they're receiving on that block. So is that clear?
Councilmember Brooks, would you like to start your time over?
Okay. If you want to come back for a second round, let me know.
Okay. Thank you, colleague. Thank you, Councilmember Squilla. Chair recognizes Councilmember Jones followed by Councilmember Landau.
Thank you, Mr. Chairman. My question is a Part 2 to what I asked before, but it's more dealing with SEPTA transportation plans for that particular strip. If I could -- I still see you. Thank you so much.
Yes. Mike Carroll, Deputy Managing Director for the Office of Transportation and Infrastructure Systems.
So whether or not this body takes the step to approve or disapprove this project, but let's suppose that we go forward with it, I am unclear about the plan for a safe SEPTA ride to the facility. Every planning study suggests that we have to really rely on mass transit for this to be successful. We cannot park our way, drive our way through a successful development of this facility. Tell me how we address safety. SEPTA is in an -- they already talked about somewhere close to a $50 million differential. I think it might have been a 14 million differential between what 15 they would need just to keep up with 16 ridership to go to the facility. 17 But tell me how we're planning to 18 work with the City of Philadelphia 19 Police Department to make that 20 experience for someone who comes from the city, but particularly people that we're attracting to spend money here, how they do that safely in conjunction with games? How do we do that?
Okay. So there's going to be work on that from today through the 30 years of that arena being in operation. So what the main principles are I think that SEPTA wants their system to be safe for everybody all the time. That's the goal. And there's a lot of work that's going into that now. And I encourage people who feel like they have not been safe or have feelings about SEPTA to give SEPTA a chance. Come back to SEPTA, try SEPTA. I think they'll see there's an improvement. The ridership numbers for the past year are showing that people are coming back to SEPTA. And I just want to set the table with that, that that work is going on now. With respect to the arena, with respect to games, there's a couple things that I would point to. The first thing I think is that in the work that SEPTA did which they presented to City Council, their focus for people coming from the suburbs is how they get on Regional Rail and how they get off at Jefferson Station and how that capacity is there in the Regional Rail system for the (inaudible). I think that's where there's some questions that need to be answered. There's work that needs to be done. The fact is though that among the modes that SEPTA operates, Regional Rail has the fewest problems and probably the best perception in terms of safety, cleanliness, the issues that relate to quality of life and people's comfort using the system. So that's not to say that that answers itself, but it gives us a better position to start from to make the improvements that I think you're speaking to and people would want to see so that people who are visiting the city have a good experience. A lot of what needs to take place is how the arena space Jefferson Station is managed. And I can tell you that there's a lot of focus not just from SEPTA in staffing up with people who will act as ambassadors, help people get their direction, you know, manage the crowds on the platforms, but also the Sixers will have personnel that are in the area doing that. Philadelphia police will have a presence there, so we'll talk about this in the next bill 19 conversation. But the main focus has to be for all of these resources to be coordinated and working together with that intention. And so, the remaining pieces I think have to do with people who are on the subways, the Broad Street Line, Market-Frankford Line who we might expect are coming from a little bit closer within the City, but also folks who don't have quick access to Regional Rail but may think, okay, it makes sense for me to drive to one of these subway or El stations, park in that vicinity and catch a ride there. And, you know, frankly when I go to see an Eagles game, that's how I travel. I'll go to the Broad Street Line, get on the train and work my way down to NRG Station and walk from there. And what you find is that there is sort of safety in numbers in terms of that crowd of people. They got their jerseys on. They all know where they're going. The misbehavior you see when there's not a lot of people on the train tends not to be an issue when you're crowded with fans and everybody's got the home team spirit and they're going to catch an event. So that does not mean there isn't work to do, and I think that goes back to the thing I was saying in the first place. SEPTA, working with Philadelphia Police, working with partners have to secure those station areas. And so, we need to get a sense for what those patterns of travel look like on those origin stations as people are on the outskirts of the system working their way in, and we have to make sure that there's effective police presence there, that there's effective management of the situation there. Some of those stations are going to more likely for folks that want to park and then ride the system in.
That's what I really was looking for. I know when we did the South Philadelphia stadiums there was some thought given to how people would take mass transit from as far away as Fern Rock down to Patterson. I want that same emphasis given for people who might want to get on at 69th Street, want to get on at 30th Street, want to get on at 40th Street to take that ride down there. And it's going to require both security and vigilance above ground and below, above ground and below. And I think if we are truly trying to make sure that if this project is approved that people feel comfortable before and after a game going to our restaurants, shopping in our commercial district, that they need to feel that when I'm done eating, when I'm done shopping, there's a reliability of safe transportation so I can get back to my neighborhood or my car. So that plan irrespective of who pays for it has to be thought out. Thank you, Mr. Chairman.
Thank you, Councilman. Chair recognizes Councilmember Landau followed by Councilmember Lozada.
Thank you. So my questions are both for Sabrina and Sam. You rattled off a lot of dollar amounts and stats in the beginning and I thought they were in your written testimony but they're not, so could you go over them again to know -- what I'm looking for is you were talking about the tax benefits. I think you were talking about the original TIF and what the tax deal was there and also what the tax benefits will be. So I'd love to hear again the numbers you both said. And then I have a follow-up question.
Certainly. Thanks very much and apologize for rattling those off. They've been swimming around in my head for too long so I appreciate that.
The question that I was responding to initially was around what would the City expect to receive in tax revenues if the arena moves forward, and then what would be the impact to the developer of the mall in terms of their TIF funds. So let me just walk through this piece-by-piece. So what we estimated and projected is what I'll call the build scenario and the no-build scenario. In other words, what happens if the arena does move forward and what could the City of Philadelphia expect to receive in tax revenues if it does not move forward. And then we subtracted A from B and that's the net benefit. So in the build scenario you're moving one block from the TIF District, one block from the Fashion District. The Fashion District is now concentrating in two blocks as opposed to three, about 900,000 feet instead of about a million three. In addition, then the block that's being freed up, the arena is being built. So under that build scenario through 2035, and we chose that number because that's when the current TIF District ends, so through 2035 if the project moves forward, the City can expect to get about $73.3 million in all of the various tax revenues for that. If we do not move forward, the City can expect to receive about $4.1 million if it remains in its current status. So the net positive to the City through 2035 is about $69.3 million.
That's helpful. And we have 2035 as the end. Why also would the remaining parcels of the Fashion District remain under the TIF if it's going to have new ownership or at least a combination of new ownership?
From a legal perspective it won't have new ownership. So the entity that owns the Fashion District will continue to own the Fashion District. It's my understanding that they may take in a new partner in terms of partnering with the Sixers, but it's effectively the same entity. And make no mistake, Macerich is a very substantive owner of malls and retail space across the country so they will continue to own and operate that.
Okay. We might disagree on whether taking in a new partner means new ownership, but I hear you. Because they are getting a tax benefit then on the two-thirds remainder through 2035. That's the point.
The tax benefit, the TIF that was put in place in 2015 will continue for those two blocks, that's correct.
Thank you, colleague. If you need to tee up for a second round, feel free to do so. But colleagues, just keep in mind this is only the first panel of about four that we have scheduled for this morning. Chair recognizes Councilmember Lozada followed by Councilmember Young.
I just have one really quick question. We've made a lot of requests from the School District of Philadelphia. We've asked for improvement plans, investments. What impact will the amendment have on the School District's budget or financial planning given their participation in the TIF adjustment?
Thank you for that, Councilwoman. And that question was asked last week when we presented in front of the School Board as well. They of course were focused on what their revenues are. So the numbers that I just went through with respect to the City, with respect to the School District through 2035, the School District can expect to see a little bit of positive revenue. They in the no-build scenario they could expect to receive about $43 million. Under the build scenario they can expect to receive a little over $48 million. So it's about a net $6 million benefit through 2035. The benefit to both the City and the School District really comes over the 30-year term of the Sixers play. The challenge with measuring it just through 2035 of course is that you're experiencing the period of time when the existing facility's being under construction, demolished and under construction so you have a dip in revenues during that time. So over the 30-year play term of the Sixers and the construction in that scenario, the School District can expect to receive about $153 million.
Thank you, colleague. Chair recognizes Councilmember Young followed by Councilmember Ahmad.
Thank you, Mr. Chair. Just a quick question. And understanding that this is just a procedural vote that's required if something will happen, will we have to remove the TIF let's say for example if a hospital wanted to develop on the site, right, or such an entity like that. Would the TIF have to be removed because of that particular type of development as well?
Yes, if there's any significant redevelopment or alteration from the original plan, then we would anticipate removing that site from the district, yes.
Thank you. Just wanted to get some clarity on that. Thank you.
Thank you, colleague. Chair recognizes Councilmember Ahmad. And after Councilmember Ahmad, that will be it for the first round of questions unless someone has a burning question that didn't get an opportunity. Councilmember Ahmad.
Good morning. Thank you for your testimony. I had a quick question about the costs incurred by the City to facilitate this process, this Arena project including this reduction of the TIF. Also to understand, what is the appropriations coming to PAID from us to you and basically all the, you know, maybe they're incidental but the expenses, the legal, the departmental, all of it together, how much is it costing the City to get this prepared for the arena to proceed?
To date, nothing. And the conversation that I think has been a little bit in the public eye is this notion of the Sixers funding -- well, let me take a step back. So the work that we've done to get to this point involves the various studies that you've seen have been undertaken. And so, we ran requests for proposals. We selected consultants for the community impact --
Pardon -- the Sixers did. So the Sixers provided funds to PIDC, which was held as a blind fund, so the Sixers had no input with respect to the RFPs, the selection, the work or the outcome. That was completely managed by PIDC in partnership with the City of Philadelphia. So all of the plans and the structuring and the work that got us to this date was funded out of that pool.
And what will the City be paying PAID? There is an appropriation piece, right. What will be that payment?
That is projected also to be nothing. So if this project is approved and we move forward, the Sixers move forward with constructing the arena and then operating it, you're correct, PAID sits in the middle of that. The City owns the land. They lease it to us. We sublease it to the Sixers. Built into that transaction is rent from the Sixers to PAID to cover our cost of administering that lease over that 30-year period of time. So we would not expect to incur any costs from the City. You're correct however there is within one of the ordinances what's called the services agreement, which effectively backstops if there are any costs that are -- again, there's none projected. But if there do end up being costs under that lease to PAID, then we would look to the City to fund that.
So we would be paying -- at the end of it we would be paying whatever cost you incur would be passed onto us?
And in a situation if as a clawback provision if they were to leave early or we were to do something outside of what the agreement is, is there -- this is not including the PILOTs and all of that, what we have lost by putting a PILOT in. Is there a dollar figure or you're saying there's no cost incurred pretty much -- just going beyond the record, there's no cost being incurred in order for this TIF to be reduced and for the parcels to be ready for the arena to be built on this new aggregated space? So no 12 cost incurred to the City in order for that to happen?
Okay. I just wanted to be clear we're not spending any money to do this.
Thank you, colleague. Quick questions for Round 2 and then we have to move on to the next panel. Chair recognizes Councilmember Gauthier.
Thank you, Mr. Chair. I have one more question for the panel, but I also want to chime in quickly on the conversation started by Councilmember Jones and Councilmember Bass. In the most respectful way possible, I too think that we should be solution-oriented when it comes to Market East or any other corridor in a city that needs economic development. However, I think it's challenging to ask community members what's their alternative when they're coming up with critiques. I think it is, in fact, the job of PIDC and the Planning Commission to offer a vision, a master plan, a vision and economic development plans for our important corridors. And unfortunately, we're in this position of only considering the one thing, right. But a master planning process might deliver other things that we can consider. So just wanted to add my thoughts in the most respectful way as possible.
Chair recognizes Councilmember Bass for a point of information.
Thank you. So while I do respect your opinion, I do disagree strongly and I'll tell you why. The idea that government, that we in these chairs have all of the answers is a fatal flaw in my opinion. We need to ask everyone what do you think, what do you want to see, what is your opinion. The idea that we hold all of the answers is incorrect and dangerous. We need to hear from everyone, and that doesn't mean that because you come and testify and you're opposed that you have an answer. But to not ask the question I think is a dereliction of our duty as members of Council. So I just -- with all due respect.
We actually are in agreement on that point. I became a city planner because I think it's important to empower community members to build their own vision for their neighborhoods.
I just think this forum makes that a little difficult. That's why I've asked so many questions about the sequencing of the master planning process. In my experience the plan comes, then the idea for the project comes and then you move forward. And this kind of seems a little bit a cart before the horse. But I'm going to get to my question, Mr. Chair. It's going to be quick.
I'm sorry. But can we be very, very quick because you just used your whole time right there.
And I have to let Councilmember Bass offer a response, but then we have to move on, right. Councilmember Bass, please.
And I certainly understand what you're saying. But at the same time if we are going to, you know, we're constantly accused of not listening to the people and to not ask them this very important question, again it's irresponsible not to at least ask for folks to come and to expound upon what is their vision for that community, and really because the Gallery is located in such a -- well, the Gallery. I'm back to that. But the location of what would be the 76 Place is in such a central location, citywide folks should be able to weigh in and say this could be a vision for it, that could be a vision for it, these are ideas that people want to bring to the table and there's nothing wrong with us as members saying to them, I want to hear what you have to say. Isn't that what we are always saying that we are all about, listening to the people. And if we don't listen to the people now, when are we going to start. And so, I just want to put that out.
Thank you. They've been doing a lot of weighing in, but I'll move to my question.
Mr. Rhoads, you acknowledged earlier that the projections we had for the original Fashion District TIF fell somewhat short of the actual outcome. So given that economic conditions are always going to be variable and it's impossible to predict the future, what kind of safeguards can we build into future tax incentives around projects including this arena project to make sure we're not giving away public resources to projects that miss their benchmarks? In other words, what kind of clawbacks might we implement as we move forward with these big projects that often time include big incentives?
Thank you. That's a great question. And the way in which Philadelphia has used Tax Increment Financing in specific effectively is self-enforcing, and a lot of jurisdictions across the country, counties or cities, guarantee the tax revenues. So to the extent the tax revenues are short, they have to make up the difference, in which case you'd get into your question of the notion of a clawback. Philadelphia has never done that. We as a matter of policy offer up the tax revenues that are generated, whatever they might be, whether they're what we estimated, whether they're higher or whether they're lower, to the developer to repay the portion of the debt taken out. If the tax revenues are lower, then the developer receives less money. They are effectively the one who guarantee and backstop that debt. So to the extent that the tax revenues are insufficient to cover the debt, they have to guarantee it. So we effectively have in -- I'll call it the Philadelphia model, a self- enforcing clawback of the Tax Increment Financing. And I would offer to say that we've been well- served in that respect.
Thank you, Chair. Two questions: One, I wanted to clarify something Councilmember Lozada asked about the School District income that would come from the taxes for the School District. You said if we build it, it would be 43 million a year -- I think I have it backwards. No build, 43 million; build, 48 million, right. So 6 million additional dollars per year if we build it, right?
And then you said over a 30-year term it would be 153 million total realized for the School District.
But 6 million times 30 years is 180 million. Where did you come up with the 153 million number?
The $153 million is in the detailed projections, so it's literally going tax-by-tax. So the taxes that benefit the School District are its portion of the PILOT, $2.8 million a year, the U&O tax and the Liquor-by- the-Drink tax are the three taxes that primarily benefit the School District. Those were projected through the 30-year operations of the arena. And that totals to that $153 million.
Okay. And one last sneaky question to put in. If the TIF is in effect until 2035, is there a renewal clause in the agreement that it would renew and how could we guarantee that it's not renewed or only renewed, if needed?
The state legislature took care of that for you. So the Pennsylvania TIF statute does not provide for renewals. It really is intended to be a one-shot deal for up to 5 years in order to encourage 6 reinvestment in a blighted or 7 underutilized property. So that 8 will not be renewed. 9
Thank 12 you. Thank you again for our first 13 panel. Sabrina, congratulations 14 again on behalf of members of City 15 Council and we look forward to 16 continuing to work with you to -- 17 okay. I'm sorry. 18 Chair recognizes 19 Councilmember Young. 20
Thank you. Just one more quick question. So you said the 43 versus the 48 million over the lifespan. Is that 43 and that additional 6, does that include the other taxes that you've come up with, this final number. So does that include the U&O, the Liquor-by-the-Drink, the current stuff like that that go to the School District as well?
Yes, I'm sorry. I missed the beginning part of your question, but the taxes for the School District and for the City include projections of all of the individual taxes.
Yeah. But we just want the School District portion of it, right, because to my colleague's point she did 48 times 30 or whatever and it wasn't that number that you said. But you've included in your final number that 6 million times the 30. You've included the anticipated U&O, Liquor-by-the-Drink, et cetera. Did we account for the current U&O, Liquor-by-the-Drink for the next 30 years if it currently stands as is? Is that included in your projection as well so we get an accurate comparison of the two?
I hear you. Thank you. So the first set of numbers through 2035 is a net of what the City or School District would have received anyway. So that's $6 million -- the notion that the City -- I apologize. The School District would receive $43 million if we did nothing. That's the projection through 2035. If we move forward, it could be expected to receive 48 million. So that $6 million is the net through 2035. Then the $153 million is if you extend that out through the full 30 years.
And that additional -- so that 153 million will be extended over the 30 years. So we will only be including let's say an additional 30 years, we just times that 43 by 30, and that's all we would get? We would not get any additional revenue for that particular 30-year period? We would not see an increase in U&O, we would not see an increase in Liquor-by- the-Drink, we would not see an increase in those other taxes that go to the School District as well?
The PILOT agreement and the U&O payment are agreements, so those are scheduled with escalators. All of the other taxes related to the activity, the amusement tax coming to the city of Philadelphia related to tickets, the Liquor-by-the-Drink tax, the beverage tax, all of those are based on volumes. All of those assumptions are in here. Those will be -- we have in here what we think are reasonable conservative assumptions. The actuality could be higher. The actuality could be lower, but those are our assumptions.
Yeah, but without -- so you're making those assumptions. But without it, are there assumptions being made that the growth will be stagnant in those taxes or can we assume those other taxes will increase as well over the next 30 years?
Chair recognizes Councilmember Squilla for a point of information and then unfortunately, colleagues, we got to wrap up this panel. I'll let you finish your line of questioning.
For the current Gallery now, so what he's saying is those projections, are you projecting those numbers for the current Gallery to compare that to the projections of the arena?
So for the Gallery we projected out, we have the current information. That got projected out as is. Yes, I'm sorry.
Thank you. Thank you all. And as I was saying earlier, Sabrina, congratulations on behalf of the members of the City Council. We look forward to working with you. Mr. Clerk, will you please call the next panel for today's hearing.
Mr. Mike Carroll, Managing Director for Transportation and Infrastructure. (Witness approached Witness table.)
Mr. Carroll, good morning, sir. How are you? Thank you for being here today. Please state your name for the record and you may proceed with your testimony.
Again, I'm Mike Carroll, the Deputy Managing Director for the Office of Transportation and Infrastructure Systems. Good morning, everyone. Council President, Councilmember Thomas and members of the Committee of the Whole, my name is Michael Carroll and I am the Deputy Managing Director for the Office of Transportation and Infrastructure Systems, which we call OTIS. I'm here to testify on Bill No. 240 --
Mr. Carroll, I apologize. You're probably a little taller than the person before. Can you just start all over. State your name for the record and begin with your testimony. We apologize.
Okay. Good morning. My name is Michael Carroll. I am the Deputy Managing Director of the Office of Transportation and Infrastructure Systems also known as OTIS. I'm here to testify on Bill No. 240964 to organize an authority to be known as the Arena Services District extending from Spring Garden Street to South Street and from Broad Street to 8th Street as amended. As Mayor Cherelle L. Parker stated in her decision to support the arena proposal, the corridor along Market Street has been under stress for decades and this project supports the Mayor's vision to turn that around by bringing investment and activity to the street and catalyzing vitality that can bring benefits to the entire city. The Parker Administration does acknowledge that many community concerns around the arena project are substantive and legitimate. At the same time, Mayor Parker asserts that the challenges associated with building and operating the 76 Place arena be put in perspective and that the Administration and the proponents of this project should be given the opportunity to address those concerns in good faith. We recognize this will require a group effort. That means building institutions that are not only guided by community voices but also include community representation in directing resources and in holding the project accountable. Therefore, as the Administration has come to appreciate the range of insightful questions raised by City Council over the past few months, we are also grateful for thoughtful ideas that have emerged from our discussions. With that in mind, we strongly support Bill No. 240964 introduced by Councilmember Squilla. Based on feedback obtained through the public engagement, we believe this area spans the potentially impacted parts of Market Street corridor, Chinatown, Washington Square West and Midtown Village. This bill is an auspicious step towards tackling community concerns and promoting both quality of life and a welcoming business environment in the context of construction and operation of the arena. Formally establishing an Arena Services District Authority will have a direct benefit in advocating for the interests of neighbors and businesses when routing issues to accountable public agencies as well as to the developers. In this respect, the Authority fills the need for a single convening and coordinating body that is exclusively focused on the needs of the existing communities. Furthermore, the Administration agrees with the bill's authors that the Arena Services District be funded through the Community Benefits Agreement. This will allow the Authority to directly fund services and improvements within the district boundaries. In that fashion, a complete mechanism is created to take the most meaningful feedback we have heard from both supporters and opponents of this project and then to turn that into focus plans. Moreover, this ensures that such plans are kept up-to-date and translated into sustained action. While one can anticipate, services will focus on cleaning and greening as well as promoting safety and security. The Administration sees real wisdom in the approach taken in crafting this bill, specifically that the services undertaken by the authorities should be determined by the members of the communities and then memorialized in a formal Authority Services Plan. This process will be transparent and it will involve engagement culminating in a public hearing process and it will require approval by City Council. The need to center all this work on the community is why the composition of the board is so important. The Administration supports an amendment to this bill 21 to establish a seven-member board that will include no less than four members who live or work within the district boundaries and have no other conflicting affiliations. The Authority necessarily will play an important role in managing the impacts of parking and traffic as well.
6 The Administration 7 strongly supports the designation of 8 a Traffic Oversight Committee under 9 the Authority that will include 10 representatives of the Registered 11 Community Organizations, businesses 12 and City Council to ensure a tight 13 feedback loop for planning and 14 advocacy. 15 The committee will also 16 convene a range of professionals 17 representing SEPTA, PATCO and 18 Administration departments 19 responsible for transportation, 20 public safety and emergency 21 services, which will support 22 planning and allow for direct 23 management of traffic and parking 24 concerns. I'm especially grateful, as characterized in the bill, for the Traffic Oversight Committee having a clear role to satisfy the requirements of the traffic event management plan that will be required as a condition of the permits necessary for the arena project to advance. By consolidating this work within the Arena Services Authority, duplication of roles and a confusion among accountable parties will be avoided. The work of the Traffic Oversight Committee should commence as soon as the Authority is incorporated by Council and the members can be appointed. This is because the bill requires the committee to develop plans to manage the impacts of demolition and construction. The committee will then adopt traffic management plans to coordinate transportation activities in the course of the arena's operation. When the arena is up and running, we anticipate that the Oversight Committee will coordinate the scheduling of events to minimize conflicts and assist in managing the parking demand as well as the supply of new parking. To summarize, we commend Councilmember Squilla and his staff for authoring this bill, which reflects thoughtful and thorough consideration of the challenges involved in constructively challenging public feedback into effective ideas. As we continue to engage with City Council and with the public around the proposed arena, we feel this bill embodies the best approach to addressing the specific concerns ranged around safety and security, construction and transportation impacts. We support this bill and encourage Councilmembers, community members and other stakeholders to get involved in making this approach a success. Thank you and this concludes my testimony.
Thank you for the testimony. Chair recognizes Councilmember Squilla followed by Councilmember Gauthier.
Thank you. Thank you, Mr. Chair. And thank you, Mr. Carroll, for that testimony. As we were looking through the initial introduction of the legislation in the CBA, we really thought it was important to work with the Mayor's office and Council President to pull together an Arena District which this Authority becomes and the amendment also, we've added the boundaries down from we heard Wash West who testified earlier from Spring Garden. It was stopping at Pine, and now we'll go down to South Street from Broad to 8th. Those boundaries are basically as requested by people from within the community. The biggest thing, as you mentioned, is the creation of the Transit Oversight Committee that the Authority will be able to review with PennDOT approval. PennDOT will have to approve any plans that are set forth. And so, it's important to make sure that as there are three phases of the plan that you mentioned during demo, during construction and then during events if the arena is built. The key I think is that it's going to be reviewed by the Controller's Office. It's required to be reviewed by the Controller's Office to see if we meet those goals. And then the Authority would then go back to the committee to make sure we have proper changes, but what we would also like to do, which in the term sheet whereas if we do not reach our goals, we've heard this over and over again, what happens if you don't reach 40 percent transit, public transit, what happens if we have gridlock there, we would like to have a provision where -- right now the Sixers have agreed to pay first year of transit passes. This has not been agreed on yet. But I mean, as we still work on our term sheet, as we still work on the CBA and look to add additional things, I think it's important to say, hey, listen, there's a responsibility for all of us. If for some reason we do not meet the 40 percent goal for that first year and the Controller comes back and tells us that, then somebody has to be accountable and then the Sixers would have to pay or the Arena folks have to pay another year of transit tickets and every year after until you reach that goal. There has to be some type of provision in here where we are held accountable as a City and as the developer to make sure that happens. Again, that is not part of the term sheet at this point. We want to make that part of the term sheet. There has to be a provision in there where there's accountability. Planning is always great, but we know that actual activity sometimes takes a different track than a plan. And so, I appreciate your involvement in working, the Administration and the Mayor's office for supporting this arena District. I think it's really important to give the autonomy to the people who live in the community, and that's why a majority of community members was also important because they should have a say on how that money is being spent and what resources they think they need to spend that on as the impact on their surrounding community. And it's not us, the City, telling them, but they will have a plan in place. And the Municipal Authority is created from this. Obviously, if the arena legislation doesn't pass, the municipal authority will not move forward in that case. But just in case it passes, this Authority will allow the community to have more of a say and the resources to do it. So thank you.
Thank you, colleague. Chair recognizes Councilmember Gauthier followed by Councilmember Lozada.