COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COUNCIL COMMITTEE ON FINANCE - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, June 1, 2000 9:15 a.m. - - - BILL 000258 - An ordinance amending Chapter 19-200 of the Philadelphia Code, entitled "City Funds, Deposits, Investments, Disbursements," by amending Section 19-201, entitled "City Depositories," by authorizing the City Treasurer to deposit funds in Sovereign Bank, under certain terms and conditions BILL 000280 - (Continued from previous hearing.) An ordinance approving the Fiscal Year 2000 Budget, providing for expenditures for the capital purposes of the Philadelphia Gas Works, including the supplying of funds to be obtained in connection therewith and rejecting the forecast for Fiscal Years in 2001 through 2005. PRESENT: COUNCILWOMAN JANNIE L. BLACKWELL, Chair COUNCILWOMAN MARIAN B. TASCO, Vice Chair COUNCILMAN DAVID COHEN COUNCILMAN FRANK DICICCO COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN BRIAN J. O'NEILL - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 /00 FINANCE I N D E X Bill 000258 * Folasade Olanipekun, City Treasurer. . . . . Leonard Ross, Sovereign Bank . . . . . . . . . Bill 000280 * Kumar Kishinchand, PGW . . . . . . . . . . . Joyce Wilkerson. . . . . . . . . . . . . . . . Secretary, Strategic Planning Initiatives * Dan Hertzel, Deputy Chief City Solicitor . . 10 Steve Hershey, Counsel to PGW. . . . . . . . . 21 (* - Also provided attached written material.) 3 6/1/00 FINANCE - BILL 000258 P R O C E E D I N G S
Good morning. This is to announce the Finance hearing that we are ready to start for the purposes of hearing two bills this morning. For the purposes of a quorum, to my left is Councilwoman Miller, who is sitting in for us. To my immediate left is the Vice Chair, Councilwoman Marian Tasco. To my right is Councilman Nutter. We will announce the other Councilpersons as they come in. The first bill to be heard is Bill No. 14 000258, an ordinance amending Chapter 19-200 of the Philadelphia Code, entitled "City Funds, Deposits, Investments, Disbursements," by amending Section 19-201, entitled "City Depositories," by authorizing the City Treasurer to deposit funds in Sovereign Bank, under certain terms and conditions. All right, we do have the City Treasurer here, so we will invite all who are going to testify come forward. Mr. Ross, we welcome you. (Witnesses come forward.) 4 6/1/00 FINANCE - BILL 000258
Councilman Frank DiCicco is also here. Thank you. Good morning again. Please identify yourself for the record and proceed with your testimony.
Good morning, Councilwoman. My name is Folasade Olanipekun, City Treasurer.
My name is Bruce Iacobucci. I'm the Director of Retail Banking at Sovereign Bank.
Good morning. I'm Chuck Barrett (ph.). I'm in charge of municipal banking for the bank.
My name is Jim McMannus (ph.) and I'm a vice president with Sovereign Bank.
Thank you. Good morning. I am Folasade Olanipekun, City 5 6/1/00 FINANCE - BILL 000258 Treasurer, and I am here today to testify in support of Bill No. 000258, which amends Section 4 19-201 of the Philadelphia Code relating to authorized City depositories. This amendment will include Sovereign Bank as a City depository, and in so doing, update the list of financial institutions that the City is authorized to deposit funds. I have reviewed the financial information provided by Sovereign Bank and have determined that they meet the basic criteria, as required by the Code, for becoming an authorized depository. Specifically, Sovereign Bank: (1) has been in business for the past five years; (2) has been profitable for the last two years; (3) is federally insured; and (4) has over $100 million in assets. This concludes my written testimony, and I am available to answer any questions you have on this matter. Thank you.
Thank you very much. 6 6/1/00 FINANCE - BILL 000258 Would anyone else like to testify?
I'm sorry. My name is Leonard Ross, and I represent Sovereign Bank. Sovereign Bank has made a commitment to all the communities they have been in, they have a commitment to Philadelphia and wish to be a part of the life of Philadelphia and a good neighbor. In their financial statement, they make their commitment to the community as follows: They want to grow and enrich the communities where they work and live; Sovereign believes in the revitalization and success of our communities; and they are committed, socially responsible corporate citizens supporting worthwhile community activities, encouraging team members to be actively involved in our community. They have approximately 16 branches in Philadelphia, 159 branches in Pennsylvania, a 7 6/1/00 FINANCE - BILL 000258 total of 591 branches throughout their entire system, and has over $26 billion in assets based on the 1999 financial statement. They are committed to Philadelphia, they are the largest bank that has their headquarters here in Philadelphia. The company that owns Sovereign Bank has their headquarters at 20th and Market, and they are committed to remain here and to grow in Philadelphia.
Thank you very much, Mr. Ross. Can you get us a copy of where their banks are?
So that the District Council people know, and certainly, we are focussing in our community development block grant period in West Philadelphia on redoing our business trips, so we would like to know where they are.
We will get you a list of all their branches in Philadelphia. And on that note, I would say that part of my representation of Sovereign Bank is to bring them to the District Council people and introduce them. They wish to 8 6/1/00 FINANCE - BILL 000258 be a part of the community and wish to take part in as much as is physically and fiscally responsible for them to participate in the neighborhoods. They will be a good partner for all of the City Councilpeople.
Thank you. We look forward to the relationship. ARE THERE any questions from members of the committee? (No questions.)
I assume that you'll be requesting a suspension of the rules.
Yes, ma'am. We would request that the rules be suspended so that the matter can be before Council.
Certainly. We will now again hear testimony on Bill No. 000280. We began this hearing, continued it until this morning. Ordinance No. 280, an ordinance approving the Fiscal Year 2000 Budget, providing for expenditures for the capital 9 6/1/00 FINANCE - BILL 000280 purposes of the Philadelphia Gas Works, including the supplying of funds to be obtained in connection therewith and rejecting the forecast for Fiscal Years in 2001 through 2005. Commissioner Kishinchand? (Witness comes forward.)
Old titles are hard to lose, so you'll -- I guess I still always call you "Commissioner." I forget your new title; I had it right the last time, but. . . COMMISSIONER KISHINCHAND: I like that title.
Thank you. And anyone else you would like to bring forward, we're happy to have. COMMISSIONER KISHINCHAND: Thank you very much, Chairwoman Blackwell. I do wish to bring Joyce Wilkerson up front, with your permission, as well as the City's Solicitors representative because there were some issues that were left open when we last came over.
Absolutely. Madam Secretary Wilkerson? Councilman O'Neill? Thank you 10 6/1/00 FINANCE - BILL 000280 Councilman O'Neill likewise is here and is a member of this Finance Committee, and Secretary Joyce Wilkerson is joining the witness table. And we will ask both guests to identify themselves for the record and then we will begin from there.
My name is Joyce Wilkerson. I'm Secretary of Strategic Planning Initiatives and a member of the PFMC Board.
I'm Dan Kantu Hertzler (ph.), Chief Deputy City Solicitor, here on behalf of (unintelligible).
Thank you very much. COMMISSIONER KISHINCHAND: I believe one of the questions that we had left unanswered last time was the one that was raised by Councilman O'Neill -- the legality, if there was one, of overspending on a line-item basis by PGW. The City Solicitor has a draft opinion at this point, and I would like Dan to sort of explain what it is and we'll pass the final signed copy to City Council to the Finance Committee.
Actually, I do have a 11 6/1/00 FINANCE - BILL 000280 signed copy. (Witness brings signed copy forward.)
The City Solicitor's Office. . . is it best if I give you a minute to look it over first?
Well, that would be wonderful, but let me ask you-- Madam Chair, can I ask a question?
I mean, you have obviously handed us a document from the City Solicitor's Office and in big letters all across it reads "draft."
I think he also passed out the original. We can have copies made of the 12 6/1/00 FINANCE - BILL 000280 original that is signed by the City Solicitor.
Oh, okay. I mean, I know the Solicitor's policy usually is, whoever asks for something, you get it in draft. It's between them, and with your now handing it to us, I mean, it's obviously out in the public, to some extent. But if it's the final now and is a signed copy, it doesn't matter, so that negates question. Thank you.
I think I can boil this down as a. . . As to the budgets you're talking about, I think the answer is clearly yes, line items are required. That's not by matter of principal under the PFMC agreement but, rather, because of the ordinance that Council has adopted saying that PGW's authorized to make certain expenditures for purposes shown. That's a little bit of a general statement, but there's not an awful lot of wiggle room there. It would be a little more clear if there were specific regulations in effect, but a line item budget is required. 13 6/1/00 FINANCE - BILL 000280
Thank you, I appreciate that. I think if it were otherwise, we'd probably be the only government agency, or quasi-government agency, in the world that can do whatever they want after they get an approved -- a legislatively approved budget. It's just sad that we've been doing it -- just that for years. Kumar, do you have another area? I also had asked for a history of orders by the Gas Commission that, obviously, would have been ignored, but I just wanted to -- you can refer to the notes if you want.
I believe there have been orders by the Gas Commission that set forth procedures with respect to line-item budgeting. I don't have those to hand up. I can make them available, but they do require that, I know, significant changes be brought back to the Commission, and I think ultimately Council and -- I do not believe that the company has really complied with that historically.
I appreciate they're willing to comply now. And I also 14 6/1/00 FINANCE - BILL 000280 appreciate the information and clarification on the historical part of this, both legally and factually. COMMISSIONER KISHINCHAND: I want to just add that, you know, having looked at the past budgets and the overspending that has occurred on a line-item basis, I've been very uncomfortable about it, but there is nothing I can do now other than to bring a reconciliation of past budgets for City Council's approval after PGC looked at them and approved them. But going forward, we have drafted in-house principles, under which we would operate, which would adhere to what City Council has already ordained, which is spending by line item. We've got those principles in draft form at this point, we have shared it with the PGC staff only to a limited extent that there may be some changes that the PGC staff might want us to make, such as providing monthly reports so that PGC can have that oversight and make sure that we're not overspending. So once we get the Gas Commission to sign off, we'd like to share that with you also. 15 6/1/00 FINANCE - BILL 000280
Kumar, you have a little experience with this at the Water Department, I assume, line-item budgets? That's the way you deal with it, right? COMMISSIONER KISHINCHAND: We deal with it on a regular basis, yeah, we have line items, yeah.
This doesn't need to be answered, but I'm a little perplexed that at the last hearing, several people, in terms of talking about the old management, said, you know, We pushed for this for years, told them they were wrong, and that kind of thing. And it surprises me that we had an advocate in place and I don't mean to cast aspersions except that it raises, I think, an obvious question: why wasn't legal action brought when it's a legal entity that is our advocate? I mean, I think it raises a question on that, and it concerns me a little bit. But I appreciate the information today. COMMISSIONER KISHINCHAND: Thank you.
Councilman Nutter? 16 6/1/00 FINANCE - BILL 000280
May I note, before you raise question, that Councilman Cohen is here also and is a member of this committee. After Councilman Nutter, Councilman Cohen.
Thank you, Madam Chair. Secretary Wilkerson or Mr. Kishinchand, are there other suggestions or recommendations that you might make at this time with regard to -- I believe I heard the terminology -- "policies and principles" around this area of line-item budgeting that could be taken to more institutionalize, beyond the knowledge and time of all of us who are presently involved in this, to either make proposed or necessary amendments to the City PFMC contract in this particular regard, to make it crystal clear about the line-item budgeting issue or any other orders or regulations that can be promulgated, I'm assuming, by the Gas Commission to, again, make it very clear and create the documented history and the paper trail that goes along with this. 17 6/1/00 FINANCE - BILL 000280 Are there any items in that particular regard that can be taken? COMMISSIONER KISHINCHAND: Well, clearly the PFMC agreement with the City requires that, of course, we bring the capital budget to City Council, and I think that agreement certainly could be modified to indicate that PGW adhered to the principles with which the City operates. However, if Council so desires, they could give PGC, the Gas Commission, certain flexibility, recognizing that the gas business is so sort of different than the other utilities, such as purchasing of gas, where you do need to make some decisions very quickly. So there are certain areas where certain flexibility may be required. So beyond that -- beyond these principles, which we will be presenting to the Gas Commission, which can be converted into regulations, that would provide some -- we hope, would provide some comfort to City Council beyond that reporting on a monthly basis to make sure that we don't overspend. Those are some of the things that can 18 6/1/00 FINANCE - BILL 000280 be done. The other thing that we will be looking at is an accounting system at PGW, where if a line item is going to be exceeded or close to that, that it will kick out the work order so that people are alerted in-house that, you know, they are close to overspending. So there are a few things that we can do administratively, as well as legally.
This may be more of a Law Department question but, I mean, given the relationship between PGW and the City, I'm assuming, whether by contract or directive, I mean, there should be nothing that would stand in the way of a requirement that PGW, to the greatest extent practicable, should be required to have similar or comparable accounting and financial systems to the City systems. Are they?
It doesn't sound like that requires substantial research. I think the answer has to be yes.
Lastly, the -- I'd like to ask a question in the same area where Councilman O'Neill was, but somewhat of a different side of that coin, and whether it's the 19 6/1/00 FINANCE - BILL 000280 consumer advocate raising the question or anyone, it seems to me that, as the Councilman framed it, this issue has apparently been going back and forth for some period of time, which seems to, quite honestly, beg the question, that whether it was the consumer advocate raising it or not raising it -- I mean, we don't have to have that debate. But the mere fact that it has been going on for so long seems to get back to an area that, I mean, we're currently grappling with, which is, if PGW, for some reason, decides to ignore an order of the Gas Commission, who ultimately has the authority and the power to make them do so, to make PGW do something, if they're not operating within the principles of either the City PFMC agreement, if they are for some reason or not -- and I'm not accusing them of doing any of these things. But if in fact or in perception, they're not following certain mandates or directives, doesn't it ultimately beg the question of, who's in charge and who's responsible for this entity?
I think there are 20 6/1/00 FINANCE - BILL 000280 control issues that probably need to be clarified. I don't know that there's a whole remedy section in the contract, but I think as we move forward looking at governance questions, I think we have enough of a history, you know, to warn us that we need to think more clearly about some of these issues.
All right, okay, all right. Thank you. Thank you, Madam Chair.
Thank you, Madam Chair. Wasn't the purpose of the formation of the Gas Commission like -- wasn't the Gas Commission really created by some form of a contract between the City negotiating with itself? On one side, the City was the board of directors of the Gas Works, and on the other side, the City created a Gas Commission to oversee what the City's appointees as members of the board of the Gas Works -- they didn't call it that, but that's what really they were. Wasn't it really 21 6/1/00 FINANCE - BILL 000280 the City really negotiating with itself all the time? I mean, I just have great difficulty. It's like we're trying to deal with two ambassadors, both appointed by the same authority basically, negotiating with each other. We have that problem with departments generally in the City. Even with the Home Rule Charter and everything else very clear, we have trouble with departments communicating with each other, talking to each other. They fight over turf, they fight over authority that, you know, one has. Isn't that really just what's happening here? It's like they're two different bodies -- the Gas Works Board and the Gas Commission. And maybe there's a third party, the executives who operate the Gas Works. COMMISSIONER KISHINCHAND: Well, we have Steven Hershey, who's counsel to the City and is very familiar with the governance issues on this matter. If you don't mind, I'd like him to respond, please.
Thank you. The Gas Commission was created by the City Charter. It's 22 6/1/00 FINANCE - BILL 000280 -- under the Charter, the Gas Commission --
Mr. Hershey, I'm sorry to interrupt you. Could you for identify yourself for the record, please.
My name is Steven Hershey. The Gas Commission was created by the City Charter, and under the Charter, it has those that authority and responsibility specifically designated by ordinance. The negotiation of the City with itself, which you referred to, occurred in the 1972 ordinance, which was the management agreement creating PFMC as a nonprofit entity to manage PGW on behalf of the City. And in that ordinance, there were specific responsibilities designated for the Gas Commission.
And, therefore, Council has the authority clearly to designate what the relationship should be and which has the authority?
Yes. The City Council can add to, change, or remove whatever responsibility the Gas Commission has.
Well, that's 23 6/1/00 FINANCE - BILL 000280 interesting, because the Board of the Gas Works, the PFMC, the initials may be in the wrong order.
They're in the right order? That's just accidental. (Laughter.)
That board is totally appointed by the Mayor. The authority of the Mayor is reduced to 40 percent from 100 percent when it comes to the Gas Commission because Council appoints two, the Mayor appoints two, the City Controller, which is an independent office under the Home Rule Charter, appoints one member. So that this -- whatever the problems are here can be subject to determination finally by the City Council, if we're able to develop an ordinance that clarifies instead of adds further confusion, which often is the case when laws get passed. But thank you very much for the clarification.
Thank you, Madam 24 6/1/00 FINANCE COMMITTEE - PUBLIC MEETING Chair.
Thank you very much. Do other members of the committee have questions? (No further questions.)
I assume, Mr. Director, I think it was, that you will need a suspension of the rules? COMMISSIONER KISHINCHAND: Yes, please. I appreciate that.
All right. If there are no other questions, then we will close out our public hearing and enter into our committee meeting. - - -
Councilman Nutter, would you give me a motion on Bill No. 20 258.
Madam Chair, I move that Bill No. 000258 be reported out of this committee with a favorable recommendation and a further recommendation that the rules of Council be suspended so as to permit first reading at our 25 6/1/00 FINANCE COMMITTEE - PUBLIC MEETING next session. (Duly seconded.)
It's been moved and seconded that Bill No. 258 be reported out of committee with a favorable recommendation and also for a suspension of the rules so that he can hear this at our next session of Council. All in favor? Opposed? The ayes have it, and so the bill 12 passes.
The Chair recognizes Councilman DiCicco for a motion on Bill 15 No. 280.
Thank you, Madam Chair. I move that Bill No. 000280 be reported out of this committee with a favorable recommendation and that the rules of Council be suspended so as to permit first reading at the next session of City Council. (Duly seconded.)
It's been moved and properly seconded that Bill No. 280 be reported out of committee with a favorable 6/1/00 FINANCE COMMITTEE - PUBLIC MEETING recommendation and also a recommendation that the rules be suspended so as to permit first reading at our next session of Council. All in favor, aye? Opposed? The ayes have it, and so it passes. Let me thank all of the members of the committee for coming and for helping us to get this done as expeditiously as possible, and certainly all of you who have come to testify. Thank you. (Adjourned at 9:40 a.m.) - - - 27 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Thursday, June 1, 2000, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE ON FINANCE BILL NO.'S 000258, 000280 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter