I understand. I understand. Let's go back to the $27 million that was raised earlier. When the Council President, when the Chair asked you about that, I thought you responded that there had been no contact with PICA with regard to those funds; is that correct? Did you say that?
No. I haven't contacted PICA regarding those funds. I said I would be glad to explore that possibility with PICA.
What is that 116 041039-041040-041041-041046, Whole, 12/8/04 money for? Why do we have $27 million -- I'll rephrase the question. Is there $27 million in interest earnings over at PICA?
Okay. So we have $27 million sitting over at PICA. We've not talked to them about it. We have no 22 presently designated project for it. And we have $30 million that the City would like to support the expanded library, which I would certainly like to do 117 041039-041040-041041-041046, Whole, 12/8/04 as well.
Did anyone think that maybe we could use the $27 million for this?
No, sir, we did not; but it's an opportunity that we would be glad to explore.
Never mind. I withdraw the question. I withdraw the 118 041039-041040-041041-041046, Whole, 12/8/04 question. Never mind. Never mind. (Laughter.)
If you're going to attack me that way, forget it. Okay? (Laughter.)
Gees. We were having such a nice dialogue here, and then you go and bring out the hammer.
I understand that. You're a smart man. Why wouldn't this be explored, just as part of the options?
Why I haven't explored it? I didn't think about it. I would be glad to.
All right. That's honest. Knowing... Never mind. Lastly, $27 million in capital project funds possibly available from this Act 71 reimbursement? Is that accurate as well?
24. 119 041039-041040-041041-041046, Whole, 12/8/04
24. I'm sorry. It's 27 with the other. Is that accurate?
We'll be glad to get you that information tomorrow. We don't have it with us.
It was, like, ten questions ago. I think the question was, are the dollars allocated for specific projects? I think your answer was, you're going to let me know.
Right, we'll let the 120 041039-041040-041041-041046, Whole, 12/8/04 Council President know.
-- of whatever the $24 million is designated for, that would be helpful.
So, this is my last question. Is the possible use of the $27 million for the library a viable option, in terms of giving immediate funding to the library from this particular source, to move this project along?
We'll be glad to explore that possibility. Until I have opportunity to talk with, you know, all the parties that are involved, I can't give you an answer right this moment.
Well, I understand that. But I think your previous response was, it could be used for this purpose.
Okay. The $10 million in the up-front which is, I guess, a 121 041039-041040-041041-041046, Whole, 12/8/04 match against the foundation's $10 million?
Is there a certain immediacy for the $10 million? And where exactly would we get it from? And what qualifies as short-term?
On the $10 million. Okay. And we would just borrow that from a bank?
Okay. All right. Let the record reflect that I did 122 041039-041040-041041-041046, Whole, 12/8/04 not take advantage of the Chair's absence, and I now relinquish all of my remaining time, which expired about minutes ago. 5 Thank you, Mr. Zies. It's always a 6 pleasure. Thank you. 7 Thank you, Madam Chair. 8
Thank you. 9 Mr. Zies, if you'll just stay where 10 you are, it's my understanding that we do 11 have people here from the Streets Department 12 that will have to testify on Bill Number 13 041040. 14 And I believe we do have... Do we 15 have someone from Public Property here, too? If you don't mind, these gentlemen do have community meeting that they must attend this evening, so we would just hear their brief testimony.
Good evening. Thank you for your patience. Please identify yourself for the record, and summarize your testimony, please.
Yes. Good evening, Madam President and members of Council. 123 041039-041040-041041-041046, Whole, 12/8/04 My name is Bruce Rader, acting Survey Bureau Manager of the Department of Streets. And the Department of Streets would like to offer the following testimony on Bill 7 Number 041040. This is an administrative Ordinance requested by the Commerce Department. The purpose of this Ordinance is to strike from City Man 63 and vacate Carlton Street from 20th Street eastwardly approximately 98 feet 4 inches, to a dead end, and to reserve in place on the City Plan a certain right of way for public utility purposes within the bed of Carlton Street, proposed to be stricken under authority of this Ordinance. This Ordinance is supported by the Department of Streets and is recommended to you for favorable action.
Thank you very much. Are there any questions from members of the Committee? 124 041039-041040-041041-041046, Whole, 12/8/04 (No response.)
Thank you. And again, I thank you for your patience.
Okay. Can we have the representative from Public Property? Again, I thank you for your patience. Kindly identify yourself for the record.
My name is Ken Sipos from the Department of Public Property. The Commissioner of Public Property supports Bill Number 041039 and 041041, and recommends that the rules be suspended so the Ordinance may be passed upon the second reading of Council.
Thank you very much, sir. Mr. Zies, would you mind coming back to the witness table. 125 041039-041040-041041-041046, Whole, 12/8/04 It's really a shame. I think this will probably be the last time you will be appearing before us for a public hearing.
I guess it would be inappropriate to say I hope so. (Laughter.)
Thank you, Madam President. Let me start with the fact that I think several of my colleagues have raised the issue of using PICA capital funds which is something you did not consider. The use of those funds would not affect Bills 39 or 40, as far as you know; is that correct?
We would not have to do the... We would not have to do the bond issue. 126 041039-041040-041041-041046, Whole, 12/8/04
I guess my specific question is, is it language within Bill 41 that precludes the use of PICA capital funds?
The Ordinance says the City would provide up to $30 million through the bond issue. So, if there were other sources, we could use those sources.
So that under the current language of Bill 41 we could, in fact, use PICA funds, as opposed to what you were considering originally.
Okay. I guess my next question is, I guess in very simple ways my colleagues have asked a question: One, can we afford this and how can we afford this; and, two, is this in fact a good financing mechanism. Of course, we've already probably resolved the last question, that if PICA is a better financing mechanism, then we can employ any financing mechanism up to that amount of indebtedness. 127 041039-041040-041041-041046, Whole, 12/8/04 So simply put, one, can we afford it? And two, is our flexibility, in terms of financing mechanisms, sufficient that we are, by passing this Bill, not using a -- not tied to a financing mechanism that is not the best option.
By passing the Bill, you are not tied to using a financing method that is not the most optimum. Can we afford it? It is in the current Five-year Plan in '08 and '09. We would have to find the money, and -- If we issued the debt, we would have to find the interest for the short-term, the $10 million short-term piece in '06 and for the debt service in '07, which would be somewhere between 2.1 and 2.7 million. We would have to find that funding when we put the plans together.
Okay. Lastly, how long have you been working on this project?
Do you mean this iteration? 128 041039-041040-041041-041046, Whole, 12/8/04
This library project. Not just these three Bills that are before us; but when the project was introduced last term, did you work on that project?
I was the Deputy Finance Director. I wasn't as involved as Deputy as I am now as Director.
So you were familiar with the fact that this legislative body is very much in favor of the project, believes very much in the work that the paid library staff and the voluntary organizations that support that paid staff support all the great work that they have done; but last time around last term had some problems with the financing mechanism and this time around might have some problems with the financing mechanism; yet, the bills were sent to us last Wednesday. Why is that?
That was when we had the information forwarded to us from PIDC and the Library Foundation.
That's the only 129 041039-041040-041041-041046, Whole, 12/8/04 reason why the Bills arrived late?
You're quite welcome. And absolutely, we understand Council supports the project.
Just for the record, Mr. Zies, there's no question that an alternative like those that have been mentioned, whether it be PICA funds, Act 71 funds, something that's already sitting in a pot somewhere, would be in the City's best interests financially than going this way, even though this may be the way we have to go.
Okay. Thank you. I just wanted to make that real clear, that that's the Finance Department's position as well and the administration's position. 130 041039-041040-041041-041046, Whole, 12/8/04
I know the Finance Director wouldn't want to leave. Do we have any other questions of the Finance Director?
I do have part of my -- If there are no other questions, I do have part of my testimony... As I mentioned in the Council briefing, there was an Exhibit 1 that was omitted from the original Ordinance 11 that was transmitted to Council. And I would like to ask that the...
Madam President, I have one other question I forgot to ask for the Director.
On the issue of the parking garages, if they become part of the project, the underground, has there been discussion within the Finance Department as 131 041039-041040-041041-041046, Whole, 12/8/04 to whether or not they would be revenue bonds, supported by the parking fees that would be generated, whether they would have to be supported by another source of general obligation type revenue?
We would explore those alternatives. We haven't had a chance to do that yet.
Madam President. I'm sorry to belabor this, but Councilman O'Neill's question prompted another one in my mind. I noticed some discussion about parking garages. There's been no 18 determination on the use of the Parking Authority as the developer for those garages or we haven't determined that yet?
One of the issues that I think we face when it comes to the cost of parking in Philadelphia is the fact that the Parking Authority probably for 132 041039-041040-041041-041046, Whole, 12/8/04 a long time wasn't doing what it was supposed to do in developing parking lots and being a competitor for private parking operations, therefore kind of facilitating a reasonable price when it comes to parking charges. If the Parking Authority were in the business more than it is in now, with structured and surface level parking, their pricing would be subsidized would naturally by market, through market effect, bring down the cost of parking overall. One of the problems that we face in Center City in short-term parking for visitors is the exorbitant amount -- I mean, it cost me $20 to take my son to the doctors at 8th and Chestnut the other day for, you know, an hour and a half parking stint. Would it make sense to make sure that the Parking Authority is involved so we don't have, you know, these exorbitant gouging prices when we have our visitors come to visit our new, improved and expanded library?
We would be glad to have 133 041039-041040-041041-041046, Whole, 12/8/04 discussions with the Parking Authority on that.
But you're not going to be having discussions with anybody. You're going to be gone. You say, yes, sir; yes, sir; yes, sir; that's right; whatever you say, Jim. (Laughter.)
No. I said would it be inappropriate if I said I hope so. I didn't say I hope so.
Thank you. Any other questions? The Chair recognizes Councilman Ramos. COUNCIMLAN RAMOS: Thank you, Madam President. Only maybe a point of information. Would we be... I know we have Joyce Wilkerson -- I don't see her in the chambers -- coming up for something else shortly. 134 041039-041040-041041-041046, Whole, 12/8/04 Will we be able to ask anyone of the administration, outside of the Director, on whether the idea that some of my colleagues have floated, tapping into the PICA fund is something that the administration looks at as favorable?
Unless the Director is speaking on behalf of the administration, on behalf of the Mayor.
Well, I mean, I believe the Finance Director always speaks on behalf of the administration.
So the answer is yes, that this administration would look favorably at us tapping into or presenting the PICA fund as an alternative source of funding.
But I'm sure Miss Wilkerson would be glad to answer that also when she gets here. 135 041039-041040-041041-041046, Whole, 12/8/04
So you're saying that although you think that you're speaking on behalf, that that could still change.
I also think I understood the Director to say that he would certainly look into it, and he would be very happy to look into the possibility and potential of this happening.
Yes. I understood that. I'm just wondering whether, since we're here tonight, if we can hear from someone else in the administration if they have had any thoughts, Joyce Wilkerson or anyone else, have had some thoughts about tapping into the PICA fund.
Councilman, I think you're free to ask any question you would like of Joyce Wilkerson 136 041039-041040-041041-041046, Whole, 12/8/04 when she comes up. Thank you.
Thank you, Madam President. Reel briefly, since you're here speaking on behalf of the administration. The parking issue, can you communicate to the administration very clearly that I would have grave concerns about my support for this parking issue, particularly if the parking garage only addresses the needs of the library, understanding the need if not the potential development of the Barnes and the Calder. But the real problem that we had with parking, as it relates to the existing facilities. So, I mean, I want you to communicate that in clear terms that unless there's some understanding that we're going to address everybody's parking issues, I would be somewhat reluctant to support parking just for the library. 137 041039-041040-041041-041046, Whole, 12/8/04
The administration does share your concern. I think Mr. Shelkrot mentioned that our planning department is looking at the master parking plan for the Parkway, and would take into account all of the needs of the Parkway, not just the library.
Thank you. Any other questions or comments. (No response.)
You have always been a gentleman, very courteous. And we really appreciate what you have done. Thank you so much?
Thank you. Do we have anyone else to testify on 138 041039-041040-041041-041046, Whole, 12/8/04 the bills before us? (No response.)
No one? Last call. Okay. Since we don't have anybody else to testify, I would ask Mr. McPherson to please read the title of Resolution Number 041046. MR. McPHERSON: Resolution 041046, Resolution approving a Revised Five Year Financial Plan for the City of Philadelphia covering Fiscal Years 2005 through 2009.
Okay. We do have your... I believe everyone has a copy of the prepared testimony of Miss Wilkerson, circulated. Kindly identify yourself for the record and proceed with your testimony.
My name is Joyce Wilkerson. I'm Chief of staff to Mayor John 139 041039-041040-041041-041046, Whole, 12/8/04 Street. And with me I have Diane Reed, our Budget Director, and Ray Zies, the acting Finance Director. Good afternoon. Good evening. Thank you for this opportunity to present testimony in support of the administration's revised FY 2005 to 2009 five-year financial plan transmitted to PICA on November 15, 2004. I know you've all received copies of the Resolution which contains the revised plan, and in a narrative describing highlights of the revision. I'll therefore keep my testimony brief by addressing only major changes to the plan from the version approved by PICA on July 7th. More explanation of these changes is available in the narrative included with Resolution Number 040146. The PICA approved plan involved severe expenditure reductions, numerous new deficit-cutting initiatives beyond those already being carried out from the FY04, FY08 140 041039-041040-041041-041046, Whole, 12/8/04 plan, and a series of revenue-generating actions, in order to avert a potential FY09 year end fund balance deficit of $905 million. The expenditure reductions included five percent cuts for most budget line items in both FY05 and FY06 and a total workforce reduction of approximately 1,700 employees over the planned period. Among a number of management and efficiency initiatives, the plan assumed the City would respond to a population and service needs that have changed significantly over time, without corresponding changes in the City's approach, by restructuring the Fire Department, resource allocation and operations of the City's recreation facilities, saving a total of nearly $8 million annually. The plan also assumed that these would continue to be updated to reflect the City's current actual costs and that the City would invest to more aggressively pursue delinquent tax collections. 141 041039-041040-041041-041046, Whole, 12/8/04 The myriad of actions and initiatives assumed in the PICA approved plan were necessary to overcome revenue growth limited by tax reductions and the dramatic growth in the City's benefits costs, including an increase in the City's FY05 pension costs of $55 million or 40 percent. The increase in the City's benefit costs assumed in the plan completely absorbed the projected growth in tax revenues, requiring sustained staffing expenditure reductions to balance the plan. The revised five-year plan was prepared against this backdrop. The major changes in the revised five year plan, when compared to the PICA approved plan, include differences in the City's actual FY04 financial results compared to what was included in the plan, as well as changes in the assumptions for FY05 and beyond. The major differences in the City's actual FY04 results include lower than expected FY04 receipts from other 142 041039-041040-041041-041046, Whole, 12/8/04 governments. The City received $116 million less in revenue from other governments in FY04 than projected in the PICA approved plan. The majority of this revenue, $103 million, was revenue from the Commonwealth of Pennsylvania for Act 148 child welfare services, and county health services. This revenue was expected by the end of August, when the City closes its books on revenue, but not collected until September and October. There's also higher than expected FY04 tax revenue. The delays in reimbursements from the state were partially offset by strong receipts from the City's major taxes. 7 million more from tax revenues in '04 than budgeted in the PICA approved plan. Higher than expected FY04 operating deficit, and lower than expected FY04 year end General Fund balance. 4 million worse than projected in the PICA approved plan. Most of this negative variance is attributable to the lower than expected revenue from other governments which was offset by higher than expected tax revenue, as well as lower than projected obligations.
8 million, the first negative year-end fund balance since 1992. The major changes for FY05 through FY09 in the plan include lower than expected beginning fund balance. 8 million provides a lower starting point for FY05 and future years. Stronger tax base and projected tax collections. The strong FY04 performance of tax collections for every major tax provided a higher beginning tax base for FY05 and future years. The revised plan maintains prior 144 041039-041040-041041-041046, Whole, 12/8/04 year growth rate assumptions which are applied to a higher tax base. 6 million over the life of the plan. The impact of state gaming legislation is also reflected in the legislation. As you know, the state passed gaming legislation in July, created two sources of positive revenue changes. The City's entitled to a local share of any gaming revenue generated within Philadelphia. The plan, therefore, includes $55 million in projected revenue from this source between FY05 and FY09. In addition, this legislation is projected to enable the City to be relieved of its current obligation to fund the Pennsylvania Convention Center debt service and operating deficits. This change, which is also projected to take effect in FY07, would save the City $42 million from FY07 to FY09. The pension fund loss amortization 145 041039-041040-041041-041046, Whole, 12/8/04 is also changed. A change in state law allowed the City to reduce its General Fund pension payment by a total of $50 million over the life of the plan. The plan also reflects changes as a result of the labor contracts. The FOP, Lodge 5, was awarded a four-year contract in August through arbitration. District Council 47 approved a new four-year contract in October. And District Council 33 agreed to a new four-year contract this month. The cost of labor agreements increased projected expenditures by $331 million from FY05 through FY09, compared to what was in the previously approved PICA plan. Finally, the PICA approved plan assumed that the number of General Fund positions would be reduced by 1700 from FY04 to FY09, including a reduction of 787 positions from FY05 to '06. The revised budget -- The revised plan budgets an additional reduction of 300 146 041039-041040-041041-041046, Whole, 12/8/04 positions in FY06, for a total of 1,087 positions from FY05 to FY06, and a total of 2,035 positions from FY04 to FY09. In order to reach these sharp reductions in time to achieve necessary budgetary savings and avoid projected deficits, the City anticipates that layoffs will be necessary in FY05, and we have begun that process. And pink slips will actually go out in January of next year. There are other smaller changes in revenue expenditures, some that are described in the body of the Resolution. I'd like to thank you for the opportunity to present the testimony in support of the amendments to the five year plan. And we ask that you approve this Resolution on the revised five-year financial plan.
And I'll be happy to answer any questions. 147 041039-041040-041041-041046, Whole, 12/8/04
I don't know why I'm going to ask this question, but I am. In the Recreation Department, I see that you are proposing to move the $10 million for the luxury box rentals from FY04 to FY05. What action has the City taken to collect these funds? And why would you think that we're going to collect it in '05?
The City is involved in litigation on that. And I'd like to get the Law Department to prepare a statement for you. I can have that for you tomorrow morning, so that I don't misstate.
That money has been owed us since what, the '90s? sometime in the '90s?
It's an old obligation. And rather than misstate where we are, because it is in litigation, I'll ask the City Solicitor to prepare a statement.
Okay. That's fine. Just hope we get it, and then we wouldn't have to worry about $10 million 148 041039-041040-041041-041046, Whole, 12/8/04 to the library. What is the status of the reimbursement by the Police Department for patrolling the highways? What revenue are you projecting in the plan for this initiative?
Good evening, Council President. I'm Diane Reed, Budget Director. This is something that the state needs to move on before the City can proceed. There are several initiatives that we have that require prior state action.
I'm sorry. You're going to have to talk into the microphone. I just didn't hear your last sentence.
Sorry. This requires state action, and we are waiting on the state.
The state has determined not to give us cash. Instead, it's going to assume responsibility for 149 041039-041040-041041-041046, Whole, 12/8/04 patrolling the highway. We're in ongoing conversations about when that's actually going to start. But we don't anticipate that there's going to be a cash --
Why are we carrying it as revenue in the revised plan?
We probably moved it into '06. Let me just check on that for you.
Let me check on that. If you just wait a couple minutes. Or I can get back to you tomorrow.
I'd appreciate it. We'll wait for your response.
Miss Wilkerson, when did you get this information that the state police were going to assume the patrolling of I-95, 76?
I think I had -- If 150 041039-041040-041041-041046, Whole, 12/8/04 my information is the most current information, it was back in, I think, the summer. It was part of the negotiations we had with the state. I'll check to make sure my information is correct.
Because I just spoke with the Police Commissioner. And he said he spoke with the State Police Commissioner, and there was no commitment to do that. So I think we better check our facts here. I've heard, similarly, that they are not going to give us the money; that they are going to assume patrol. I'd prefer to get the money, and let us do it. But that's their call. Thank you. Thank you, Madam President.
You're welcome. Did you want to -- Do you have your schedule there, Miss Reed?
I do have my schedule here, but probably we need to clear that up 151 041039-041040-041041-041046, Whole, 12/8/04 before we get back to you, if you could wait for another day.
Very well. You'll get back to us. As I understand it, the administration continues to carry the $30 million of asset sales for FY05. What assets have been sold? And how much have we generated? What do we expect?
We have a committee that's been dedicated to keeping track of where we are on the asset sale. And that committee meets weekly. We have identified $35 million of properties that could be sold in excess of what we might realize from the J.F.K. Plaza garage, which has a quite high valuation. We have appraisals for about 14 and a half million dollars of those properties. And one of them has been sold is in the process of being closed and sold. And it's worth about a million. I don't have the name of it with me right at the moment.
Thank you. 152 041039-041040-041041-041046, Whole, 12/8/04 I received a letter yesterday from Fleet Management, and they enclose signatures of employees at the Office of Fleet Management, who are appealing to City Council for assistance. I don't know if other Council members received a copy of the letter. They go on to say that we need your help to maintain our employment with the City, and to stop the closing of our Center City repair facility at 26th and Master Street, and contracting out 500 vehicles for service, starting with City Council vehicles. Can you enlighten us as to what's going on with that issue?
Yes. I think that as part of the management initiatives for this fiscal year there has been a consolidation of fleet shops. There's several around the City. And this was a cost effectiveness initiative. 153 041039-041040-041041-041046, Whole, 12/8/04
A point of information. Madam President, I spoke with... I have some information that I can provide. The 26th and Master shop is not going to close. The only facility that's going to close in Fleet Management is what they call the car barn. It's an old facility over in the park that was never meant to be an auto repair facility. The 26th and Master shop is not closing.
Well, the administration is looking at consolidating Fleet Management operations. We also are taking a look at what savings might be realized from privatizing -- from sourcing out the maintenance of the fleet. There are other organizations in the City, the Housing Authority, for example, contracts out the maintenance of its fleet. 154 041039-041040-041041-041046, Whole, 12/8/04 We're undertaking the analysis to determine whether or not there are potential savings for the City as a result of contracting out some of the maintenance.
It appears that the only department that you were proposing to cut beside fringes in FY05 is Public Property. Why are you reducing their budget? It's the only department that we save.
I'm sorry. I didn't hear the beginning of that question. Did you say fringe benefits?
Beside fringes in FY05. Do you have that, Charley? And it would appear that Public Property is the only department.
Good evening. Kay Van Dell. I'm the Deputy Budget Director. We had several initiatives in the '05 budget that have been delayed until fiscal year '06, our custodial consolidation and maintenance consolidation. And as part of the original budget, 155 041039-041040-041041-041046, Whole, 12/8/04 we had reduced departments Class 100 personnel expenses, and put that money in Public Property's Class 200, assuming we would contract those services out. That's been delayed, and so we needed to take the money out of Public Property's Class 200 and restore it to the departments. It is not cut out of the Property's budget.
Looking at the figures, we really can't tell what class has been cut.
Thank you, Madam President. Anyone at the table. This question's for anyone at the table. Can you explain administration's rationale for increasing your principle based taxes by $256.8 million over the five year 156 041039-041040-041041-041046, Whole, 12/8/04 plan?
The FY04 base revenues were actually stronger than expected by about $62 million, and this was straight across the various revenue sources.
Would this be a tacit acceptance of supply side tax cutting?
Okay. Well, I mean, it seems that -- I mean, for all the doom and gloom we heard about tax cutting, we are projecting now a $256 million increase over the five year plan. Doesn't seem to affect our tax revenue. As a matter of fact, it may have improved our tax --
I think when you look at where a lot of the strength is, it really is in the real estate transfer tax. And we think that that probably is more driven by what's going on with the interest rates. But, you know, I think all of us have embraced some level of tax reduction, 157 041039-041040-041041-041046, Whole, 12/8/04 anticipating that there would be some upside to it. I think what the caution has been over time is, you know, not to spend it before it's realized. That's when you get into trouble. That's what, you know, the experts have told us. That's what, you know, the rating agencies have told us. That's the guidance we've gotten from almost every quarter. And so, you know, we're glad to see, you know, the revenue, but...