COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COUNCIL COMMITTEE ON COMMERCE & ECONOMIC DEVELOPMENT - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, June 9, 1999 10:27 a.m. - - - BILL 990160 - Amending Title of The Philadelphia Code entitled "Miscellaneous" by 11 amending Chapter 21-1100, entitled "Community Development," by addition provisions which provide 12 for the funding of neighborhood revitalization projects with Community Development Block Grant 13 funds and Housing and Urban Development Section 108 Loan funds; and by adding a new Chapter 14 21-1400 entitled "Community Revitalization and Infrastructure Benefit Fund," which provides for 15 the establishment and administration of the Community Revitalization and Infrastructure 16 Benefit Fund and for the funding of eligible neighborhood projects and activities. 17 18 PRESENT: COUNCILMAN MICHAEL A. NUTTER, Chairman COUNCILWOMAN JANNIE BLACKWELL 19 COUNCILMAN DAVID COHEN COUNCILMAN DARRYL CLARKE 20 COUNCILWOMAN DONNA REED MILLER COUNCILMAN FRANK DICICCO 21 - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 6/9/99 COMMERCE/EC. DEV. - Bill 990160 I N D E X David Volpe, First Deputy City Controller . . Jeremy Nowak, Executive Director. . . . . . . 6 Delaware Valley Community Reinvestment Fund 7 John Kromer, Director, OHCD . . . . . . . . . 54 8 Steve Mullin, Director of Commerce. . . . . . 83 9 Bill Hankowsky, President, PIDC . . . . . . . 99 10 Rick Sauer, Executive Director. . . . . . . . 137 Philadelphia Association of Community Development 11 Corporations 12 Whittier Dow, Housing Specialist. . . . . . . 143 Housing Consortium for Disabled Individuals 13 John Rowe, Executive Director . . . . . . . . 150 14 Tenants Action Group 15 Evelyn Hidalgo, Executive Director. . . . . . 154 Intercultural Family Services 16 Rebecca Barragan. . . . . . . . . . . . . . . 158 17 People's Emergency Center CDC 18 Joan Curran, Deputy Executive Director. . . . 169 Action AIDS 19 Kay Smith, Executive Director . . . . . . . . 172 20 Manayunk Development Corporation 21 Michelle Lewis. . . . . . . . . . . . . . . . 178 Northwest Counseling Service Judith Robinson, Real Estate Broker . . . . . 185 North Philadelphia Resident 3 6/9/99 COMMERCE/EC. DEV. - Bill 990160 (Index - cont'd.) Camille Tyson, Housing Counselor. . . . . . . 190 Philadelphia Senior Center Peggy Massey, Consumer. . . . . . . . . . . . 192 Philadelphia Senior Center John Dodds, Director. . . . . . . . . . . . . 193 Philadelphia Unemployment Project Francis Vargas. . . . . . . . . . . . . . . . 198 Asociacion de Puerto Riquenos Liz Ford. . . . . . . . . . . . . . . . . . . 202 Independent Community Network Joanne Jackson, Executive Director. . . . . . 206 Advocate Community Development Corporation Kahlil Walker, Program Director . . . . . . . 207 Housing Association of Delaware Valley's Counseling Program Rameses Lee, Private Citizen. . . . . . . . . 210 West Philadelphia Resident 4 6/9/99 COMMERCE/EC. DEV. - Bill 990160 P R O C E E D I N G S
Good morning, ladies and gentlemen. I apologize for the delay. My name is Councilman Michael Nutter, Chair of the Committee on Commerce and Economic Development. We are now in session in consideration of Bill 8 990160. In attendance today are Councilwoman Blackwell, Councilman Cohen, Councilman DiCicco, and Councilwoman Donna Reed Miller, having a quorum. What we'd like to do is to hear from the first set of witnesses and engage in some discussion, which will serve as some foundation for a larger discussion about this particular bill, and then have some comments that I'd like to make, and then move into a discussion about the particular bill in front of us. Are there any comments by the committee members? Gentlemen, would you please identify yourselves for the record.
My name a is David Volpe. I'm the First Deputy City Controller. And I have with me John Folks. 5 6/9/99 COMMERCE/EC. DEV. - Bill 990160
We're here today at your request to give you a short and brief discussion of the history of some of the City's expenditures on curbs, sidewalks, and street trees -- I should say footways and street trees, in addition to a little discussion of the eliminations that have been placed on the expenditure of City monies. And when I say "City monies," I mean operating dollars, capital dollars, and CDBG funds on the expenditure for curbs, footways, and street trees. So if I could, I'll take a couple minutes and go through my testimony relatively quickly and again provide that frame work. In the past, there has been an enormous amount of debate concerning the use of City funds -- operating, capital and CDBG -- for the initial installation, repair or maintenance, and removal or replacement of curbs, footways, and street trees. The record is replete with testimony, letters, and opinions regarding the use of City funds for these purposes. The most comprehensive document on the 6 6/9/99 COMMERCE/EC. DEV. - Bill 990160 subject was a briefing memorandum dated May 16, 1996 concerning the expenditure of City funds for the installation, repair, maintenance, removal or replacement of curbs, footways, and street trees. The briefing memorandum included a City Solicitor's opinion issued to do David L. Cohen, dated March 28, 1995, on the use of City funds for curbs, footways, and street trees, and a letter from the City Controller, dated March 3, 1995, on the same subject. The purpose of all these documents was to set forth the law and the City's position on the use of City capital operating and CDBG funds for the initial installation, repair or maintenance, and removal and replacement of curbs, footways, street trees. The briefing memorandum both supplements and expands upon the City's policy for the use of capital funds for these purposes included in the City's expenditure eligibility guidelines for capital funding, dated March 1992. I have a few copies of the briefing memorandum package available for review with me now, and I would be happy to provide additional 7 6/9/99 COMMERCE/EC. DEV. - Bill 990160 copies for anyone who has an interest after the reading.
Generally, the views expressed by the Administration and the Solicitor embodied in the above-mentioned documents are consistent with those of the Controller's office, with the exception of the responsibility for street trees abutting private-property owners. Which has been discussed previously in past City Council hearings. I will now attempt to briefly summarize the legal frame work and limitations on the use of City funds for the installation, repair or maintenance, and removal and replacement of curbs, footways, and street trees. Regarding curbs and footways, if the City is not the abutting property owner, the property owner's responsible for the necessary work done at his or her expense. There is a 8 6/9/99 COMMERCE/EC. DEV. - Bill 990160 narrow exception in the Philadelphia Code regarding use of City funds for curbs or footway replacement which is considered an integral component of a street improvement project administered by the Streets Department for a sewer or water main replacement managed by the Water Department. This exception was expanded in 1993 by administrative action to include curb add footway installation and removal and replacement completed as part of a larger housing and commercial development and redevelopment projects. Given the City's limited resources, criteria were established to determine when a sufficient public purpose would be served by a curb or sidewalk improvement project to warrant City capital funding. The authors of the briefing memorandum cautioned against further extending exceptions for the use of City funds for curbs and sidewalks due to the huge cost that the City could incur based on the sheer number of curbs and sidewalks in the City and the prospect for increased tort liability to which the City would be exposed if the primary 9 6/9/99 COMMERCE/EC. DEV. - Bill 990160 liability for repair and maintenance and replacement of footways were to shift from the private-property owner to the City. The City may not fund the initial installation or setting of curbs and footways with operating or capital funds where it is not the abutting property owner. For removal and replacement, there is a narrow exception to the prohibition and using City funds if the work is an integral component of a street improvement or if the roadway next to the curb and sidewalk must be removed or replaced as part of a public project. In addition, as I noted above earlier, there is an exception carved out for the installation and removal or replacement of curbs and footways incidental to a much larger redevelopment project approved by the Commerce Department or OHCD. To be eligible, the project must leverage significant other governmental funding or private investment. CDBG funds may be used for initial installation in CDBG-eligible areas under limited conditions. An activity is eligible for funding if it furthers one of the national objectives of 10 6/9/99 COMMERCE/EC. DEV. , it benefits low- and moderate-income persons, aids in the prevention or elimination of blight, or it is designated to meet community development needs having a particular urgency. Use of any City funds for repair or maintenance of curbs and footways is expressly prohibited where the City is not the abutting property owner. This includes the use of CDBG funds. The private-property owner must pay for the repair and maintenance of curbs and footways. Regarding street trees abutting City-owned property, the briefing memorandum specifies that the City may fund planting of street trees with operating or capital dollars. The City may also fund the planting of street trees with CDBG funds if the expenditure is a part of the City's annual CDBG plan and benefits lower- and moderate-income or blighted neighborhoods, or otherwise complies with fundability requirements of the program. Operating funds may be used for pruning and trimming of street trees. The use of capital fund is prohibited.
In addition, CDBG funds are ineligible for operating and maintenance 11 6/9/99 COMMERCE/EC. DEV. - Bill 990160 expenditures. The briefing document states that the City may fund the removal and replacement of street trees with operating or capital dollars if it is the abutting property owner. Expenditure for removal and replacement is eligible for capital funding only if it directly relates to the re planting of a tree connection in connection with some other capital improvement. According to the City's capital funding eligibility eligible guidelines, the City may fund the removal of street trees with capital funds only if removal is directly attendant to an improvement project or is a component of a site preparation required either for planting a new tree or other capital funding construction activity. The replacement must be in the same approximate location or block face, or in requisite instances, zip codes. The latter is by agreement between Council and the Controller's office. The same funding limitations apply to the case where the City is not the abutting property owner. According to the briefing document, the 12 6/9/99 COMMERCE/EC. DEV. - Bill 990160 City may also be able to fund the removal and replacement of street trees with CDBG funds under the same fundability conditions as with initial installation. The authors of the briefing documents state that if the City is not the abutting property owner, operating or capital funds can be used to plant street trees in the public right-of-way, except that a private developer must fund the initial installation under the Land Subdivision Ordinance. The City may also be eligible to use CDBG funds for the planting of street trees in the public right-of-way. The expenditure may be eligible as the installation of a public improvement or urban renewal project completion under CDBG regulations. Assuming the public purpose requirement is satisfied, City operating funds may be used for the pruning and trimming of streets trees in the public right-of-way. The expenditure is not eligible for capital funding. Operating and maintenance expenses are generally ineligible for CDBG funding also. CDBG funding for street tree removal and replacement is also an ineligible expenditure 13 6/9/99 COMMERCE/EC. DEV. - Bill 990160 if it is part of the annual CDBG plan and benefits a lower- or moderate-income or blighted neighborhood, or otherwise complies with fundability requirements. To conclude, I have addressed only the current limitations on the use of capital, operating, and CDBG funds for curb, footway, and street tree installation, repair, maintenance, and removal. The Controller's office is in the process of formulating a position on the full bill 12 at this time. And I'd be happy to answer any questions that you may have.
Thank you very much, Mr. Volpe. Just in summary, I take it from your testimony based on the memorandum from 1996, there are essentially a couple of somewhat narrow ways in which to use City dollars for these kinds of site improvements or public infrastructure improvements. On the operating dollars, it is if the Streets Department determines, under the Philadelphia Code, that work that they are doing in the street, in their opinion or justification, 14 6/9/99 COMMERCE/EC. DEV. - Bill 990160 if you will, the curb and sidewalk work could be done if they believe it's incidental to the roadway work that they are already presently doing. Is that correct?
And on the capital budget side, it is only as a part of a larger either approved housing development or commercial or economic development project or a part of work that may be done by the Water Department. Is that also correct?
And those are the only ways that we can use operating or capital dollars for these kind of neighborhood revitalization or public infrastructure improvements?
Based on the policy that's set forth by the City right now and the interpretation of the Code, that is the current limitations.
And are you aware as to whether or not there are any particular programs that utilize either those dollars 15 6/9/99 COMMERCE/EC. DEV. - Bill 990160 specifically for those kinds of activities?
Yes. As a regular matter, if there's a large project -- for example, the Avenue of the Arts -- a large project, significant private investment, leveraging dollars, the curbs footways were replaced. So on larger projects, that happens routinely.
Are you aware of any projects that take place in many of the outlying neighborhoods not in Center City where this activity is regularly done?
Yes. I don't want to say "regularly," but we normally approve projects that are in neighborhood commercial corridors around the City where the curb replacement or installation of footways, rehabilitation of footways, is a part of the larger project. If they're doing street lighting, if they're doing, you know, awnings, if they're doing all kinds of other work, we'll normally approve the project.
Normally, no. Unless it is part of, for example, CDBG-funded. If it's a 16 6/9/99 COMMERCE/EC. DEV. - Bill 990160 housing development, if it's part of a large part of a block, for example, where they are going in and putting new homes and that's a part of -- or they're generally rehabbing the homes, using a large amount of federal money or private money, and the curb and footway replacement is a part of that project.
And what's available in areas where you don't have large housing activity or commercial or economic development activity but just primarily residential areas that may be facing some of the same distress or deterioration that either goes on in some of the commercial areas or, for instance, in the Avenue of the Arts example? What goes on in residential neighborhoods?
Under the current law and regulations, it's the home owner's responsibility or the property owner's responsibility.
Okay, all right, thank you. Are there any questions for Mr. Volpe? (No questions.)
What you've stated, has that always been true? For example, in certain areas in the northwest, there has been over time, through some neighborhoods organizations, the ability to replace curbs and sidewalks -- or "footways," as you call them -- 'cause that has occurred, and I'm wondering where that fit into over the last few years. It hasn't been done in the last two years or so but, say, four or five years ago.
Well, I can say this: Before 1990 -- and John Folks is our resident expert on curbs and footways and certainly the law related them, so he can step in any time he wants. Prior to 1990, being a Councilman, especially a District Councilman had a prerogative to appropriate funds on a Councilmatic basis, so there were expenditures for, you know, in Council District 1, 2, 3, 4, whatever it is, for particular improvements. And in many cases, they 18 6/9/99 COMMERCE/EC. DEV. - Bill 990160 were for curb and footway replacement that may not have met the guidelines that had been created in 1992 or may not have met the overall Code strictures that date back to the 1850s or something like that. So that may have occurred then. But in the last ten years, that hasn't occurred.
No, that's not -- the example I have in mind is -- there are community groups like Fern Rock, Olney, Boulevard throughout the City. There are groups that, over the years -- I don't say recently, but about four or five years ago, did have funding for the purpose of covering sidewalks, curbs, and the planting of street trees, the initial planting. You're not familiar with that or where that came from.
It did not come directly through Council. It was some outside funding.
I thought it came 19 6/9/99 COMMERCE/EC. DEV. - Bill 990160 through Community Development Block Grant funds.
Yeah, you can certainly ask Mr. Kromer. They're supposed to follow the CDBG guidelines in terms of eligibility. We do our best to make sure that both on the capital and operating CDBG side, the eligibility is met. There are certain things we don't see.
But just from what you were saying, to me at least, it appears to be a very unfair approach by the City. Residential areas were at the bottom of the list; everything else seemed to have priority.
Councilman Cohen, it's my understanding that in 1994, prior to me coming on Council, there were some curbs and sidewalk work done in the northwest, but those 20 6/9/99 COMMERCE/EC. DEV. - Bill 990160 funds were leftover funds from when Councilman Joseph Coleman was here, prior to this ruling in '91 or '92. So, you know, I just want to concur with some of what you said. It is true, but those were monies that was left over from before.
Mr. Jeremy Nowak, Executive Director of the Delaware Valley Community Reinvestment Fund. (Jerry Nowak comes forward.)
I am Jeremy Nowak, the Director of the Reinvestment Fund. Thank you, Councilman, for the invitation to speak here. I will be brief. I know you have a lot of speakers, and I also have an 11 o'clock engagement, so I will try to be brief as I can. I'm the Director of the Reinvestment 21 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Fund. We're a $70 million community development financial institution that finances housing and economic development projects throughout the region. Last year, we did about $32 million worth of financing principally in Philadelphia. I'm here to support two pieces of this bill, but then to ask questions and add some caution on the third piece, so I want to talk a little bit about the different pieces of the bill 11 and then ask questions about the third piece. As I understand it there are three different aspects of the bill. One part of the bill -- and I'll get to the one that surely is the most controversial part last.
What I'd like to suggest is if your remarks -- and I'm obviously not telling you what to say, but I don't want you to get too far into something. I know you have some general thoughts --
-- or beliefs or 22 6/9/99 COMMERCE/EC. DEV. - Bill 990160 perspective about the larger issue at hand.
There will actually be some amendments that -- I don't know what your concerns are about some of the components, but I think that the amendments to be proposed may, in fact, either clarify or alleviate many of the concerns that you may have.
But I'd like to not have that discussion at this moment.
Let me talk first about why I support that part of the bill that deals with Section 108 spending. I find in the work that we do throughout the City that it is vitally important for us to look for funding streams to support neighborhood -- the revitalization of neighborhood commercial strips. Some aspect of the revitalization of neighborhood commercial strips has to do with the brick and mortar of businesses or has to do with small business loans. Most of that comes from the private 23 6/9/99 COMMERCE/EC. DEV. - Bill 990160 markets, some of that comes from quasi public agencies, some of it comes from financial intermediaries like ourselves. But to rebuild devastated commercial strips in this city at some scale, there is a significant need for infrastructure investment in those strips, and it is difficult to find that money. And so targeting some Section 108 money for those commercial strips, I think, is very important. More importantly, I think the whole question of the use of Section 108 Loans is an issue that City Council needs to pay greater attention to. To me, the issue really is, what are the standards by which we make choices for the use of Section 108 Loans -- Section 108 Loans, both as they relate to housing investments and as they relate to economic development investments. I would have at least three standards that I would want to look at. One would have to do with the investment impact. Is the use of this public money, is the use of that money going to give us the impact in terms of jobs, ratables, other kinds of economic development, stabilization 24 6/9/99 COMMERCE/EC. DEV. - Bill 990160 of neighborhoods that justifies the public expenditure? That's number one. Number two -- and I think one that really has often not been looked at -- is the use of the Section 108, could this money have been gotten from other sources? It's the capital access issue. And here I would say this is not only an issue for Section 108, but this is an issue, in some instances, for Tax Increment Financing. The way of doing business in this city for anybody that does a large deal, the way of doing business, the expectation is, you will get, whether you need it or not -- and in many instances it is needed, in some instances, it is not and you can go to the private capital markets. The expectation is, Section 108 Loan Tax Increment Financing. So standard number two ought to be the capital access standards and there are many states and many municipalities that have really spent time trying to put together this kind of standard and monitor it. The third, of course, has to do with things like repayment capacity. Well, all Section 25 108 should not be used for projects that if it can 6/9/99 COMMERCE/EC. DEV. - Bill 990160 show repayment, there is this long-term question of borrowing against the future and where it makes sense to borrow against future CDBG allocations. Part of the conversation we're having here and part of the fear here, the scarcity fear here, has in part to do with the fact that there will be diminished capacities within Community Development Block Grant money because of Section 108 uses. So any bill that takes a look at targeting Section 108 for neighborhood commercial strips -- and I think is maybe one piece of a broader conversation about a rethinking of or the creation of standards around the use of Section 15 108s and Tax Increment Financing -- I find is welcome. The second has to do with the linkage bill for large economic development projects, those projects that are $250 million or more. It didn't say it in the bill -- I take this to be the stadium bill, I suppose. I like that, and I like it for a few reasons. Number one, I think, again, this question of what is the right use of public subsidy and what is the public quid pro quo? has 6/9/99 COMMERCE/EC. DEV. - Bill 990160 got to be asked.
But I think, number two, what I like about the linkage bill, the $250 million or more bill that would put a certain percentage of money back into a fund administered by PIDC, is that it targets that money for neighborhoods that are -- where 51 percent of the people are 80 percent at median and above. Well, I think it is great that the Community Development Block Grant money targets the overwhelming majority of its money, as it should, for those who are 80 percent and below. There is a real question in this city about who you how you deal with those neighborhoods -- infrastructure, housing quality, commercial strips, those neighborhoods that are not CDBG-eligible but are in a process of deterioration, whether they're in South Philadelphia, the lower Northeast, West Philadelphia, or the Northwest. And so any thinking here about targeting money for those kinds of neighborhoods, and in essence, reopening the question of where we target money around the issue equity versus where we target money around the issue of growth for housing and economic 27 6/9/99 COMMERCE/EC. DEV. - Bill 990160 development, I think is welcome and important. The third, and I know and I won't repeat, but the third and, I'm sure, the most controversial, has to do with the use of CDBG money for infrastructure investments. Here, I think the principle that I like is the principle of using targeted, well-developed, community-based plans as a vehicle for making these kinds of decisions. The issue, of course, which I'm sure will come up over and over again, and I'm assuming that the amendments deal with, will have to do with where should the money come from, how much, and probably most importantly, what does it take away from, and does it take away from projects this year and in future years which are also important. I think it's too bad we've gotten to this scarcity conversation so quickly around this issue, and I'm sure I was not the only one in this room that got a telephone call from lots of different people saying that they were to testify for or against this bill for lots of different reasons. And I think it's because we've been placed into a scarcity conversation about public 28 6/9/99 COMMERCE/EC. DEV. - Bill 990160 ends that are important. And I would hope and I would urge this Council to consider the twin issues of equity and growth as the way to shape public policy without having this kind of a scarcity conversation drive everything. Councilman Nutter, about month ago, 8 you and I and a group of people sat around a room 9 and had a conversation about the problem of 10 transitional neighborhoods, those neighborhoods -- 11 again, whether it's in Ogontz, parts of South or 12 parts of West Philadelphia, that are neighborhoods 13 that can go and either rapidly deteriorate or 14 might stabilize. In many instances, they are 15 neighborhoods where people have got the income and 16 the capacity to leave that neighborhood. 17 And as we all know, Philadelphia, 18 unfortunately, in the last decade, is the leading City in the country in population loss -- not as a percentage or population, but in the aggregate, lost something like 150,000 people. So despite all of the wonderful things we've done -- and we've done some wonderful things in this town in the last decade -- this kind of population loss, which translates into a loss of tax ratables, 29 6/9/99 COMMERCE/EC. DEV. - Bill 990160 which translates into a loss of public wealth, has implications not only for CDBG, General Fund and the rest. So the question, it seems to me, when we got together was, where do you find the money to deal with those neighborhoods, and how do you find that money to deal with those neighborhoods so we don't create this sort of oppositional frame work between the poor and the working poor, or the working poor and the moderate income, both of whom are obviously important for the growth of this city. And I think our original conversation was to look for cash-flow streams.
I think at one time, we talked about some of the real estate transfer tax and other tax flows. And the idea was to go to the capital to securitize it, to go to the capital markets, securitize that, and look at that as a source of money to deal with moderate-income infrastructure needs. It sounds to me like we didn't get far with the Administration. That's my understanding, I don't know what happened. But it seems to me we wee on the right path, and we were on a path that I would urge this city Council and the present 30 6/9/99 COMMERCE/EC. DEV. - Bill 990160 administration and whoever drives the next administration to continue down, because this city is supported by the wonderful things we do with CDBG, but it ultimately cannot survive unless those moderate-income transitional neighborhoods are stabilized. Thank you very much.
Thank you very much, Mr. Nowak. To respond to the one issue that you raised, there were some discussions with the Administration about securitization and looking at targeted revenue streams. I would probably have to characterize it as a discussion that we need to get back to. We reached a certain point and things just kind of trailed off from there. I think that it is still a very viable idea and project, and it merits continued consideration. This effort today does, though, to some extent, spin off of, or is an offshoot of that particular proposal. But I think that that is still potentially a great idea that people can work on. Are there any questions for Mr. Nowak? 31 6/9/99 COMMERCE/EC. DEV. - Bill 990160
Just one question for information. Early on, you indicated that somehow or another, the use of Section 108 funds will diminish the availability of CDBG funds in general?
Could you elaborate a bit on that. I'm not familiar with that and didn't quite understand it.
Well, it's for Section 108 Loans, and John Kromer from the Office of Housing is here, so I'm sure you could get the details from John and others that can give it to you. But when you hit a cap, there's -- you can use Section 108 Loans for either economic development -- that's one form of Section 108 -- and there's a Section 108 for housing. And the repayment for the Section 108 housing loans, as we've used them, will be based on the temporarily diminishing CDBG authority. So there will be less money this year in CDBG funds because of prior years' borrowing 32 6/9/99 COMMERCE/EC. DEV. - Bill 990160 for Section 108. Unless someone wants to correct me, that is my understanding.
Well, I'm going to be very interested in Mr. Kromer's statement.
And I thought -- I assumed that everyone -- I mean this, Councilman. As you know, I respect you and I mean this in no 9 disrespect, but I assumed that everyone understood that and, therefore, when we made use of Section 11 108 Loans, whether it's in economic development or housing, we're asking tough questions, that if we're going to borrow against the future, whether it's temporary or not, is this the right kind of investment to borrow? Sometimes it makes sense to borrow against the future, sometimes it makes sense to quickly tap out a fund of $320 million or whatever the total cap was, but it's got to make strategic sense.
We've known that with Tax Increment Financing, we're borrowing against the future because we know that money that would go into the General Fund doesn't go into the General Fund.
It's with the School Board. 33 6/9/99 COMMERCE/EC. DEV. - Bill 990160
But goes to -- or into the School Board, if we use the School Board's portion of the real estate tax.
But I did not know-- I did not know and I've heard no discussion at City Council ever with respect to 108 diminishing the future availability of funds.
As I understand, for the 108 loans -- and Mr. Hankowsky's here, but as I understand it, for the 108 Economic Development loans, they're being repaid based on the cash flow of those projects, that's how I understand it. That is not an issue. For the housing loans, using them as subsidy that has got to be repaid, that may be a good use of that money. But the question I have is, what is the criteria? Do we have criteria, do we have a strategy, or are these transactions by transactions that have really got limited coherence within the overall scheme of things?
The bigger the project, the less criteria there are. If big 34 6/9/99 COMMERCE/EC. DEV. - Bill 990160 business comes in here, we only basically have one question in City Council, and that is, can't we find some way to give you more money? When it comes to residents, the answer is always the other way -- whatever the request is, it's too much.
And so now we're here having a war between residents that are 80 percent below poverty and 82 percent -- no, 80 percent of median and 82 percent of median, which I think is the wrong conversation, quite frankly. But what I would worry about, even for those Section 108 Loans, economic development loans that I think are well structured, they're being paid back. I think the pool of money was handled well and responsibly. But there's this question of, was it needed? Were there other uses of that money? When you rehabilitate a law firm's office by a major developer, gee, do you think that major law firm could have gone out in the regular capital markets and gotten a loan? I'll bet they could have, right? I mean, there's a whole set of questions here so --
So some cities, some states 35 6/9/99 COMMERCE/EC. DEV. - Bill 990160 ask questions, and the ultimate question is, could this project have gone forward without this TIF or without this Section 108 Loan? Now, there's a gray area there. That's often a difficult thing to decide. But to have no 7 conversation about the use of it, to have no 8 conversation about what the nature of the reinvestment impact ought to be based on the investments I think puts in us a funny position vis-a-vis control over our future.
Councilman, what I would mention for the record is that there was some discussion last week about the HUD 108 Loan repayment on the housing side. It is correct that on the commerce or PIDC side on the economic development HUD 108 Loans, there is the prospect usually insisted upon by the agency that the HUD 108 Loan be repaid. On the housing side, what has happened is, there will be upwards of $107 million that will have been borrowed through the Section 108 Loan Program for housing. And in the Year 25 36 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Plan, it is proposed that $13 million in CDBG funds will not be available to any of the community-based organizations and any of the people here in this room because those loans now have to be repaid by OHCD. And every year, from now until the year 2009, there will be minimum payments of $10 million, $11 million, $12 million. In 02 and 03 and 01, $15 million of CDBG funds will not be available to any community-based organization for the use and benefit of low- and moderate-income people in those years because of HUD 108 Loan repayments. Those dollar amounts, and in this upcoming Year budget, the $13 million 16 represents 19 percent of the entire CDBG 17 allocation of $68 million. 18 That is, I believe, a very serious 19 issue. I don't think anyone questions the 20 viability, the validity of the projects that were 21 supported. Many of them are potentially done, and 22 maybe people are living in those houses. That is 23 not the issue. I think the issue is, what do we 24 do when upwards of 20 percent of our CDBG 25 allocation for the next 10 or 11 years will be 37 6/9/99 COMMERCE/EC. DEV. - Bill 990160 unavailable for anyone's use?
I think it's a very serious question that we've got to deal with.
Are there any other questions for Mr. Nowak? (No further questions.)
I'd like to make some remarks and then take care of a particular housekeeping matter. First, let me say thank you to everyone who has come here today. We have a fairly long list, and we will make sure that everyone has the opportunity to speak. First let me say that I have extreme admiration and support for all of the various CDCs that have been funded in the past and expect to be funded in this year's plan and in future years' plan and the projects that you have put forward, whether in my district, in the 4th Councilmatic District, or throughout the City of Philadelphia. For myself, I have had many hard-fought 38 6/9/99 COMMERCE/EC. DEV. ), or other Philadelphia neighborhood housing services, or even -- not in my district but in Councilwoman Blackwell's district -- People's Emergency Center on whose board I used to assist sit many years ago. Anyone who has told you or called you or faxed information to you saying that your program or activity will be cut as a result of this particular bill has not told you the truth. No one will be able to come to this table, to the witness table, and state that any program or activity will be cut, and I would certainly not propose such an idea. It is, though, an insult to the cosponsors of this bill who have relied on my reputation as a community person and serious legislator to give anyone the impression that my Council colleagues, in general or members of the 39 6/9/99 COMMERCE/EC. DEV. - Bill 990160 of this committee in particular, would ever try to hurt CDCs in Philadelphia. I despise people who do not tell the truth and know it and those would use underhanded scare tactics to virtually force many of you to come here today on the threat that your funding would be affected by this bill. Rather than engage in these duplicitous tactics, the Housing Director and staff should have taken the serious time to have a discussion with me and others about this particular bill and the long-standing concerns that many of us have had for many years about the health and vitality of all of the neighborhoods of Philadelphia. Many of the communities leaders, though, were at least willing to question the information or disinformation that they were given, either because it was so outrageous or so implausible or because many of you know me better. To those of you, I say thank you on behalf of my office, my chief of staff, who many of you talked to, Julia Chapman, and certainly myself. I find some of the personal 40 6/9/99 COMMERCE/EC. DEV. - Bill 990160 deficiencies with which this disinformation campaign has been conducted to be despicable, disrespectful, two-faced, and unworthy of any further discussion. But I do believe that Mr. Kromer and others owe an apology to all the CDCs and the City Council members who were the targets of this campaign in an effort to prevent legitimate, rational, and serious discussion about the serious issues that affect Philadelphia and its neighborhoods. I believe that many of the CDCs want to see the kinds of projects and activities that are proposed in this particular bill to happen in their neighborhoods because they know that it is good for their neighborhoods. I agree with you and I share your concern that you just don't want to see the precious resources that you get in an environment of limited resources today directed in another place in order to accomplish these particular goals. It is, quite honestly, with that in mind that this particular bill was proposed and there are other actions that need to be taken. What I would like to do at this point 41 6/9/99 COMMERCE/EC. DEV. - Pub. Meeting in time is recess the public hearing and move into a public meeting. There are a variety of amendments that need to be read into the record. And then we will move forward with our business. - - -
We are now in a public meeting, and these amendments are offered to Bill No. 990160. First, amend the bill, , Paragraph (5) to read as follows: (5) No more than percent and no 13 less than 10 percent of each year CDBG entitlement 14 program funds, inclusive of administration and 15 program management costs, shall be allocated and spent directly on designated neighborhood revitalization projects or activities which directly relate to community revitalization and infrastructure renewal, including, but not limited to: the repair, replacement and reconstruction of curb, sidewalks and other neighborhood public infrastructure; the removal and planting of street trees; the repair, replacement and installation of street and pedestrian lighting; and, any other CDBG-eligible projects or activities related to 42 6/9/99 COMMERCE/EC. DEV. - Pub. Meeting neighborhood revitalization. Such neighborhood revitalization projects or activities shall be in accordance with an approved neighborhood revitalization plan. Beginning in CDBG Year 25, no more than five percent (5%) of each year's CDBG entitlement program funds shall be spent to repay Section 108 Loan principal and interest obligations from prior program years. Any CDBG entitlement program funds in the Year 11 Consolidated Plan or subsequent year consolidated 12 plan in an amount of more than five percent (5%) 13 of such funds that are designated in the 14 consolidated plan for repayment of Section 108 15 Loans shall instead be used for the purposes 16 stated in this subsection. OHCD shall not 17 decrease any funding in the Year 25 Consolidated 18 Plan for any proposed housing program, housing 19 development project, service provider, training 20 program, or any other nongovernmental grant 21 recipient in order to fund any community 22 revitalization and infrastructure renewal project 23 or activity. 24 Number 2. Amend bill, Pages 2 and 3, 25 Paragraph (6) to read as follows: 43 6/9/99 COMMERCE/EC. DEV. - Pub. Meeting (6) It shall be the policy of the City that no less than (strike percent) (insert) 4 five percent (5%) of the total funds applied for 5 by the City through the HUD Section 108 Loan 6 Guarantee Assistance Program shall be allocated 7 and spent directly on designated neighborhood 8 retail and commercial corridor revitalization 9 projects or activities including, but not limited 10 to: the repair, replacement and reconstruction of curbs, sidewalks, and other neighbor public infrastructure; the removal and planting of street trees; the repair, replacement and installation of street and pedestrian lighting and any other CDBG-eligible projects or activities related to neighborhood retail and commercial corridor revitalization. Allocations may be in the form of a grant, loan, or combination thereof. Such revitalization projects or activities shall be in accordance with an approved neighborhood commercial corridor revitalization plan. On the effective date of this ordinance (strike 10 percent) (insert) five percent (5%) of the amount equal to five times the annual CDBG allocation received by the City shall be made available and 44 6/9/99 COMMERCE/EC. DEV. - Pub. Meeting subsequently awarded to these neighborhood retail and commercial corridor revitalization projects or activities; provided that no fund shall be transferred from any specific project which has been awarded a HUD 108 Loan. For future applications to HUD for Section 108 Loan funds occurring after the effective date of this ordinance (strike percent) (insert) five 10 percent (5%) of the amount applied for shall be made available and subsequently awarded to these neighborhood retail or commercial corridor revitalization projects or activities. Number 3. Amend bill, , by inserting after Paragraph (6) and prior to Section 16 (2) the following: Section 21-1110. Rules and Regulations. New material.
At the end of the sentence that reads, "The OHCD is authorized to establish and enforce reasonable rules and regulations necessary to promote compliance with the provisions of this chapter," add a new sentence: "Any funds received pursuant to any CDBG entitlement program or other community or economic development program fund application 45 6/9/99 COMMERCE/EC. DEV. - Pub. " Number 4. Amend bill, , Paragraph (1) to read as follows: (1) The Community Revitalization and Infrastructure Benefit Fund (herein referred to as the "CRIB Fund") is hereby established and shall be administered by the Philadelphia Industrial Development Corporation (PIDC). New material. The PIDC is authorized to promulgate and enforce reasonable rules and regulations necessary to ensure compliance with the provisions of this chapter and the utilization of the CRIB Fund pursuant to the contract between the City and the PIDC. Number 5. Amend bill, Pages 4 and 5, Paragraph (2) to read as follows: (2) For any development project within the City for which the total project cost is two hundred and fifty million dollars ($250 million) or more and in which the City contributes twenty percent (20%) or more of the total project cost, an amount equal to (strike 10 percent) 46 6/9/99 COMMERCE/EC. DEV. - Pub. Meeting (insert) five percent (5%) of the total project cost shall be paid into the CRIB Fund by the (strike non-public developer, non-public owner or both) (insert) City no later than five years after the completion of the development project. For purposes of this paragraph, the City contribution to the total cost of such a project shall be calculated by determining the total value of any land transfer, site improvements, environmental remediation, infrastructure improvements which benefit the project (including but not limited to curbs, sidewalks, streets, drainage or water and sewer mains) loans, grants, tax incentives, tax abatements, tax increment financing, or any other form of public supported financing. Those are the amendments. I would ask for a motion on the amendments.
Mr. Chairman, since you're the sponsor of the bill, I believe you have an absolute right to have the bill in the particular form you wish to have it discussed. So I move the adoption of those amendments. (Duly seconded.)
All in favor of the 47 6/9/99 COMMERCE/EC. DEV. - Bill 990160 adoption of the amendments say aye. All opposed, say nay. The amendments are adopted - - -
We'll move back into our public hearing. The bill has been amended. I would ask that get copies of amendments circulated around, and it would be helpful for any individuals to testify if we could talk about the bill now in its amended form. Thank you very much. Mr. Kromer, Mr. Hankowsky, Mr. Mullin. (Messrs. Kromer, Hankowsky and Mullin come forward.)
Mr. Chairman, would it be appropriate at this time, because it's very difficult, I know, for members of the committee to follow what these amendments -- really how they change the bill, and I think it would be very difficult for anybody in the audience to follow it. It might be helpful if you could explain just very generally the purpose of these amendments and how they impact on the bill.
Thank you, 48 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Councilman Cohen. I plan to do that and I appreciate you. . . Councilman Cohen, thank you for raising that issue, which I had certainly planned to do. There have been a number of concerns about the issue of the moving around or the taking away, I believe, as it has been characterized in the past, of CDBG dollars, or telling groups and organizations that they would suffer potential cuts in funding.
I've received more than a few. Again, let me certainly state for the record, there was never any intention of harming any of the various groups and organizations, and I would never think to do something like that. And I will also say, had I been asked by the Housing Office, I would have told them that as well. But what the amendments do, Councilman Cohen, and to my colleagues is, one, clarify some language. There was one mistake made in the beginning where it talked about "exclusive" of 49 6/9/99 COMMERCE/EC. DEV. " There would be certainly implications certainly if the other term had remained. Secondly, it goes back, Councilman Cohen, in this particular section to the discussion that we had just a little while ago about the propriety of using CDBG funds to repay HUD 108 Loans from previous years. Again, I'm not making any comment and am generally supporting whatever those particular projects were but questioning whether HUD CDBG funds should be used to such a magnitude to repay HUD 108 Loans. So the first amendment places a cap on the Year Plan and future plans on the amount of 17 CDBG dollars that can be used to repay below HUD 18 108 Loans. As we all know, HUD 108 Loans are an 19 allowable source of funds for the repayment of HUD 20 108 Loans. They are not the only reliable source, 21 and as a matter of fact, generally, the HUD Office 22 and the federal government does not care where the 23 City gets funds to repay HUD 108 Loans. 24 And so there are some additional 25 options other than the use of CDBG dollars. For 50 6/9/99 COMMERCE/EC. DEV. - Bill 990160 instance, we could look at the Economic Stimulus Program, we could look at general City dollars. There are a variety of places in a budget as large as ours that we can certainly look to find funding to repay those loans. What we do know is that there is no 8 funding available that is as flexible as the CDBG dollars in comparison to any others dollars that we have access to. And in the flexibility argument, it seems to me that we should try to put as much CDBG money out on the street, serving low- and moderate-income people for whose benefit the dollars were sent to the City in the first place. The second amendment, Councilman, has to do with the section on getting HUD 108 Loan dollars into commercial corridors and providing some of the same services. The amendment in that section cuts the rate from 10 percent to 5 percent and also addresses a concern that funding could potentially be taken from some projects that have either been approved recently or are in the pipeline. And the amendment that addresses that basically says that no funds can be transferred from a project that has already been approved for 51 6/9/99 COMMERCE/EC. DEV. - Bill 990160 HUD 108 Loans in order to fulfill the percent requirement. The third amendment primarily states that whatever's done with these dollars, it has to be in compliance with all federal, State, and City statutes and ordinances. I don't think anyone can have any particular concern about that. The fourth amendment deals with some clarifying language on the creation of a CRIB Fund and trying to give additional weight and direction to PIDC in terms of trying to manage such a program. Lastly, there was some concern about the amount and the appropriateness of trying to extract additional dollars out of a very large project developer. Mr. Hankowsky is at the table, so I guess we can ask him the question of how many times we get or how often we get $250 million projects here in the City. But should we have any, there would be some opportunity to get dollars back in a fund and a new funding source for areas of the City that are not eligible for CDBG funds. But it provides that the City would make that contribution over a five-year period of 52 6/9/99 COMMERCE/EC. DEV. - Bill 990160 time after the completion of the project.
A project of that size and magnitude, I'm sure, within five years is generating significant revenues not only for the owner- developer, but probably also throwing off a fairly significant amount of tax revenue to the City that would then be available for such a contribution.
Would it be a fair characterization of the last amendment to say that it eliminates the element of linkage that Mr. Nowak talked about? Because the money would be coming from the City, and that it cuts in half the amount of money originally intended to be used for this purpose.
It wasn't really dealing with the bill and the amendments.
I understand. It does, in fact, cut the amount. I think that the City, or whoever is in control at that time, will certainly take a look at this and try to figure out between the City and the developer how to make such a contribution, but it -- on a $250 million project, even at the 5 percent rate, you are 53 6/9/99 COMMERCE/EC. DEV. - Bill 990160 talking about $12.5 million.
But it would be the City that would have pay it, not the private developer.
It would certainly be the City. There's certainly no obstacle to the developer participating. Or if they're dealing with a person like Mr. Hankowsky, they might enthusiastically want to make some contribution to such a fund. I understand that Mr. Hankowsky drives a pretty hard bargain with developers in Philadelphia.
But it removes the element of compulsion as far as the developer.
It does take away the compulsion. The City, though, certainly reserves the right as to whether to make such a level of contribution which is in the percent 20 range. Again, that's a fairly significant amount of money, and maybe the developer ends up having to put more of their own money into such a project in first place.
I'll refrain from making -- since I'm looking right at Mr. 54 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Hankowsky, I'll refrain from a characterization. I was about to suggest as to whose pockets he seemed to be more protective of -- the City's or the private developer.
We appreciate your retraining from making that comment, Councilman. (Laughter.)
Before we go to the witnesses, let me acknowledge the presence of Councilman Clarke, who is also a member of this committee. Gentlemen, I will assume that you have figured out who's going first among you, and please identify yourselves for the record and proceed.
Good morning, Mr. Chairman and members of the committee. I'm John Kromer, the Director of the City of Philadelphia Office of Housing and Community Development. I've submitted written testimony on this bill, and rather than read that over again, I wanted to make a few brief comments which address only the first two portions, not the charge on major City-supported development ventures. 55 6/9/99 COMMERCE/EC. DEV. - Bill 990160 I don't think that there is anybody in this room that does not support the idea of making more resources available for site improvements such as curb and sidewalk installation, the planting of street trees, the installation of street lighting. And I don't think there's anybody in this room who disagrees with what Jeremy Nowak said about the need to build up or rebuild the infrastructure of neighborhood commercial corridors; those needs are all critical needs, and in a sense, they're critical economic development needs. The City has to present itself not only as a great place with a wonderful downtown, but also as a place full of liveable, attractive, appealing neighborhoods, and site improvements just happen to be a part of that appeal and that attraction. And to the extent that we can do something about that situation to enhance these neighborhoods, we all benefit. Secondly -- this may be obvious to everyone -- but I just want to emphasize that the installation of these site improvements -- curbs, sidewalks, trees, lighting, and so on -- is 56 6/9/99 COMMERCE/EC. DEV. - Bill 990160 definitely an eligible use of Community Development Block Grant funding. There's no real barrier to using Community Development Block Grant funding for this purpose. The issue really is a decision about the appropriate allocation of resources. We have a Community Development Block Grant budget, we have other funding that's available through the Federal Home Program and other sources. And every year, we prepare a proposed plan that is available for public review. It is submitted to City Council, there is a hearing before the City's Finance Committee, and the budget is passed, and an application is made to HUD for this funding. Now, as other witnesses have testified, the issue of funding for curbs, sidewalks, trees, and so on has been an issue for some years now. The Community Development Block Grant proposed plan, the preliminary plan for the coming fiscal year, was published in December of last year, it was available for public review. The second draft of the plan was published several weeks later and was made available for public review, and there was an in-house hearing at OHCD to obtain 57 6/9/99 COMMERCE/EC. DEV. - Bill 990160 comments. And then finally, last week, the Finance Committee heard the testimony on the proposed plan for Year 25. One issue, just in terms of process, is the fact that although the matter of concern for funding for these site improvements has been a concern among some for several years now, this bill is coming to public hearing today, the week after the Finance Committee hearing on the Year 11 Plan, and it proposes substantial revisions in the 12 Year 25 Plan. In terms of process, I'm not sure 13 that many people who attended the Finance 14 Committee hearing last week were aware that the 15 week after, a hearing would be held that called 16 for a substantial revision to the plan that was 17 under discussion at that time. 18 City Council is free to hear and 19 consider and act upon any measures that it feels 20 are appropriate, but this process issue is one 21 that concerns me. First of all, the use of our 22 Community Development Block Grant funding for 23 these activities is definitely an eligible 24 activity. But it is a matter of, as Jeremy Nowak 25 said, having some dialogue. We really need to 58 6/9/99 COMMERCE/EC. DEV. - Bill 990160 have some dialogue about how to use this resource, which is valuable, is substantial, is flexible.
And we have to have that dialogue and make serious choices amongst various alternatives. And this is a dialogue that we had last week, and now we're entering into another dialogue which affects that budget. And I recently heard the reading of these amendments, which I'm hearing for the first time, which I don't think anyone in this room 12 other than perhaps Councilmembers have seen before this day and which I'm expected to be responding to, which I'll be glad to do. And then, finally, Councilman Nutter has expressed some criticism and apparently formed an impression of things that I may have said or did, but I've had no communication with either him or either his office, despite the fact that I was in Council for half the day yesterday, about his concerns and about what he may have heard that I may have said or done. So in terms of process, I support the idea of dialogue, and I'm glad to have this opportunity to participate in this dialogue. Let 59 6/9/99 COMMERCE/EC. DEV. - Bill 990160 me make a couple of brief comments. The issue is a resource issue and a decision about how we are going to use the resources that we have available. At last week's Finance Committee hearing, there were a series of questions about the Basic Systems Repair Program and whether enough funding was available for the Basic Systems Repair Program. The witness from the Youth Build Program was asked why Youth Build couldn't be expanded, and there were other questions that related to the general issue of, why can't we do more? And, of course, the answer is, we have a certain amount of funding available to use, and we have no more than this. This proposed legislation adds an additional issue. Should we take any funding at all from activities such as housing production, the preservation of existing occupied housing, employment and training and job readiness programs to get people into the work place and other activities that currently appear in the plan that was heard last week by the Finance Committee. Do we take from some of these activities, any of these activities, in order to fund curb and 60 6/9/99 COMMERCE/EC. DEV. - Bill 990160 sidewalk installation? And that is the basic issue that we do have to consider. And my response to this would be no, that the programs that we have in place, that we have proposed to continue are all worthwhile programs. They provide very clear benefits. The policy is very clearly articulated in the proposed plan, which has been available for review for some months from now, and the program has produced very substantial results. And I think in particular of the representatives of the job readiness and training programs that appeared first last week, who described the results of those programs in terms of placing people in unsubsidized, good-paying, private-sector jobs. Our programs are delivering now, and any reduction of funding for those programs is going to produce less housing services, although it will certainly fund more curbs and sidewalks and trees. Secondly, Councilmember, last week --
Mr. Kromer, I'm sorry, let me interrupt you for a second. Your comments, I take it, are still in the context of the bill as introduced as opposed to the bill as 61 6/9/99 COMMERCE/EC. DEV. - Bill 990160 amended.
I believe the amendments would also take funding from the budget that was included in the plan last week, so they do --
Well, my understanding is that there would still be reduction of funds in the Community Development Block Grant Program to fund these activities. And, secondly, the assumption --
Well, secondly -- let me just finish. Secondly, the assumption that there would be a cap on the repayment of 108 funding does not appear to me to be consistent with the process established by HUD for repayment in which a letter of credit from HUD to the City is simply reduced every year. The City is not provided with an option; the funding is simply reduced. So the other --
Well, if I could comment 62 6/9/99 COMMERCE/EC. DEV. - Bill 990160 on that later in my testimony, I have a suggestion about that issue. The Finance Committee hearing last week included a discussion of neighborhood employment. And you, Councilman Nutter, characterized the program as one that had been -- funding that had been earned on the backs of low- and moderate-income people. And I really agree with that characterization -- HUD funding is based on poverty levels and other criteria of need, and that's how we get the funding. And I think that point is really important, particularly in Philadelphia, because it's the only resource really, other than the public housing system -- which is improving but far from perfect -- that is a substantial resource for addressing the needs of low- and moderate-income people in Philadelphia communities. Unlike other cities such as New York City, there is no money from the City's General Fund that is used for this purpose. And in contrast, New York spent over $2 billion in the 1980s for this purpose and still budgets substantial general funding for affordable housing 63 6/9/99 COMMERCE/EC. DEV. - Bill 990160 and other services for low- and moderate-income people.
My point is that there is no funding that is made available through the City's General Fund for the Housing and Community Development activities that are --
Well, there has been a policy decision that's been in effect since the start of the program, in the 1970s.
So does that mean we can't ever have a discussion about it?
Or should we just continue doing what we've been doing?
Well, in cases where the General Fund has paid for affordable housing 64 6/9/99 COMMERCE/EC. DEV. - Bill 990160 activities, such as New York, a lot of housing production is comparable to the lower North Philadelphia housing construction that is going on now was funded through the General Fund, the construction of South Bronx, for example, freeing up federal funds for other purposes. But that's an issue, again, that is a part of the consideration. A dialogue --
So we just continue the policy that was established sometime in the '70s that the City of Philadelphia doesn't use any of its General Fund dollars to deal with the housing issues, and we fund it all primarily out of CDBG?
Out of federal money. And I think one point that has to be understood, and I think is generally understood, is that there are multiple goals that the City has to consider. One of those is balancing the budget and staying in the black. And I'm sitting here as Housing Director and saying that I think getting rid of 65 6/9/99 COMMERCE/EC. DEV. - Bill 990160 the deficit and retaining a surplus is far more important to the future of the City than the most wonderful housing development that could be supported. By contrast, New York City is still struggling with budget deficit problems, and I don't think we can afford to do that. I'm sure in this administration, that issue was of paramount concern.
What about the issue of salaries or administrative costs?
Taking from administrative costs? Well, we certainly would respond to that portion of the amendment and try to be very clear with Council about the implications of that. I can't do that now and tell you exactly --
Your current administrative costs are covered by CDBG funds also, right?
Okay, what are 66 6/9/99 COMMERCE/EC. DEV. - Bill 990160 they?
Well, they're detailed in the proposed Year Plan. They include -- 7
Okay. Of the CDBG 11 funds go to administrative costs. 12
To return to my point 16 about low- and moderate-income need, 17 unfortunately, we're not like cities that address 18 this need in part with City General Funds. 19 Unfortunately, Pennsylvania has never been a state 20 that has been similar to states like New Jersey 21 and Maryland, that have made available a lot of 22 state funding for affordable housing and other 23 benefits to low- and moderate-income people. 24 So, again, that just returns to the 25 point that the HUD resource, this budget is the 67 6/9/99 COMMERCE/EC. DEV. - Bill 990160 basic resource available for this purpose. And I agree with those who say we should do more for middle-class people; we shouldn't just be dealing with people below poverty level. But as I said, this is the primary resource, the core resource that is available to that population and that population. And that population has been adversely affected during the past decade. Welfare reform, at best, has produced serious disadvantages for low- and moderate-income people. The Block Grant Fund itself has declined during the past decade in terms of real dollars. The --
I'm sorry, Mr. Kromer, let me just make sure we keep the record clear. You're not suggesting that the bill 18 or I are suggesting that CDBG dollars should be used anywhere other than in CDBG-eligible communities; you're not suggesting that, are you?
So this a valued and the core resource for low- and moderate-income people. And, again, we've got to make some choices about how that resource will be used. A decision to fund one new activity, whatever it is, will require reducing the amount of funding available for some other activity or that is proposed for some other activity. And I'd be pleased to join with you in that discussion. With respect to the issue of Section 12 108 repayments and the debt service obligation that is proposed during the coming fiscal year and, in fact, will extend for a series of years after that time, as I had indicated in the Finance Committee hearing last week, the City, with City Council's support, has taken out Section 108 financing during each of the past five years. And some of that financing was associated with housing development activities that took some time to get started up. And as a result, a substantial debt service repayment is beginning this year, and that will continue during the coming year. So it's a big jump, from approximately 4 million to approximately 13 million. 69 6/9/99 COMMERCE/EC. DEV. - Bill 990160 The majority of that funding, that financing that was taken out during that period, was used to support two activities. One was the development in the lower North Philadelphia area. The development in that area is consistent with a policy called "Home in North Philadelphia," which was published in 1993, which I'm really proud to say Council has supported consistently in every year since then, in every Block Grant budget, including the 108 financing, so that we've been able to take on development in a major section of this city that is close to the downtown area, where we made commitments to the community during past decades and where we really need to build out the area. So this is really the first time that the City of Philadelphia has been able to implement a targeted policy of housing production, and the results have been terrific, so far. There's more to be done, but the results have been great. The second activity that has been a primary focus of 108 borrowing, has been the acquisition and relocation activities in the Logan 70 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Triangle area to support the relocation of residents living in dangerous conditions in the so-called "sinking homes area," the Logan Triangle. The commitment to provide relocation benefits and to acquire properties in that area was made under the last administration by former Mayor Goode in 1986, and I believe that was made with the expectation that special-purpose HUD funding and state funding would be made available exclusively for those costs or to pay for substantial amounts of those costs. Unfortunately, that expectation, if it was part of the plan then, did not prove to be true. And during most of the years which have passed since 1986, there has been no federal and state funding available for Logan relocation, but this legal obligation to serve the residents of that area and to provide them with federal relocation benefits has been a continuing legal obligation. And Council, again, I'm proud to say, has supported a consistent commitment to Logan relocation during each year of this administration. And the Logan Assistance Corporation, during the past four and five years, 71 6/9/99 COMMERCE/EC. DEV. - Bill 990160 has done a great job in moving people out of dangerous conditions in that area. The other uses of 108 funding are detailed in an appendix to the proposed Year 6 Community Development Block Grant Plan. Again, 7 the debt service payment is very substantial. But 8 if you would refer to the sources page of the 9 plan, you will see that the Block Grant and the 10 Home Program and the Hopwell funding and the other 11 resources amount to a substantially greater budget 12 than $1000 million, of which a debt service 13 repayment amounts to roughly 10 percent.
14 My opinion, with which others may 15 disagree, is that a 10 percent debt service 16 repayment is not excessive. And, secondly, my 17 personal view -- again, others may disagree -- is 18 that this funding should have been borrowed and 19 spent a long time ago, ten years ago preferably, 20 to address critically issues like the build-out of 21 areas such as lower North Philadelphia, where the 22 City made commitment after commitment but failed 23 to follow through. We had an opportunity to make 24 a commitment and keep it and deliver the housing 25 production and we were able to keep it, and I'm 72 6/9/99 COMMERCE/EC. DEV. - Bill 990160 proud of that and, again, am very pleased to have had Council's support in following through on that commitment. All of these comments really don't do anything to address an underlying issue that I know, you Mr. Chairman, are concerned about, and that is where are we going to find the dollars to support these improvements. I know that other Councilmembers hear from neighborhood constituencies about the needs for these improvements. And if I'm sitting here saying we oppose the use of Block Grant funding for this purpose, the question must be asked, where can the funding be if the capital program is not an option and if General Fund is not option and if now the Administration is saying the Block Grant fund is not an option? Other than simply making the statement that --
-- we can't afford it and, you know, this is one thing that we'd like to do but we can't do, the only other possibility that I 73 6/9/99 COMMERCE/EC. DEV. - Bill 990160 can think of that I have not discussed with the Mayor's staff, but have discussed with you and it might be considered, although it's not necessarily long-term solution, is the Economic Stimulus Program. And the possibility that if funds are available in this program, they have even more flexibility than the Block Grant and can be used for this purpose. In my experience with the program -- and it has been a limited experience because not that much funding has been available for housing -- the preference of the Administration has been to use this Economic Stimulus funding for tangible physical development or other activities that produce jobs and other long-term benefits to communities. And the argument could be made, and is being made, that curbs and sidewalks and site improvements provide very clear long-term benefits to communities. And there may be an opportunity to take up that issue in the context of the Stimulus Program. It certainly doesn't provide the long-term solution to --
How much money is in the Stimulus Program right now? 74 6/9/99 COMMERCE/EC. DEV. - Bill 990160
I don't know. Possibly one of the others can answer. I don't think it provides the kind of built-in solution that I believe is being proposed here, but it may be one way to open up the dialogue a little bit further. Thank you.
You had made a statement earlier, although I didn't really hear you come back to it, which had to do with, you have $13 million, which are not available, of CDBG funds because, again, for good projects, you borrowed money, you now have to pay it back, and $13 million is about percent of your budget. 19 If funding is found to pay a substantial portion of that $13 million repayment with no impact on your bottom line of the $49.5 million that you need to run your programs coming off of the total of about $77 million minus $17 million in program delivery cost, minus $12 million is administrative costs, and now minus 75 6/9/99 COMMERCE/EC. DEV. - Bill 990160 $13 million in HUD 108 Loan repayments, which is what leaves you with, I believe, less than 50 percent of what you started with. But if we were able to find a way to significantly pay back your HUD 108 Loan obligations and free up the CDBG dollars that you have now targeted for that, then how are you harmed?
I think I would be very pleased to try to work with Council on an approach that would do that. The issue would be that others who manage those other sources of funding would have to be brought in on the discussion. And because I was not aware of the amendment, I have had no discussion with them about that.
I understand that. And I'm not charging you with a lack of being involved. What I'm asking you is, if there is a way to significantly pay your HUD 108 Loan debt with non-CDBG dollars and still leave you with $49.5 million to run your program, are you harmed?
I believe the answer to your question is no. However, that would not 76 6/9/99 COMMERCE/EC. DEV. - Bill 990160 change my position with respect to the bill. I think that the issue of the CDBG Program should be considered in terms of evaluating the program in total, and that the resources of the Block Grant should not be used for curbs, sidewalks, and trees.
Even if these are dollars that are now freed up, that you had no 10 access to the in the first place?.
No. And my recommendation would be that those new sources of funding, which might come in to pay the debt service, should simply be allocated to the site improvements.
Those dollars generally are not allowable and certainly don't have the flexibility of the CDBG funds. I think we heard a fair amount of that discussion from Mr. Volpe this morning. The dollars that have the greatest level of flexibility, at least according to HUD CDBG regulations, is in fact the CDBG dollars.
So, I mean, you don't have access to the 13. 77 6/9/99 COMMERCE/EC. DEV. - Bill 990160
If there's a way to free up a portion of that, why wouldn't you then agree to have it used for the things that you now agree -- one of the few things that we agree on today -- that you now agree are needed and important, and you have no other use for those dollars other than loan repayment?
I just have no way of knowing whether that is feasible or not.
I understand that. I didn't ask you that question. I said, if that is the case, what is your position?
My position would still be that the Block Grant resource should never be used for site improvements.
That's right. And that other sources of funding should pay for these expenses. 78 6/9/99 COMMERCE/EC. DEV. - Bill 990160
Even though they're CDBG-eligible according to the guidelines in 570201.
Yes. And many activities, of course, are CDBG-eligible but the point that I think many have made is that we need to have a focussed policy so that we really make an impact on the neighborhoods that need support.
We'll have some of that discussion, then we can go to Mr. Mullin. Some of that discussion may revolve around a difference in perspective between you and I or you and other people about what has the most impact in some neighborhoods. If building 40 new houses in a particular new neighborhood is the thing that gives impact, fine, I'm more than willing to support that. Some neighborhoods don't necessarily need 40 new houses on the block, but they are CDBG-eligible, they are low- and moderate-income people. And it just seems to me that they have some level of expectation, if not right, to get the benefit of what the dollars are sent to the City for in the first place. What I don't understand is why you only 79 6/9/99 COMMERCE/EC. DEV. - Bill 990160 have to be in a deteriorated situation or have severe housing needs to have access to dollars that are, according to the regulations, there are upwards of different uses for -- housing 6 certainly being primarily one of them. But there 7 are certainly other allowable uses for these 8 dollars, and other jurisdictions use them for 9 those purposes or in a combination. 10 I don't believe, for instance, that the 11 Housing Office should only get support out of the 12 CDBG Program. I mean, it amazes me that we have 13 that kind of policy in place. I know that we use 14 certainly some of our capital dollars to help 15 support projects. And even in the first part of this administration, given our financial situation, there was no question that dollars were tight for just running the City. So I certainly never advocated expanding. But we are in a slightly different time. And there are still great needs. So in an environment where, over the next 10 years, every year, probably easily 15 percent of the CDBG dollars are not going to be available to anyone that's going out to 09, and you have to do a new 80 6/9/99 COMMERCE/EC. DEV. - Bill 990160 five-year plan, I understand, next year, it seems to me that this is the time to focus on the other parts of the City that could in fact benefit from these activities but don't have the same kinds of needs as other parts of City. That's the kind of discussion that I'd like to legitimately have and put together different funding sources that have different constraints and different rules and regulations that go with them, but where there is the greatest flexibility, use them to the maximum, but that everyone is getting the benefit.
Okay. Well, I think that dialogue is really important. During this administration, the Mayor, in the first week of the administration, emphasized to me and others how important it was that we do something about those neighborhoods that are stable now but that need a little bit help to remain stable and actually improve. And we've tried to, despite the restriction of HUD funding, do something about that. We created moderate rehab program, which has been successful in many areas of the City that 81 6/9/99 COMMERCE/EC. DEV. - Bill 990160 were never touched before by the housing development programs. We organized the country's largest housing counseling and settlement assistance program that made available the choice of housing anywhere, in any neighborhood of the City, to counsel buyers who were receiving services through nonprofits. And a lot of the houses that were purchased were purchased in areas that had never been touched by the program before. We've continued funding for Philadelphia Neighborhood Housing Services, which specifically targets areas like that. And I believe, Councilman Cohen, that may have been the instance in which curb and sidewalk --
-- was done, although NHS, as I understand it, simply replaces individual sections of individual blocks rather than undertaking full block curb and sidewalk reconstruction. Some would say that that's not enough, and they're probably right. We have to have the 82 6/9/99 COMMERCE/EC. DEV. - Bill 990160 dialogue, and I'm glad to have this opportunity to do so.
I mean, I believe in limits. Let me ask you this. Out of the 1996 memo, which I know that Mr. Volpe made reference to and you've probably seen on a couple of occasions, one particular section reads: "But the cost of widespread curb and footway removal and replacement is so great that literally, the City's entire CDBG allocation could be swallowed with such a program. Therefore, OHCD is in the process of developing a policy and procedure for circumspect expenditure of CDBG funds for eligible and fundable curb and footways installation, removal and replacement in CDBG-eligible areas." Can you tell me what has been done to address that particular statement?
The only thing that has been done has been our continued support of NHS, which is not a new policy, and also our efforts where we could, to fund curb and sidewalk installation adjacent to private development ventures that were being completed by developers 83 6/9/99 COMMERCE/EC. DEV. - Bill 990160 who receive support with Block Grant funding. So that did not really address the issue about which I understand you are concerned.
So basically, you're saying that since the time of this memo, you haven't really come up with a new policy or procedure for these programs, right?
With the exception of possibly broadening it slightly to provide more assistance to funded developers, but that was it.
Good morning, Councilman and members of the committee. My name is Steve Mullin. I'm the Director of Commerce for the City. And I have some testimony that I had passed around, but I've been scratching some notes given some of the -- given a quick look at some of the amendments. I note here that I think that the amendments appear to address several of the issues and concerns that we had, but following in line with John, I'd like to reserve complete comment on those until we've had a chance to discuss with other members of the Administration about this, 84 6/9/99 COMMERCE/EC. DEV. - Bill 990160 because this does look like it -- these amendments do look like we're talking about allocation decisions between the General Fund and the Block Grant and some legal issues there as well as ultimately the prerogative of the Mayor to submit the Block Grant budget to the Council. But, again, the amendments do appear to address some of the concerns both in terms of clarifying what we were looking at and, as I'll mention in a few minutes, the CRIB Fund. First a couple of comments, though, too. I do believe that the Administration recognizes that neighborhoods have development needs, and especially through the creation of the Economic Stimulus Program, which really is General Fund dollars, there really are only two courses sources of revenues for any sizable amounts of money. Either we have our own locally-generated tax dollars or we have the Block Grant. We can get funding from the State in various programs if they're continuous type of State aid, they are built into our General Fund and our operations typically. We have been extremely aggressive on 85 6/9/99 COMMERCE/EC. DEV. - Bill 990160 all fronts in attempting to get discretionary money from the State and from the federal government in the various types of economic development programs, and I think we would continue to do so. And I think a new administration would also continue to do so. But the goal of expanding support, especially through this Economic Stimulus Program, which, again, I repeat, are City General Fund dollars, and an allocation decision made there has been vigorously applied to the economic development programs and strategies here by the Administration.
Mr. Mullin, what's the size of the Economic Stimulus Fund?
Right now, including -- right now, my answer would be $115 million is what has been allocated from the City's General Fund since the inception of the program. Of that, about $5 million to $7 million is really revolved from the loans in the program. So I think -- I think initially, there's been about $108 million proposed for the Economic Stimulus Program and approved by City Council in the regular budgetary 86 6/9/99 COMMERCE/EC. DEV. - Bill 990160 process.
And are any of those dollars allocated to particular projects at this moment?
Well, I'd say the vast majority of those dollars have been allocated. And I think too -- I don't have the numbers in front of me, but I think too that more than half of those have actually been expended. But a good chunk of those that have been expended are in loans and will revolve. But --
Of all the proposed or expended Economic Stimulus fund dollars.
Yeah. In your packet -- when I say I don't have it now, in your packet, I've provided an update through October of 1998 with a listing of the various projects and allocations.
Is it attached there? I passed it out this morning. 87 6/9/99 COMMERCE/EC. DEV. - Bill 990160
So if it's a copy you got last night, it did not have that. But I will have that, and I do note that out of the roughly $115 million to date, $32.5 million has been in the allocation of the neighborhood economic development, and $19.5 million has been in the allocation described as housing to support the CDBG -- either support CDBG or deal with low- to moderate-income housing or other types of housing projects that are not CDBG-eligible. And I have two quick notes here and --
Are the kind of items that we're talking about today eligible for funding through the Economic Stimulus Program?
The Economic Stimulus Program essentially, since they are essentially General Fund tax dollars, I think probably -- and I might have to check with our lawyers and I heard the Deputy controller's Comments this morning -- would basically follow whatever restrictions those general operating dollars have. But I think that in certain cases, the answer would be yes, just like in the case of our 88 6/9/99 COMMERCE/EC. DEV. - Bill 990160 capital budget where, if site improvements are done in conjunction with economic development -- with neighborhood economic development programs and projects, those are ones that we typically have been able to get approval from the Controller's office.
In addition, I guess two quick comments, or two comments here too. In addition to the availability or the legal ability to use certain dollars, I think we should make sure that we take a look at the efficiency of using those dollars. The HUD 108 Loans are actually loans; they are not at subsidized interest rates. So to the extent that there are ways that we could borrow and are using our municipal credit, all else equal, it would end up being cheaper over time to the extent that we could use General Fund or General Fund through stimulus dollars, it would be cheaper over time than paying the interest rate on the HUD 108 Loan. But those comments are subject to the availability and legal ability to use those. My last note was on your amendment 89 6/9/99 COMMERCE/EC. DEV. - Bill 990160 number really does address the note that Jeremy Nowak was calling "linkage." The original proposal that has now been adjusted to percent 5 from the City after a major project to go into the CRIB Fund, I think that that's -- in one sense, I think that that's a good thing because I think it turns this allocation decision into what I'll call above the board. And I don't mean by that that there's anything below the board, but an above-the-board allocation of resources here. The trade-off is that if there's a big project that the City contributes to, then the City will also contribute funds to smaller neighborhood projects and neighborhood economic development projects. The reason I think that before it was basically doing the same thing under the old terms is that we were essentially, if we're talking about the City subsidies, for the most part, I think that an additional requirement essentially for every dollar of additional requirement we up our subsidy by another dollar. So it's coming out of one pocket and putting it into another, which is more indirect. But by the same token, even though I 90 6/9/99 COMMERCE/EC. DEV. - Bill 990160 think it's above the board, I think it gets right back into that resource allocation issue, and you're talking about -- one of the questions that I had was sort of, out of what funds do we fund the CRIB in the next five years? and those are issues that we'd have to talk about. Again, I think the two main sources would be General Fund or the CDBG in some way, shape or form there for anything that we know of that would be specific sources over the next five years. Indirectly, if the project is doing great and bringing in lots of tax revenues, then in theory, the General Fund is -- and by the way, I say "in theory," but in practicality, that's exactly what's happening. The General Fund is getting stronger, but it still has to go through -- something there would still have to go through an appropriation process through the regular budgetary process, I suspect.
And, again, I'll work with 91 6/9/99 COMMERCE/EC. DEV. - Bill 990160 John and Bill, and we will talk with other members of the Administration on this. Thank you.
Can you get us a copy of a listing of the projects that you supported with the $19.5 million that, at least on the copy of the testimony I have, you mention on ?
Yes. And I think it is -- I'll find a packet that I passed out this morning.
If you can detail what those projects are and how you funded them and what they were for.
Thank you, Mr. Chairman. Mr. Mullin, could we talk about the fifth amendment, the development of the different kind of linkage program, an internal linkage? 'Cause I think it's a forward step, and we would be establishing for the first time the City's responsibility that as it develops these major 92 6/9/99 COMMERCE/EC. DEV. - Bill 990160 programs, it not forget the people in the neighborhoods. Because up until this time, we've been pleading with the administration after administration to remember that the City consists, in large part, of neighborhoods that maybe certain officials like mayors may have been forgotten about them, but they're there and they need attention. In fact, some of us think they're the most important part of the City. But be that as it may, there is that concept, which I think is a very important one, as presented in the amendment by Councilman Nutter. It's not the linkage that we generally think about of tying it into a developer, but squarely placing the responsibility on the City.
And I don't remember our ever doing anything like that before.
My first reaction to your comment there is that internal linkage, I think that is essentially what we do every year when looking at the resource allocation through the normal budgetary process. And I think that this 93 6/9/99 COMMERCE/EC. DEV. - Bill 990160 administration, this mayor has been very careful and very interested in spending that money now in the neighborhoods and for housing. And that -- that even if you wanted to carve out and say something's linked to this particular project even though, it's our dollars, I guess I could say internal linkage as opposed to external, but I still --
You know, it removes the element of pleading, hoping for. It establishes a legal responsibility, and that's why it's called "linkage" because there's a definite link. And that is something that we have had not had. You make a good defense for the administration and maybe past administrations too. But were you go out among the various neighborhoods, you'd find that there's a very strong feeling in the opposite direction, and it was to that that I was referring. This could give those of us that constantly live in the 94 6/9/99 COMMERCE/EC. DEV. - Bill 990160 neighborhoods a chance to show that there is a very solid commitment rather than it be necessary constantly to keep pleading and hoping that something will come our way. If I may, Mr. Chairman, go back for a moment to Mr. Kromer. You said at one point in response to a question from the Chairman about why can't we have the funds for the footways and the trees and the curbs? you said we've got to keep the program focused. Could you tell me what you meant by focused. What's the focus on? I assume focus means a concentration of attention, a concentration of resources in some direction. What direction?
That's right, it is a concentration. And the flexibility of the Block Grant really provides a terrific opportunity for us, but it also presents a potential danger, and the danger of that flexibility is that it will be used locally, as it has been used in other cities, as a kind of Christmas tree, as a fragmented allocation of resources all around the City, not guided by a central policy. And all of those expenditures in those 95 6/9/99 COMMERCE/EC. DEV. - Bill 990160 other cities may be very appropriate -- and a lot of Block Grant funds in other cities are spent on community centers, for example. There are few things more important than a great community center. But we've a policy since the 1980s of not funding community centers through the Block Grant, just as our policy has been not to fund curb and sidewalk improvement. So there's kind of a tension between the desire to use this flexibility to fund a lot of eligible activities and a criticism of the City for not being more focused, not making more of an impact. And the approach that we have tried to take during this administration, and I've been pleased to have had Council's support for that basic approach, has been to focus our housing production in lower North Philadelphia, where historically, a lot of work has already been done, and to use that work as anchors for a build-out of that area, which has been very successful. And to make our other housing production priority Community Development Corporation activity and fund the best-performing CDCs based on their performance and keeping those CDCs as busy as they 96 6/9/99 COMMERCE/EC. DEV. - Bill 990160 can be in producing housing with our funding. We've also made it a priority to leverage as much tax credit rental funding as we possibly can because that's a big resource for rental housing, and to produce as much special-needs housing for formerly homeless and others with combined housing and service needs as the providers that are capable. The working developers, the special-needs housing like Project Home and People's Emergency Center, Dignity Housing can produce, to keep them as busy as they can be. In addition, we've supported consumer choice and housing opportunity through the housing counseling programs. So those are the basic divisions that we've tried to make that excludes a lot of other activities. However, the program, although not totally perfect and far from it, is a lot more focused and is delivering a lot more results than it ever has.
All right. Thank you. I just wanted for the record a clearer statement of the objectives and goals of the CDBG 97 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Program. Thank you, Mr. Chairman.
Thank you, Mr. Chairman. I don't know if this question should go to either Mr. Mullin or Mr. Hankowsky. I have a question about the stimulus dollars. What are the prohibitions on stimulus dollars on a yearly basis in terms of eligibility?
I'll note that we have our own restrictions. But, again, the stimulus dollars are -- and we have our own restrictions and requirements based on a contract that we have through the Commerce Department to PIDC to administer the stimulus dollars. But fundamentally, they are expended General Fund tax dollars, so they do not have the same requirements to at least the federal government or to the State government that CDBG does. 98 6/9/99 COMMERCE/EC. DEV. - Bill 990160
Yes, not the same restrictions that the capital dollars do, correct.
So ideally, assuming that we continue to have these stimulus dollars on a yearly basis, those funds can be used for possibly street trees, curbs and sidewalks.
Well, they have the same -- we believe they have the same -- and this is subject to continuing review, but they may have the same restrictions as general operating dollars. The Deputy Controller was in earlier this morning testifying on some restrictions on those, and that we'd have to check legally. We do -- we have used -- I believe we have used, and I'll check on this, but I believe we have used stimulus dollars for capital improvements related to particular projects that we have been funding. And in some of the those cases, it might be stimulus dollars in addition to Block Grant dollars, too.
Is that something 99 6/9/99 COMMERCE/EC. DEV. - Bill 990160 that can be readily available? 'Cause I've heard of stimulus dollars being used for things, some of them in our district, and I was just interested to find out what exactly, though, they are.
Yes. I guess I should introduce myself. Bill Hankowsky, President, Philadelphia Industrial Development Corporation. I just would like to augment Steve's comments, Mr. Mullin's comments. Stimulus dollars are appropriated out of the General Fund as operating dollars, so they carry whatever the prohibitions are or flexibility that our General Fund operating dollars do.
Mr. Hankowsky, I'm sorry, I don't mean to interrupt you.
July 1, where are those dollars now in the upcoming FY 2000 budget? Where do they go and how do they get to you? 100 6/9/99 COMMERCE/EC. DEV. - Bill 990160
Okay, I'll try that. You may have asked one mechanical question too many for me. Mechanically, I believe what occurs is that Council, via the annual budget process, includes within the umbrella of the General Fund an appropriation. I think it's generally in the Commerce Department. And that includes, quote/unquote, the stimulus dollars. Subsequent to the adoption of the budget at the beginning of the fiscal year, a contract is entered into between the City of Philadelphia and PIDC. The funds are then transferred sometimes in bulk, sometimes in installment to deal somewhat more with the City cash flow situation than anything else to PIDC. We then -- obviously, we invest the funds in the short term just to get the interest which is counted in the Stimulus Program. So when Steve mentioned the difference between 108 and 115, there's also interest earned on the money, and we keep track of all that, so it's a segregated account. The contract's in place. The contract requires -- and the contract generally includes 101 6/9/99 COMMERCE/EC. DEV. - Bill 990160 allocation of the funds among four basic categories: housing, neighborhoods, business retention and attraction, and then administration.
Why is it that the Commerce Department allocates the money over to PIDC? Why does that money not stay with Commerce?
I think I can answer that -- though maybe Steve wants to. But basically, I think we've all dealt with the City, which is a great institution that I love. But the theory was that we would attempt to get this program in the least bureaucratic place it could be. So that PIDC is then in a position to relatively quickly enter into an agreement, if for some reason something has to happen -- whether it's a loan to a company or a grant to a CDC, etc. We can disburse relatively quickly, and I think that was the basic intent. That we do not have -- so back to -- if I could continue for just a moment. 102 6/9/99 COMMERCE/EC. DEV. - Bill 990160
One additional thing is that we're not really -- the Commerce Department, since a portion of these dollars are set up for lending and revolving loan programs, the Commerce Department really isn't set up to do that and no 10 general fund department really is set up to allow revolving loans because any repayment on a loan in the Commerce Department would be another net receipt into the City's General Fund and would have to be reappropriated. Part of the idea behind this was to make sure that we had a resolving loan program and do it so that -- and from day one, the notion of setting aside these funds for stimulus and to concentrate in many casts on loans was to make this a self-perpetuating funding source for economic development.
Actually, again, I may further augment those comments. I believe there, in fact, may be both State and Charter issues with regard to the City being direct lender to a 103 6/9/99 COMMERCE/EC. DEV. - Bill 990160 for-profit entity -- I think that's what, in fact, PIDC has set up, or PCDC or others. So in a loan situation, the City has to -- or the Commonwealth basically always has to set up these intermediate entities. You can send the money there and then that -- we hold the mortgages, we hold the collateral, we foreclose on people. The City is not in a legal position to do that. But back to the use of the funds. So there's a contract, the contract creates general allocations. There is a methodology established in the contract for the approval of the expenditure of those funds. That requires a four-part signature form. It requires myself on behalf of PIDC, Steve on behalf of the Commerce Department, Mr. Hayllar on behalf of the Finance Department, and now Greg Ross previously -- David Cohen -- as the Mayor's Chief of Staff. So no 21 individual commitment of the funds can occur without three City officials' consent. And then PIDC either directly administers -- for example, loans the money. Or in the case of, for example, the use of the 104 6/9/99 COMMERCE/EC. DEV. - Bill 990160 housing dollars for OHCD, then we would transfer those dollars over to OHCD or the Redevelopment Authority or to whoever we were directed as the implementing agency for a particular program and then they subsequently administer the program. Is that helpful?
It is, but I want to -- on that particular point, is it your testimony that some of the Economic Stimulus dollars are, in fact, loaned to businesses?
And in some instances, you essentially put them into projects which end up, for all intents and purposes really being a grant. Is that correct?
Both are true. We loan money. And then there are instances where some of the neighborhood projects are, quote, grants. 105 6/9/99 COMMERCE/EC. DEV. - Bill 990160 They were added to the cost of the project as a funding source. No expectation of repayment.
The contract that you have -- again, not to interrupt you -- with the City, what are the guidelines by which the decisions are made as to any expenditure of dollars, whether in loan form or in grant form? How do you decide that you're going to expend dollars out of the Economic Stimulus Program? And who has access to it and who has the ability to cause or force some expenditure to happen?
Basically, as I said, there's a contract, there's a methodology. From PIDC's perspective -- I'm not trying to be a lawyer, but I look at -- we're the agent of these funds on behalf of the City.
We do not have a unilateral capacity to expend any of those dollars without the City's consent. We may have ourselves have it, per se, and say to the City that we think there's a company that could use a loan, do you agree so? We may bring forth the expenditure. But it is not -- the decision-making power has not 106 6/9/99 COMMERCE/EC. DEV. - Bill 990160 been delegated to us. I just wanted to be --
Well, I understand that, but let's cut to the chase. Who is the decision-making authority in this particular matter? Who says yes or no to a request for an Economic Stimulus Fund expenditure?
Mr. Mullin, those four people, with all due respect to you as one of the signers and possibly to Bill, I mean, you're not deciding whether someone gets the money or not; you're signing a form to allow for the expenditure.
Let me step through. We have a rough allocation that, each year when we come in with new --
I got all that. Let's say somebody makes a request for dollars.
Who decides? I 107 6/9/99 COMMERCE/EC. DEV. - Bill 990160 didn't ask who signed the form. Who decides yes or no?
If it's in the housing allocation and John sent something over and says he wants to do this project and however John deals with the Mayor's Office and they say yes, this is a project that we would like to do, or this is an expenditure that we would like to do, that the form comes in with a request from John Kromer. And we sign off, Ben Hayllar signs off with the is there money in the account. And the rest of us sign off as yes, this fits in the housing allocation. When the neighborhood economic development proposals come in, requests come in, we set up different types of programs out of that. For example, one of the things I passed out is we have a security assistance program.
Yeah, I understand all of that. You get a request one day, it's a form for a housing project.
How do you decide whether to sign your name to that document? Do 108 6/9/99 COMMERCE/EC. DEV. - Bill 990160 you just look at it and evaluate whether the people in that neighborhoods need housing and it sounds like a great idea? Or do you get a phone call, do you get a fax, do you get a memo? Is there a nod, a secret handshake? (Laughter.)
Who tells you it's okay to, sign your name to this form? 'Cause I'm sure you're not going out, checking out all these locations to determine whether this is a viable or project not. Why don't just we cut to the --
No, I thought I was saying that. In the housing case, if John Kromer says this is the project or this is the expenditure and he says that it fits in the rough categories that we had established at the beginning of the year, then I sign off.
Could I make just one 109 6/9/99 COMMERCE/EC. DEV. - Bill 990160 addition to that?
As Steve said, you know, if Council has appropriated a round of stimulus funding and there's going to be a new 5 million for housing -- just hypothetically, actually what we actually do is say, John, could tell us what you think you're going to do with the money over the course of the year? And John will generally prepare a projection as to I've got the Mortgage Assistance Program, the bankers initiative, and lays out actually a kind of -- I'll use the term a "mini budget" or a "mini allocation." And then when the form comes, is that consistent with the overall allocation? And if it is not, what has happened? Because we do play very close attention -- it's one of the things that I'm moderately compulsive about -- is, do we have enough money for all the commitments we're making? So when it moves, that triggers a response. 110 6/9/99 COMMERCE/EC. DEV. - Bill 990160 But basically, there's a beginning-of- the-year allocation driven by OHCD.
I understand that. But you decide project by project. You figure out whether you have the money, you know what the overall goal was coming in, this is consistent with that. You get the form. It would amaze me if there were no one else involved in this particular process. Now, does the Mayor decide or does his chief of staff decide, or is there somebody else somewhere else that we don't know about who decides? But you cannot be getting these documents and information and just deciding on the basis of what you have in your hand whether or not to expend the dollars. Now, who decides?
Well, I think it's important to note that there are at least two levels in here. At the very beginning, what Bill 21 was just talking about there, the Mayor does, when we put together, what do we want in stimulus. When I come in in the initial parts of the budget process and say we'd like $700 million in stimulus and my colleagues all say no, and we end up with 111 6/9/99 COMMERCE/EC. DEV. - Bill 990160 some number that's smaller than what I would like internally and things like that. We could end with the correct number. We end up with, here are the rough categories, or here are the particular projects, or here are particular programs. John has certain types of project, he says, this is what I think we'll need in here. And then we rough that out. And then it becomes part of what we describe in a general sense, X-million in housing, Y-million dollars in business and attraction, and Z-million dollars in neighborhood economic development. Some of those are particular programs -- the mortgage that John says, here, we need $1.3 million for this because of --
Mr. Mullin, I really do understand all of that. All I'm simply asking you is about your decision-making process. I know about you, I know about Mr. Hankowsky, the Chief of Staff, the Finance Director. I just want a straight answer as to after you get through all of that, who decides yes or no on the request? 112 6/9/99 COMMERCE/EC. DEV. - Bill 990160
Let me note one other thing, because I'm holding in my hand here 130 companies who have received a security assistance rebate from us. The Mayor has probably -- except for knowing 130, the Mayor doesn't get involved in this at all. What we did here was, we said, out of that neighborhood economic development stimulus, we would like to try this program and fund it for $100,000. That's a program out of my office. I send that around, saying we want to try this program based on this type of -- based on this type of procedures, here's how companies can come, and we go out try to market it. And companies come in, fill this out, and people on my staff review, does it meet this? yes, sign off, and a check for a rebate goes out. So at that level, it's sort of the subprogram level. And I think there's analogous cases of what happens with the loans, for business loans. The contract that we have with PIDC for the stimulus, we basically said, Look, we want to -- we want to mimic in a sense the CDBG Loan Program, the UDAG Repayment Loan Program, and the Small 113 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Business Revolving Loan Program over at PIDC. We want to mimic those things, we don't want to have each one come back to us in any particular case.
So there's decisions being made at the PIDC Board level and could be having MBEC people working in on it too. But that's all under the rough category of $7 million in this loan program that ultimately the Mayor has signed off on.
All right, let's go back to Councilman Clarke's question, which, I believe, had to do so with flexibility of these dollars, what's eligible, what's not. Mr. Kromer has mentioned earlier that he might like to seek Economic Stimulus funds to do a variety of things. The question still occurs about eligibility. Now, are there some guidelines that go with Economic Stimulus funds that are outlined in the contract that you have with the City?
Yeah. Because I do want to be totally responsive to the committee, the fundamental guideline is, it's City operating 114 6/9/99 COMMERCE/EC. DEV. - Bill 990160 dollars. If the City, via the contract with PIDC, wanted to say, Use this money to repay HUD 108 Loans, they could say that, and we would cut checks and do that. I just want to be careful, though, to the degree that the City Law Department says, you can't do somebody's sidewalk because operating funds don't do that, then we can't do it either. But basically, yeah, there's a contract, and today we could repay HUD 108 Loans because that's one of the things we could do, but you could write the scope however you wanted to write it.
I said that whatever scope of services the City wanted to include in that, and they are fairly flexible dollars, the only constraint is whatever constraint City operating dollars generate.
Right. So your earlier statement was that you could, in fact, use Economic Stimulus dollars to repay HUD 108 Loans. 115 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Is that what you said?
I said if the City directed us to do that, we would do what the City directed us to do, yeah.
Councilman, I actually had another question. Mr. Kromer, the recent Home Ownership Zone, the Cecil B. Moore Home Ownership Zone, what was the 108 commitment that we got? Do you know off the top of your head?
What impact potentially would this bill have on that particular development? If we were somehow to forfeit our repayment of our 108 at the level that you would like to do?
As I understand the bill, I don't think there would be any impact, and I think it's designed not to have any impact. My only point was that the resource is finite, and we 116 6/9/99 COMMERCE/EC. DEV. - Bill 990160 have to make some decisions about how we pay for all the activities that we'd like to pay for.
Okay, so it won't limit our ability to access that 108 at all.
Not necessarily. But the decision has to be made regarding how the activities proposed here will be paid for, and I don't believe we've determined that.
And without the definitive answer on where that would be paid for --
I'm sorry, Councilman, what was its last thing you said?
I was basically saying without a definitive answer as to how that money was going to be repaid separate the 108 payment from CDBG, then we would have a problem.
With your current project or past project or -- 117 6/9/99 COMMERCE/EC. DEV. - Bill 990160
Current. Cecil B. Moore Home Ownership Zone, which is near and dear to my heart.
No, I understand that. And is that one of projects that's in the current budget?
For repayment, or is it in the pipeline for development?
Right. Is that a part of the $10.5 million application?
Okay, and your response was, it is affected or unaffected?
It would not necessarily be affected. But if this bill were to be passed, then we would have to do some reallocation, and I don't know what principle we would use, whether we would take it entirely out of administration, 118 6/9/99 COMMERCE/EC. DEV. - Bill 990160 whether we would make an across-the-board --
Resources in order to provide the funding that would be needed to address the priorities specified in this bill. So --
You mean the $10.5 million HUD 108 Loan that you're getting in the Year Plan? 12
No, the curb and sidewalk 13 improvements and the other activities. 14
I'm sorry, you've 15 lost me there. The Councilman's project is in the 16 pipeline to get funding out of your current 17 application for $10.5 million in HUD 108 Loans; is 18 that correct? 19
I'm sorry, there is the 20 Year 25 Plan a proposal to borrow over $10 million 21 in 108 financing. 22
Right, and part of 23 it is to go to this particular project. 24
No, I'm sorry. The Cecil 25 B. Moore activities are being supported through a 119 6/9/99 COMMERCE/EC. DEV. - Bill 990160 108 loan that had previously been approved by Council in a prior year.
And I assume you're going to use those dollars, right?
Yes, but the housing production going on in that area is supported through a combination of the 108 financing which HUD required us to take in order to qualify for the Home Ownership Zone funding.
Plus a commitment of Community Development Block Grant funding, which we are making separately from that. It's got to be a combination of the two.
And if the Community Development Block Grant budget had to be reduced, it would --
That's the part I'm not understanding. Why would it have to be reduced? 120 6/9/99 COMMERCE/EC. DEV. - Bill 990160
Well, that's my interpretation of what's being proposed. I know the amendments are --
The amendments are intended to address that, but if we are going to use Community Development Block Grant dollars to fund site improvements, then those Block Grant dollars will not be funding something else.
But we're only talking -- again, Mr. Kromer, we're only talking about Block Grant dollars that are presently programmed to go to HUD 108 Loan repayments. You didn't plan any of the dollars that are going into the Councilman's project for that.
Well, this is a part an the amendment that I've just seen this morning.
And I don't believe the Law Department or the Finance Department have seen it, and so I can't really confirm to you whether it's workable.
But you can like or not like the proposal. I just want to make sure 121 6/9/99 COMMERCE/EC. DEV. - Bill 990160 the record is clear about funding. You plan to fund, by a combination of HUD 108 Loans and CDBG allocations, a particular project. It is in the Year Plan. There is no 6 disturbance or disruption to the plan or any of 7 the projects. As a matter of fact, there is an 8 amendment that has now been passed that says that 9 no program or development project or anything else 10 that's in the action plan can have its funding 11 reduced -- at least to pay for any of this, and 12 that the proposal here is that you use less CDBG 13 dollars than the $13 million you have already 14 allocated, which don't affect the Councilman's 15 project, and if some dollars are freed up to repay 16 your loans, that those dollars would be used for 17 site improvement. 18 I mean, that's -- I mean, this is not 19 particularly complicated. I mean, do you under -- 20 I mean -- 21
This is the 23 proposal, so I don't understand why you would then 24 say on the record that there may have to be some 25 reallocation of dollars. We're not touching 122 6/9/99 COMMERCE/EC. DEV. - Bill 990160 anything in the action plan.
I understand the intent of the committee, and I understand that that is what is being proposed in the amendments. However, I have no way of determining whether the bill, as amended, will or will not have an impact on the Block Grant budget; I just don't know that because we have just seen the amendments. And I understand the intent and I understand what is being proposed, but I cannot sit here and tell you that this will solve our problem in terms of the Block Grants. Secondly, as I said earlier, I oppose any use of Block Grant Funds for site improvements. If we were on a roll and were a period in which Congress was increasing the Block Grant year by year, things would be different. But, in fact, the Block Grant is decreasing year by year, and Congress is making up new set-asides before the Block Grant resource even gets to the cities. We have less real dollars. And so no matter what is intended or proposed, the policy that we support is not to use Community Development Block Grant funding for site 123 6/9/99 COMMERCE/EC. DEV. - Bill 990160 improvements.
Okay. I understand that, I respect that. But to the extent possible, if you can keep those views separate from what the facts are in terms of the budget and any proposed amendments to it, there are none. And I'm certainly willing to state for the record that we do not touch anybody's CDBG allocation and that we are only looking at the $13 million in loan repayment as a funding source for these kinds of activities. Those are the facts. I understand you may not understand that. I respect that. But those are the facts. Okay?
The mechanism that is proposed is the introduction of site improvements as a CDBG-funded activity much. This was not proposed or discussed substantially at the hearing on the Block Grant proposal last week, which went on for an entire day. This is a new piece of legislation which is intended to change the proposal that was discussed then, which has been under circulation for five months, and this is a substantial change which includes some significant 124 6/9/99 COMMERCE/EC. DEV. - Bill 990160 elements that I am seeing for the first time today.
Again, I have some questions and issues that need to be resolved before we can move further on this.
Okay, I'd be glad to talk to you about it. Are any questions for any the other panelists? Mr. Hankowsky?
That's okay. I did prepare testimony. I believe it has been circulated. I feel like Johnny Carson when he put the envelope up. It seems as if some of the amendments are in the spirit of my testimony, so I'm going to ignore going over my testimony and would request the indulges of the committee if perhaps I could supplement once I've had a chance to review the amendments because I do think they 125 6/9/99 COMMERCE/EC. DEV. - Bill 990160 are somewhat in the spirit of the comments. So I just wanted to make a couple quick comments which were: One, I do want to understand the amendment as it affects the 108 Program. As I understand it, as proposed, we would take 5 percent of the total limit, which a quick calculation says to me is roughly 17 million.
And that we would fund that only out of not-previously-approved HUD projects. So prospective, which I calculated quickly to -- and I may modify this once I have more time -- up to around 68 million. So it's the applications that haven't gone in or haven't been approved that the 17 would have to come out of. And so it would be hold harmless to those transactions that have commitment.
And that's helpful and I appreciate the clarification. And then on the --
Again, I have no 25 interest in taking or putting aside any money from 126 6/9/99 COMMERCE/EC. DEV. - Bill 990160 anybody's project.
Whether it's on the CDBG side, in the action plan, or people who are in the process of getting 108 Loans. I believe the facts in that case again are, there are some dollars that are unallocated at this point in time.
Right. There are clearly proposals vying for it, but in a pure technical sense, it is accurate that they have not been committed in a legally binding way that would create lender liability for PIDC, which I would care about.
And on the CRIB side, I simply wanted to commented that, one, I'd take it as perhaps a modest compliment, but we'd be happy to administer a program if there were money for it. And I think the spirit of the amendment is the spirit of my comments, which was, I was nervous about if we were providing funding for a project, it was probably because, at least we believed, it had a requirement a gap, and that 127 6/9/99 COMMERCE/EC. DEV. - Bill 990160 simply adding -- from a developer perspective, enhance the gap, and we'd have to put more money in see in.
And actually, as you'll see in my testimony, I actually make the point that what seemed better was to let the project happen, let it create new revenue, and let's appropriate out of the new revenue the goals of the program. And that's, again, moderately consistent with the amendment. So I would ask the indulgence and I may supplement this testimony once we've reviewed them further.
This is not addressed to anybody in particular but to at least to one of the three witnesses. Would it be fair to characterize the Economic Stimulus Fund as being equivalent to an appropriation by City Council to the Mayor's Office of a stipulated sum of money? I don't know 128 6/9/99 COMMERCE/EC. DEV. - Bill 990160 how much out of the General Fund was taken. Do you know what the figure was this past year, Mr. Mullin? How much went from the General Fund into the Economic Stimulus Plan in the current fiscal year?
It was 27, approximately 27 million, on that order of magnitude.
Well, doesn't the Economic Stimulus Fund then, say, for the current fiscal year, didn't it actually constitute a general appropriation in the Mayor's Office to use the 27 million -- approximately that figure -- for whatever economic purposes the Mayor saw fit to use it for provided it met, you know, the requirements that apply to all general funds? Wasn't that a general appropriation to the Mayor? And then the Mayor -- and, you know, it permits this contract to be entered into, PIDC manages the funds. But somewhere along the line, you always have to have a general understanding that this meets with the Mayor's approval. I assume the Mayor can initiate a suggestion for use at any time, 'cause he's the chief executive of the City. 129 6/9/99 COMMERCE/EC. DEV. - Bill 990160 But it frees the Mayor's Office from having to come to City Council. Once that general appropriation is made, there's no need at any time now to come to City Council with respect to that amount of money. We've already appropriated that money by establishing the Economic Stimulus fund, and we give the money to the Mayor, and he makes the decisions instead of, in the normal course of events, Council playing a role.
Well, I would note two things. One is that that's subject to the categorization; it's not just a lump sum. We do say to Council, These are the three areas where we would divide that up. And, second, my reaction to that is that it almost seems like the annual budget process in any appropriation. Anytime something's appropriated during the year, then the Administration works, and we come back and report how things are doing.
Well, it sort of may be like that, but it may also be like what is known as "WAMs," walking-around money for the Mayor. He has the flexibility, without accounting 130 6/9/99 COMMERCE/EC. DEV. - Bill 990160 to City Council, for using this money for an economic project as he sees it, that he feels he wants to support, without going through a public hearing process. That's the point that I'm making, that it seems to me to be a sort of blanket appropriation advance. We could actually do it for maybe the whole $2.5 billion, you know, gamble and then just turn everything over to the Mayor. Thank you, Mr. Chairman.
Sure. Lastly, Mr. Kromer, from the plan, the one thing that there does not appear to be any narrative on is your annual operating costs section. There's a Section A called "Program Delivery," and it lists four of our various agencies for a total of $17,212,000. But I have not been able to find anything that's written about what Program Delivery is. What does that mean?
Program Delivery relates to the City employees whose services are required in order to produce one of the products that's funded through the program -- for example, housing 131 6/9/99 COMMERCE/EC. DEV. - Bill 990160 inspectors, construction inspectors who go out into the field and who need to check on the status of housing in construction in order to approve payouts.
Do they work for the Office of Housing or do they work for L&I or do they --
No. You see that the Program Delivery categories primarily apply to the Redevelopment Authority, which staffs those functions that relate to housing production as well as to some staff at PHDC, but does not apply to the Office of Housing and Community Development, which is purely administrative.
No, I understand that. So RDA has its own inspectors, and then PHDC has its own inspectors, and PIDC has people who do something, and PCDC?
Okay. And then all of those agencies, including OHCD, are then listed a second time in the General Administration section, which seems to add up to $12,320,000.
Now, how is Program Delivery different from General Administration? What's the difference between the two?
Well, that's -- I've refer to Program Delivery. General Administration refers to City employees such as myself who have general responsibilities for the program but who are not directly involved in producing the goods and services that are supported through the program. So that my salary clerical staff, as well as functions like auditing and monitoring, are covered by General Administration.
Now, on the plan, it's listed that the total administration budget is $14,033,000.
Which seems to be 18.1 percent of your total resource base, which is your entitlement of $68 million, and you've got some program income of $8 million.
So your total 133 6/9/99 COMMERCE/EC. DEV. - Bill 990160 administration costs are percent of your allocation and your program income base?
Okay. Now, how 6 does that match up with the 15 percent cap on 7 administrative costs? 8
I believe the cap applies 9 to the General Administration category but not to 10 the Program Delivery category. 11
And I believe the cap is 14 20 percent, if I'm not mistaken. 15
Well, it's 20 16 percent by HUD, and it's 15 percent by the City. 17
I'll have to get back to 18 you on that. I believe the HUD standard is certainly the one that we use, and I'm not sure about the relationship to the City standard.
Well, are you saying that you don't have to adhere to it?
Okay. Well, what I 134 6/9/99 COMMERCE/EC. DEV. - Bill 990160 would at least direct you to is that in Section 3 21-1109 of the Philadelphia Code, it says that it shall be the policy of City that no more than 15 percent of any year's Community Development Block Grant allocation may be spent on administrative costs of OHCD. So wouldn't you have to be in compliance with not only the federal limit, which is 20, but also the City limit at 15?
I'm sure that we would have to be in compliance with all City Code requirements that apply, and I will get back to you today on that specific issue.
Okay. Well, what I would also like to get is, can you get us a full detailed budget of the various organizations and who is assigned to what place and who's being accounted for by way of either Program Delivery or General Administration, and which dollars are going where, and who the individuals are, and what their job responsibilities are as it relates to getting paid off of either of those two categories?
Yes, I'd be glad to do 135 6/9/99 COMMERCE/EC. DEV. - Bill 990160 that.
Okay. Thank you very much. Are there any other questions? Councilman Clark?
Mr. Kromer, I got to go back to the Home Ownership Zone, one last question. Right now, are we doing this in a phased approach?
And is that because we don't have enough money in each year's allocation to do the entire 296 units? Is that essentially --
That's right. And also, it's a function of the speed at which we can acquire land and market completed houses.
And that also requires additional resources to do the acquisition?
If somehow the precedent was set to allow us to appropriate General Fund or Stimulus funds to pay off the 108, 136 6/9/99 COMMERCE/EC. DEV. - Bill 990160 and say, for instance, we were able to pay that off when we had this $13 million, would it be your preference to expedite the Home Ownership Zone and maybe use a portion of that million to acquire 6 the land, build the 296 units maybe in two years 7 as opposed to ten years? 8
Absolutely. To the extent 9 that we had additional resources from whatever 10 source, I would support using those additional 11 resources to provide housing and services and 12 provide as much immediate value as we could to 13 Philadelphia neighborhoods in that form.
And is it your thought that, in the long run, would be a more cost-effective way because of the economies of scales of purchases and being able to build that in two years as opposed to six or seven years as it relates to salaries and everything else?
Building more housing now certainly would be more cost-effective, and that was a rationale for budgeting as much of the 108 funding up front as we could to take advantage of those economies of scale and produce more results, yes. 137 6/9/99 COMMERCE/EC. DEV. - Bill 990160
Okay, thank you. Rick Sauer. (Rick Sauer come forward.)
One announcement. There was a 12:30 Finance Committee hearing that was scheduled. It will still happen, and as soon as we have a better read on what time the Finance Committee hearing will take place, that announcement will be made. Please identify yourself for the record.
Yes. My name is Rick Sauer. I'm the Executive Director of the Philadelphia Association of Community Development Corporations, an association of over 50 CDCs and other nonprofit groups that are involved in community revitalization activities in the Philadelphia area. And I want to thank you, Councilman Nutter and other members of the committee, for the 138 6/9/99 COMMERCE/EC. DEV. - Bill 990160 opportunity to testify here today. I guess we just heard lengthy discussions with the City officials around this bill. I think it's important to note that the CDCs here in the City, and our members in particular, recognize the important role that streetscape improvements play in the neighborhood revitalization process. And as was mentioned earlier, most of the projects that these groups undertake -- housing development projects, economic development projects -- do incorporate those type of activities such as curb cuts, sidewalk improvements, street tree plantings, etc. And on some occasions, while dollars are not as available, groups have made efforts to undertake these activities such as shade tree plantings in areas aside from where they're undertaking actual physical development activities to spruce up the neighborhood, increase the viability of commercial districts etc. So I want to thank you for raising this important issue and the need to address it -- in particular, the need to identify a funding stream for these activities. 139 6/9/99 COMMERCE/EC. DEV. - Bill 990160 I think we can also agree that there's a need for these activities in neighborhoods throughout the City, whether it's a lower-income neighborhood, a moderate-income neighborhood, or middle-income neighborhood. And I would like to applaud the fact that the bill identifies the need for this funding to take place or to be done in a manner consistent with a more comprehensive neighborhood revitalization strategy. We would not want to see these funds just scattered about and used in a haphazard way.
Certainly. And, finally, we certainly support the effort to target more economic development funds towards the neighborhood commercial districts, and it's a critical issue that more funding is needed for. I certainly need to modify my testimony before what I planned on saying, based on the amendments that were listed earlier. And I came here initially with a lot of concern -- I think well-grounded concern -- that the way the bill was 140 6/9/99 COMMERCE/EC. DEV. - Bill 990160 initially written would potentially lead to the diversion of a significant amount of CDBG funds away from other activities. So I'm glad to see that the sponsor has proposed amendments that appear in large part to address a lot of these concerns that I and, I'm sure, many other folks have. Clearly, when we're looking at the CDBG budget that the City -- of allocation that we get each year, you know, we have 68 million in total, as mentioned, 30 million of that is going towards administration and program delivery, another 13 million is going towards Section 108 Loan repayment. That only leaves about 25 million new dollars each year to fund community and economic development housing activities. And the concern was, if we're going to use 10 million of that for streetscape improvements, while those improvements are very important, that would have a direct impact. The understanding I get, based on the amendments, the key thing was that we would look to not use CDBG funds to repay approximately $10 million in Section 108 funding; instead, look 141 6/9/99 COMMERCE/EC. DEV. - Bill 990160 to the City to provide funding directly for that; in essence, freeing up $10 million currently used for that purpose for other CDBG-eligible activities. And in particular what was proposed was to use that million for streetscape 7 improvement. 8 And I think the whole issue raised 9 that's been here is an important one. Here we're 10 talking about divying up a very limited pool of funds. The real question's a larger one, and that is, what can be done to expand the pie? So I certainly congratulate you on pushing that discussion forward, looking at what are the City resources currently available to either repay Section 108 money or to cover some of the administrative costs that are currently supported through CDBG allocations. The one thing I would hope we would do as part of this process is not just try to identify funds that could be used for streetscape improvements, but also to look at this as an opportunity to identify additional funds for housing projects and other community development activities as well. And, clearly, 142 6/9/99 COMMERCE/EC. DEV. - Bill 990160 million is not addressing the magnitude of the need that we have in the neighborhoods. And it sounds like there are some possibilities of other funds, whether it's the stimulus funds, whether it's general operating funds, whether it's funds that become available through this linkage idea on larger-scale development. And I think we need to take a larger look at ensuring that we're expanding the pie for all activities -- not just preserving, making sure we hold steady on the limited fund that are there now for housing production, housing counseling, and other activities, but to expand the pie both for those activities as well as for streetscape improvements. So, hopefully, this will lead to a larger dialogue around that issue, and we certainly welcome the opportunity to be involved in that process. Thank you.
Thank you very much 143 6/9/99 COMMERCE/EC. DEV. - Bill 990160 for your time. Whittier Dow. (Whittier Dow comes forward.)
And other Council people. My name is Whittier Dow. I'm a housing specialist for the Housing Consortium for Disabled Individuals. We thank the Council for giving us the opportunity to speak on this. Before coming here this morning, I also was concerned about the intent of the Councilman's bill. I'm concerned on two fronts. First of all, because I've worked for a housing organization in the City for the last ten years, the service segment of (unintelligible) too much in City Council; and second of all, because I come from the neighborhoods. And with that in mind, I will speak from both areas -- both in my official capacity and both as a neighborhood person. First in my official capacity, as a fair housing specialist, Philadelphia, although we have made many strides in the last five to six 144 6/9/99 COMMERCE/EC. DEV. - Bill 990160 years with revitalization of the neighborhoods, we have not done as much as I would like to see in the neighborhoods where people live. And HCDI, being a citywide agency, realizes that many of the concerns that Councilman Nutter has addressed are concerns of our constituents. And we would like these things that Councilman Nutter is concerned about to be spread about evenhandedly throughout the community. I am currently a resident of South Philadelphia. I grew up in West Philadelphia, however, and I know about neighborhoods. If I don't know about anything else, I know about neighborhoods. And our concern at HCDI is that whatever money is reconfigured in whatever form, that it does not take away from neighborhood revitalization or neighborhood programs. And I'm glad that I was able to hear the whole presentation this morning from other people. And if there are other ways to get funding for your proposed amendment, Councilman Nutter, it's time that you open up the discussion not only with the City officials but with other community groups that come in these chambers every 145 6/9/99 COMMERCE/EC. DEV. - Bill 990160 day and that call your offices every day so that we are also a part of the ongoing discussion, you know, 'cause so often, the discussion is centered around City officials and not centered around the community groups and the people that are actually out there doing the work for the people in the community. So we feel, as an organization, HCDI, that your bill has good intentions, but we do not want a bill that would hurt people in the community, like my friends from Tenant Action Group, or other groups like that, or other groups that are doing fine community work throughout the communities. And these are our concerns as an organization. Putting on my other hat, as a community person, I always feel that the neighborhoods should be recognized first, 'cause neighborhoods are our most important function that we have here. Because without neighborhoods, you and the City Council would not be sitting there hearing our testimony, I would not be sitting here testifying as a community activist. So -- and I'm more concerned about the 146 6/9/99 COMMERCE/EC. DEV. - Bill 990160 neighborhoods that historically have been neglected throughout the whole process of the community development, such neighborhoods as where I grew up -- 52nd Street, the 52nd Street corridor, the 60th Street corridor. Now that I live in South Philadelphia, south of Broad Street after you pass Federal Street, you know, 'cause I come home every day from work and I see the new music center being built, I see everything being. . But once you get past Washington Avenue and you go up to the hospital, it's a whole different thing. So these are the concerns that I have as a individual who's worked in the community and who lives in the community 'cause, you know, and no matter what we do for the center of the City, we also have to bring it back to the neighborhoods where folks live at, you know.
And these are the true concerns, and this is why you have such a good turnout this morning, Councilman, because people are concerned, and people do want to know what's going to happen to their community. We cannot take constant cuts from the housing budget, you know. And if money can be 147 6/9/99 COMMERCE/EC. DEV. - Bill 990160 reshifted from another City source to make it work, make it work that way, you know, don't make it work on the backs of the people where --just like Councilman Clarke brought up the concern about how things are done in phases. And it would be more cost-efficient if it couldn't be done in phases, if it was done in one big lump. 'Cause the longer you wait for the phases to come in, the higher the cost is going to get, and the more money that the communities are going to lose. And maybe it's time to open the discussion to a whole different level, Councilman Nutter, where we're looking at maybe changing the way the whole allocation of HUD money is allocated to the City and the way we have used it. You know, when I heard we're using basic policies that we used back in the '70s to allocate money that we're using in the year 2000, back in the '70s, I didn't even know how to use a computer. And if I didn't know how to use a computer today, I wouldn't be working. So it's time that we looked at maybe shifting the way that we do the programs, you know. And this is not in my official capacity 148 6/9/99 COMMERCE/EC. DEV. - Bill 990160 working for my organization, but that's how I feel as a community person.
And we need to open up the total discussion where everyone's concerned, where not only Mr. Kromer and people from Commerce and other people around the table, where people who have been in the community and know the community are also a part of that dialogue.
And until that's done, groups like mine are always going to have reservations about it, you know, when they hear resources going another way.
Well, we've known each other for a long time, so you know that I'm always interested in an open discussion and dialogue. And I think absolutely right, the process does need to be opened up, and more and more groups should participate in that dialogue.
As we particularly move into 149 6/9/99 COMMERCE/EC. DEV. - Bill 990160 the new millennium and particularly with the new mayor coming in, whoever he may be, we need to make the City move forward so that not only are we building baseball stadiums, but we're also doing things for the community, and we're about the community. And we need to allocate -- take the same concern of allocating money for stadiums and put it back into the neighborhoods, you know. And when I hear that all our money comes basically from CDBG monies for housing and for other activities, that concerns me, that concerns me as a community activist. And this is one reason I wanted to speak today before the Council.
To voice my concern, you know, 'cause I love the city, and so do the other people around this table and around this city Council chambers. But we, as community people, are tired of always being thought that we are the ones that are being taken away from, and we're not part of the process. Because without us, there would not be a process.
You're right. 150 6/9/99 COMMERCE/EC. DEV. - Bill 990160
Councilman Nutter, thank you for your time. And I appreciate it.
Thank you very, very much. Any questions? (No questions.) (Applause.)
Why don't we have the next three people come up. John Rowe, Hidalgo, and Rebecca Barragan. (Above-named witnesses come forward.) Please proceed.
I'm John Rowe, Executive Director of the Tenants Action Group. And I appear before this committee to present TAG's position on Council Bill 990160. First, I'd like to thank the committee for the direction that the new amendments have taken the bill. We appreciate that. And we did call Miss Chapman a few days ago, and we found out that the intent of the bill was not to diminish the essential housing services. 151 6/9/99 COMMERCE/EC. DEV. - Bill 990160
You're welcome. TAG opposes using CDBG funds to finance infrastructure projects at the expense of essential houses services. The way I understand the amendment to read is that, after Year 25, there would be the possibility for decreased services -- housing services to social service agencies and such.
I'm sorry. Could you say that again? I was distracted.
Sure. The way I understand the amendment to read is that in the consolidated plan for Year 15, there will be no decrease in any of the services.
In Year 25, yes. That same type of guarantee does not exist for Year and 20 on. And our concern would be for the future, when 21 the good Council people are no longer here maybe. 22 As you know, CDC funds exist -- 23
Sure. As you know, CDBG 152 6/9/99 COMMERCE/EC. DEV. - Bill 990160 funds assist low-income tenants in numerous ways. The funds enable TAG to provide housing counseling, organizing assistance to tenants. We conduct six tenants' rights workshops per week, we serve a thousand clients this way a year. We conduction eviction prevention classes. The funding allows TAG to provide hotline counseling to tenants 9 to 5 every day, and we serve over 10,000 clients this way. These funds allow TAG to provide walking counseling from 10 to 4 every day. We assisted over a thousand clients this year. Our organizing unit assists tenants across the City in forming tenant councils so that tenants may collectively deal with landlords and bargain for better conditions. This CDBG allows TAG to provide rental assistance, housing counseling, and supportive services to those with special needs, including HIV and AIDES clients. The funding allows TAG to provide transitional housing assistance. Participants in this program come from the City shelter system and receive rental assistance, counseling, and case management. These services will be in jeopardy if 153 6/9/99 COMMERCE/EC. DEV. - Bill 990160 CDBG funds are diverted in future years towards neighborhood infrastructure and revitalization projects. We do not dispute the fact that various City neighborhoods do need sidewalks, curbs, and street lighting. And moreover, such neighborhood projects do encourage community investment by the business sector and encourages homeowners to keep their properties in top conditions. Maintaining the City's infrastructure can only be characterized as a positive thing. But great hardships will arise if CDBG funds used for this purpose and funds are diverted from essential human services, which are needed now more than ever in this age of welfare reform. A void will certainly exist if Council allows CDBG funds to be diverted. TAG developed as a grass-roots, citywide coalition of tenant groups Philadelphia committed to improving rental housing conditions in Philadelphia. TAG remains committed to giving Philadelphia tenants more control over their housing condition and to equalize the political, economic, and legal relationships between landlords and tenants. 154 6/9/99 COMMERCE/EC. DEV. - Bill 990160 This committee should not allow CDBG funds to be diverted after Year 25, which adversely impacts those essential services provided to the poor, the homeless, and those with special needs by organizations such as TAG. Thank you.
Good afternoon. Just like Mr. Rowe, I share the same views. We thank you for the amendment but I come here today to --
My name is Evelyn Hidalgo. I'm the Executive Director of Intercultural Family Services. Just like Mr. Rowe, I share his views regarding after Year 25. So I'm here from a district of Councilwoman Blackwell. I think she stepped out. We're located at 4225 Chestnut Street. And on behalf of the board of directors and the many people we serve, and also some of my staff are here right now with me. I'm pleased to come before you and present our views on Bill No. 155 6/9/99 COMMERCE/EC. DEV. - Bill 990160 990160 relating to the proposed percent allocation of CDBG funding to neighborhood infrastructure. We have quietly provided services to thousands of people across the city. Many of our clients are people come to reside here after being uprooted from their homelands under circumstances similar to the tragedy in Kosovo. Other clients have lived in America, with roots extending back generations but who find themselves today trapped in the under class, with diminishing hopes for escape. They are all colors, speak many languages and dialects, worship in different ways, have a multitude of cultural traditions, and live across the city. As I understand it, this bill would authorize the use of 15 percent of Philadelphia's Community Development Block Grant dollars to fund the repair of City sidewalks, curbs, street lighting, and trees. While it is commendable that Council would like to fund a valuable effort like that of maintaining City sidewalks, lights, and streets in disrepair, we cannot support this version of the bill which diverts CDBG dollars 156 6/9/99 COMMERCE/EC. DEV. - Bill 990160 from services provided to some of Philadelphia's most vulnerable citizens after Year 25. Over the years, the City has exercised good judgment in using funds to provide direct services for Philadelphia's citizens in need. One of the most valuable of these services has been the Housing Counseling Program. For years, 9 this program has been of tremendous help to some 10 of our clients whose histories are firmly 11 intertwined with that of America but who, due to 12 economic and social reasons, needed help with 13 issues ranging from tenant rights to tenant 14 first-time homeowner mortgages. 15 The counseling program also has been particularly helped through one of our agencies constituencies for former refugees and immigrants from countries including Ethiopia, Sudan, Liberia, Vietnam, Cambodia, Laos, the Philippines, Mainland China, Pakistan, India, to name a few. A recent Philadelphia Daily News noted that Philadelphia has benefitted from the steady influx of immigrants, experiencing a net gain of 41,700 immigrants from 1990 to 1998, an amount our Honorable Mayor Ed Rendell declared to be an under 157 6/9/99 COMMERCE/EC. DEV. - Bill 990160 count. Intercultural was the first agency to identify and act upon the refugees' and immigrants' desperate need for housing counseling. Before 1984, when Intercultural, the Housing Association of Delaware Valley, and OHCD collaborated to provide the specialized services for this population, none existed. After the resettlement in Philadelphia, the refugees and immigrants faced language and cultural barriers that made them easy targets for unscrupulous landlord and Realtors. As a result, many often paid exorbitant rents to live in substandard housing. Still others were evicted without due process and didn't understand that there was help available to assist them to buy an affordable home. There have been improvements in the housing situations for our clients since we began serving their needs. However, our office recognizes that more, not less, remains to be done. We understand the delicate balance that the Council must achieve in order to equitably 158 6/9/99 COMMERCE/EC. DEV. - Bill 990160 distribute resources to all constituencies. Do we believe that infrastructure improvements are required to support the rebuilding and the revitalization efforts in the City? Definitely yes.
Do we believe that the City must regain the confidence of middle-class communities in order to halt their flight from the City? Of course, yes. However, we believe that it would be I ill-advised for Council to reduce its support for families in need. Particularly at this time, the increased stress on families resulting from welfare reform, the increased competition for jobs and demands on unlimited family resources. Therefore, we request that you secure other ways to fund these capital efforts after Year and vote no on Bill No. 990160 in its 18 present form. 19 Thank you for your time. ) 21
Hi. Good afternoon. My 24 name is Rebecca Barragan, from the People's 25 Emergency Center Community Development 159 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Corporation, and I'm here on behalf of Gloria Guard, who had to leave early.
People's Emergency Center was founded in 1972 and is Pennsylvania's oldest an largest agency serving homeless women and children. PEC's continuum of care, from emergency, food and shelter to case management, job training, and housing, has evolved in response to the real needs of homeless families as they move from crisis to stability. Having served nearly 6,000 families in the past quarter century, we at PEC know that without available and affordable housing or other comprehensive services, we simply cannot bring families to permanent self-sufficiency. Each part of the continuum of care is essential, and housing is no exception. Seven years ago, PEC formed the PEC Community Development Corporation as a practical response to the need for more available housing within our community, which is where many PEC graduates ultimately reside. With support from corporate partners, the PEC CDC has completed 160 6/9/99 COMMERCE/EC. DEV. - Bill 990160 units of transitional housing units, units of scattered-site Section 8 rental units, and 8 houses for home ownership -- 9 more under development at present. In total, the PEC CDC has converted 39 abandoned properties into vibrant restored housing or recreational and educational facilities for a total investment of $12 million in improvements to our West Philadelphia neighborhood. We are very proud of our accomplishments in the area of housing development behalf of homeless families, and we will do more as funding and opportunities allow. But we know it will not be enough. Right now, there are many mothers living with their children in transitional housing at PEC who are stable and ready the move out. Some of them even have jobs. But because of lack of affordable housing, they continue to reside at PEC. The result is that PEC's continuum has developed a bottle neck at the final step. -- Permanent housing. When mothers and children are stuck in transitional housing as they wait for an 161 6/9/99 COMMERCE/EC. DEV. - Bill 990160 apartment, the number of homeless families PEC can serve every week increasingly limited. At the same time, we expect the demand for PEC's emergency and transitional services to increase as families meet, or fail to meet, changing welfare regulations. It is, therefore, imperative that current families move through PEC's continuum with as few external impediments as possible. Now PEC's position on the community revitalization and infrastructure benefit fund obviously has somewhat changed as a result of the amendments that you presented earlier. However, I'd like to reserve the right for us to be able to study these amendments further and come back with a response. But overall, the community infrastructure and reinvestment benefit funds still proposes to earmark between 10 and 15 percent, or at least 7.1 million, of the CDBG Block Grant for street and sidewalk improvements and tree planting. This amount for infrastructural renewal is twice what is earmarked for special-needs housing. PEC does not oppose neighbor 162 6/9/99 COMMERCE/EC. DEV. - Bill 990160 beautification. PEC CDC is itself active in the creation of green spaces and other physical improvements to our community. However, we do oppose funding of such beautification projects with CDBG money without a guarantee that these funds will be made whole beyond Year 25. And at this point, these are the comments that we have. Thank you.
I understand. Thank you very much. Just a couple quick comments. I'm sure that this will not -- this may address one of three or four concerns that you raised. But I would certainly be more than open -- and I think it was more an error on my part. If you look at the amendments, if you have them handy, where it talks about OHCD shall not decrease any funding in the Year Consolidated Plan Fund, the return of 20 many of my colleagues, at that section, what I 21 would probably propose is a further amendment to 22 read something like "or any subsequent year plan." 23 I understand your concern. That was 24 certainly the intention. 25
That the same protection would generally be available. And I apologize for the that particular mistake. A couple things I at least wanted to ask, and it just kind of worked out this way that many of your testimonies are somewhat consistent. To at least establish for the record that a couple of you have mentioned the phrase "diversion of funds."
I at least want to make it clear for the record that, one, this is not a new use of CDBG funds. The City actually used to do this some number of years ago. But I think possibly more importantly than that is that these are, in fact -- and I want to make sure that we're at least communicating and understanding each other. These are all eligible activities under the same CDBG guidelines that allow you to access those dollars. They're mentioned in different places in the regulations, although all of them are in 570201, under the heading of "eligible 164 6/9/99 COMMERCE/EC. DEV. - Bill 990160 activities." I believe these are under small letter c, and your activities probably come under the heading of "Public Services," which is small letter e. These activities are covered by small letter e, "Public Facilities Improvements," which allows for acquisition, construction, reconstruction, rehabilitation or installation of public facilities and improvement. There's another section f on interim assistance which covers some of the same items. So I mean I at least -- you may still disagree about whether the City should or should not use the funds for those purposes, but I at least wanted to make sure that for our discussion and this record that no one is trying to do anything untoward, inappropriate, non-eligible, or flat-out wrong -- at least by way of the guidelines. So do we collectively understand that?
I think my major concern would be any adverse impact on essential human services that would result from the, quote, diversion of the funds.
Right. And I have 165 6/9/99 COMMERCE/EC. DEV. - Bill 990160 no interest whatsoever and am always reluctant to speak on behalf of my colleagues, but I think on something as fundamental as this, no one has any interest in having any impact on you. I think most of our fight is actually fought around how we get more resources for you. In that context, though, and I think I alluded to this earlier, there are other Philadelphians who are also low- and moderate-income who may or may not on occasion access some of the services that you provide, but they are nonetheless eligible people, and the dollars that came into Philadelphia or come into Philadelphia are based on their being residents and their economic status. The dilemma for me and some others is, how do we balance the spreading out of those resources between and among all qualified people. And so if I don't need TAG services but I happen to live in a neighborhood that is, you know, basically stable, CDBG-eligible, I don't have any vacant houses on my block, but everything around me is falling apart, the question does occur from time to time -- either calls in the office or out 166 6/9/99 COMMERCE/EC. DEV. - Bill 990160 at community meetings -- well, why can't we get any access to any of those dollars? Do our neighborhoods, in fact, have to fall apart first before someone will then come in and build us 6 new houses? 7 I'm in the kind of situation where I 8 don't really want to have to wait for that. 9 That's kind of not a good position to be in. And 10 so whether it's these dollars, and I'm sure most 11 of you were here earlier and you know that the 12 path that I've tried to take on this is City 13 dollars first. They were completely unavailable 14 when we first got here 'cause there was no money 15 for anything. There used to be programs that used 16 City dollars for these purposes; they were ended. 17 So that door closed. 18 We've pursued a couple other doors. 19 They've been closed. We're now kind of coming 20 back to operating capital dollars as a potential source -- which have restrictions. But the one source of funding that we all know and these activities are eligible, and there's no question about, are these dollars. So I mean, in this constant battle and 167 6/9/99 COMMERCE/EC. DEV. - Bill 990160 debate about how we serve all of the citizens of this city, this is further discussion about the allocation of limited resources. That's what this discussion is about. It's certainly not an effort to hurt anybody; it's an effort to help more people.
Sure. But I think we're particularly nervous in regard to what is happening with welfare reform. March of '99 was two years after March of '97 where a new work requirement happened, and there's a sense of complacency that I think has come over us because we haven't seen the influx of people who we thought would get thrown off of welfare. But we realize that's only due to the appeals processes that just have delayed that. For the first time last week, for the first time in the State of Pennsylvania, eight people were suspended from welfare, and this is the beginning. And I think the need on this side is going to grow.
And, you know, we're just 168 6/9/99 COMMERCE/EC. DEV. - Bill 990160 concerned about the diminishing CDBG itself year after year.
Again, we are also thankful that you made another insertion in your amendment, that you said other years after the Year 25. You added some more amendments, Mr. Nutter?
I said that I would certainly entertain that kind of discussion when we get to that part of the meeting and I suggested what the language would probably say. I mean, I don't have any problem with that. And I understand what you're saying. It had been written in another location and didn't end up in this version.
The intention certainly was that it would cover subsequent years as well.
Sure, thank you. Joan Curran, Kay Smith, and Michelle 169 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Louis.
You're Joan. Please identify yourself for the record and you can proceed.
Good morning, Councilman Nutter and members of City Council. I'm Joan Curran. I am a native of Philadelphia and I reside in the Mt. Airy section of the City. I'm the Deputy Executive Director of Action AIDS, which is a nonprofit AIDS service organization.
Sure. We provide social services and support to about 2500 lived HIV-infected individuals and families in the City of Philadelphia. I want to thank Councilman Nutter for the clarification of the amendments, but I still want to express my concerns. Action AIDS receives $138,750 in CDBG funding for housing and back-to-work programs. Over the last year, this funding has supported services to 323 HIV-infected individuals and families, 66 of which were homeless before 170 6/9/99 COMMERCE/EC. DEV. - Bill 990160 receiving the services. These services are provided at multiple sites throughout the city, including four at the county prisons. I am supportive of Bill 990160 and respect what the cosponsors of this bill are attempting to accomplish. Action AIDS is in process of building a new service site at Sixth and Lehigh to provide more accessible services in the community. We acquired seven lots through the Gift Property Program. Neighborhood revitalization will help the development of this site as well as improve the quality of life in the neighborhood in which I live. I have in my neighbor had my car broken into numerous times. I've had my car stolen. I was mugged in front of my house. So increased lighting certainly would be an advantage for me, and increased infrastructure also would be helpful. My concern is about the programs that are funded by CDBG funding, and I'm requesting that existing programs are held harmless and not affected in any way by the funds needed for the revitalization project. 171 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Action AIDS presently matches funds for our housing and back-to-work programs, and any cuts to these programs would seriously jeopardize our ability to continue to provide these valuable services. One of my concerns is that money allocated to repair lights and replace infrastructures, which would benefit our agency and community as well as my own community, will reduce the CDBG monies allocated for these programs. And I have heard you say that that's not your intent. It does not seem feasible to me that an organization could sustain millions of dollars in reductions without those costs trickling down in some way to affect the CDBG-funded programs in future years. Another grave concern is that Action AIDS could end up with a community site which we are building at the present time enhanced by neighborhood redevelopment efforts, but virtually hollow and ineffective without the valuable programs to assist folks to acquire and maintain housing and also to acquire the skills needed for job employment. I want to thank you for the opportunity 172 6/9/99 COMMERCE/EC. DEV. - Bill 990160 to testify.
Good afternoon. My name is Kay Smith, and I'm Executive Director of Manayunk Development Corporation. And I want to qualify a little bit because I think when people think of Manayunk, they think of a neighborhood that's sort of all the way there, and they have a hard time relating to the issues and that the fact that we have many, many of the same issues and have gone through a lot of the issues of change that all communities face just to get where we are. I want to make it clear that neighborhood commercial districts are really the windows to our community. And this is much more complex than that simple statement because it goes well beyond the physical. But it defines not only how visitors see our neighborhood but how we see ourselves. So when you look at housing in a neighborhood, you can't really address it by itself but you need to address the center core of 173 6/9/99 COMMERCE/EC. DEV. - Bill 990160 the neighborhood, and realize too that in a lot of the older commercial districts, where there's been deterioration, that that deterioration actually spirals out away from a business district that is deteriorating. Our neighborhoods are about the people who live in the city. And for little investment -- particularly in middle-income neighborhoods, and I underline that because in middle-income neighborhoods -- and I've been down that road -- there are no resources for economic development in the sense of programming, or easy tools that people can access. Manayunk, at this point, has a good rapport on a project-by-project basis. But the early years of trying to get ourselves together and trying to organize a direction, it's clear that the City needs to find a way of better programming that. Okay, in our cities we're still trying to recreate what we were, and I think that's a huge problem. We keep trying to create an identity that we had at another time. And at a conference last fall put on the Foundation for Architecture and OHCD, a professor from Harvard 174 6/9/99 COMMERCE/EC. DEV. - Bill 990160 spoke of redefining our business opportunities and working to create a market-driven economy. ), an architect known for his role in the development of the philosophy of new urbanism held up a mirror from the suburban experience to reflect back on the City its shortcomings, and these shortcomings are more about a lack of attention to detail and a bureaucratic process that is so complex that potential business people don't even try. And there are many opportunities for market-driven business within the City of Philadelphia. And it's not defined necessarily by the income level of the neighborhoods. And that's part of taking a look at where we're at and rethinking what kind of business opportunities there can be. In the retail area, which is probably the area I'm most familiar with, we have a new retail climate, and I'm going to describe this just because I think there's an expectation in the City of something that's not completely realistic. Our new retail climate is sophisticated and competitive. Malls have redefined our retail 175 6/9/99 COMMERCE/EC. DEV. - Bill 990160 experience for neighborhoods, but not just by putting a roof over the heads, but by controlling key issues that guarantee people will come. Single ownership guarantees retail mix, attention to price point, critical mass, and will often give away space that will complete the package to attract customers usually from our urban areas. Shopping malls and centers are also maintained, secure, promoted in a competitive way. Urban neighborhoods, however, are still waiting. We're waiting to be found. We're waiting to be found by someone or a group of people and transformed. We're asking a business that's, and I will put that in parentheses, similar to malls or shopping districts, because I feel that these districts need to treat themselves as a business to succeed. Shopping centers, on the other hand, do everything in one location.
, which usually don't happen in a neighborhood district. The fact is that in Manayunk, we created a entity with paid staff to implement and make sure we made the best use of 176 6/9/99 COMMERCE/EC. DEV. - Bill 990160 our opportunities and resources. We created a business-friendly climate and interacted with the business, helping them to understand how they could best benefit from our efforts. But at this point, I would also point out that all facets of our community participate, and our projects go far afield from just the commercial district. We do a jobs program, we are working with Pretzel Park, we are working with the canal, and we are doing a number of promotional projects, which everyone is probably aware about. But the ability to do any of this all comes down to funding -- funding and planning and funding. And that's funding to stay alive and funding to do projects. Currently. There is no 17 cohesive funding program available for middle-income neighborhoods, except on a piecemeal basis. All efforts, no matter what the income level of the community, need focused attention and staff. But while there are dollars available for many of the low-income neighborhoods, there are not any dollars available for middle-income neighborhoods. And I think people really need to think about that. There's some kind of sense of 177 6/9/99 COMMERCE/EC. DEV. - Bill 990160 osmosis. So to do business in the City of Philadelphia in a commercial district, in a neighborhood, one has to gamble on the whim and limited time of volunteers, become a full-time volunteer, and beg for resources that may or may not show up in time to solve whatever issue is at hand. Whereas in a suburban experience, that is all done for you. But -- and I want to take this back to the point I made in the beginning, is that our commercial directs not only present an economic opportunity for the City, but they also are how our neighborhoods define themselves. And so there's many reasons. And I would tell you that in Manayunk, the housing level changed as the commercial district changed. It went down as it went down in the center core, and it's improved as the district has improved.
I also have copies of testimony and annual reports and stuff here for people that are interested. 178 6/9/99 COMMERCE/EC. DEV. - Bill 990160
Okay, thank you. We'll have the sergeant-at-arms pick that up. Michelle Lewis?
My name of Michelle Lewis, of Northwest Counseling Service. And first I'd like to thank you for having me. It's certainly an honor and a privilege to be before you today. And the first thing I want to say is that I am eternally grateful for these amendments that have been presented. I haven't actually seen them, but if they propose to do some of the things that you're saying they do, which is to use other funds other than the CDBG funds that take away from some of the things I'm going to talk about today, then that will certainly be a plus to the City of Philadelphia. Philadelphia right now has been leading the charge around the country in terms of creating home ownership opportunities. I mean, we are actually in a period right now that will ultimately go down in history as being the period of the greatest levels of home ownership activity 179 6/9/99 COMMERCE/EC. DEV. - Bill 990160 ever, ever in the history of this nation. And I think we've all been a part of that, and this city Council has certainly been a huge part of that success that we've had. Now, this has been done here in the City of Philadelphia largely through efforts out of this CDBG pocket of funds for the last -- well, since 1993, we've had a City Settlement Grant Assistance Program which has really, really been sort of the backbone in providing these home ownership opportunities for people around the City, and it really has worked. Northwest Counseling Service recently did a study that ended March of this year that looked at the City's Inspection Program, a component of the City's Settlement Grant Program, and it showed that through this program, mortgage delinquency rates, directly due to early defaults as a result of property repairs, have been reduced by nearly one-half. And this is extraordinary. I mean, it shows that that inspection program really, really works. Northwest Counseling Service and other agencies like it that provide these comprehensive 180 6/9/99 COMMERCE/EC. DEV. - Bill 990160 counseling services have worked really, really hard with the people that come in to us. Our client is the person -- which might be somewhat different than the CDCs who have the bricks and mortar to worry about, and we're so glad they do 'cause we don't do any of that. But we look at the people, and through these efforts, Northwest Counseling Service, as an example, has been able to reduce the mortgage delinquency rates in the City of Philadelphia. We had reached a record level of over 33 percent, 33 percent in some neighborhoods, which meant that more than one-third of the people in some of these neighborhoods were losing their homes, or facing losing their homes at one point. We have been able to reduce those levels, and we had a 95 percent retention rate in keeping people in their homes out of foreclosure and current in their mortgage obligation. And that third one is certainly the hardest to do. We have attained 82 percent levels of creating home ownership opportunities. That means getting people, you know, to that home of their dreams. And also 79 percent in being able to 181 6/9/99 COMMERCE/EC. DEV. - Bill 990160 place people in rental housing. With the bill that was originally introduced, I was really, really concerned because it really looked as if the pocket of money that this would come out of would actually eliminate in its entirety these counseling programs, and that would totally devastate the neighborhoods in the City of Philadelphia, particularly on the heels of welfare reform that we're approaching as John Rowe said earlier. And this is no joke. We have actually, in studies that we have done in recent months, we have actually been able to identify entire blocks that, due to welfare reform and a combination of mortgage foreclosure, that will be completely empty as a result of these things. And we work hard to kind of prevent those things, and that's why we have to continue to do this.
The curbs and sidewalks, there's no 20 question that will only enhance Philadelphia's position around the country in terms of providing all of the things that we've done, and I think that's, you know, an absolute marvelous thing -- if it can come from somewhere else because I think it can't happen really on the backs of the people, 182 6/9/99 COMMERCE/EC. DEV. - Bill 990160 it can't. I mean, because we want to -- again, we're going down in history with this stuff. And we want the history books to say yes, Philadelphia led the charge, we made these wonderful things happen. We don't want the history books to say that we stole the dream of home ownership or we stole even the opportunity at traditional housing and offered them a free sidewalk. Because I think in that instance, free is just too expensive. Thank you so much.
I appreciate that, and we certainly do want to have high home ownership here in Philadelphia. We'd actually like some more people to live in Philadelphia.
This is true. But as was testified earlier and you're probably aware, unfortunately, in the past few years, notwithstanding tremendous efforts either on the economic development side, the wonderful work that you do you and many other organizations do, no 24 other county in the United States of America has still lost as much population as Philadelphia. 183 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Again, in this balancing act that we're trying to deal with, there are people clearly in need, and we want to support them. There are other people in different situations who are still eligible but who, in many instances, have options. And instead of waiting for the neighborhood to be taken care of, they just move.
Right. I just want to say, with all due respect, Northwest Counseling Service is a HUD-certified agency. And while we get the bulk of funding from CDBG funds, being a HUD- certified agency literally means that anyone that walks into our office, regardless of net worth, will be serviced. And so that means that a good portion of the people that come into us -- and this is citywide and beyond -- are beyond those income limits for the CDBG funds. So we have a special interest in all communities in the City of Philadelphia and all income level.
So I, you know, fully support that idea for that. But I'm just saying -- and I think that 184 6/9/99 COMMERCE/EC. DEV. - Bill 990160 curbs and sidewalks are -- I don't think there's anyone in this room that feels any more strongly than I do about that. I think we have to have that in support of these other things. It's just that can't do it at the expense of these things.
It has now become my somewhat unfortunate task -- as much as I enjoy having long discussions about this, there are actually two other committees that have to meet at some point in time when we are done. And so at this point, I would have to ask for anyone else that comes to the table, if we could keep comments somewhere in the neighborhood of about three minutes or so, that would be helpful as we try to move to both Finance and then a subsequent hearing by the Law and Government Committee. Judith Robinson, Camille Tyson, and Dennis Murphy. (Above-named witnesses come forward.) 185 6/9/99 COMMERCE/EC. DEV. - Bill 990160
Go ahead. Please identify yourself for the record and you can proceed.
I'm Judith Robinson. I am a resident of North Philadelphia, and I am also a real estate broker licensed in the State of Pennsylvania. I would just like to thank you very much for the debate. I really do appreciate it. And I think that it's something that is definitely we will needed. Although the Community Development Block Grant does fund a lot of very important and very worthy projects, I think if we analyze the budget, or any budget for that matter, and take a closer look, we will see waste and mismanagement. To this extent, for many years, I have been concerned with how the CDBG funds are spent in the area of housing. We are not really making the kind of impact after nearly years of these funds being 22 spent in Philadelphia. We're not truly making the 23 kind of impact in the area of revitalization that 24 I really think we could have for the amount of 25 money that we're spending. For instance, these 186 6/9/99 COMMERCE/EC. DEV. - Bill 990160 newer developed homes are costing well over $100,000 per house. And if we are to really truly try to revitalize an area, we definitely need to bring down the cost of one unit of house. If these funds are truly to eliminate blight, then we need to use economic skills -- economic of sales, I should say, to bring a greater impact in the communities. The amendments did address a lot of questions that I had. But the area that you mentioned about having a comprehensive neighborhood revitalization program as opposed to the piecemeal projects, I would agree with you 100 percent. I live in area of North Philadelphia that Mr. Kromer mentioned something about the lower North Philadelphia revitalization program. And even as I drive through the area, I see that although millions have been spent -- and we cannot deny that millions of dollars have been spent -- I would question how they are truly impacting the community. So there are some people that have concerns about taking some of these funds and dedicating them to other areas, Mr. Nutter. I 187 6/9/99 COMMERCE/EC. DEV. - Bill 990160 don't have that certain because I know that those funds could be directed in an area that we truly could have economic development. As you go through North Philadelphia, you will see that after millions of dollars have been spent, we still don't have that impact. Even in the area of Cecil B. Moore Avenue -- if go from, say, 33rd to Broad, you will see after all these years, after all dollars have been spent, our communities still looks in a disarray. So that is really my concern. You answered the question in your amendment about who would administer the program. I am concerned about administration costs of these programs because, you know, they put people to work so to speak and they kind of move people from one area to the other, but I don't know if these people necessarily have the concern or the dedication to truly revitalize a neighborhood, because in fact, if they did their job, they would not have a job at a certain point. So that is an area that really concerns me. And if it's any way -- I hear -- although I hear about the sidewalks and trees 188 6/9/99 COMMERCE/EC. DEV. , I also hear that you're saying that there other projects that could qualify under these funds. So that's the area that I'm really concerned. Other areas that will have a true impact on how a neighborhood is perceived and overall thought of. So if you do have lights and trees and areas where people feel comfortable, then I'm sure that will help overall. But I guess my main concern is that we truly make some efforts to eliminate blight. So to that extent, I guess that's why I'm here to testify. And I wondered like what criterions (sic) would be used to determine eligible projects and things like that but that's something I'm sure that we will discuss in the future.
Also, I wonder if way that we can coordinate projects -- say, RDA, PHA, Office of Community Housing Development -- to make sure if one project is done, what other projects around that project are going to be coordinated so that we can economics to scale. I know time is authority short, so I'll end there. And thank you very much for the discussion. 189 6/9/99 COMMERCE/EC. DEV. - Bill 990160
Thank you, thank you very much. Councilman, do you want to resist the urge or --
Well, no, I'd just like to thank Miss Robinson for coming today, and I would like to have further discussion at another time 'cause I know that you are a member of the community that's very interested in the Diamond Street corridor. And at some point, I'd like to sit down and talk to you about development possibilities at length. Thank you.
Please pull the microphone close to you and identify yourself for the record.
Good afternoon, good afternoon, Councilman Nutter and Councilmembers. My name is Camille Marie Tyson. And I have along with me Miss Peggy Massey, who will speak right after I speak. 190 6/9/99 COMMERCE/EC. DEV. - Bill 990160 My name is Camille Tyson, and I'm a housing counselor at the Philadelphia Senior Center, located 509 South Broad Street, and our branch center at 1531 West Tioga Street. The Philadelphia Senior Center Housing Counseling Program is a counseling and referral program funded by the Philadelphia Office of Housing and Community Development. The services are offered on a citywide basis and are free. The eligibility requirements are that our program participants be 60 years of age and older or low-income. The majority of the consumers using this program are very, very low-income and many live alone without relatives, neighborhoods, or friends to provide any assistance. Services include relocation assistance, resolutions of landlord and tenant issues, home repair referrals, mortgage counseling, consumer education regarding housing. And home visits are often made to the home-bound age 60 or older who are often unable to come to our office because of physical and/or mental disabilities. An example of an older person who receives help through this program is a 191 6/9/99 COMMERCE/EC. DEV. - Bill 990160 69-year-old man who lived alone, with no informal supports and who had a very low income. He had been living at the Adelphia House for years and 5 he received a 30-day eviction notice because he 6 was unable to pay a substantial increase in his rent. Through the assistance of our housing counseling program, he was relocated into subsidized housing where he will pay only 30 percent of his income for rent. Our program prevents older people becoming homeless or losing their home due to financial problems. Housing counselors are also instrumental in maintaining a stable housing environment in Philadelphia and preventing abandoned houses. I am urging that City Council continue funding for this and other vital OHCD programs, as there are never enough funds for these programs. Thank you. And right now, I'd like to introduce Miss Peggy Massey (ph.).
Good afternoon to Councilmen. My name is Peggy Massey. I'm 66 years old and I have a very low income. 192 6/9/99 COMMERCE/EC. DEV. - Bill 990160 The Philadelphia Senior Center Housing Council assisted me with foundation funds to help pay delinquent gas and electric bills. She helped me obtain refinancing for my mortgage instead of filing for bankruptcy 'cause I was going to file 7 for bankruptcy. She also helped me find more affordable fire insurance for my home. The Housing Council referred me for needed home repairs, broken windows, and replacements of pipes which had frozen during the winter. Without all of this help, I would not be able to remain in my home. And I thank them very much for helping me.
Thank you very much. I had called earlier Dennis Murphy. I assume Mr. Murphy's not here. (Dennis Murphy not present.)
John Dodds? I know he's here. 193 6/9/99 COMMERCE/EC. DEV. - Bill 990160 (John Dodds comes forward.)
My name is John Dodds. I'm Director of he Philadelphia Unemployment Project. I'm glad to be here. I'd like to say I have the greatest respect for Chairman Nutter, and I'm sure that this bill and the discussions surrounding it are designed to help better the citizens of the City of Philadelphia. As I understand the bill, it would require that percent of CDBG funds be moved 13 into neighborhood revitalization -- or 10 to 15 14 percent with the amendment. 15
Unfortunately, to do that, as I've been told that HUD's regulations require that those funds come out of the public service category for activities for low- and moderate-income families. This public service category is limited to 15 percent of all CDBG funds.
But based on your first couple sentences, I certainly have a good idea of where you're going. Based on my read of the regulations, these activities are not in the -- they are in the public rather -- than try to remember, I'll --
Public service category. I think you read that earlier, if I'm not mistaken.
Yes. They are in "Public Facilities and Improvements."
I wasn't going to imply that they were not allowable; I think they're allowable.
Yes, they are. They don't have the 15 percent limitation in that particular category. You're right on the other category.
Now, if that's not true, 195 6/9/99 COMMERCE/EC. DEV. - Bill 990160 then -- if it is true, though, it would mean that a tremendous portion of the public service category -- and if that's not, you know, I guess that's a question for the attorneys -- would have been to be used for so-called --
It's always a question for the attorneys. Go ahead, I'm sorry.
And it slows down a lot of things. But anyhow, right now, the public service category is funding a lot of service and very important counseling services for Philadelphia families, and assists first-time home buyers with settlement costs, pre-purchase counseling, and so forth. Our agency does a tremendous amount of work trying to prevent foreclosures for families, help the unemployed with unemployment compensation, uninsured receive health benefits, help people get jobs, and so on. Philadelphia families maintaining their homes, we think, is a very important use of CDBG funds. I'm sure you agree with that. And I guess the real issue -- and I don't want to -- I'll cut this short. The real issue is, are we going to be 196 6/9/99 COMMERCE/EC. DEV. - Bill 990160 forced to cut into these services to expand the neighborhood revitalization services? That is something that we think is not a good idea. We think that there is a need for the neighborhood revitalization, but we hope it would not come at the expense of the counseling services that are helping people prevent foreclosures, helping people get jobs, and so forth. We think that helping people get through those hard times is a very important use of CDBG funds. Families needs help when the breadwinner's out of work and facing foreclosure. This kind of counseling and advocacy helps maintain and neighborhoods should not be cut back. Hopefully -- and I hear what you're saying, that we're going to try to work that out. And I think that is the essential thing. If we can find a way to do all that, I think that makes this a win-win situation. And I guess we're just here to make sure that we don't do one at the expense of other. They're all important, but helping people keep a roof over their head, we think, is about as fundamental as we can get in the City. And, hopefully, those kinds of services 197 6/9/99 COMMERCE/EC. DEV. - Bill 990160 go on. So I'll just it cut short there.
I appreciate it. Thank you for coming in. I saw the one -- I think there was a sheet that had apparently been circulated at some point in time that talked about the financial issue. I assume that there must have been another facts sheet that went around about the public services issue.
I decided to talk to some people at the housing agency. And I guess that's one of the things to work out. And I guess the discussion that would happen would help clarify that and would make this whole procedure go along more smoothly.
Right, no 19 question. Thank you very much. I appreciate it. Violet Marrero, who I believe left testimony. (Violet Marrero not present.)
Good afternoon. I'm going 198 6/9/99 COMMERCE/EC. DEV. - Bill 990160 to try to make this brief as possible. My name is Francis Vargas, and I'm here today representing Asociacion de Puerto Riquenos (sp.) En Marcha, Incorporated, otherwise known as APM. I'm here to provide testimony to Bill No. 7 990160. APM is a Latino social service agency with over 200 employees. It's been providing services to the Latino community and other under-serviced communities in Philadelphia for nearly 28 years. APM has been a housing and economic developer for eight years now. APM has developed and currently manages 170 affordable rental units and is currently under construction with 42 more units. APM is also responsible for developing and building a 44,000-square-foot supermarket at Fifth and Berk Street. This is the community's first new supermarket in 29 years. The supermarket now employs nearly 170 people, the majority of whom reside in our community and half of whom are former welfare recipients. The supermarket would not have been built without CDBG funding. 199 6/9/99 COMMERCE/EC. DEV. - Bill 990160 As you can see, APM's done quite a bit of work in North Philadelphia. Throughout the projects briefly described above, APM's been responsible for bringing in approximately $25 million of investment into North Philadelphia. APM has generated this investment by leveraging the up to $1.5 million subsidy cap per project of Community Development Block Grant funds against equity investors and other funding sources. To give you a current example of using the project now under construction, APM is using up to $1.5 million of CDBG funding to fund a 42-unit rental development known as Tiano (ph.) Gardens. This $1.5 million of CDBG funds is leveraging an additional $5 million for the $6.5 million project. APM's experience has been that using $1 of CDBG funding has allowed us, on average, to leverage an additional $3. In our opinion, this is clearly a more effective use of CDBG funding. I'm here today to testify that APM's work is not done. We need to continue to develop our neighborhood. In order to do so, we need to be able to use CDBG dollars to leverage other 200 6/9/99 COMMERCE/EC. DEV. - Bill 990160 investors. APM is also currently using $40,000 a year of CDBG dollars to fund a first-rate Housing Counseling Program that assists first-time home buyers in purchasing a home. I support the basic notion of Bill No. 7 990160, however, APM cannot support a bill that reduces the amount of CDBG funding available for APM and other community development corporations to continue the work that they have been doing. In this bill, one CDBG dollar would provide $1 worth of work to improve a neighborhood. In North Philadelphia and throughout the City, one CDBG dollar has been used to generate several more dollars to improve and develop our neighborhoods. APM as well as other CDCs, I am sure, will be more than willing to discuss alternate ways to fund Bill No. 990160. This testimony was prepared based on the original bill. I see that there's some amendments, but I still have some concerns on some of the amendments with regards to where some of the additional fundings. Where APM stands is, we all agree that, yes, infrastructure improvements are very important. Where will the funding come 201 6/9/99 COMMERCE/EC. DEV. - Bill 990160 from? And we don't want to see it jeopardize any of the work that we have done in the past or the work that we need to continue doing.
Anthony Lewis? I actually know Anthony Lewis, so I know he cannot be here. Marcia Gonzales? (Marcia Gonzales not present.)
Liz Ford? While Miss Ford is coming up, let me just see who we have left, at least according to the list. Liz Hersch, Joanne Jackson, Rameses Lee. (Liz Ford comes forward.)
Miss Ford, please identify yourself for the record and proceed. 202 6/9/99 COMMERCE/EC. DEV. - Bill 990160
Good afternoon and thank you for allowing me to take this time to speak with you to testify. I know this is last minute, and I do not have anything to give to you, but I will do something to follow up on this statement that I'd like to make. ICAN, or the Independent Community Network, has been in existence since '83, and we've been doing some things that would help our community to do economic development and to help it to vitalize itself. Unfortunately, ICAN has not had the opportunity of obtaining monies and whatnot to do any of the social things that they're trying to do, but ICAN has continued to move on and to provide services for its community, including housing, housing counseling, and other issues that our community asks us to perform. We have continued to do that without the benefits of the additional monies that's needed. ICAN was awarded CDBG dollars in Year 18, and we intend to use that through the Year 2000 because we have already supplied or sent to PHFA our tax credit proposal to use those dollars. 203 6/9/99 COMMERCE/EC. DEV. - Bill 990160 We are -- even though we are small, we do impact and we do do things that benefit our communities, and this is one of the things that we're looking at. The other part of that is that we're looking at commercial pieces that will impact on our youth, which is building that we are trying to build for our youth, with youth participation. It's called WKRP and there's a panel that goes along with it. And I know we're not in Cincinnati; we're here in Philadelphia. But that project is coming along. So we're looking at commercial advantages that's coming up for the Independent Community Assistance Network on Vine Street, and we're looking at CDBG dollars and any other funding that we can get a hold of to assist us in doing what we are trying to do. We do know, and I am very pleased when I first saw the announcement the other day, and I got it in the mail, because I had not seen anything of this type of ordinance come out in such a long time, that I was pleased to see it come out. We do need to have the trees, those 204 6/9/99 COMMERCE/EC. DEV. - Bill 990160 that are dead removed, we need to have streets and whatnot recemented, and all kinds of other things. So I am for this particular proposal or ordinance that is coming out, and I commend the group that is putting it out good. It's a start, and I understand there's going to be other talks and comments about it, but I believe it is a good start because there was nothing there before that I knew of that we could get a hold of to help people to get those dead trees up or to recement their pavement. So I believe this is a good start. My one major concern, though, is that as I go through the various City agencies, trying to get help, I'm finding out that I'm twisting and turning and going upside down and around. There is nothing that I can see that collaborates the how to. How do we get monies from PIDC, how do we get monies from the Commerce Department? Every time I go to each one of the departments, there's something different. It's not nothing that is germane that we can put a hold on and that we can move efficiently through. So I am asking if something of a -- and 205 6/9/99 COMMERCE/EC. DEV. - Bill 990160 it is a change -- that we can provide anyone that looks at the efforts of trying to obtain money, that it won't be a card shuffle, that it be something that's stable and straightforward and not different in that department, that's different in something else. It creates to me a vast waste of a whole lot of people's time because the end result is that the person like myself, with a very small agency or whatever, do not have the opportunity to show how effective they can be or impacting their neighborhood. Even though the people in the neighborhood come in and they will say, Well, you doing a good job, we want to go and have the impact where the money's coming in so we can show the people that we doing a good job.
Presently, ICAN is involved in housing counseling with PHA, and I think we are doing a every good job with that. We're almost halfway through our contract. We have tried extensively to become a housing counseling agency with the City and it has not come forth, and I would like to see some discussions about the how to of becoming a housing counseling agency under the City. 206 6/9/99 COMMERCE/EC. DEV. - Bill 990160 I thank you once again. And, please, if you have any questions, I would answer them. Thank you.
Thank you very much, Miss Ford. I appreciate it. Liz Hersch, Joanne Jackson. And it's my understanding that Anthony Lewis is not here but that there is a representative from the Housing Association of the Delaware Valley but was out of the room when I called the organization. Why don't we get those three individuals up. I'm sorry, Mr. Ali? Akilah Ali? Sir, didn't you raise your hand earlier? Didn't I call your name? Well, why don't you come up as well. So Joanne Jackson, and Liz Hersch is not here. And Mr. Ali. So these will be our last three panelists. (Above-named witnesses come forward.)
My name's Joanne Jackson, and I'm Executive Director of Advocate Community Development Corporation. I do have a prepared statement, and I will be very brief. 207 6/9/99 COMMERCE/EC. DEV. - Bill 990160 As everyone who has testified before me, I believe that my organization believes in the importance of infrastructure improvements. However, like many who have testified before me, we feel that housing is more important. Certainly it's more important in my North Philadelphia neighborhood that has gotten money from OHCD for many years in the past and hopefully in the future to implement our Diamond Street Corridor plan. Thank you very much.
Good afternoon. My name is Kahlil (ph.), and I'm the Program Director of the Housing Association of Delaware Valley's Counseling Program. I'm in for Tony Louis, who's still in Chester. I'd like to say good afternoon to Councilman Nutter and to the other honorable members of the committee. The Housing Association has been around for about 90 years, and we've implemented a number of innovative cutting-edge kinds of programs to improve a continuum of the quality of life for low- and moderate-income housing residents in Philadelphia. A lot of those issues, such as Southwark Development, which will be the first in 208 6/9/99 COMMERCE/EC. DEV. - Bill 990160 the nation to become an owned and operated public housing development by the residents. A lot of those issues have been done particularly with funding from Community Development Block Grant funds and a host of other federal subsidies. These subsidies are important to our mission so that we can continue to assist low- and moderate-individuals become homeowners, constantly upgrade and develop the transition. We listen to what they want to do with their lives. And while as an individual may come through our office on the brink of homelessness or mortgage foreclosure or facing eviction, we then look at them, help them come up with a plan consistent with improving their situation so that renter can become a homeowner at some point, so that homeowner can become an entrepreneur with a community-based, owned and operated business and hire and employ neighborhood residents. And these kinds of housing programs are necessary and cannot be done without the Community Development Block Grant monies. I'd like to applaud the efforts of Councilman Nutter in this bill. I think it was a 209 6/9/99 COMMERCE/EC. DEV. - Bill 990160 very valiant effort and the idea was very honorable in trying to address the needs of infrastructure, sidewalks, and retail revitalization of commercial strips. However, I would not like to see it done at the expense of the CDBG monies in the ways currently mentioned here. Further, in the amendment, which I really haven't had a chance to look at, number 5, it mentions that monies will come from the City to go to the CRIB in a sort of a linkage fund. Well, as you mentioned earlier, folks are, in fact, leaving, middle-income people are leaving the city in record levels. Given other wonderful records that experienced, we've experienced a record level of mortgages, we've experienced a record level of renters making the transition to home ownership. However, my concern is, where would that money come from and would that money, in fact, come from other taxpayers who are able to pay? Would other taxes be imposed on them so that they then leave, as you mentioned? And of particular concern to that is the potential of Philadelphia losing Congressional funds and 210 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Congressional representation as a result of the census. So I say all this to indicate that if there are other ways to viably assist with infrastructure development, that we do it in a manner without balancing it on the backs of the CDBG recipients. Thank you.
Good afternoon. My name is Rameses Lee, VII. Brother Nutter, sister Blackwell, I do know you all personally. Today all that I've heard was, we have the money but we can't spend it because over here, we have this law over here that says the money can't go for this because of this and this and this and this. The reality of this day is that we don't have the money. The money is not coming forth, so therefore, we cannot go forth in what we must do with this city, and that is to beautify the city. So how do we get out of this mess and how do we bring some money in here? Well, number 211 6/9/99 COMMERCE/EC. DEV. - Bill 990160 one, we got to get rid of the wage tax. Get rid of the wage tax and you will bring 500,000 people into this city within in the next year. You will bring in over 50,000 more jobs, businesses in this city. You don't have to believe me, just try it. With this money of getting rid of the wage taxes, we may have to go up on the property taxes, maybe $50 or $100. But I pay more money in wage taxes than I do on my property taxes. And I'd rather put money in property taxes and get rid of the wage taxes so I can have extra money to spend so that I can help do some of the things that need to be done in this city. There's another way that we can get money, and it would be tax with representation. And that is for all our sports and our entertainment, if we just tax it a dime, a nickel put onto this price, it could raise this money that is needed in order to beautify our city. And I believe that our only hope in this city is to get rid of wage taxes, put the taxes where it is needed so that we can bring the money into this city and we can rebeautify our city. 212 6/9/99 COMMERCE/EC. DEV. - Bill 990160 I live on a street that I have, from my house to the curb, there are three different sections of pavement, four-by-fours. I only need two, I can get rid of one and put a flower bed in a part of it, and the rest of it, the other two that goes out to the street can be the pavement. That would be saving money in building new streets, new pavement. That will save you by cutting down the size of the street of the pavements. This is one way that we can raise the money. But we have to get rid of the wage taxes so that we can bring more people in here. We need to get a lottery, a Philadelphia lottery only for Philadelphia folks. We need a casino in this city, we need a boat, a casino boat on the riverfront. All of this will bring in money and cut down the wage taxes and will bring more money into the city so that we can beautify our city with new lights, new sidewalks, new trees, help building these homes. We need to do this. If the City don't have the money, we got to go out there and get it. The only way to go out there and to get it is to create. And the 213 6/9/99 COMMERCE/EC. DEV. - Bill 990160 people will spend their money, people want to spend their money if they can spend it for something worthwhile. Lotteries, they go out there, they spend $5 or $6 and they come with 2 or 300 every now and then, they'd be happy, the people would be happy 'cause they'd see their money is going somewhere. You could fix up the neighborhoods and the people would be happy. On my street alone, it needs just a little work done, just a little work done. A little money is needed. Most of the people keep their homes up. And that's all I'm saying is we just get out of the this deadness that we're in. We're a tree that's growing but the tree is not growing because there's no green water coming through it. Give us some green water and the branches come out and they start to bloom and people start to get happy, people start to feel good start. People start to say, Well, Philadelphia has come from a deadness and has become something great. It is known in the world today that Philadelphia's the best map city in the world, but it's one of the worst places to live because it's 214 6/9/99 COMMERCE/EC. DEV. - Bill 990160 too hard to live.
And why is it too hard to live? We have city wage taxes, and that cuts us out. If we can get rid of the City wage taxes, we can make a new move.
A question was raised about the percent administrative cap in the 14 City Charter. And I believe the correct answer is 15 that --
I'm sorry. I believe the correct answer is that OHCD and each of the individual agencies are well within that cap, although the agencies in total would not be within the cap. The determination is made based on the agency, and OHCD is well within that 15 percent cap. Secondly, there was some brief 215 6/9/99 COMMERCE/EC. DEV. - Bill 990160 discussion about --
I'm sorry, Mr. Kromer, you have to take me back through that. The total administrative costs, as outlined in your budget, is 18.1 percent, I believe. It's $14,033,000.
So take me back through how you're within the 15 percent.
That total that you identified is a total of several agencies. Each of those agencies is within the 15 percent cap. In addition -- and I don't know whether this --
You're interpreting this to mean that there is a 15 percent cap on each agency? 216 6/9/99 COMMERCE/EC. DEV. - Bill 990160
On OHCD, yes, and on each individual agency. In addition, and I have consulted with --
How are you reading that? I mean. . . I mean, the only agency that's mentioned in the Code, as it relates to this particular section, in Title 2100, and I'm going to have to take it in terms of legislative intent, and I don't know what was going back in 1982. But more than likely, I guess, all of these agencies were not involved, but OHCD is the lead agency.
The Code reads: "It shall be the policy of the City that no more than 15 percent of any year's Community Development Block Grant allocation may be spent on administrative costs of OHCD."
Now, are you taking a reading that says it's 15 percent for OHCD and it can be 15 percent for PIDC, PHDC, RDA, the Law Department, the Planning Commission, and anyone else? Is that what you're saying? 217 6/9/99 COMMERCE/EC. DEV. - Bill 990160
My understanding is that provision relates to OHCD, and OHCD is within the cap.
Well, I don't know that those agencies are identified in that section of the Code. Again, I'd be glad to consult with the Law Department, but that is my interpretation of the Code, that I think we've used. . . Secondly, the issue very briefly --
Wait, I'm not finished. Then your interpretation then is that there is no cap for any of the other agencies and that there is only a cap for OHCD?
I can't speak for them at this time, but I wanted to address that issue that was raised, I believe, specifically with respect to OHCD and to try to clarify that.
So, again, your position is that as long as OHCD stays within the 15 percent cap, whatever else happens with all the other entities -- PHDC, RDA, the Commerce Department, PIDC, the Finance Department, the Law 218 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Department, and City Planning -- their administrative costs as paid by CDBG budget have no limit.
Except for the HUD cap, which is percent. So that's a real limitation. 7
Well, does the HUD 8 cap only apply to OHCD or does it apply to the 9 entire administrative budget? 10
It applies to the entire 11 administrative portion of the program. 12
Okay. So your 13 position here today is, on the City's side, as 14 long as OHCD itself -- and no other agencies 15 combined in -- stays within the 15 percent cap, 16 that's fine. And as long as collectively, all of 17 you stay within the 20 percent cap for HUD 18 purposes, that's okay too. 19
But the 15 percent cap only applies only to OHCD and none of the other half a dozen agencies that receive CDBG funds for their administrative costs.
That's my understanding of that section of the Code. 219 6/9/99 COMMERCE/EC. DEV. - Bill 990160 Secondly, there was some brief discussion of the issue of the HUD category to which some of these activities will be subject, that were mentioned in the testimony -- the counseling and the employment and training as well as the site improvements, and the category of Public Facilities was mentioned. The category of Public Facilities is -- only relates to publicly-owned properties, such as recreation centers and other publicly-owned facilities. And so funding for curb, sidewalks, and trees would not fall into the Public Facilities category but would fall under the Public Services category, which is subject to a 15 percent cap, which is the category that funds housing counseling services as well as job- readiness programs, such as Youth Build, housing counseling, and employment and training services. So there would be a potential --
What do you have in the Public Services category that has anything to do with infrastructure?
My understanding is that any infrastructure, any of the curbs and sidewalks 220 6/9/99 COMMERCE/EC. DEV. - Bill 990160 and trees would be subject to that percent -- would be a part of the calculation of that 15 percent cap. 5
That wasn't the 6 question I was asking you. The question I'm 7 asking you is, can you cite for me in the 8 regulations under the Public Services category, 9 small letter e, any reference made to any of these 10 particular items? 11
Well, I have them 14 right here. Do you want to -- I mean, what is 15 says is: "Public Service. Provision of public services, including labor, supplies and materials, including, but not limited to, those concerned with employment, crime prevention, child care, health, drug abuse education, fair housing counseling, energy conservation, welfare (but excluding the provision of income payments identified under Section 5720207B.4, homeowner down payment assistance or recreational needs. . ." Now, I mean there's more. But out of 221 6/9/99 COMMERCE/EC. DEV. - Bill 990160 all of that, tell me what you heard that's related any public infrastructure improvements.
I'm afraid it's part of the "more" to which you made reference, but the --
Well, fine, I'll read the rest. "To be eligible for CDBG assistance, a public service must be either a new service or a quantifiable increase in the level of an existing service above that which has been provided by or on behalf of the unit of general local government through funds raised by the unit or received by the unit from the state in which it is located in the 12 calendar months before the submission of the action plan."
The only similar use of Community Development Block Grant funds that is occurring now, to which I referred through the PNHS Program, is funded through that Public Services category.
And that is the category that we have used and that we would expect to use in terms of the HUD regulations. 222 6/9/99 COMMERCE/EC. DEV. - Bill 990160
So, I mean, that's your interpretation, or it's -- how you currently do it is through that item.
But that does not mean that that item is strictly or solely for that particular use. It is the way that you are utilizing that area and providing dollars to go through an organization that does that work.
But for our discussion here as it relates to the regulations, there is nothing in there that says anything about public infrastructure, sidewalks, or any revitalization efforts. It's the policy of the Housing Office to fund a particular organization through that particular category to do that work.
It does not mean, though, that that is the only way that it can be done. And then we could go into the Interim Assistance section that specifically talks about, again, those items. So, I mean, I think I respected your 223 6/9/99 COMMERCE/EC. DEV. - Bill 990160 opinion; I think that you should respect what the facts are. You cannot sit here and say that the providing of these services could or would only be done through the Public Services category since the Public Services category, by the guidelines, has nothing to do with curb, sidewalks, public infrastructure, or anything else.
Well, it clearly does have something to do with those activities.
It has something to do with it in the context of how you funded it in the past.
The fact is that they could not be funded under the Public Facilities category to which reference was made earlier, and I just wanted to point that out.
Well, I believe that that's actually debatable, but there's still another section that we can utilize. Okay, thank you.
Finally, we requested last week at the Finance Committee hearing on the Year Plan a suspension of the rules, which I 25 appreciate was granted by the Finance Committee in 224 6/9/99 COMMERCE/EC. DEV. - Bill 990160 the expectation that the ordinance would be passed tomorrow. And I hope that it will be possible and that it will resolve whatever issues are outstanding here because we need every single week that we can possibly get in terms of implementing quickly during this calendar year and getting the funding and spending it as quickly as we can. Thank you.
Okay. Have you -- with regard to the issue that you raised on the cap, you mentioned that that's what you've been told. Have you sought any particular advice about that?
No, but I will check with the legal department or with the Law Department.
Okay. And you're going to get back with information on a detailed explanation of the budgeted items in the administrative costs area as well as the program delivery.
What those actual costs are, who the people are, what their jobs 225 6/9/99 COMMERCE/EC. DEV. - Bill 990160 are, and how they can connected to those particular services.
Okay, thank you. Are there any other questions for Mr. Kromer. (No further questions.)
Okay, thank you. I think based on conversations with some members of the committee, I have one other amendment that I would like to move. It responds to an issue that's been raised on a couple occasions by some of the people who have testified. It has to do with future years and any impact of these activities on subsequent consolidated plans. What I would like to do is move into the public meeting, deal with that particular amendment solely so that the bill is in a fully amended version and is clear what it will now say when it's printed by the chief clerk. If there's no objection, I'd like to move into a public meeting for the purpose of 226 6/9/99 COMMERCE, EC. DEV. Public Meeting dealing with one particular amendment - - -
We are now in a public meeting. There was an issue raised earlier about a previous amendment that has already been voted on, which starts with the sentence in number 5, on . And it's Paragraph (5). The sentence currently reads: "OHCD shall not decrease any funding in the Year Consolidated Plan." 12 At that point, I would propose to 13 insert the language "or any subsequent year plan" 14 and then continue the sentence, "for any proposed 15 housing program, housing development project, 16 service provider, training program, or any other 17 nongovernmental grant recipient in order to fund 18 any community revitalization and infrastructure 19 renewal project or activity." 20 I would is ask for a motion on that 21 particular amendment. 22
Mr. Chairman, I move 23 the adoption of the amendment as read by you. 24 (Duly seconded.) 25
It has been 227 6/9/99 COMMERCE, EC. DEV. Public Meeting properly moved and seconded. All in favor, say aye. Any opposed, say nay. The ayes have it and the bill has been amended. At this point in time, now having a fully amended bill, the bill will be held in committee. There is obviously a great amount of conversation and discussion that will continue to take place about this particular proposal, but we now at least have a fully amended bill that at some level addresses many of the concerns raised by Administration people or citizens in community-based organizations. If there is no further business for the committee, the Committee on Commerce and Economic Development stands in recess to the call of the Chair. Thank you very much. (Adjourned at 2:50 p.m.) - - - 228 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 Wednesday, June 9, 1999, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT BILL NO. 990160 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter