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.