Committee Hearing, December 10, 2002

COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE ON RULES - - - Room 696, City Hall Philadelphia, Pennsylvania Tuesday, December 10, 2002 10:10 a.m. - - - BILL 020737 - an ordinance adopting an amendment to the Articles of Incorporation of the Old City Special Services District... BILL 020738, an ordinance to amend the Philadelphia Zoning Maps by changing the zoning designations of certain areas of land located within an area bounded by Snyder Avenue, Christopher Columbus Boulevard, Porter Street, Weccacoe Avenue and Vandalia Avenue. BILL 020684 - An ordinance to amend the Philadelphia Zoning Maps by changing the zoning designations of certain areas of land located within an area bounded by Roosevelt Boulevard, Grant Avenue and Blue Grass Road. - - - PRESENT: COUNCILMAN JAMES KENNEY, Chair COUNCILMAN DARRELL CLARKE COUNCILMAN FRANK DICICCO COUNCILMAN RICHARD MARIANO COUNCILMAN MICHAEL NUTTER COUNCILMAN BRIAN O'NEILL COUNCILMAN ANGEL ORTIZ - - - V A R A L L O, Incorporated Litigation Support Services 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 (215) 561-2220 I N D E X BILL 020737 PAGE CYNTHIA PHILO, Old City Special Services District.............................. BILL 020738 JAMES CUORATO, Commerce Director .......... 13 PATRICK SMITH, IKEA ....................... 29 CARL PRIMAVERA, ESQ. ...................... 33 SENATOR VINCENT J. FUMO ................... 77 REPRESENTATIVE WILLIAM KELLER ............. 100 SAL CANDELARIA, ILA ....................... 109 JAMES T. MCDERMOTT, JR., PRPA ............. 112 BILL MCLAUGHLIN, PRPA ..................... 139 KEVIN HURLEY, CSX Real Property ........... 141 CARL PRIMAVERA, ESQ. ...................... 179 BILL 020684 JAMES CUORATO, Commerce Director .......... 182 ROBERT FREEDMAN, Goldenberg Group ......... 189 THOMAS CHAPMAN, Planning Commission ....... 192 HARRY ABBERKERN (ph), Greater Bustleton Civic League Zoning Board ............ 195 3 12/10/02 - RULES - BILL 020737

Good morning. First Bill on the Calendar for today is Bill No. 020737, which is an ordinance adopting an amendment to the Articles of Incorporation of the Old City Special Services District of Philadelphia to extend the terms of that authority, all under certain terms and conditions. Cynthia Philo, please. Good morning.

Good morning.

Please identify yourself for the record.

Sure. My name is Cynthia M. Philo. That's P-H-I-L-O. Good morning, Council President, as well as other Members of the Committee. My name is Cynthia Philo and I'm the Executive Director of the Old City District here in Philadelphia. Thank you for allowing me to testify before you today on the extension of the term for the Old City District. With me today are the members of the Executive Committee of the Special Services District. I have Bob Croskey, who is our Secretary, and Allen Greenberger, who is our Vice Chair, but will be our new president for next year. 4 12/10/02 - RULES - BILL 020737 The Old City District incorporates a 22-square-block area running from the east side of 6th Street to Front Street, and from Walnut Street, also including Dock Street, up through the Ben Franklin Bridge. The purpose of Bill 020737 is to extend the lifespan of the district through to December 31st, 2022. Next year, the district will develop and release the first five-year plan, which will include a budget and programming plan. Councilman Frank DiCicco, as well as State Representative Marie Lederer, have both played key roles in the creation, as well as the support of the Old City District, and continue to do so in supporting its effort of expansion and continuation. During the first four years of operation, the Old City District has achieved a number of significant accomplishments, including establishing a Community Service Representative Safety Ambassador Program, which report on business contacts throughout the year so that we can improve our services to the area. Our Clean Team, which was established in '98, has removed over 2,000 graffiti tags and has also picked up some 370,000 gallons of trash from 5 12/10/02 - RULES - BILL 020737 the sidewalks in Old City. We've worked with the City Lighting Department to install new lighting on 2nd Street from Race to Market. We've assisted a number of businesses, obtaining rebates for them so that they can improve their properties and make the area look great. We also continue to work with the 6th District Police Department on matters of safety that affect all of us in the area. We also finished our 5th Annual Silver Bells in Old City, which is our holiday season's promotion. The Old City District continues to realizes its potential. During the past year we have developed a comprehensive and ambitious Streetscape Vision Plan which will further enhance our community. Some of the projected next steps are new lighting for all major streets within our district, the design and installation of new banners to beautify the area, as well as removal of dead and dying trees, and the planting of new ones. These are just a few of the ideas that we are moving forward with, obviously, for the next 20 years. Once again, I want to thank you for providing me with the opportunity to testify before you today. I would be happy to answer any of your 6 12/10/02 - RULES - BILL 020737 questions, as well as I'm sure that members of the Executive Committee would also be happy to answer any questions.

Thank you very much for your testimony. Councilman DiCicco, do you have anything you would like to add?

I'd just like to take this opportunity to thank Ms. Philo and the other members of the Old City Civic Association for your support and all the great things you've done to make Old City the most popular neighborhood in the City of Philadelphia today, notwithstanding some of the growing pains you're going through. But absent those growing pains, it really has been a benefit to the entire City of Philadelphia. Thank you.

Thank you very much.

Thank you again for your testimony and for coming in this morning.

Thank you.

Thank you, Members of your Board and Committee. Thank you. Anyone else to testify on this Bill? (No response.)

Seeing none, we will 7 12/10/02 - RULES - BILL 020738 now move to Bill No. 020738, which is an ordinance 3 to amend the Philadelphia Zoning Maps by changing the zoning designations of certain areas of land located within an area bounded by Snyder Avenue, Christopher Columbus Boulevard, Porter Street, Weccacoe Avenue and Vandalia Avenue. The first witness I have on the list is Mr. Jim Cuorato, who is the Commerce Director. Prior to Mr. Cuorato's testimony, I'd like to recognize Councilman DiCicco.

Thank you, Mr. Chairman, and good morning, everyone. I'd like to, in the briefest possible way, first of all, thank everyone for coming here today. And if I fail to at the end of this hearing, because it may be that some of the folks who are here now will not be able to stay through its entirety, I'd like to recognize some of the people who have been very supportive of this very important issue, not only to the South Philadelphia community, but to the City of Philadelphia as a whole, and that is the issue of bringing Ikea to Philadelphia. It has always been my intention to work with Ikea from their first choice site, which was 8 12/10/02 - RULES - BILL 020738 at, I think, Delaware and Reed, to the second site, which was at the incinerator site. And Mr. Cuorato is shaking his head yes. I think, Jim, you'll understand that when the incinerator site was one -- or the second proposed site that Ikea was seeking, you and I were probably in the minority. Most people felt that it would not be the best use for that site. It was entirely too important of a riverfront location to have a retail box located on it, but we worked through a number of those issues. And you and I and a few other people worked along with Ikea to, hopefully -- to make that a reality. But with some issues that were not within our control, a lot had to do with the EPA and other issues, Ikea was not able to locate at that site. There have been a number of people, including Jim Cuorato, James McDermott, who is here from the Philadelphia Regional Port Authority, who will be testifying today. Ed Hamlin (ph) from Senator Fumo's office. Senator Fumo, I understand, will also be testifying this morning. More recently State Representative Keller, Sal Candelaria, who's the president of the ILA -- is it 1291, Sal? In any event, this has been a long process. 9 12/10/02 - RULES - BILL 020738 The process of the site in which this Bill refers to at Delaware and Snyder began about a year ago. A letter was sent to me by Mr. McDermott from the PRPA back in December of 2001, asking that I take no action on the Snyder Avenue site, the CSX site, to keep it industrial. I received letters from the ILA and other interested parties as well. I always believed from then, and I still believe up until today, that reasonable people can make a difference. There have been a number of ongoing discussions over the last few months that involved the folks from CSX. And Kevin is here -- and Kevin, I apologize. I just lost your last name. I can't remember your last name -- from CSX to try to work to, not only bring Ikea to Philadelphia, but also to preserve the integrity of the port-related businesses and to grow the port-related businesses. And what has made that more important is the recent event where the federal government has now designated Philadelphia as a strategic port. And what that means to Philadelphia and what it should mean to Philadelphia is additional port business, a lot of port business, for that matter. But we need to be able to have the facilities to 10 12/10/02 - RULES - BILL 020738 accommodate what we anticipate is a huge growth in port-related business. And because of that, the CSX site at Delaware and Snyder is not just a simple, in my opinion, just make a zoning change and everything else will follow. We needed to keep all the players in the room. That was the intent of the Bill that I introduced about two months ago, which was Phase I, to let Ikea understand that we want Ikea here. We're going to work to make sure that Ikea comes to Philadelphia. But we needed not only pave the way for Ikea, but we also needed to lay the groundwork for future discussions to protect that port business that I spoke about earlier in my statement. So I want to thank all of those folks. I'm sure I missed a few people.

I'll recognize you as the morning progresses for your willingness to make the commitment to discuss and not make this a kind of quid pro quo, Frank DiCicco being the Councilman just do the zoning change from industrial to commercial and not be concerned with the other issues that are important to the City of Philadelphia as well. I think I'll probably reserve any statements for the witnesses as they testify. But again, I want to thank all of you for your 11 12/10/02 - RULES - BILL 020738 support.

Thank you very much. Prior to your testimony, I'd just like to offer a few quick comments based on -- echoing some of what Councilman DiCicco has already said, but from a more historical perspective. When I first started in government in 1978, the southern boundary of the Philadelphia Port Zone was Catherine Street in South Philadelphia. And as years went on, working for Senator Fumo as a staff person, the chief of staff, and being involved as a member of the Philadelphia Regional Port Authority for a number of years, I watched the port zone boundary go from Catherine Street to Washington Avenue to Reed Street and now to Snyder Avenue, as proposed in this legislation. And while I recognize that during the course of the '80s, the Port of Philadelphia, the industrial port of Philadelphia, went through some very difficult times. And through a lot of hard work from people, the PRPA, Representative Keller, the unions and many other people were involved in really bringing this port back. The railroads made a major investment. We have three, as you know, 12 12/10/02 - RULES - BILL 020738 three competing railroads in Philadelphia Port. There's a lot of opportunities and a resurgence of the port in lots of different types of cargoes. We don't know what Fast Ship may bring, the new federal designation for the port. I mean, there's a lot of issues that have really made this port a growing opportunity coming into future through a lot of hard work from a lot of different people. And while I recognize and applaud Ikea for finding faith in Philadelphia, and Jim Cuorato for wanting to bring Ikea -- along with the Administration -- to bring Ikea here, there is a way to balance the needs and issues that affect jobs on every side; commercial side, the construction side, the retail side and the industrial port side. There's still a lot of people who work on the industrial port, making a living, raising families, buying homes, paying mortgages, and we cannot lose sight of the fact that those individuals need to have an opportunity to preserve their opportunity to work. And I applaud the unions again for some of the efforts that they've made in some of the contractual issues that they've had to deal with 13 12/10/02 - RULES - BILL 020738 over the years. It's not been an easy thing. It's been a very difficult process. And I'm hopeful, as a matter of fact, that today, seeing the people that are here in this room and the decorous way in which we're going to conduct this hearing, I think we may have an opportunity to have some real policy discussions on what's important for the future of the City, both as issues relative to the development of Christopher Columbus Boulevard, to issues relative to the expansion of the port and the strengthening of the port, and issues relative to bringing in new retailers, like Ikea and Lowes and others. And I think it's a great opportunity and a great forum today to have this discussion and really discuss the issues from a policy perspective and not from an emotional perspective. So I want to thank Mr. Cuorato for being here and all the other witnesses and ask you to identify yourself for the record and proceed.

Thank you very much, Mr. Chairman, and good morning.

Good morning.

Good morning, Madam President and Members of City Council. My name is 14 12/10/02 - RULES - BILL 020738 James Cuorato and I'm the City Representative and Director of Commerce for the City of Philadelphia. I'm here this morning to provide testimony on Bill 5 No. 020738, which would amend the zoning for a site in South Philadelphia in the vicinity of Columbus Boulevard and Snyder Avenue. This site is commonly referred to as the CSX site because it is the location of a former intermodal rail yard facility operated by CSX, which has since been relocated to the navy yard. The site which is the subject of this Bill now sits vacant and unused. Yesterday, we announced that a major corporation, American Business Financial Service, will move their 700 employees from the suburbs into Philadelphia. In addition to the estimated $30 million in new tax revenues to the City that this transaction will generate, this development sent a strong and positive signal to the corporate community that Philadelphia is a good place to do business. I believe that we will reap additional benefits as a result of ABFS, a company that was heavily courted by New Jersey and could have stayed in the suburbs and instead chose Philadelphia. That 15 12/10/02 - RULES - BILL 020738 made a statement. We now have another extraordinary opportunity to make a similar statement. The City has been presented with a proposal for a 600,000 square foot retail commercial project on the CSX site. And the anchor for the project would be Ikea. Ikea is the world's largest furniture store, but it is much more than that. Ikea is an attraction. A store that will draw shoppers into Philadelphia from a wide geographic region. Their current location in this area is in Plymouth Meeting. The company has embarked on a major expansion program in the United States, and the fact that they have decided to build their new store in the City of Philadelphia speaks volumes about the progress we are making in developing a positive business climate. I can tell you that I am out visiting neighborhoods and business associations in every part of the City, and everywhere I go these days I am asked about Ikea and urged to bring them into the City. For my two and a half years as Director of Commerce, I would rank Ikea's decision to come here among the top two or three economic 16 12/10/02 - RULES - BILL 020738 development opportunities that have come before us. Ikea estimates that they will generate between 80 and $100 million in sales in their first year of operation. These are staggering numbers. And all of those sales are currently taking place outside the City. The City's share of sales taxes alone on these revenues is one million dollars. In addition, Ikea will employ up to 500 people at salaries that are consistent with what first-class retailers are paying in Philadelphia. And all employees who work at least hours per week receive a benefit 13 package. In short, these are good jobs, 500 of 14 them, that will go largely to Philadelphia 15 residents. I hope that this description has 16 convincingly made the case that we should do 17 whatever we possibly can to bring Ikea into 18 Philadelphia. 19 I would now like to address some of the 20 issues that have arisen as a result of our efforts over the last 10 months to make this project a reality. First is the basic issue of land use, and this has two components. We take very seriously any proposal to convert industrial-zoned land to commercial. Indeed as with another project that is 17 12/10/02 - RULES - BILL 020738 on this Committee's agenda for today, the Whitman's Chocolate site, we carefully evaluate a number of factors, including the condition and marketability of the site, the prospects for future industrial use and the proposed new use. One of our strengths as a City is our diverse economy, and manufacturing and industrial-based jobs are important to us.

We want to ensure that we maintain an adequate inventory of industrial land, and I believe we have done that. Our evaluation of this site indicated that the prospects for future industrial use are not strong and the proposed new use would generate substantial benefits to the City. The second aspect of our land use evaluation relates to the issue of usage by the port, which both Councilman DiCicco and Chairman Kenney referenced in their preliminary remarks. This issue has received much attention, and I am grateful for the opportunity to clearly state this Administration's position in this regard. Let me state clearly for the record that, one, the City of Philadelphia strongly supports the continued expansion of the port in 18 12/10/02 - RULES - BILL 020738 Philadelphia; and two, this is not an Ikea versus port issue. The expansion of the port in South Philadelphia and a commercial development of the CSX site are not mutually exclusive. We can achieve both goals. The port is responsible for thousands of jobs and we would like nothing better than to see the port grow. I have participated in a series of meetings with representatives of the Philadelphia Regional Port Authority to reiterate the support from the City. There are dozens of acres of land in the area of the Packer Marine Terminal that are available to expand the port's presence and activities in this area. The CSX site is not, we believe, the linchpin for future growth of the port, and converting its use to commercial will in no way diminish the ability of the port to expand. We support the PRPA's aquisition of a number of parcels south of Oregon Avenue and we are actively assisting the PRPA in several other related activities, including the relocation of an existing business that would free up additional land. Ironically, much of the land that the port needs is controlled either in whole or as part of its 19 12/10/02 - RULES - BILL 020738 ownership in Conrail by CSX. Others will testify here this morning about the progress of those discussions to enable the port to gain control of this land. For my part, I believe that all parties have been and are acting in good faith, and I firmly believe that the PRPA will be successful in expanding in this area. To repeat, we, the City, will do anything possible to facilitate this growth. So I hope this dispels any notion that the City is somehow making a choice of commercial over port use here. Clearly, we can achieve both goals. I would now like to address the specific Bill before you today, which would re-zone only that portion of the CSX site upon which Ikea would build. In introducing this Bill, I believe that Councilman DiCicco indicated that he supports Ikea's entry into Philadelphia; and for that, we are grateful. And the Councilman reiterated that position this morning. The Councilman has also stated that he had been told that Ikea would, if they had to, quote, build alone, end quote. However, that statement by Ikea needs to be clarified. I would like to set the record straight. And a representative from Ikea 20 12/10/02 - RULES - BILL 020738 will further reiterate this position. Ikea has stated that they would build as part of a first phase of development on the site. To that extent, they are prepared to start building before any other construction takes place on the site. In fact, their targeted goal is to be open by mid-2004, so they must begin construction this spring. And it is likely that they would be the first construction on the site. But they must have assurances now that the second phase, that is the balance of the overall development of the site, is going to happen. Although they are prepared to start building alone, they must have a guaranteed assurance now that the rest of the development will follow, and that they will not be stuck as a stand-alone retail commercial project surrounded by vacant industrial land. For this reason, Bill No. 19 020738 in is present form will not enable Ikea to proceed.

A rezoning of the entire 44-acre CSX site is necessary in order to give Ikea the assurance it needs. The other elements of the project would be noted as major developments in their own right, if not for all of the attention that has been given 21 12/10/02 - RULES - BILL 020738 to Ikea. On November 14, 2002, I met with Robert J. , Senior Real Estate Manager for Lowes Home Center, Inc. Lowes is a Fortune 100 company and is the second largest home improvement retailer in the world. They are also the second largest appliance seller in the United States, behind only Sears. They have over 800 stores in 43 states, none of which are presently in the City of Philadelphia. In another sign of the momentum that we have created, Lowes is now anxious to come into the City. The CSX site is their number one location. Not only are they not worried about competition or too much retail in the area, they have singled out this site as their location for their entry into the City. Lowes alone will generate an additional 200 jobs, 80 percent of which will be full time. As I said, this store alone would be cause for celebration, but it has been overshadowed by Ikea. Lowes is a second key anchor for the project and it cannot proceed without the entire CSX site being rezoned. Rounding out the project would be another major well-known and successful retailer, along with several restaurants and smaller shops. 2 million per year in new tax revenues. But for all of this to occur, we need to have the entire CSX site rezoned. Therefore, I am respectfully requesting that Bill No. 020738 be amended to include a rezoning of the entire site for commercial use. An approval of an amended Bill enables Ikea to proceed secure in the knowledge that they will anchor a major retail center and brings another major victory to Philadelphia. Approving this Bill in its current form will bring this project to a halt and force Ikea to consider a New Jersey alternative. To state the Administration's position clearly, we and Ikea are opposed to the Bill in its present form. I respectfully urge Councilmembers to amend this Bill, to approve the amended version and to help us continue this great role that we're on right now. Thank you for this opportunity to testify on this most important project. And I would be glad to answer any questions that you may have. 23 12/10/02 - RULES - BILL 020738

Thank you very much for your testimony. This situation reminds me exactly of the situation we dealt with when we were dealing with the rezoning issues for Wal-Mart and for Home Depot. And there were also competing port interests and paralleled issues that are represented here today. And we went along and we eventually did that rezoning, which created two very successful operations there, a great amount of construction/retail jobs and tax retables. But we didn't do it until we had a deal for a swap of land that involved, at that time, the DRPA, not the PRPA. And I guess the concern is, is that if we follow the recommendations that you're making today and rezone the parcel prior to the identification and the swap of land in a -- hopefully, in an equal portion, acreage portion, that there really is not much leverage left to accomplish what you would like to accomplish in the industrial port, and what all of us would like to accomplish, bringing the retail opportunities here, but at the same time preserving for industrial purposes. And at that time we did not move forward 24 12/10/02 - RULES - BILL 020738 on the rezoning until we had a specific arrangement, deal, agreement with DRPA. Privately, I think it was Jack Brown at Penn Trucking -- at Penn Warehousing at the time and the Wal-Mart site or Home Depot site. So it is a similar situation, but we didn't do it until we had the land already in our land bank for the port. And I'm wondering what your view is on why we should do it differently now?

Mr. Chairman, I think, and others can testify to this, that all parties have been negotiating in good faith. I think Councilman DiCicco referenced that in his preliminary remarks because we've both been a party to all of these meetings. It is my firm belief that the land that I referenced in my testimony and that Councilman DiCicco referenced will be made available to the Philadelphia Regional Port Authority. As I said, others can testify about the specifics of the discussions, but we have come a long way. And, frankly, thanks to the efforts of Councilman DiCicco in pushing this process, I think we are on the brink of having an arrangement worked out whereby that land can be made available. 25 12/10/02 - RULES - BILL 020738 My concern is I have the world's largest furniture retailer wanting to come into Philadelphia on a very aggressive schedule and I do not want to jeopardize their decision-making process. I would like to see the entire site re-zoned. And I am confident that the port can be accommodated, as far as the additional land that it needs.

I appreciate your reply, and I also agree with you. I think that all parties have been acting in good faith and it's been a very good process. However, I personally believe that unless there is a specific arrangement made prior to, I think we're somewhat letting the horse out of the barn, prior to getting a specific arrangement for this land. And I think maybe that disagreement is a minor issue in the scheme of things, but I think that my concern is that the energy and the necessity to do the deal is more apparent if we were to zone a portion of this to allow Ikea to do their planning as a Phase I, and then in the Phase II, rezone the other portions once the port has acquired the land and, you know, in their control, and things could move forward. I don't think that necessarily has to 12/10/02 - RULES - BILL 020738 be a long period of time. And I think the incentive to rezone the other portion, I think, speeds the process along as opposed to slowing it up. And that's just my opinion. You don't have to comment, but that's my opinion. Councilman DiCicco.

Thank you, Mr. Chairman. Just to follow-up on that, and then I have a question for Mr. Cuorato. I think the thing that makes this a little bit different is the fact that, according to Ikea, it is more time sensitive. Ikea indicated to me, and I think in your presence, Jim, and maybe in the presence of Mr. Primavera about two months ago when you came to my office for a meeting, that Ikea needed to know by the end of this calendar year whether or not the City was going to entertain the opportunity for them to locate at Delaware and Snyder Avenue. So I think the time sensitive issue is really the reason why we just could not say at one point, give us another six months, give us another six weeks. And I indicated at that meeting in my office to Mr. Smith, who represents Ikea, that the last date in which a Bill could be introduced so 27 12/10/02 - RULES - BILL 020738 that we can have final passage of a Bill before this Council recesses on the 19th of December, I would make certain one way or another that a clear indication would be, if we're going to do a Bill or a portion of a Bill, that we'll send a signal to Ikea that, yes, we are going to continue to work to bring Ikea to Philadelphia. Is that a fair assessment of what was some of the discussion that morning? I mean, in terms of the sensitivity of the dates --

Excuse me. I'm sorry. Can I just interrupt you for a second? With all due respect, there is a sign as you're coming in that all cell phones and beepers could be please put on vibrate. It is very disruptive sometimes when people are testifying to have the phones ringing. So most phones and pagers, I understand, have vibration. So if everybody could either turn them off or do that, that would be a big help. Thank you.

And again, I just want to set the record straight so that the Chair and the other Members of Council, and hopefully other Councilpeople who are in today in their 28 12/10/02 - RULES - BILL 020738 offices who are hearing this, that there have been a lot of things that have been said. There are people who have suggested that I don't want Ikea, and I think I've talked that away already. That it was the sensitivity of the timing as to what we needed to do. And maybe in a sense, that urgency, if you will, has really led us much further down that road to having some agreements with the PRPA and CSX and the other entities, because everyone knew that something needed to get done before December 19th of 2002, if we were to, in fact, bring Ikea to Philadelphia. Your statement on where you talk about my statement, that I understood Ikea, at that same meeting that took place in my office, that they would build alone. What I just want to do for the record -- I think we've made a lot of progress and I certainly don't want to undo any of the progress we've made. But as an elected official who has been under somewhat of an attack on this issue -- a lot of e-mails have been flying around, a lot of stories have been written in the newspapers, and people are suggesting all kind of things. It's important that I, for the record at least, comment as to what I 29 12/10/02 - RULES - BILL 020738 recall that conversation in my office on that morning to be. And is Mr. Smith going to testify on behalf of Ikea?

Yes, Councilman.

He may want to come up to the table now because it's basically a question for Mr. Smith. Good morning, Mr. Smith.

Good morning.

I'm sorry, Mr. Smith. Could you, for the record, identify yourself?

Patrick Smith, 496 West Germantown Pike, Plymouth Meeting, Pennsylvania. I'm the Director of Real Estate for Ikea in the Northeast.

Thank you.

Thank you, Mr. Chairman. Mr. Smith, I don't recall the exact date, but I believe it was sometime either late September or early October. I remember we tried to set up a couple of meetings, but for one reason or 30 12/10/02 - RULES - BILL 020738 another, we weren't able to do it until -- I think it was in October, if I'm not mistaken. You came to my office and, I believe, Mr. Cuorato was at that meeting as well. And I'm not sure if Mr. Primavera was there or not. But there was at least one, if not two, other people there. We discussed the CSX site at Delaware Avenue and Snyder and we talked about some of the possibilities. And I talked to you also, I think, and we spoke about the issues with the PRPA. And I'm not going to go through all of those issues again. PRPA will testify as to what their concerns are. And just for the record, I understood you to say that you would like to be part of a retail center complex, but if you had to stand alone, that you would. And you presented me with a map and, actually, I still have the original map in front of me which shows the entire CSX site, but has little hash marks and describes the area that Ikea would need in order to, at least, stand alone. Whether it was temporary, indefinitely, I'm not sure. I think that's probably where the communication may be lacking here or maybe we had a misunderstanding. But did you not hand me a map that 31 12/10/02 - RULES - BILL 020738 indicated a portion -- and again, I'm not trying to undo all the goodwill and all the progress we've made over the last few weeks. But I think it's important that -- for me, to let the people of this Committee and the other Members of City Council who will be voting on either this Bill or an amended Bill or some form of a Bill over the next few days, to understand that that is what took place, and that the bill that I introduced, which I refer to as the Portion Bill or the First Phase Bill was, in fact, reflecting the map that you left with me in my office on that day.

First of all, Councilman, I want to also say that you have been a great supporter of Ikea and we appreciate all of your efforts to get this deal done. And as far as -- that's correct. We did have a meeting and we did present the plan. And the hash marks that you're referring to are the actual property boundaries that Ikea will be purchasing as part of the shopping center. What I said at that meeting -- and I apologize because I probably didn't say it clearly -- was that Ikea could go alone initially as part of a phase development. And we didn't talk about these 32 12/10/02 - RULES - BILL 020738 at timetable. We can, as we proved in Elizabeth, New Jersey, we can go it alone for a little while, for a couple of years. But I never wanted to ever give the impression that it could stand as a permanent stand-alone Ikea at that location.

Okay. I appreciate that and I understand that as well. And when I introduced the bill, the bill that I introduced, the one that we're speaking about day, 020684, in my comments to the media and other folks was that I considered this as Phase I of the CSX rezoning. So I thought I was doing a bill that at least would get you guys in the door, get you started, keep all the interested parties at the negotiating table, interested parties again being PRPA, the developer Goldenberg, CSX, Senator Fumo, who represents the neighborhood of Front -- Delaware and Snyder, as well. And that's what my intention was. That, hopefully, at the end the day, whenever that day comes, that there would be an agreement with all the parties to move forward and it could be a win/win/win for all of us. Ikea comes to the site, gets developed as a retail center, and the PRPA can continue to do what it needs to do to grow 33 12/10/02 - RULES - BILL 020738 jobs at the port.

Councilman -- Carl Primavera, for the record.

Mr. Primavera, I'm sorry. Could you please clearly identify yourself and who it is you're at the table for today?

Yes. Interestingly enough, and it goes to my comments, I have the pleasure of representing the owner, which is CSX; the proposed developer, which is the Goldenberg Group; and then the celebrity tenant, which is Ikea. And it's a pleasure. And my comment really goes to the fact that, unfortunately, I wasn't at that meeting with Pat Smith. And it's a shame that I wasn't, because whatever was said -- you'll remember we had a separate conversation where I said, whatever Pat had said, he didn't mean it. Because I see the big picture. And Ikea as a tenant with a proposed developer, who itself has an agreement with the railroad, was in no legal position to do anything other than to be a tenant in an overall larger development. And I said I had heard what you had 34 12/10/02 - RULES - BILL 020738 heard. And I said, you know what, Pat is a great real estate guy. He's not a lawyer. He doesn't own the property, and there are a lot of moving parts and pieces that he's not privy to, and that I think that perhaps that miscommunication was problematic. He's apologized for what, perhaps, you and others may have heard. But his point was to try to be helpful, to say he has to open first. He has to order steel first. He has to have pilings done first. And he will ultimately buy a piece of the site. But to the extent that it was ever conceived that he would do a free-standing Ikea, a large retail development surrounded by a sea of industrial, that was never intended to be mentioned. So, you know, in that regard, we're sorry that conversation took place. And he meant to be helpful, but I know it started people moving in a lot of different directions. But there was no 20 intent to mislead or deceive. And he, to some extent, caused more confusion in trying to be helpful. It wasn't helpful, and we've already said that we're moving past that. But I know what you heard, but I wanted to make you know that I wasn't there. And that when I did hear about it, I 35 12/10/02 - RULES - BILL 020738 immediately said that that can't possibly be. One, because of things that Pat may not be privy to and the fact that I probably knew what he was saying because I know more of the background.

I understand that. But, again, it was said -- certainly, I'm not an attorney either. Just two men sitting in a room 9 trying to get Ikea to work. We've been working on it for the better part of 14 months from one site to another site to the third site. And I just wanted to get this thing -- this process going. And as you said, there are a lot of other interested parties that could make the deal happen or maybe not make it happen as well. This is not a typical rezoning. And although there aren't many typicals to speak to in Philadelphia, because they're generally issues, especially if it's a zoning change that's in a community, a residential neighborhood, you always have the residential issues to deal with. In this case, there are other entities in addition to community groups. Albeit that one community group has responded that they support the rezoning change, the other one, Pennsport Civic 36 12/10/02 - RULES - BILL 020738 Association, has still not responded after a couple of different letters. But I don't want to get in that.

I'm authorized to say they are supportive along with --

Are you representing Pennsport?

No. But I've heard from their president last night.

Who is the president?

Mr. John Dougherty. And also, I believe, Mr. Fred Druding (ph) is here on behalf of Weccacoe, so we'll get into this in our testimony --

Weccacoe and Whitman have indicated in writing a long time ago, but Mr. Dougherty has not indicated anything to me.

He authorized --

Well, you know, he came to a meeting uninvited a couple of weeks ago down at the PRPA, and even at that meeting, with the exception of the $100,000 in community investment that he would like to control, he has not sent me a 37 12/10/02 - RULES - BILL 020738 letter to the effect that he supports --

Well, he's authorized me to say that his group, along with the other groups, support it.

Is the condition on the $100,000 community reinvestment?

What he wants is the same amount that we're giving to Whitman Council, so that we would be in parity with the community groups so that the groups wouldn't fight amongst themselves. The amount of money was supposed to be confidential because --

Mr. Primavera, I would ask that you instruct your client -- it sounds like he's your client now -- to do something in writing to me no later than tomorrow.

No, I don't represent Whitman or Pennsport.

Is that fair? I'm not a lawyer. I guess that's enough. Okay. It's on the record.

No. All he said was, since he couldn't be here today because of his wife's illness -- and I know we're all concerned 38 12/10/02 - RULES - BILL 020738 about her -- that he wanted me to say for the record, if it was mentioned, that he joined along with the other groups who were in support of this. And also that the community groups, as you'll hear, are being supported in this endeavor through a lot of what we believe, community development projects. Pat can go into that in his remarks later about what Ikea does for the community.

At the meeting, I wasn't certain -- I think I said that for the record. I wasn't sure if he were at that meeting two months ago, and you clarified for us. Pat and I did have some discussions in my office that morning as well about community dollars and reinvestment. No dollar figure was put on the table. And I asked Pat to make sure that he did go have a meeting with both Whitman and Pennsport Civic Association. That's the way I've always done my business. Go to the community groups, discuss it with them, get their feedback and we'll proceed from there. Thank you. And, again, I'm not looking to dismantle all the goodwill and all the stuff we've done, but I needed to get certain things on the record for me. 39 12/10/02 - RULES - BILL 020738 Because a lot of things have been said -- and some of it comes from the community group representative who you just mentioned as well -- that maybe I don't want Ikea here; and that's a bold-faced lie. But anyway, thank you, Mr. Smith, for clearing up that issue.

Mr. Smith, before you leave the table, are you authorized, for the record, to tell us what the purchase price of the land that Ikea is buying from CSX?

No, I'm not, Councilman. We're under a confidentiality agreement with both Goldenberg and CSX.

Thank you.

But I can say that --

Can you give me a ballpark?

No, I can't. But I can say that just the construction, just the Ikea portion of the property, just the construction, will be approximately between $40 and $50 million between our building, our foundations and our site work.

Is that union construction? 40 12/10/02 - RULES - BILL 020738

That will be union construction, yes.

I know Councilman Kenney appreciates union construction.

100 percent union construction.

Is there some purpose to that statement?

Well, I know that there are so many people from your district or actually --

I don't have a district. I'm at-large.

Well, so many people in the City feel that it's important that this City have strong job opportunities. And we have a chart that will show not only the permanent jobs but the construction jobs.

I'm very interested in that. And I'm also very interested in maintaining the opportunities for longshoremen and Teamsters and other port-related union employees to have their jobs, too. I think it's in our best interests to have that balance. Thank you. 41 12/10/02 - RULES - BILL 020738 Any other questions for Mr. Cuorato first? Councilman Ortiz.

There are a couple of questions in terms of public policy, and I would like to get a clarification for the record. Development of the port and the development of a retail area in the City are not mutually exclusive. I think we want to do both of them. To me, it is not clear yet. What is the City's public policy position in terms of development of the port, and what are the strategies and plans that the City has? If this happens in a very clear, concise way, how are we -- how is the City's public policy position prepared to do both at the same time? Because I don't think you can say to one, we're going to develop this, and not develop the other. So for the record, I'd like for you to establish that and put it on the minutes.

Councilman, I'd be glad to answer that question. As a result of the discussions that have been initiated as part of this process, the PRPA -- and I don't want to speak for 42 12/10/02 - RULES - BILL 020738 them because they are here today, but I can summarize the process and the meetings that we've been through. The PRPA has submitted a list of properties that they are interested in acquiring that would enable them to expand the area around the Packer Avenue Marine Terminal. It is a list of --

Point of information.

Councilman DiCicco.

I think that those questions will be answered through the testimony of Mr. McDermott. Because I think you're going to do some of it and then it's going to be rehashed.

What I'd like, though, is -- I know that Mr. McDermott is going to speak on the PRPA position. I want to see what the City's position is.

And Councilman DiCicco, I'd be glad to reiterate the City's position as Councilman Ortiz has requested. The PRPA has submitted a list of requirements requests that involve additional properties that they would like to acquire. In one case, a business, that it would be to their great 43 12/10/02 - RULES - BILL 020738 advantage that if that business relocated. There are some questions regarding turning portions of Delaware Avenue into a service road. In short, it's a wish list, if you will, of additional properties and other items that would enable the port to expand. The City and this Administration fully support the PRPA's list of requests, and we are working with them. And I think that Mr. McDermott will testify that we've been working with them to help accomplish those goals. As you said, Councilman, and as I said in my testimony, these are not mutually exclusive goals. We can have both. So my answer to your question is the Administration supports expansion of the port and will continue to work with the PRPA on the list of items that they need.

In your negotiations with Ikea and the other key components of this development, have you made clear to them -- and I would like to find out what would be their position in terms of key minority participation goals in each and every aspect of the development? And as to the permanent jobs, what would be the goals that would be established for that? 44 12/10/02 - RULES - BILL 020738

Councilman, I'm going to refer that question to Mr. Smith, because Ikea has asked for no City subsidy whatsoever, so there's no 5 City financial participation. I will let Mr. Smith answer the question.

Let me just first say with regard to the construction, we do have a representative from Goldenberg Group. They will, as closely as possible, try to achieve the same level of minority participation in the construction aspects of this total complex as they can, even though it's not publicly subsidized. I think the total construction budget is a $100 million just for the Ikea, the Lowes, Best Buy. So out of a $100 million construction budget, the developer is committed to trying to do as much as it can do for the minority participants' goals, as far as the permanent jobs.

I'm somewhat confused. You answered the question as a result of your representation of the developer? I'm just trying to, for the record's clarity -- and I understand your three hats you're wearing. I'm trying to determine, you're answering the minority 45 12/10/02 - RULES - BILL 020738 issue question on behalf of the developer or on the behalf of Ikea?

Well, the first question was the construction jobs, if I understood the Councilman. And then the second question is the employees. The construction will be handled by the developer. And the developer's interest is in trying to promote the minority participation.

What are those numbers? Do we know what those goals were?

Bob Freedman will be available in that testimony. But they are familiar. And even though there's no public subsidy, they are going to try, within the budgets available, to advance those minority participation goals. And that's a significant commitment where there is no 18 public money. Once the shops are constructed --

So that's the answer for Goldenberg?

That's the answer for the construction piece. Now, once all these stores are constructed and it's time for permanent employees, then we can let Lowes speak to that and Ikea speak to that, because the developer doesn't 46 12/10/02 - RULES - BILL 020738 hire the employees. So, Pat, are you familiar with the --

So this is the answer for Ikea?

Exactly. Because he can't speak for Lowes. We do have a representative from Lowes.

Do you represent Lowes, too?

No. Joanne Phillips does. I have to let her have some of the business.

I admire your -- I haven't seen anything like this since David L.

That's a significant goal. I appreciate that.

I mean it as a compliment, actually. The only person I've ever seen leap frog up the aisle to get to the witness table is David L. When difficult questions are asked, so I admire you. Mr. Smith, please.

Thank you, Councilman. Ikea is extremely committed to diversity. Our overriding goal right now is that our stores and the coworkers in our stores reflect the neighborhoods 47 12/10/02 - RULES - BILL 020738 that they're in. And if you look at our stores all around the country right now, even all around the world, you'll see that we have been very successful in achieving that goal. The primary way that we do this -- and as Mr. Cuorato said, this store will employ about 500 coworkers. About 60 percent of those will be full time, 40 percent will be part-time. We do offer full time benefits to all of our part-time coworkers. So the same benefits that I get or the president of the company gets, someone working on the floor working hours a week will get those 14 same benefits. 15 The way that we ensure that we get the 16 maximum amount of local participation in jobs is 17 that seven months before this store opens, we'll be 18 setting up a hiring trailer at this location. So 19 anyone that wants to get a job at this store has to 20 apply at that trailer. So someone can't walk into the Plymouth Meeting store and apply for a job in Philadelphia. We've found that that is the most effective way to ensure that we get local participation in the jobs.

Councilman Nutter. 48 12/10/02 - RULES - BILL 020738

Thank you, Mr. Chairman. Is it Mr. Smith?

Yes, sir.

First, let me apologize to you. I missed a part of the exchange between yourself and Councilman DiCicco. I have been generally following what's going on with this primarily through the newspapers. You and I have not met. I have not had any discussions with anyone about this particular issue. But as a Member of the Committee, I do want to better understand some of the dynamics that have taken place here. Can you in a briefer way -- because there have been some conflicting comments in the newspaper about size of acreage, what's needed, whether you're coming, whether you're not coming, depending on some of the actions by the Council. So I do want to better understand. And if there were a chain of events that caused different statements to be made at different times, I'll certainly understand that. It seems like this is a fairly fluid process. But I want to get back to the meeting that the Councilman made reference to and better 49 12/10/02 - RULES - BILL 020738 understand what was said at that time, and then you can tell me about any subsequent amendments, I guess, to your statement. But what actually was said about the ability of Ikea to, quote, unquote, stand alone and develop its project or its building, notwithstanding any other development opportunities around it? What actually was said?

I have to go back a little bit just to kind of give you a breakdown of how the deal is going to work. The site is 44 acres, the total CSX site. Ikea is going to purchase approximately half, or about of those acres. The 14 idea is that we'll buy our piece directly from CSX 15 at the same time that Goldenberg would buy their 16 piece, and the shopping center will be developed as 17 one shopping center. 18

So the 44-acre site 19 is going to be split into two? 20

Split into, actually, three. 21 I believe Lowes is also going to buy their piece.

With each entity buying its own parcel from CSX?

From CSX, that's correct. And the question that came up was, could Ikea go it 50 12/10/02 - RULES - BILL 020738 alone if we're only going to rezone half the site, the acres. And my answer, which I apologize 4 because I was not completely clear, was, yes, Ikea 5 could go it alone. Because the way the site break 6 downs, we can stand alone on the site and build and 7 get going. What I didn't fully clarify was that it 8 was part of a phase development. 9 If Ikea had to go and the rest of the 10 shopping center were to come three, six months or 11 even a year later, that would be okay as long as we 12 knew there was going to be a shopping center. And I 13 think you're going to see later with the way the 14 site lays out there's a -- it's not just one piece. 15 There's also another building that sits in the 16 middle of the site that Goldenberg has under the 17 contract. The idea of an Ikea sitting in the middle 18 of this thing with vacant port property -- 19

Pat, does that help 20 you, that exhibit? 21

Yes, that helps a lot.

So the red is surrounded by the blue. And the red is, I guess, where we are with just the, quote, Ikea pad surrounded by, I guess, the blue would be -- 51 12/10/02 - RULES - BILL 020738

Mr. Primavera, unlike a zoning hearing, I'm in the middle of the question.

Okay. I'm sorry. I'm just trying to be helpful.

Thanks. I appreciate that. Mr. Smith was doing quite well with me. Thank you.

The idea that just an Ikea freestanding alone forever in the middle of an industrial area wasn't something that we were interested in. We weren't interested then and we're not interested now. And I apologize, and I apologize to the Councilman and to the Committee here for not making that clear at that time.

Okay. So as I'm best understanding the discussion between you and the Councilman, you could do what you needed to do if you were able to buy your site. You would not like to be -- that's what you said at the time. Subsequently, either you rethought it, you had conversations, whatever the case may be, which is fine. But you would not like to be in a situation where, for some extended period of time, you would 52 12/10/02 - RULES - BILL 020738 be sitting out in, what I'll now describe since I don't know the site, potentially in the middle of nowhere with your building, with the furniture and all that goes with it. Because either for the economics or for the traffic or whatever happens as a part of this synergy, you need to see the other activity around it and you'd just like some level of assurance that, if all the components didn't happen at the same time, that their phasing would not be either unduly delayed or take place over some extended, lifelong period of time; is that fairly accurate?

That is correct. It was a timing issue as opposed to a permanency versus a temporary issue.

I understand. Thank you. Thank you.

Can I just clarify? That was then --

Mr. Primavera. Mr. Primavera, first of all, I just need a little -- the outside discussion. As the Chair of the Committee, in order for us -- I have two witnesses at the table. I have one microphone. If there's things 53 12/10/02 - RULES - BILL 020738 that you want to jot down and correct when you testify --

Well, I'm counsel for the witness. There was one misinterpretation --

Can I finish, please?

I'm trying to be helpful and get the facts. I'm just afraid Mr. Smith --

Mr. Primavera.

Yes?

You are now talking through the Chair. And I'm trying to at least establish some process of give and take, question answer, and I would really appreciate it, really appreciate it, respectfully, if once he's finished, you could at least ask to be recognized before you jump into the conversation. That's all I'm asking.

But as counsel for the witness, I don't think I need to be recognized if I'm trying to be helpful in his answer.

And also the stenographer is now telling us she's having trouble keeping track of who's speaking for whom at what time. So I just really need to be -- 54 12/10/02 - RULES - BILL 020738

And Mr. Chairman, with all respect, what happened was, Mr. Cuorato was speaking for the Administration. I think the Councilman wanted to clarify one thin point with Mr. Smith. His testimony was going to come up with me at a later point in time. We are still in Mr. Cuorato's testimony.

You're not representing Mr. Cuorato?

I am not. I would be proud to, because he is a wonderful public citizen, but I do not.

Yes, he is. Yes, he is.

So what happened was -- and I think the Committee will realize this. That one small question from Mr. Smith taken out of order during Mr. Cuorato's testimony -- and I was trying to be patient because I knew we would bring Mr. Smith back -- has resulted in a much more elaborate questioning regarding Ikea. And that's really -- I didn't know how much to let him go. If we're going to get into the merits of his testimony, then I need to make sure that what we say is correct. 55 12/10/02 - RULES - BILL 020738 There's been one miscommunication, which I think has been unhelpful, in the past, which we're trying to address today. And if that miscommunication is compounded here today -- and I'm not saying Mr. Smith is trying to do it. I'm just trying to say that he doesn't have the experience and counsel that, obviously, elected officials do. And I don't want him to basically say today something that sounded like what the Councilman heard before, and then the Council walks away saying, it's just a timing issue. No, it's not a timing issue today. Because what Mr. Smith will be telling you is, if the whole site isn't rezoned he can't take down a piece or get out of sequence with the entire piece being developed. So that's not something that's available for him to do. I think those remarks went back to his discussion with Councilman DiCicco.

I just want to raise the issue of process in the room so we can have an orderly discussion back and forth and the stenographer has the opportunity to take it down accurately. Councilman Nutter. 56 12/10/02 - RULES - BILL 020738

Thank you, Mr. Chairman. Mr. Primavera, let me first mention that I was clear on what Mr. Smith was saying. I fully understood that his last comment was with regard to the prior conversation. And I only subsequently become confused when you entered the discussion.

Well, then, disregard my comments.

Second, I do want to thank you for -- I think you made reference to my questioning as more elaborate questioning. I do appreciate the compliment, which I will remind you of the next time we're over at One Parkway. Thank you very much. I appreciate the opportunity to go out of sequence. Thank you.

Thank you very much. Councilman, are you through?

I am through with my out-of-sequence question, yes, Mr. Chairman.

Is there anyone else on the Committee that has questions for Mr. Cuorato at this point? Mr. Cuorato, is there anything you would like to add? 57 12/10/02 - RULES - BILL 020738

Mr. Chairman, I'm here on my own. Mr. Chairman, if you would permit, I would just like to make one more comment.

Absolutely. Thank you.

I have worked in economic development in the City for a long time. I have worked with Members of City Council. I have had the pleasure of working with Councilman DiCicco on a number of projects in his district and I think we have always worked well together. I think I am hopeful that I have established a level of credibility with Councilman DiCicco and with you, Mr. Chairman, and with the Council President and with other Members of City Council. I just want to emphasize to you this morning that this is an extraordinary opportunity that's before us. I mentioned in my testimony that I've been Director of Commerce for two-and-a-half years. And I would put this in the top two or three opportunities that have come before us, and we really have got to find a way to make this happen. If I were coming to you this morning and saying to you, "We need to have Ikea; we need the 58 12/10/02 - RULES - BILL 020738 entire site rezoned; put the port issues aside; we'll have to deal with those another day; and besides, this is more important;" I could certainly understand that you would rightfully take a position that we need to have both areas addressed. I am not here saying that this morning. What I am saying to you is that we are all trying to address the port expansion issues. I have clearly stated for the record that the Administration supports expansion of the port, that these are not mutually exclusive and that we will continue to work with the port. But I just want to emphasize in the strongest terms possible, it really would be a shame if we let this opportunity slip away. And, therefore, again, what I would like to respectfully request is that the bill be amended to allow the entire site to be rezoned. That gives Ikea the assurance it needs. It enables Lowes to proceed. It enables us to have the overall development that we've talked about here this morning. And we will continue to work with the port. There will be no turning our backs on port expansion. I know I mentioned these points in my 59 12/10/02 - RULES - BILL 020738 testimony. I don't mean to rehash those. I just want to emphasize in the strongest terms possible how important this project is to this City.

And, Mr. Cuorato, I've known you for a long time, and I accept with full sincerity what you're saying. And I do appreciate and agree with your assessment of this being a unique opportunity for Philadelphia. I think the real difference of opinion comes as whether or not the port interests can be accommodated in a more timely fashion with a portion of this parcel being rezoned, as opposed to all of them. I think that's where the real issue is for us to decide is, do port interests get accommodated in a more timely and quicker way because of the pressure of having only a portion of it rezoned, or does it get done in a slower pace as a result of really having no leverage? That's really -- we agree with everything -- I think I agree, I'm speaking for myself, agree with everything else you've said. Councilman Nutter.

I went already.

Councilman O'Neill. 60 12/10/02 - RULES - BILL 020738

Jim, is your position consistent with the PRPA?

Yes, Councilman, it is. The only difference that I think you may hear this morning is that -- and again, I don't want to speak for the PRPA. We've had discussions and meetings over the past several months about the PRPA acquiring additional properties. The Administration supports the PRPA's efforts to acquire those properties. I think the issue is how quickly that acquisition process can be completely signed and sealed, and that's the point that the Chairman just raised. But the Administration and the PRPA are both in agreement that the PRPA should acquire additional properties for expansion in the area of the Packer Avenue Marine Terminal.

The question I have, though, is, are you and the PRPA, the Administration and the PRPA, on the same page as far as rezoning the whole property today, notwithstanding the leverage issue? I just really think that's where the rubber meets the road here. Are you in agreement on the bottom line, especially in light of fact that I believe they can ford any 61 12/10/02 - RULES - BILL 020738 rezoning we do anyway based on their enabling legislation? At least that's how I've --

That's a mistake. We'll talk about that, Councilman O'Neill.

I'm really absolutely doing my best to be as patient as possible with this. I really need you, when a Councilmember is asking a member of the Administration a question, I would really appreciate if you did not jump in and answer the question. I just would appreciate if you didn't do it. As far as your client is concerned, you can speak for him any time you like. Mr. Cuorato was asked a direct question. I really would need you to restrain yourself. It's not your question.

Maybe it would be better for me to wait for PRPA to testify.

Councilman, what I'll do is clearly restate the Administration's position, and then we can compare with what the PRPA will say. The Administration's position is clearly that we would like to have this bill amended to include the entire site. And although I didn't ask for it, I don't believe I asked for it in my 62 12/10/02 - RULES - BILL 020738 testimony, we would like the Bill amended to include the entire site. And I would respectfully request a waiver of Council Rules to permit first reading on Thursday, and final passage of an amended Bill on Thursday, December 19th. What that does is give Ikea the assurance that they can start building, knowing that Lowes is coming, Best Buy is coming, the rest of the retail development is coming. So although they will be first, they will have the assurance that the rest of those properties are coming.

Jim, I'm a little clearer on the Bill involving the Whitman site, which is in my District, so I beg your indulgence here. It seemed to me that the issue was once the horse is out of the barn, CSX -- I don't know if they are here in the room today -- that they have very little reason other than goodwill to share some of the increased value of this property, some $50, $60 million, if we do the whole thing with the port. And if I were the port, I'd be a little concerned about that and with everybody being on the same page. If you were asking us to get this Bill 63 12/10/02 - RULES - BILL 020738 out of Committee with the whole property rezoned, but holding it on final passage until the port and CSX strike a deal, and it seems like a deal is reachable based on the issues I've heard, I'd feel a lot better sitting here with your position, whether the heads shake aye or nay in the audience, based on whether the port has leverage. We depend on the port a whole lot in the City and we haven't, the City, that is, had the best of luck with the house majority leader in the last two weeks. His chief of staff chairs the PRPA board. I don't know if we want to make it any worse deliberately. So it's just a concern of mine. I could live much easier with a statement like the one I just alluded to rather than, "Let's get it done, and let's say our prayers for CSX and PRPA to work out a deal, even though there's no leverage anymore." I mean, I don't know any leverage that would occur. Maybe somebody can enlighten me to it. I'll wait for the rest of the testimony.

Thank you very much. Councilman Nutter.

Thank you, Mr. 64 12/10/02 - RULES - BILL 020738 Chairman. Mr. Cuorato, I don't have to go back through our level of respect and relationship but -- and I know you're doing your best under difficult circumstances. But I mean, you did not -- I think you know you did not answer Councilman O'Neill's question, which was the same question that I had. But I have one other question. The initial question prior to the question that Councilman O'Neill asked you was based on your statement. What is the solution, or is there a solution that allows both entities here to, in essence, get what they want? You talked about a continued working relationship with the port and you'll continue talking to them. And I'm sure you will. I'll take you, naturally, at your word. But clearly, one of the parties is moving out of the gate much quicker and getting potentially what they'd like to see, and the other party will continue to have discussions. What I wanted to know from you, the first question was, what is the scenario as proposed by the City Administration to resolve this issue in a way that's favorable to both? I hear you're 65 12/10/02 - RULES - BILL 020738 saying that there is a possible solution. I don't necessarily know what the solution is, so I'd like to hear from you what is that proposed solution? What are you working on and how would you get to the point where both entities get what they want? Because I don't know what that answer is. That's the first question. I have a second question.

Councilman, I thought that I had answered Councilman O'Neill's question, but if I didn't, let me more clearly respond.

You can wait because I'm just going to ask you myself. Why don't you deal with the question that I asked you and then we can have our own discussion about --

I believe a scenario that would satisfy all parties would involve CSX and the PRPA reaching an agreement, a written agreement, that could take the form of letter of intent, or could take the form of an agreement of sale, or any other legal document that clearly establishes that CSX would convey its property interests at either a determined price or establishes a process by which the sales price would be determined. That would 66 12/10/02 - RULES - BILL 020738 give the PRPA the assurance that it will, in fact, give --

Sale of what? Are we talking about some other property?

We are talking about additional land in the area south of Oregon Avenue.

Are we talking about Piers 122 and 124?

Right. And as you will hear, Councilman Nutter, from the other people testifying this morning, the negotiations are somewhat complicated by the fact that CSX owns some of this land outright and, therefore, is in a better position to negotiate directly; whereas other properties are owned by Conrail. Conrail, in turn, is controlled by CSX and Norfolk Southern. So the process by which agreements for sale of those properties can be fully and completely negotiated is a little bit more complicated.

Let me ask this question. What is the City doing, if the City can do anything, to effectuate that type of agreement between CSX and the port? What efforts have been made thus far to make that happen? What kind of 67 12/10/02 - RULES - BILL 020738 position are we in? I, again, have no idea how the City Administration might be able to influence these two parties to do something, other than the fact that the City is, by the testimony here today, trying to make this particular project happen. So we obviously have an interest in this. I don't know if you can --I know the word leverage has been used in many different ways here today. I tend not to use that word very much. Having never had any leverage, I generally tend not to use the word. How do you make that happen?

Mr. Chairman, if I may?

Yes, sir.

Councilman Nutter?

Yes.

A statement has been made that this is going to be totally self-sufficient and the City will not be contributing any financial assistance. But, however, the mere fact that this act takes place today, if it does take place the way you're asking it to take place, changes the whole value of the 68 12/10/02 - RULES - BILL 020738 land. And I believe at that point it also changes the way negotiations can take place. Does it not do that? Once you rezone you're actually giving a financial benefit because the land increases in value, does it not?

Yes.

So in terms of -- doesn't that then create some other problems in terms of negotiating posture and the ability to be able to -- of affordability for CSX vis-a-vis the port? Doesn't it put them, the port, in a more disadvantaged position vis-a-vis CSX in terms of economics?

Yes. Councilman, the answer to your question is yes.

Thank you.

Councilman Nutter, do you have anything more?

I think Mr. Cuorato was getting ready to tell me what the City was going to do or prepared to do or could do under the circumstance to try to resolve the matter favorable to both or all of the various parties. 69 12/10/02 - RULES - BILL 020738

Well, we've participated in a series of meetings between the parties. Most of the issues here involve the sale of land between CSX and Conrail and the PRPA and establishing a process for that sale and a purchase price for those parcels of land. We have monitored those discussions. We are hopeful that those discussions are fruitful. On the items that involve the City directly, we have tried our best to help the PRPA. I trust and I hope that Mr. McDermott will reaffirm that this morning when he testifies. But basically it comes down to a negotiation for the purchase of properties, Councilman. And short of stressing the importance of this project to all parties and urging them to come to an agreement, we don't have any other leverage either. Certainly, I don't want to lose this project. And I think I've made that clear here this morning. But I can't force CSX to sell these properties to the PRPA. There is a scenario in front of us where this could all come tumbling down, and that would be a real shame, which is if the site can't be rezoned and CSX, for whatever reason, doesn't sell the properties that the port is 70 12/10/02 - RULES - BILL 020738 interested in to the PRPA, then we all lose.

I don't want to confuse a number of different pieces of information. But I thought I either heard or read somewhere that CSX stands to potentially benefit in a fairly substantial fashion if the property is rezoned as compared to the value of the property if it's not rezoned.

Yes.

What are those ranges of potential benefits to CSX of a sale of the site non-rezoned versus rezoned?

I haven't seen appraisals, Councilman. But it's safe to say that it's a substantial increase in value.

What's your definition of substantial?

Millions of dollars.

Is that single digit, double digit, triple digit?

Councilman, I can't answer the question because I don't know.

Have you heard any ranges of possible sale prices? 71 12/10/02 - RULES - BILL 020738

I've heard ranges, but none based upon enough solid information that I'd be willing to --

What are the ranges that you've heard?

$20 million.

For?

Increase in value of the site.

Would $60 million be out of the ballpark or an outrageous figure?

I believe it is.

That's outrageous?

I believe that is, yes.

And what would be the unzoned, or non-rezoned, I guess?

Again, Councilman, I can only tell you what I've heard.

Tell me what you heard.

Somewhere in the 5 to $7 million range.

Okay. So for this discussion at least, the difference between the 72 12/10/02 - RULES - BILL 020738 non-rezoned land and the rezoned land is somewhere between $5 million and $20 million; is that fair?

Yes.

So in that context, as everybody is trying to, I guess, leverage everybody, you're saying that the CSX people could not be -- what's that other wonderful word we use around here -- incentivized to do something with regard to the port people, based on the fact that they stand to substantially increase the value of their property by action we may take here and then you have the consequential relationship between CSX and the port and everyone basically getting what they want and you don't think -- I mean, they're willing to just blow off $15 million in order to continue just having kind discussions?

No, Councilman, they certainly are not. And in fact --

You don't think that's a fairly substantial card or tool in the tool box of discussion?

It certainly is. And, in fact, CSX has been working very hard to try to reach an agreement with the PRPA on these properties. I 73 12/10/02 - RULES - BILL 020738 certainly don't want to leave the impression that CSX has been unwilling to engage in these discussions and try to make this transaction happen. I mean, we're all working very hard to satisfy all interests. And your point is well taken and everyone, I think, is aware of that.

Do you have any concern that if this particular part of the transaction were to go forward, that there would be less timely interest by CSX in continuing or consummating these discussions with the port as compared to what may be at the moment a rather heightened interest in trying to get something done? I mean, does something change potentially after this? Do you have a concern about that? Is that realistic?

Here is what I believe is a realistic time frame. And, again, I've been speaking for a lot of different parties here and I'm doing the best I can.

You're doing fine.

And I know each of these parties will have a chance to speak directly, but I'll do the best I can in representing where I 74 12/10/02 - RULES - BILL 020738 think the discussions are. What we need is to have this site entirely rezoned by December 19th. That's what I am respectfully requesting this Council to do. By December 19th, I don't know that we necessarily will have a situation where there are agreements of sale signed, committed agreements of sale for all of the properties in which the PRPA is interested. I do think a more realistic goal --

I'm sorry. Let me interrupt you, and I apologize. Do you have a deadline by which you'd like to see that transaction take place? You've obviously laid it out very clear. There's no confusion. I just want to reassure Mr. Primavera that I am still not confused, at least on this matter. I could be confused on other matters. You're clear about your deadline for this particular transaction. Have you determined one for the CSX/port transaction?

What I would like to see by December 19th, in order to give everyone the assurances they're looking for, is at a minimum an agreement in principle or a conceptual agreement that sets forth a process by which these properties are conveyed to the PRPA. 75 12/10/02 - RULES - BILL 020738

Let me ask this question. If this matter were to go forward and we get to December 19th, a matter sitting on our calendar, there is no agreement -- or I think you called it an agreement of sale, an agreement in principle, conceptual agreement by December 19th between CSX and the port, from your perspective, based on what you've now laid out, what action should we take?

Assuming CSX and the PRPA are still engaged in goodwill discussions, which I believe is the intention, I would still strongly urge that an amended bill 020738 be passed by this Council.

Well, how long have they been engaged in these good-faith discussions?

I think the discussions have actually been taking place for a year, give or take. But the intensity of the discussion --

That's a lot of faith.

Councilman DiCicco.

Councilman, point of information. I think that that question will be 76 12/10/02 - RULES - BILL 020738 best answered by Mr. McDermott from the PRPA. The recent discussions that I myself, Senator Fumo and others have been involved in about five or six weeks maybe at the outset, five weeks, six weeks. But the other discussions, I think the timing of that could be better answered by Mr. McDermott.

Okay. No problem. Mr. Cuorato, my last question was the second question, which goes back to, actually, the question that Councilman O'Neill asked which is -- and I think the Councilman's question was, is there an agreement on the matter in front of us -- let me rephrase that. Is there agreement between the City Administration and the port on the Administration's position, which is rezone the entire site and move forward? Now, I need a yes or no answer to this particular question.

No. No. 20

Okay. Thank you. Thank you, Chairman.

Thank you very much. Are there any questions for Mr. Cuorato? (No response.)

Seeing none. Mr. 77 12/10/02 - RULES - BILL 020738 Smith, we appreciate your coming to the table. You're later on the list. We ask Senator Fumo, please. Good morning. Please identify yourself for the record. SENATOR FUMO: Good morning. Senator Vincent J. Fumo, First District of Pennsylvania.

Please proceed. SENATOR FUMO: Thank you. I've been sitting here for a little bit of time listening now, and I must say that, first of all, I'm very impressed with the perceptiveness of the Members of the Committee. You sit on your chair and you want to give the answer. And then you find one of the Councilman, particularly Mr. O'Neill, figuring out part of the game here and you become very impressed by that. Let me give you a little bit of the history here. And there are going to be other people that testify that can give you a little bit more in depth. The Philadelphia Port Authority, the PRPA, Jamie McDermott, being the Executive Director, went down to talk to CSX 14 months ago. They were basically blown off. They got some politeness and nothing happened whatsoever. 78 12/10/02 - RULES - BILL 020738 Then the story started to surface about Ikea. "Oh, bring Ikea to Philadelphia. " And quite frankly, as I've told Ikea, they themselves are a magnet for people shopping. And I recanted when -- God, it's got to be or years when they first 8 opened up in Montgomery County and I went out there 9 to buy furniture for my children. It took me 20 10 minutes to find out where they were, yet I still got 11 to the place because I wanted to buy the product. 12 And so did a lot of others get to the place. So the 13 argument about the fact that, gee, if they had this 14 particular plan that's been put up there by Mr. 15 Primavera and they'd have to be behind one of these commercial buildings would hurt their traffic is beyond ludicrous. I think what happened here -- and I wasn't at the meeting, but I do trust Councilman DiCicco -- is that you are exactly right. What the Councilpeople here have seen is that Councilman DiCicco, in an effort to do his job, to balance, as it will, with the wisdom of Solomon, the interest of the port and the interest of Ikea and retail, try to strike a balance here because leverage is very 79 12/10/02 - RULES - BILL 020738 necessary. 5 million profit. We do not yet know what the developer will make by selling -- and there was a fallacy here. I checked with CSX. Ikea is not going to buy the property from CSX. They are going to buy the property from Goldenberg, the developer. What he's going to charge them, we do not know. And I think that's relevant for discussion. Because as Councilman Ortiz pointed out, the zoning itself is a contribution of the City. 5 million. Goldenberg stands to make a substantial profit. Those are contributions and that should not be taken lightly. What happened was that the port got absolutely nowhere. And it wasn't until three or four weeks ago that I called a meeting because I was tired of being put in the middle of this, but I am a player here. I represented the port for years 23 in April. Councilman Kenney then was a young 24 administrative assistant to me. And we went down 25 and slept -- and it's true -- slept through some 80 12/10/02 - RULES - BILL 020738 meetings of the port as to what they were doing in those days and decided that this port had to be kept viable. What we have today is nothing unique. We have a sexy entity called Ikea that wants to come to Philadelphia that creates a big buzz. We have a lot of people going to make a lot of money. And the port, well, that's just something that's boring. A bunch of guys get up at four o'clock and unload some ships. You know, what's really that about? The average citizen of Philadelphia doesn't understand the value of the port to this City, doesn't understand the economics. They understand they want to shop at Ikea, but they don't have a clue as to where that stuff even comes from. And I think one of the conditions of this deal should be that their product be shipped through the port of Philadelphia, something which has not been allowed to be discussed because of the steamroller effect of the public relations of getting Ikea here. " That's nonsense. If they were going to Cherry Hill, they'd have went to Cherry Hill six months ago.

They would not have put up with this type of a battle. There's a reason why 81 12/10/02 - RULES - BILL 020738 they want to be here, and it's the customer base. We have learned in government that retail is where it is because of the customers. You pay money to bring a manufacturer in because he can go anywhere because you want the jobs. Retail goes where the people are that are going to buy the product. This is where Ikea wants to go, despite all the hoodwinking. And I don't blame them. You leverage New Jersey against Pennsylvania, Pennsylvania against New Jersey; it's common practice anymore. In fact, it's a shame that local governments have been subjected to that. We see, you know, "If we don't build a new stadium, my God, the franchise is going to leave. Hurry up. " Well, that's almost the same type of mentality going on here. Ikea is not going anywhere. They want to be in Philadelphia. In fact, the original site was the incinerator site -- that was the second one. The Councilman knows better than I do. The incinerator site was not a good location. You know, it's prime waterfront real estate. And if we ever do get riverboat gambling, that's going to be there, not an Ikea. So this steamroll effect has come 82 12/10/02 - RULES - BILL 020738 along. I am distressed by Mr. Cuorato's testimony. I understand he has a job to do. And it's nice to say that the City supports the port. That's great. But there's an interesting definition that, if you will, former Speaker O'Donnell used to tell me and it always rings true. There's a big difference between being supportive of something and being committed to something. If you have ham and eggs in the morning, the chicken is supported, but the pig's committed. And what we've got here is a nice, supportive thing. Yeah, we're for the port. We're for motherhood. We're for apple pie, the American flag, whatever else you can think of. But it was aptly pointed out, I think, by Mr. Nutter or Mr. O'Neill, the City has leverage here. What is Mr. Cuorato doing testifying here when he hasn't used his leverage to protect the port? Now, as far as the meetings, he came to my first meeting and so did, by the way, the president of the Pennsport Civic Association, who I understand may or may not be represented by Mr. Primavera. But in any event, he brought along an interesting person, Pat Gillespie, who's been a 83 12/10/02 - RULES - BILL 020738 friend of mine for years. During the meeting, as we went back and forth, and the people from CSX discussed quite candidly with the port the history of what was going on, Pat Gillespie said something very poignant. He looked at the people on the left side of the table, which was basically Ikea, CSX and the developer, and said, you know, I came here today to help you, but you've been messing with these guys for months. When are you going to move your 11 rear-end and worry about them? He was as outraged 12 as I was. And that's when I found out it was a 13 14-month-long process. 14 But by that time, the people in charge of this development had felt they had won the PR war. They had felt that -- they were even pounding their chest, that they went into City Council and started to break a tradition of the District Councilman being in charge of his district by having poor Thacher Longstreth introduce an ordinance 21 conflicting with the local Councilman. First time I remember that. But they were cocky. They went so far as to tell Mr. McDermott that they even had his board tied up, and he didn't mean anything. It was when I called Brian Preskey (ph) and said, what's 84 12/10/02 - RULES - BILL 020738 going on here. And he did not know. And he supports his executive director. That's the kind of arrogance we're talking about here, when you've got one side of the story only getting out. And that's the kind of arrogance that happens when you've got this much money involved in this process. Now, let me tell you, by the way, when we had the second meeting, Mr.

Cuorato did not show up, nor did he send a representative. And when we had the third meeting, which was the conference call just the other day, he was not on the conference call, nor was his representative. That's no 14 offense at him. I know he takes orders. Let's take a look where this thing boils down to. Only because I stepped in and let everybody know that, even if they were going end run the District Councilman and try to amend the Bill on the floor, that there are interested people who were going to sue for spot zoning. And I remember turning to Mr. Goldenberg, if Ikea wants to try to open up under those circumstances, tell him to go to Cherry Hill because the case will be in litigation for 20 years. I told CSX and Norfolk Southern and Conrail, if you want to see a shell game, deal with 85 12/10/02 - RULES - BILL 020738 those three entities. I told them we had more money litigate this than they had in taxpayer money. It was first time they listened. They thought they had City Council tied up. They thought they had everything tied up. That was the wild card, and I still have it to use, if I have to. Let's see where we are today. After these meetings -- and I might add, this is the first time that we got anybody off their rear-ends. No offense. I think one of the problems is Mr. Primavera represents CSX, the developer, and Ikea. He wants to get a deal. He goes back and forth and he has a conflict. He's got to try and get CSX spend the least amount of money that he can. He's got to get Ikea open. He's got developer Mondayer. They may not be a legal conflict, but. It sure is a conflict when it comes to protecting the port of Philadelphia. We've got visual aides too. I've asked Representative Keller to join with me because he has additional information about the port, with a little more patriotic nature, I guess. You see in front of you an aerial photograph of the general area in which we're 86 12/10/02 - RULES - BILL 020738 talking about, all of which happens to be in the First Councilmatic District, which Mr. Longstreth seems to ignore and forget about. What you have on the left labeled as No. 5 is the CSX yard. As we've been told, that yard is about 44 acres. What you have on the right is Pier 124, Pier 122, a parcel called the Loop, which is the green shaded area, the Whiskey Yard, which is in purple, and the Savage Yard, which is labeled No. 4. The port has said, in return for its signing off on this deal -- and I believe that both Councilman O'Neill and Councilman Nutter asked Mr. Cuorato if they were in agreement or not because of this. The port has said -- and I say as well -- that if CSX gets conveyed to the port, those parcels of land, then they are willing to bless this deal on the whole parcel at CSX. Now, that's what they asked for 14 months ago, went back and forth, and it wasn't until I finally threatened a lawsuit that some of these people realized we were serious. We then met and, again, at the suggestion of Mr. Gillespie, we were going to have a meeting every week. So we met the following week. All of a sudden, after 14 months, when the debate 87 12/10/02 - RULES - BILL 020738 got serious we hear, "Well, gee, if we give you 124, we got to go to something called the Surface Transportation Agency in Washington, and we need environmental studies, and we need appraisers, and our appraiser is busy. " I think where we are today, the best place we are today is that CSX and Conrail -- and I don't know what Norfolk Southern has to do with this, but they were there -- can get an appraisal done by mid-January. Okay. We sat down in my office. We asked Mr. Goldenberg what he thought, as a developer, these various parcels were worth. 5 million. Now, as was testified to, some of this land is owned by CSX; some of it is owned by Conrail. Ironically, on the win/win here, when the port completes what it wants to do with this land, Conrail gets increased tonnage. They're going to ship more stuff by rail.

But they weren't concerned about that because, I don't know, their theory was they weren't making money. I don't know how they make money, but God only knows. Some accountant does. But anyway, they get increased tonnage. We 88 12/10/02 - RULES - BILL 020738 get increased jobs. The port's plan is to take from the tip of 124 over to what I continue to call the Lavino Shipping Yard, but it's the Packer Terminal, and fill that in. That then gives them a thousand-foot frontage along the river, which Representative Keller tells us, now that we're a strategic port, we need. In addition, the reason why the battle is over how much real estate is when the port goes out to answer an RFP for car storage, which is what that big parcel of land right next to the CSX lot right now is used for, that's the Poshelot (ph), they have to have a hundred acres roughly in order to respond to the RFP. Their land plus the CSX yard gives them that acreage. They've said, "What we need to do is combine other parcels. " And their magic number is reached by conveying the properties. Now, recognizing that everybody wants to get this thing done, and so do I, what we finally came down to -- because it's a myriad of bureaucracy. It's unbelievable, when you try to deal. Here is the bottom line to get this deal done 89 12/10/02 - RULES - BILL 020738 today. We don't need appraisers. We don't even need environmental studies. The port is willing to take the land, as is, on the environment. They'll worry about that part. They've already said that a number of times. What I have proposed -- you may not know this. But when CSX merged with Conrail, part of the deal was that they were to put up $15 million for economic development. It was kind of a give-back to the community because they were making money on the merger. They gave back $10 million to help build Kvaerner, which was that great other entity in my district which made the "Fleecing of America," and I was on with Tom Brokaw. But anyway, they did come up with that $10 million. The other five million is something called the B Fund. It's to be used for economic development, but it has to be rail related. There is nothing better than this that meets that definition. This is economic development and it is rail related. What I proposed yesterday -- and I haven't heard. Maybe they're going to accept today. But I'm sure if they were, someone would have told me. What I proposed yesterday was that Conrail meet their moral obligation of spending that $5 million, which by the 90 12/10/02 - RULES - BILL 020738 way, was never earmarked and placed into a separate fund. It's just something they keep on their books so, you know, the internal bureaucrats don't want to part with that 5 million. It'll take them 100 years to come up with the next great economic development project that meets rail requirements. 5 million profit or enhancement or whatever you want to call it that you're going to get on the sale of the CSX yard. 5 million to the PRPA with the following conditions: That the PRPA use that money to buy this land. And whatever's left over, CSX gets back. Because what we're finding out from the appraisers of the PRPA, for example, the Whiskey Yard, they pegged at a $135,000 an acre. The appraiser for the PRPA says it's $48,000 an acre. So this deal could be worth even a lot less than the $5 million moral commitment. So I said yesterday, sign off on that. " I don't care who owns it. Go buy it. They'll condemn it if they have to, if they have the funds to pay for it. 5 million. And if it's million, you get back a million and a 6 half. You know, there's an old saying, "Bulls and bears will make money. " In this case, everybody wants to be a pig except the PRPA. And the overriding interest here should be the citizens of Philadelphia and the Philadelphia economy, which includes the port. Now, that deal can be signed in 30 seconds. It's not contingent on appraisals. 5 million. 5 million will be found by me.

But it's not going to be that much. " All right. " "Well, wait a minute. It's not worth 92 12/10/02 - RULES - BILL 020738 that much. It's worth $50,000 an acre," back and forth. But that's the way to resolve this. That letter comes from Mr. Primavera to the port's counsel, Peter Tucci, this afternoon. Signed, sealed, delivered. Deal done. Everything over. And God bless them. 5. And let the developers make what they're going to make. And let Ikea make what it's going to make. But protect the port, the non-sexy item. That's the crux of the deal. I found a way to do it quickly, because anything else, if we're going to wait for agreements of sales and everything else, we need appraisals. End of story. Give them that B Fund, which I don't think Conrail ever wants to part with, but they should be made to part with. And they should be made by you. They should be made by the Administration to part with that money. And they also add in the extra money. And guess what? We're buying it back from them. It isn't going anywhere else. It's a big circle, but it short circuits the bullshit, if you pardon my words. The BS, whatever. 93 12/10/02 - RULES - BILL 020738 And I've been good so far. You know that. Don't laugh at me, Ortiz. It short circuits that whole operation, and it gets the deal done in time. And everybody can walk away from this happy, without all this aggravation. But that's what it means to be committed versus what it means to be supportive. That's the crux of the issue. We wind up with jobs in commercial and much better paying jobs at the port. We take care of the port, which has been our good friend for so many years, and we wind up adding jobs and Conrail gets more tonnage. And CSX and Conrail gets back the money they're giving us. I mean, it's a shell game. And it's really starting to tick me off because it's so simple to solve. But no. Nobody wants to devote the time. Nobody wants to have the courage to stand up to the PR. And I thank the Councilman for doing that. I think it's very important. And I think it's very important for District Councilmen to be able to serve their districts. I'm appalled at what Councilman Longstreth did. But that's the way to solve it. And I'm now ready for any questions. 94 12/10/02 - RULES - BILL 020738 Do you agree, Billy? REPRESENTATIVE KELLER: Yes.

Let the record show that State Representative Keller is at the table with Senator Fumo and is also available to answer any questions. Are there any questions for either of the gentlemen at the table? Representative, do you have testimony to offer? SENATOR FUMO: He's going to come back on the strategic port issue and some of the others.

That's fine. Any questions for the Senator? (No response.) SENATOR FUMO: Well, that's either very good or very bad. We'll wait and see.

Councilman O'Neill.

I just have a question. Senator, you mentioned Pat Gillespie being at the meetings and being very supportive of what you were trying to accomplish -- what the port was trying to accomplish, what you were trying to help them accomplish. 95 12/10/02 - RULES - BILL 020738 SENATOR FUMO: Well, reluctantly. He didn't go there with that. His eyes were as opened as mine were at that meeting.

Do they have a position on this at this point? SENATOR FUMO: The port -- CSX?

No. Pat Gillespie. SENATOR FUMO: Oh, no, I haven't heard from them. The latest I've heard from CSX is, "We will use some of the $5 million, but only as credits against our own property." Now, nowhere in that agreement did it say that it had to be used as credits against their own property, because, obviously, Kvaerner was not a credit against their own property. Now they're trying to rewrite history. The issue is, here they want to be -- and I hate to say it -- but they want to be pigs. They want to hold onto the 5 million they promised to citizens of the Commonwealth to spend here, and they want to take every nickel they can out of the profits of CSX because they think they're in the front of the bandwagon. And I think it's time for everybody to stand up to them and everybody else to 96 12/10/02 - RULES - BILL 020738 say, "We all want to do what's right. We want to do everything that's right, and the port should not be forgotten."

I appreciate your conservatism on the evaluation upgrade of the land between the buyer and the re-seller -- SENATOR FUMO: Yeah. I wasn't allowed to call it profit either.

-- between the CSX and the other -- whoever moves the property. I believe the $13 million is -- not a fraction, but a much smaller part of that based on things that have been told to me by pretty reliable sources. And I think this can be done tonight -- I mean, you know, if we come back here tomorrow. We're not talking about somebody saying, "You're going to get $60 million; we want $50 of it." SENATOR FUMO: Right. And we're not talking about anything that requires appraisals, any kind of study or anything else. It's CSX stepping up -- I don't even require Conrail. Because if Conrail says, "Well, I want more than that per acre," good. The condemnation proceeding will take care of the value of that land. But it will be paid 97 12/10/02 - RULES - BILL 020738 for with CSX's profit, part of their profit, a little bit of their profit.

I think that's the way to go. SENATOR FUMO: Thank you.

Thank you very much. Any other questions?

Mr. Chairman.

Councilman Nutter.

Thank you. Two questions. One, Mr. Chairman, a question of you, whether you know or not. Do we know whether there are any CSX representatives with us today?

Yes, there is. They are not scheduled to testify, but the opportunity is there.

I'll be intrigued to ask them a couple questions. One question for Senator Fumo. From your perspective -- and thank you for the presentation. What is the status as you've laid things out, who could do what, how it could get done, discussions, meetings, some public, some private, however it all shakes out, from your 98 12/10/02 - RULES - BILL 020738 perspective, I mean, what is the status of all of it? SENATOR FUMO: The status is I'm waiting to hear back from CSX and, I guess, Mr. Primavera regarding the proposal that I've made. What I tried to do in framing the proposal was to limit it to as few players as possible so I don't have to get a run-around with this guy and that guy and to make it with a minimal pain to CSX. And I don't think that -- first of all, I think they're obligated to spend the B Fund and they ought to stop playing around with it. And secondly, I think $2.5 million out of a conservative profit of $13 million is not a lot of money for them to put up. I also told them that if they didn't do this deal, I would urge Councilman DiCicco not to let this bill be amended and keep it the way it is. And come February, we'll find enough money for the port to go condemn the whole site for 6.5 million, as far as CSX is concerned. And then maybe they'll do a deal with Ikea, and they can make the profit, which is not a bad idea either. I don't know why we're allowing CSX to make this kind of a profit. But if they're going to make that kind of profit, 99 12/10/02 - RULES - BILL 020738 they ought to be good corporative citizens and protect the port.

Thank you, Senator. Mr. Chairman, you may recall from the earlier testimony -- and if you could possibly get us some score cards because I'm having a little trouble keeping track of some of the players. Do I understand from the earlier testimony that Mr. Primavera represents CSX and the developer and Ikea? Is that the situation?

That's my understanding. SENATOR FUMO: And morally, Pennsport.

Well, I'm just trying to understand who represents who. SENATOR FUMO: Thank you.

Thank you, Senator.

Is that it?

Yes.

Okay. Thank you. The Chair now asks State Representative Keller along with Mr. Candelaria, who's the president of Local 1291 of the ILA, to give joint testimony. 100 12/10/02 - RULES - BILL 020738 Good afternoon, gentlemen? Please identify yourselves for the record. REPRESENTATIVE KELLER: I'm Bill 5 Keller, State Representative of the 184th District.

Good afternoon. I'm Sal Candelaria, President of International Longshoremen's Association, Local 1291.

Thank you. Please proceed. REPRESENTATIVE KELLER: Thank you, Mr. Chairman. It's good talking to you today. Madam President, fellow Councilmembers, I'm here today because I think I've been getting as many faxes and e-mails as all of you have. And just -- I know we had some great testimony here, but just to set it straight, I don't believe anybody, myself included, nor the ILA, probably any elected officials are against Ikea. I think we all understand that Ikea should come to Philadelphia, and we welcome them into South Philadelphia. Just to highlight that, I went to the Whitman Council meeting when Mr. Smith made a presentation. And not that I don't trust them, but after he gave the testimony, I did a James Carvell 101 12/10/02 - RULES - BILL 020738 and drove out to Ikea, just to talk to some of the employees out there. " She also said she has 13 a 401K that the company contributes to. And she was 14 trying to get ahead and she took three college courses, and when she completed them, they gave her a tuition reimbursement. I believe that's the kind of corporate citizens we want in Philadelphia and we want in South Philadelphia. So those 400 jobs will be very important to us. It was never about Ikea or trying to keep Ikea out of our neighborhoods. What it was about, it was about the port. And myself and Sal, you know, we're longshoremen, so we think the port is very important. The jobs -- you know, I worked 102 12/10/02 - RULES - BILL 020738 down the waterfront for years. Sal and I are the only guys who took jobs that paid less than the current workers are getting down the waterfront. They're good jobs. They're the jobs that we should have in the neighborhoods. This is one way for port expansion. As the Senator said, we were lucky enough to be designated a strategic port. A strategic port in this day and age is very important. What that is, is if the military goes to deployment, they'll come through the Port of the Philadelphia. There are only ports in the United 14 States designated as strategic ports. And with the great work of the Philadelphia Regional Port Authority and Jamie McDermott and their board, we worked for three years and we got that designation. That is very important to Philadelphia. That is one step in how we're going to get the port back to the position it should be. And why it's important, it's not just for the deployment of the troops that come through, but in Susquehanna, right outside Harrisburg, the military has -- the Defense Logistics Agency has a depot out there. The largest shipper in the world 103 12/10/02 - RULES - BILL 020738 is the Department of Defense. Half of everything they ship comes from Susquehanna. All right. Eighty-five percent of that goes through ports. Zero percent of that goes through the Port of Philadelphia. Now that we've been designated as a strategic port, our plan is to go get that cargo. And that's sustainable cargo. That's every day we will be getting that. And that's why it's very important that we do this. Along with the strategic port, there is a Port Readiness Committee which had its first meeting yesterday. And what they have to guarantee -- and even if the Port Authority or the stevedore says, you know, "We're busy today. " They come down and they'll federalize the port. They'll take the port over. So, you know, I mean, it's real stuff. At that Port Readiness Committee, they said, "What we'll need if we deploy is 2,000 feet of bulkhead space and 35 acres of lay-down space for the tanks and the military equipment. As you can see, that addition of that additional property will be very important to us as a strategic port. And that's why it's important that the port is 104 12/10/02 - RULES - BILL 020738 considered and we get that property. As far as an economic engine, as the Senator said, it's not very sexy, the port.

And people go down to look at the port and help the port and they always come back with an eye missing or an arm missing. So not too many people want to go down and help us. But it is a real good economic engine. It provides real jobs. Sal will tell you that -- what are we getting paid now, $25 an hour?

$27 on master contracts, but $21.70 -- REPRESENTATIVE KELLER: $27 an hour is what you get paid, plus benefits. So they're real jobs. And I sit every day and I watch in the papers where it is important to the City that the Convention Center is always on the front page, about how important it is and it's an economic engine for the City. And I believe that the port is more of an important economic engine. If we have to get some publicity because they're always fighting over at the Convention Center, me and Sal will fight here today if that help will us get the port some notice. But that's what's really important to us. And it's one of the few times, it's one 105 12/10/02 - RULES - BILL 020738 of the rare few times -- and you hear the cliche all the time, it'll be a win/win/win situation. When we get this done -- and I do believe we will get this done because it has to get done, you know, the neighborhoods are winning, our districts are winning, because they are 400 to 500 hundred good jobs. And that's good. And the City will win because we'll be collecting tax revenues, hopefully, from people from New Jersey for a change. And that's good for the City. The port will definitely win because that's what we need. We need to get on the map. We need people to consider how important the port is. And for the strategic port, that will really help us. Of course, the railroads will win also. Because, as we've said, they'll make a nice profit, which I'm not against profit. So this is the one time where it is truly a win/win/win situation. If we stay together and stay on the track we're on now, I do believe that the negotiation, although they've been going on -- we've been talking for 14 months, but I believe the negotiations really have only been a couple weeks old. And I think we'll get where we have to be. 106 12/10/02 - RULES - BILL 020738 However, just to let you know, and I'm sure everybody will appreciate this, there will be one loser in this. I bet Henry Bryant from the Inquirer that we would get this done. I bet him a quarter. So everybody will happy that the Philadelphia Inquirer Editorial Board will lose on this. And I want that quarter. I don't care if it's illegal.

Thank you very much for your testimony. And may I publicly state that I also thank you for all the work you've done over your career, both with this issue and the port. And also the dredging stuff that you've been involved in, in making this port a federal facility, and just kind of turning around this port around and bringing it back, with your cooperation, with labor and your understanding and knowledge of the port from your experience down there, so I think it's -- you've served that part of the City and the whole City well, the people who work there, and hopefully we'll have a great future. REPRESENTATIVE KELLER: Thank you, Mr. Chairman. And just as an added note, this may be a stretch, but I believe this could go -- if we get 107 12/10/02 - RULES - BILL 020738 this property, 122 and 124, this could go a long way in solving our dredging problem, because the dredge material we need to fill it in, instead of paying $90 a cubic yard or whatever, some outrageous price they cost, we could just pump it right in there. That's how Packer Avenue was made. That's all from dredge material from the river. So we could just extend that and that would be an added benefit.

Council President Verna.

I'm just rather curious, exactly where are Piers 122 and 124 located? REPRESENTATIVE KELLER: It is as far down south as you can get on Delaware Avenue. The point that you see sticking out above Pier 124 is the Navy Yard.

Is what, the Navy Yard? REPRESENTATIVE KELLER: The Navy Yard. That's the naval homes -- see those homes on the right hand side? That's the homes that are down the Navy Yard. So it's at the southern tip of Delaware Avenue. 108 12/10/02 - RULES - BILL 020738 Madam President, that's your district, isn't it?

Yes. And it's properly zoned. Thank you.

Councilman DiCicco.

I just was actually -- two things. One, thank you, Representative Keller, for coming here today. And my earlier remark, when I said recently you got involved, was only referencing the three meetings that have taken place between PRPA, Senator Fumo and myself, CSX and the developer. The first two meetings you were out of town or not available, but you were available for the conference call meeting yesterday, and I want to thank you for that and thank you for your testimony. And again, just to set the record straight, Senator Fumo, I think, misunderstood the boundaries, because as a Senator he represents everything you see on that map. The district that I represent basically ends at the southern end of the CSX yard. The green, the yellow, the purple and the reddish savage yard are all in Council President Verna's district. But they're not an issue as to zoning. That's why it's not been as involved as it 109 12/10/02 - RULES - BILL 020738 is today. REPRESENTATIVE KELLER: Not yet.

Mr. Candelaria, would you please add your comments?

All right. Again, good afternoon, everyone. First off, I'd like to start out by saying, not only do I support Ikea done the proper way, I'm a customer of Ikea. Every piece of furniture -- I eat on an Ikea table, my coffee table. And only due to the fact that -- Frank, you're also my neighbor, not only my Councilman -- I can't get any pre-built furniture in my house, so I have to bring it up in the boxes and assemble it. And listen, I could save the trip to Plymouth Meeting if it's here. But with all that said, I don't want Ikea here if it's going to cause us -- let me rephrase that. I believe that it's a win/win situation, like State Rep. Keller said. I commend you and I thank you for this process. Because I believe that this may be the mechanism that we need to achieve our ultimate objectives, and that's to serve the port in the best way possible. I work in tandem with State Rep. Keller 110 12/10/02 - RULES - BILL 020738 and anyone else who wants to assist the ILA in turning this port around. So as a novice at these type of hearings, I came in a little cold. But I'm going to spend some more time around, so I can learn a little better. And I heard some different things -- testimonies this morning, and I like the idea of -- I want both without a doubt. I'd rather have that land there. That's more conducive to my memberships' needs and the thousands of retirees that I still have in the City of Philadelphia in all of your districts. They didn't go anywhere. They're still around. Those old longshoremen live a long age. But I am supportive -- I am in agreement with having something a little more concrete to assure us that we'll get the land, as Representative Keller said, that's needed for us to obtain what we have to do. I would like to see that deal done this afternoon, if possible, that I was not aware of. But I am supportive of Ikea. And I want that other land because that's more beneficial to my membership. And I had an executive board meeting yesterday via phone. And our position is that, if 111 12/10/02 - RULES - BILL 020738 we could work out the particulars, we would like to see Ikea come, but the right way. And I credit you with -- for the possibilities of finalizing this deal, because I'm sure that this brought the attention to a lot of people. And if they don't want to give us that land for the port, I'll put it on record, I will oppose Ikea. And that's the only way I would oppose it. And I do represent, for the record, Whitman, Pennsport, along with my dear friends who do that. Because that's where my membership lives and that's where I grew up. And I'll always be supportive of that port community. I thank you for your time.

Thank you very much. Any questions for these witnesses? Councilman Nutter.

None for these witnesses, Mr. Chairman. I have one for Mr. Cuorato, but I'll wait.

Thank you for coming in and thank you for your testimony.

Thank you.

Next on the list is 112 12/10/02 - RULES - BILL 020738 James T. McDermott, Philadelphia Regional Port Authority.

Thank you, Mr. Chairman, Madam President, Councilmembers. I greatly appreciate this opportunity to address the Council on this. There has been so many misstatements --

Jim, I'm sorry. You have to formally identify yourself for the record.

I'm sorry. My name is James Thomas McDermott, Junior. I'm the Executive Director of the Philadelphia Regional Port Authority. I am going to ask that my recorded statement be put into the record. But because of all that has been said, a lot of what I was going to say in my recorded testimony has been said. I just want to take a minute and give everybody -- because you've heard the name PRPA thrown around all morning, and I just want to make sure that everybody here understands exactly what it is that we're talking about. In 1989, the State of Pennsylvania, at Senator Fumo's urging, stepped in and purchased the holdings of what we all knew to be the Philadelphia 113 12/10/02 - RULES - BILL 020738 Port Corporation. The Philadelphia Port Corporation, a lot of those finger piers that I'm going to identify for you on that map had shut down. The infrastructure had been let go. The dollars weren't there to continually support the upkeep of the marine terminals. The Commonwealth purchased for $57 million those facilities that primarily are there. The only two facilities that are not in that photo that the Philadelphia Regional Port Authority owns are Piers 38 and 40, which are just a little north of Washington Avenue, and a 107-acre facility up off of Allegheny Avenue, which is the Tioga Marine Terminal. That's where all the fruit comes all winter that we all enjoy so much. But in 1989 in the agreement of sale, the Commonwealth was given, vis-a-vis the Philadelphia Regional Port Authority, specific powers, because these kinds of issues were contemplated even back then. And so we have -- at least our Council tells us we have -- and I have copies. Which I'll submit with my testimony, of the statutes, the relevant statutes, which tells us that we have zoning supersession rights in what we will 114 12/10/02 - RULES - BILL 020738 call the Port District. And certainly Councilman DiCicco, what we're talking about here today is in the Port District. That's east of I-95 and along the Delaware River there. We also were told by our Council, Reed Smith, that we also could step in and take this land in a condemnation proceeding. Both of those concepts are costly, time consuming and expensive. And we're not about any of that. And, in fact, this is our proposal, no 11 one else's but the Philadelphia Regional Port Authority's proposal. We submitted this to the City of Philadelphia. We said to them, we want Ikea here. We want the other stores here. We want that area to be so designated. However, in exchange for us giving up our rights of using that land some day in the future, for the lay down of vehicles or the lay down of military equipment that will go off of Packer Avenue, we needed some consideration from CSX. The facilities that we're talking about right there starting in the yellow, Pier 124 has been abandoned by CSX for over 20 years. That facility has not handled a ship nor moved cargo in over 20 years. We have done preliminary --

Is that the pier 115 12/10/02 - RULES - BILL 020738 that the State invested a substantial sum of money in?

That's the next pier, 122.

Okay. Thank you. I didn't mean to interrupt you. Sorry.

8 million. 8 million. That facility has not been dredged in years. There's probably four or 19 five feet of water there at low tide. It's 20 virtually a useless pier that has sat abandoned. The next piece of property that I want to speak to is 122. And Councilman, that's what you're referring to. Delaware River Stevedores, President Bob Polima (ph), which leases our Tioga Marine Terminal, has a, I believe, a month-to-month 116 12/10/02 - RULES - BILL 020738 lease on that facility. And that facility had also been closed for many years. The Delaware River Port Authority gave money, over a million dollars, I believe the figure is, a million and a half dollars, to dredge that facility, as well as to repair some of the infrastructure on that facility so that that pier put could be back to work. I'm very proud to say that we're marketing that facility and that facility is back to work and, thanks to public dollars DRS, is working ships there. The next piece of property also in green is what we call the Loop Track. And we need ownership of that land to lay down the bulk product that 122 discharges and needs acreage to lay down. That's approximately, I believe, acres of land 17 there. Once again, there is some leases on that 18 area. You can see those white circles there. There 19 are tanks there. Apparently, Agway was there for many years working and now there's another tenant of the railroads there. We are not about interrupting Delaware River Stevedores' lease. We're not about interrupting the leases of working businesses in the Loop Track. We will assume those businesses, welcome them and, hopefully, they'll become port 117 12/10/02 - RULES - BILL 020738 users. The next piece of property has been abandoned for approximately years. That's the 5 site in purple. It's known as the -- we call it the 6 Whiskey Yard because at one time it was the rail 7 access in and out of the old Pub Liquor site, which 8 is to the left of the Walt Whitman Bridge. 8 acres. 10 As Representative Keller testified, now 11 that we are deemed a strategic military port, that 12 land is perfect lay-down space for either containers 13 that are existing on Packer Avenue now and will need 14 a new place when the military uses Packer Avenue, or 15 to lay the military equipment down or, finally, to 16 extend our Poshelot (ph), which is on the south side 17 of Delaware and Oregon Avenue, and somehow attach 18 that property to that, and get that magic hundred 19 acres that we've all been talking about. 20 The acreage in the red is -- we call the Savage Industry's acreage. It is unused land owned by the railroad that's been leased to an entity called Savage Industries. The railroad has stepped up to the plate and is trying to have some conversations with Savage to see if, in fact, they 118 12/10/02 - RULES - BILL 020738 would sublease that land to us. That's acres of land. We would extend the Poshelot (ph) going west along the north side of the Walt Whitman Bridge and, once again, add another very valuable acres of 6 land. 7 Let me just step back a minute and show 8 you what we do own down there. I think that's 9 important, that we're not a fly-by-nighter here. I 10 mean, this is real land, 5,000 jobs, $340 million in 11 business revenue and over $25 million paid in state 12 and local taxes on the acreage and lands and businesses that work off these facilities. We're what's called in the port business, a landlord port. That means that the 82 employees of the Philadelphia Regional Port Authority don't operate our facilities. We lease them out to different terminal operators. And if I could, just for a minute -- because I think it's important that you understand the proximity of this Snyder Avenue yard to the port. In the picture that was previously up with the big red box, I just want to point out, that's a ship across Delaware Avenue. And there are four ships. You can see the bow of the ship, 119 12/10/02 - RULES - BILL 020738 the SS United States.

That is a vessel. That is a ship. And on the left-hand side of that, every week is another ship. On both sides of the next pier, to the right of the SS United States, are two ships a week. That warehouse right there, the large one, Bob, the new paper warehouse, point that out. That's a PRPA facility that moves -- rail cars go into that facility and take huge roles of paper out of there. That's an active paper plant across the street right to the right of the Snyder Avenue yard. I just wanted to point out what we're talking about here in terms of proximity to trucks and rail. Once again, the jewel of our facilities, as Representative Keller said, the Packer Avenue Marine Terminal, 107 acres leased to cargo systems. It's a multi-purpose facility. It handles containers. It's got freezer capacity, refrigeration capacity, and it's capable of working six ships at a time. This summer on a weekly basis there were five vessels being discharged there weekly. Moving north, going underneath the Walt Whitman Bridge, that's the old Pub Liquor site there. That site is approximately 75 acres -- 120 12/10/02 - RULES - BILL 020738 By the way, Packer Avenue is at capacity. There is no room at Packer Avenue for a new customer right now. And we've just signed a contract with the military to guarantee them 35 acres and 2,000 feet of berth space. Pub Liquor site: Steel, slab steel, mattress-sized pieces of steel are discharged at Packer Avenue by longshoremen, and Teamsters truck those slabs over to that site. And that site, if you went down there today, is piled eight high. It's got rail access into the facility and is owned by our terminal operator at Packer Avenue, the Holt family. We ultimately intend to expand Packer Avenue that way, as well as Representative Keller said, to the south to cover in 122 and 124. Moving north, we own Pier 98, which was built by the Army Corp of Engineers pre- 1918, served both world war efforts and currently cannot handle a ship because of the decrepit nature of its aprons. However, the buildings are used as a maintenance and repair shop that support the Packer Avenue Marine Terminal. Once again, moving north, Pier 96. That's the automobile terminal. A ship goes on the 121 12/10/02 - RULES - BILL 020738 south side of that facility and discharges automobiles into the Poshelot (ph), which we own, which is the 57 acres that currently discharges overflow vessels from Wilmington, primarily a lot of Volkswagens. If you go down there, you'll see Volkswagens and Fords. The reason that this yard became initially cantankerous with us, the CSX yard, is Volkswagen is going to leave Wilmington. They've made that announcement. We intend to bid on that work. We need a hundred acres minimum to be able to attract Volkswagen to Philadelphia. And that's why we thought that Snyder Avenue yard was so very important initially. The next pier is Pier 92. It's the old Southwark PECO Power Station.

Jim, can I interrupt you just for a moment? As I understand your testimony, prior to the promotion of this particular resolution to the problem, there was a possibility for the use of the CSX yard for the overflow capacity of the Poshelot (ph) facility?

Respectfully, Councilman, we intended to add that land as if it 122 12/10/02 - RULES - BILL 020738 was ours.

So prior testimony, that that particular land is useless to port interests is not accurate --

That's not accurate.

In your opinion?

That's correct. And I would particularly emphasize now, as a strategic military port with our first orders for January 4th, we need land.

Thank you.

So let me keep moving here. I apologize if I'm taking too long. The next pier is Pier 84. When the City owned it, it was abandoned. We put it back to work. It's a Teamster operation. It's leased to dependable distribution. It moves cocoa beans. Approximately vessels a year can comes through 20 that facility. And all the candy bars that M & M 21 and Mars make come through that facility. The 22 cocoa beans are trucked and railed up to upstate 23 Pennsylvania. 24 Pier 82. A weekly banana service, an entity called Banacol (ph), we lease that facility, 123 12/10/02 - RULES - BILL 020738 which you can see now we're directly across the street from where we're talking about. We lease that to Horizon Stevedore, Inc. There's 52 vessels a year at that facility. Every Monday and Tuesday the vessels are discharged in the refrigerated warehouse base and then trucked or railed out of that facility to the supermarkets. Pier 78 and 80, I'll combine them. And the new paper warehouse there -- that's what we call it, the new paper warehouse. That's our forests products center. That handles two vessels a week, 52 weeks a year. And it's huge roles of paper that get trucked and railed out of that facility. As I indicated, we own Pier 38 and 40, which is essentially across from old Swede's Church. They take scrap paper every week out of Philadelphia and take it back over to Finland to make the finished paper products. These are 5,000 real jobs; longshoremen, Teamsters, machinists, boilermakers every day going to work with guaranteed 40-hour-a-week pay, a lot of overtime in our winter months. So these are jobs. These are real. We can touch them. You saw their president here today. I say all that to you to tell you that 124 12/10/02 - RULES - BILL 020738 we're not opposed to Ikea, not in the least. But I heard someone say on a Sunday talk show on the TV the other day that this can be the new King of Prussia. King of Prussia doesn't have thousand-foot vessels across the street from it. It doesn't have the railroad going right by that very site on the Philadelphia belt line. So that's the situation that we're facing. And I want to thank Councilman DiCicco and state emphatically that we need this to be the two-step process that you suggest. Because we've had a lot of happy talk, a lot of positive meetings. But I went down there 14 months ago and told them when this went up for sale that we were going to be here. This day was going to come unless they dealt with us and dealt with us reasonably. We left them the law. We notified everybody we had to notify. And all we were told was, we didn't think you guys -- we didn't understand whether you were the DRPA or the PRPA or what it is that you guys do. I think that we have put forward a very reasonable solution. You heard Senator Fumo on the costs. We have retained and are moving forward with Keystone 125 12/10/02 - RULES - BILL 020738 Appraisals. Harvey Levin is the principal there. I understand he does a lot of City work. 5 million. He says Pier 122 and Pier 124 have a negative value. And we are busily working on the Savage Yard site, as well as the other lands, to try to come up with a fair market value. Understand that for us, fair market value isn't giving the Port Authority anything for giving up its rights. We have, according to Reed Smith and according to our statute, the right to take this land today at fair market value. I'm not going to say you can do that overnight. I'm not going to say that's free or that's not a lot of cost involved and we haven't been fighting. And I'll close by saying this: I was the executive director nine years ago when we traded 55 acres that Councilman Kenney talked about earlier today. 5. There was a second component to that. We were told, What are you worried about? We're going to get the Navy Yard. " There is 126 12/10/02 - RULES - BILL 020738 water-borne capabilities at the Navy Yard. The Navy wisely kept it all.

Every job opportunity and business opportunity that we think makes sense and we send over to PIDC is flatly rejected. So there is no 7 more land, as we were promised eight years ago. We were promised this would never happen again. We took that as gentlemen and now it's happening again. And we're not objecting because it is in the best interest of the City. It is the highest and best use of that land. We want that there. But we need the accommodations and the help of this Council. This isn't winks and nods and hope that this is going to happen. Not like last time. This time we need your help. And Councilman DiCicco has helped us by the bill he has put forward. What leverage would I have? I wouldn't be sitting here today probably boring some of you if Councilman Longstreth's 44 acres are going in. Ball game over. I've got to move and try to condemn that land. And we've had that land appraised. 75 million in its current zoning. I'll stand with 127 12/10/02 - RULES - BILL 020738 Keystone and the way they determined that. So we ask you for your help today. I acknowledge Senator Fumo and I acknowledge Representative Keller and all the help that they are to this port each and every day. And Councilman DiCicco, I thank you very much for this opportunity today.

Thank you, Jim. I appreciate your testimony. And I think one of the important parts or one of the overall macro issues in your testimony is the explanation to the press and to Members of Council and to the public at large that the port exists and it's important. And, again, we'll reiterate the other theme, that's it's not necessarily sexy. But it is well-paying jobs that really make this region an important hub for economic development and commerce. I don't think some -- a lot of times that's not understood or appreciated. And, again, I think what you're saying to us is, we don't mind the encouraging of retail and commercial. We think things like this are inevitable and good for the City, but just keep us whole and allow us to compete.

That's correct. And I'll also point out why these lands -- even though 128 12/10/02 - RULES - BILL 020738 there may be environmental concerns, the land south of the Walt Whitman Bridge are important to us primarily because these vessels are getting larger and larger. And in our lifetimes, the Walt Whitman Bridge will be an impediment to the container ships and to a lot of the different types of vessels that we see. Already, the Ben Franklin standing at 135 feet is a -- container ships can no longer go to Tioga.

Unless we get dredging.

Well, that might help. This is an air draft --

Okay. So dredging is not an issue?

No, it's not a dredging issue.

Okay. Thank you. Councilman O'Neill.

Yes. A couple questions for Mr. McDermott. Two questions I have. One, when Keystone did the appraisal that you just referred to at the end of your testimony, did Keystone do any appraisal on the 129 12/10/02 - RULES - BILL 020738 valuation for highest and best use?

I don't believe so. If I could just affirm. I don't believe so.

It was determined that that was highest and best use. Industrial.

But they didn't do any appraisal for commercial?

For commercial purposes, no. 11

And you've been in all the meetings that have been referred to that some people have been in and other people haven't been in for 14 months. Do you think that if it becomes clear to all the parties, as I think it will be if it isn't already, that this bill is not going to come out of City Council without the port being at the table signing off on it that this could be done in 24, if not a few more than hours? 20

That's correct. I 21 believe the deal that Senator Fumo put on the table 22 and put on the table a couple of different times in 23 meetings is a deal I can sell to my board. Let me 24 explain --

That's the deal -- 130 12/10/02 - RULES - BILL 020738 I want to make clarities. I've talked to you and others on this in the past several weeks. The deal isn't the Fumo deal or the Senator Fumo deal or Vince's deal. This is a deal that he learned about at a meeting he alluded to in his testimony that the port has been trying to effectuate for some time.

That's correct.

I don't want this tied up and confused.

No, I understand. At Representative Keller's urging this summer, we put a master plan together for the port knowing that this was going to be an issue. This was an in-house plan done by our Strategic Planning Department on how we can take care of the port for the next hundred years and also allow good solid retail to go into the Snyder Avenue yard.

Thank you. I think you guys have been very nice at the port. I think your demands are very low. And I would hope within a very short period of time, meaning between now and Thursday morning, we can get this thing resolved.

Thank you very much. 131 12/10/02 - RULES - BILL 020738 Councilman Ortiz.

Mr. McDermott, I think we had a much longer debate when we had the 55-acre lot being put forward in this Council. And, actually, we had a much longer Council meeting because it went into the evening in terms of the proposed Wal-Mart, Home Depot boxes that were going to go in there. Some of you remember that I was very vehement because I thought it was a bad deal for the City. It was, I think, prime real estate riverfront land that could have been utilized. I think Wal-Mart and Home Depot can probably go any place across the City. But I remember those promises that were made at that point and we argued very vehemently for that. It surprises me that none of those things have been kept. But for matter of clarification, I think it is good to remember the way things were done prior before we take this issue.

Thank you.

Councilman Clarke.

Thank you, Mr. Chairman. Good afternoon, Mr. McDermott.

Councilman. 132 12/10/02 - RULES - BILL 020738

Mr. McDermott, first of all -- and I guess I should have asked this earlier when the Senator was here, but as I keep hearing reference to a particular deal that's on the table, I guess my question is -- and I know my colleague, Councilman DiCicco, has been involved throughout the process. Not being very knowledgeable of the port beyond maybe going to Dave and Buster's, I think the closest thing I have to a port in my district is Boat House Row. I'm getting a lot of knowledge today. Is there anything in writing that lays out the scenario that's before some of the individuals because it's -- in a brief presentation, it's somewhat difficult for a person who's not familiar with the site and hasn't participated in the various discussions what the actual, quote/unquote, deal would be, at least with respect to some of the individuals involved in the process.

Yes, sir. We gave to the City of Philadelphia at some point, I guess in September, six requests that the Port Authority had as it pertained to Snyder Avenue. This morning, I've only spoken to the rail components because I 133 12/10/02 - RULES - BILL 020738 want to echo Jim Cuorato and tell you that he has been very up front with us. There is a role that the City is going to have to play in this, and I trust that he is moving in that direction. That was in reference to the old Delaware Avenue -- the service yard. So, yes, we have put this in writing. This has been in Ikea's hands, CSX's hands, everyone's hands for -- since September.

Jim, Council President requests if we could get a copy of that at this point. If you have any personal notes -- I think there's some personal notes on the back of there.

Does it reference the different locations, the Whiskey Site --

Yes, it does. I'll read just the headings. Expand the Packer Avenue --

You don't have to read it. If you could just provide a copy of it during the course of the deliberations here.

I have some notes on the back of that. It's the only one I have, but --

Can we just make copies of this? And I assure you the back will 134 12/10/02 - RULES - BILL 020738 not be copied.

Sure.

Not having a lot of knowledge about the port's -- with respect to your organization, I think I may have heard of it from time to time, but I'm not very familiar with it. I'm trying to get a sense of -- I understand the creation of the organization. And, subsequently, the organization was able to acquire land through what process? Because during your testimony you referenced the fact that you either helped develop or lease various portions of the port. How did you become title holder to the properties in question, just to familiarize myself with the organization?

In 1989 the State -- the Commonwealth of Pennsylvania purchased the holdings of the Philadelphia Port Corporation, which I understand to have been a City agency that was the manager for the City of these different marine terminals that I've just outlined. I believe the purchase price was $57 million. The agreement of sale is probably 12 inches thick. It's a leather bound book. And since then, the Authority has approximately put a $100 million of state capital 135 12/10/02 - RULES - BILL 020738 dollars into these different facilities. These are essentially, in our business, these finger piers that you see are antiquated. They're yesterday's news. And our ultimate plan is to ultimately have Philadelphia have three or four super terminals similar to Packer Avenue and ultimately do away with those finger piers and marginalize the berthing and then fill in behind them. And as Representative Keller said, we're trying to do this in consistency and with, hopefully, the dredging of the Delaware River from 40 to 45 feet.

Your ability to finance projects is solely depending on state capital assistance, or do you have the ability to leverage financing through bond proceeds or yourself?

We have done bond issues. We're currently refinancing a bond issue at the Port Authority. Governor-Elect Rendell has pledged an $88 million bond issue to the Philadelphia Regional Port Authority for a lot of these improvements we're talking about. We have the capability to take commercial loans. We've done that. But, Councilman, 90 percent has been relying 136 12/10/02 - RULES - BILL 020738 on the Capital Budget, which is the Legislature approving a budget and the Governor releasing the funds.

But you do have the wherewithal to maintain financing beyond that?

Yes, sir.

I don't know where the State's going to go. I know there are a lot of promises made during the course of the election, but we are all suffering from fiscal decisions that we have to make in the near future. So I'm just concerned as to whether or not you had the ability to finance projects beyond the State.

Yes.

Okay. Thank you. Thank you, Mr. Chairman.

Are there any other Members of the Committee that have questions before we go to other Councilmembers? Councilman Nutter.

Thank you, Mr. Chairman. You have made reference in your 137 12/10/02 - RULES - BILL 020738 testimony with regard to the issue -- and I'm reading from your testimony now on -- "That is why when this public discussion began, we thought it was prudent to alert all interested parties to our concern and remind them that we have the lawful authority to keep that area zoned for port industrial purposes." You had made reference to, I believe, having copies of the referenced statutes. Could you point my attention to that? And if you have an extra copy, I'd certainly like to have an opportunity to look at it. Thank you. Can you direct me to the appropriate citation?

Yes. I'll read, "Location of Port Facilities and Project."

Is this Section 19 21?

697.21. "The Authority may pursue its purposes and exercise its powers and authority under this Act to locate port facilities and port-related projects within the port zone, notwithstanding any zoning ordinance or regulation adopted or enacted by a 138 12/10/02 - RULES - BILL 020738 political subdivision under the authority of any statute or under the authority of any Home Rule Charter authorized and adopted under any statute or the Constitution of Pennsylvania."

What does that section mean to you?

That would mean to me that -- and I'm an attorney, but I don't practice law and I don't pretend to be an expert on this. But it would mean to me that if Council went and rezoned the 44 acres over our objection, that somehow we could override that Council action and petition for that 44 acres to remain in what I call the port industrial zoning that it's currently in.

Can you tell me based on the statute, what is designated as the port zone and is there -- I'm assuming there must be another provision in the statute that describes or lays out what the port zone is?

The port zone -- it runs from Bucks County to Delaware County and it's one mile going west from the river.

Is that 139 12/10/02 - RULES - BILL 020738 described in that particular statute as well?

If you don't mind, this is Bill McLaughlin, our Government Affairs Director.

Mr. McLaughlin, please identify yourself for the record.

I'm Bill McLaughlin. I'm the Government Relations Director for the Port Authority. The Act 50 of 1989 which created the Philadelphia Regional Port Authority mandated that we cooperate with the coastal zone management process and develop a port zone and file that with the Department of Environmental Protection. That zone is roughly -- and I can produce a map, Councilman, not today, but we can provide you with it. It's roughly from the top of Bucks County to the bottom of Delaware County and about a mile in from the river. And in that zone we're told we can exercise the prerogatives of the Act.

If you could provide to the Chair a copy of the appropriate section of the statute that you refer to which describes the, quote/unquote, port zone, I would 140 12/10/02 - RULES - BILL 020738 greatly appreciate it. Mr. McDermott, you've also made reference to legal advice that you've received from a particular law firm. Has that advice been reduced to writing?

Yes, it has.

Do you have a copy of it?

Of Reed Smith's opinion?

If that's what it is.

I do have a copy.

Are you in a position to --

Councilman, with all due respect, if I may check with the law firm to make sure I'm not violating any attorney/client privilege.

I understand. My question was going to be if you were at liberty to share it.

And if I am able to do that, I'll provide it to the Chair. 141 12/10/02 - RULES - BILL 020738

I would greatly appreciate it. Mr. Chairman, with your permission, I'd like to ask if there is, in fact, a representative from CSX in the audience, if that person could approach the table for a question.

This is Carl Primavera again, counsel for CSX.

Please identify yourself for the record.

My name is Kevin Hurley. I'm Assistant Vice President for CSX Real Property.

Is it Hurley?

Hurley.

H-U-R --

L-E-Y.

Mr. Hurley, you've had either the pleasure or the discomfort of hearing a lot of testimony, a lot of comments and a lot of discussion back and forth. Could you share with us, for the record, your views on the items that have been discussed from the various perspectives, whether it's the port 142 12/10/02 - RULES - BILL 020738 perspective or the City perspective, and now you represent, naturally, the CSX perspective matters? You're obviously an integral part of any of these projects going forward and play a central role in possibly resolving an item of very serious nature, but also serious dispute between and among a variety of parties. Can you tell us, for the record, where CSX is on all of these matters?

Well, I didn't come prepared to make a presentation.

Well, I understand that, but the way this works is, once you come on the field, you can always be called on to play. You're in the game.

Councilman, again, without risking the ire of the Chair, I am prepared to address these comments.

You risk it every day, Mr. Primavera. That isn't going to stop you.

I thought on the agenda that we were going to be next and we would make a formal presentation. I don't know 143 12/10/02 - RULES - BILL 020738 whether you would be willing to wait for that formal presentation or whether you have a specific question of Mr. Hurley. But I was going to, on behalf of CSX, since it's a large organization and Mr. Hurley doesn't own it, but I am authorized to speak on behalf of CSX and make a presentation. But if you would like to ask him a specific question, I won't interfere with that. But the presentation will be mine to make and then you can ask him specific questions off of that presentation.

I appreciate your accommodation in allowing me to ask the questions that I'd like to ask. I would like to ask Mr. Hurley the questions -- or at least the one question that I laid out to him. I understand that he may not own the company, but he is a representative. He's here in our Chambers. The Chairman, for whatever reason, has accommodated me the opportunity to ask the question, so I'd like to ask the question.

Okay. Your question isn't a simple one. It involves a great deal of history. Going back, I guess, to when CSX 144 12/10/02 - RULES - BILL 020738 acquired a portion of Conrail and was able then to invest in South Philadelphia in order to free up the property that's in question now for rezoning. CSX, at the time it acquired Conrail, made a pledge to the City and to the State to make investments in the State and the City relative to economic development, specifically rail-related economic development. In addition to that, they made a pledge to support the City's efforts at that time to attract Kvaerner Ship Yards to the City. That pledge was to provide financing in the amount of $2 million for five years to support the Kvaerner operation. We also agreed to provide -- or committed to make available a fund of $5 million that was to be used for rail-served economic development throughout the City. This was to be done on a project-by-project basis, projects submitted to CSX and then to the Governor's Action Council to determine whether they qualified for funding for that program. To date, no proposals have been made to CSX.

I'm sorry. How 145 12/10/02 - RULES - BILL 020738 long has that been?

It was since 1998.

Okay.

With regard to the specific issue at hand today, I think it's fair to say that we've been negotiating in good faith with the Port Authority since we received their -- it was referred to as a wish list, the items that they felt necessary to support the expansion of the port.

Now, is this specifically Piers 122 and 124; is that what you're talking about?

That's correct. In addition to the Whiskey Yard and what's referred to as the Savage Yard.

Mr. Hurley, I apologize. I did get your name down. What I did not get was, what is your position with the company?

Assistant Vice President.

For?

For CSX Real Property. 146 12/10/02 - RULES - BILL 020738 We act as agent for the transportation company in real estate matters.

I apologize. Go ahead.

And I think it's fair to say that since we received that --

And when did you receive that?

I think it was in the same time frame that Jamie McDermott referred to, around September.

Is this the 14 months?

No, no. This wish list, I'll refer to it since that's what it was referred to previously, was presented to us sometime in September. And we've been working since then with them to try to address some of these concerns. Given the fact that CSX does not own a great deal of the property that's of interest, and there are --

Say that again. Does not own? 147 12/10/02 - RULES - BILL 020738

CSX does not own a great deal of the property that is of interest to the port. We have a partial interest in it. It's less than 50 percent interest in most of the property.

Who is the other?

The other owner of Conrail is Norfolk Southern, and they have a majority interest in the properties that are owned by Conrail.

Point of information.

Point of information, Council DiCicco.

Are you speaking to your portion of an interest, Piers 122, 124, the Whiskey Yard and the Savage Yard? You said that CSX does not own all of those in its entirety?

That's correct.

You're not speaking to the CSX yard?

No. 25

CSX does own 148 12/10/02 - RULES - BILL 020738 that in its entirety?

We do.

That's approximately 44 acres?

Approximately, yes.

Thank you. Thank you.

Thank you, Councilman, because, you know, if you had not jumped in with that, Mr. Primavera would have jumped in to make sure that I was not confused about what Mr. Hurley had said. Not to be confused with Mr. Smith, who had had the previous confusion from the other discussion.

In this particular case, it is appropriate that Mr. Primavera is representing his client.

Oh, no question. For which he's said nothing so far. Mr. Hurley is doing a great job.

As long as the truth is available, I won't object. When we waiver from that, I feel the need to object. Thank you.

As deemed by Carl 149 12/10/02 - RULES - BILL 020738 Primavera. Mr. Hurley, please continue.

I think I need to point out when CSX made the commitment to the City and to the State to make an investment in South Philadelphia, we did just that by spending $20 million on a new intermodal yard. The intermodal yard that operated at the subject site was not an efficient operation and it wasn't large enough to support the intermodal business that was being generated by the port. We spent $20 million on a piece of property that we acquired through the Conrail acquisition in Greenwich Yard, which is just south of Oregon Avenue and just to the left of the area shown in green on that map. When we did that investment, we did it with the understanding that -- external understanding that it would be something that would be a benefit to the port, and I think to date it has been. We also believed that this would free up this property for a resale on our part so that we could recoup some of the investment that we did from the construction of the new intermodal yard. 150 12/10/02 - RULES - BILL 020738

Well, let me ask this question, Mr. Hurley. What is your perspective on the ability to make -- putting aside the various colors up on the map. I'm starting to get a sense that somewhere on that map represents an opportunity for all the various parties to get what they want, whether it's Ikea, Lowes, Best Buy, ILA, all the various parties. Their solution seems to be up on the map in the various colors. Your company is a central linchpin to all of that. What's your perspective on the opportunity to create, in the best use of the term, a deal that results in everyone getting what they want up here without some of the back and forth and the acrimony that goes with the current situation? How realistic is that?

I think it's realistic.

What's the time frame for that realism?

Well, I think this is a negotiated process and I can't really say when the negotiations stop.

From your perspective, they have started? 151 12/10/02 - RULES - BILL 020738

O, I think they've been ongoing.

Okay. Do you have any sense -- one of the parties at least has established what sounds like a fairly firm deadline for what they'd like to get done in their part of the process. Do you have any such deadline for the rest of the process?

I'm not sure which deadline you're referring to.

I think we've been told, at least on the 44-acre site that you own outright, and whether it's this bill, an expanded bill or any other Bill, Ikea, Lowes, Best Buy -- at least the Ikea folks. We haven't heard from, I think, the other two -- would like to see action taken by December 19th. I think Mr. Cuorato in his -- it wasn't in his testimony, but in response to questions, said that he'd certainly like to see various agreements of sale, letters of intent, appropriate nod, winks, or secret handshakes or any other form of appropriate communication between, I guess, CSX and the port by or around 152 12/10/02 - RULES - BILL 020738 that same time. He's tried, I think, within his jurisdiction to establish a bit of deadline on that part, the second part. So I'd like your perspective on that.

I think it's possible to come to some agreement with the port that's a win/win situation for CSX and the port within that time frame.

Is it in your interest to have such a transaction take place?

Yes, it is. CSX and Norfolk Southern and Conrail all benefit from traffic that's generated through the port.

What's stopping it from happening?

To a certain degree, as I said, it's a negotiating process. We've heard from the port in terms of what they feel is necessary. We've responded once. We will respond again. I think it's --

What's the main obstacle, Mr. Hurley?

I think the main obstacle is -- I'm not sure that there is a main 153 12/10/02 - RULES - BILL 020738 obstacle. I think that it's just a --

Well, that's nice to hear. What's the problem?

It's a question of each party recognizing the needs and requirements of the other party and then coming to some mutual agreement.

What are your needs and requirements?

Well, I think CSX needs to have -- as we are a public company and responsible for shareholders, we need to receive fair market value for whatever property we are going to be conveying to the port.