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.
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 again for your testimony and for coming in this morning.
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.
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?
He may want to come up to the table now because it's basically a question for Mr. Smith. Good morning, Mr. Smith.
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, 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.
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.
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.
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.
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.
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
Well, I know that there are so many people from your district or actually --
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 --
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 --
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 --
Exactly. Because he can't speak for Lowes. We do have a representative from Lowes.
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.
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.
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.
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
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.
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.
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 --
I'm trying to be helpful and get the facts. I'm just afraid Mr. Smith --
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.
I am not. I would be proud to, because he is a wonderful public citizen, but I do not.
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.
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.
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.
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.
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, 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.
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?
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?
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?
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.
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.
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 --
Would $60 million be out of the ballpark or an outrageous figure?
And what would be the unzoned, or non-rezoned, I guess?
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?
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?
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?