COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON FINANCE - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, April 15, 2010 9:15 a.m. - - - PRESENT: COUNCILWOMAN MARIAN B. TASCO COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN FRANK DiCICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN WILLIAM GREENLEE COUNCILMAN JAMES F. KENNEY COUNCILWOMAN BLONDELL REYNOLDS BROWN BILL 100184 - An ordinance amending Section 15 19-513 of The Philadelphia Code, entitled "Tax Amnesty Program," by providing for treatment of additions to tax... BILL 100186 - An ordinance further amending Bill No. 090325, entitled "An ordinance 18 approving the Fiscal Year 2010 Capital Budget providing for expenditures for the capital purposes of the Philadelphia Gas Works"... - - - 2
Good morning. The Finance Committee will come to order. I will note that we have a quorum in the presence of Councilman Goode, Greenlee, Kenney and Councilwoman Blackwell. We ask the Clerk to read the first bill, please.
Bill No. 100184, an ordinance amending Section 19-513 of The Philadelphia Code, entitled "Tax Amnesty Program," by providing for treatment of additions to tax, and making technical amendments, under certain terms and conditions. Bill No. 100186, an ordinance 18 further amending Bill No. 090325, entitled "An ordinance approving the Fiscal Year 2010 Capital Budget providing for expenditures for the capital purposes of the Philadelphia Gas Works (including the supplying of funds in connection therewith) subject to certain constraints and conditions, and acknowledging receipt 3 4/15/10 - FINANCE - BILLS 100184 & 186 of the Forecast of Capital Budgets for Fiscal Year 2011 through 2015," as previously amended by Bill No. 090750, by approving a further amended Capital Budget for Fiscal Year 2010.
Thank you very much. Do we have someone to testify on Bill 100184? (Witness approached witness table.) COMMISSIONER RICHARDSON: Good morning.
Good morning. COMMISSIONER RICHARDSON: Good morning, Chairwoman Tasco and members of the City Council Committee on Finance. I am Revenue Commissioner Keith J. Richardson. I am here today to testify on Bill No. 100184, which amends the legislation authorizing a temporary tax amnesty program during Fiscal Year 2010. I am here to testify in support 4 4/15/10 - FINANCE - BILLS 100184 & 186 of the proposed amendment. This change clarifies the treatment of additions to the real estate tax to ensure consistency with the City's current treatment, which is to treat additions to the tax, a monthly penalty for late payment, as principal. This amendment to the tax amnesty legislation is essential to the Department's ability to administer the tax amnesty, because even if we wanted to deviate from the currently legislated treatment of additions to tax during the amnesty period, the City's Taxpayer Information Processing System would require extensive programming adjustments that could not be made in time for amnesty, even if we had begun the work before the amnesty legislation was introduced. With this change, the Administration will be able to continue to provide -- to move forward with the tax amnesty approved by this Council and expected to generate $25 to $30 million after advertising and administrative 5 4/15/10 - FINANCE - BILLS 100184 & 186 costs. With the passage of this bill, all aspects of our preparation for the Philadelphia Tax Amnesty, which starts on May 3rd, are on track. The website and the Tax Amnesty Hotline will be available two weeks in advance, or actually on April 19th, this upcoming Monday, to assist taxpayers even before amnesty starts, and we have an advertising and public relations campaign in the works that will reach potential amnesty participants in the City, region and nationwide. We appreciate your support in this amendment and would like to request that the rules of Council be suspended so as to permit the first reading at the next session of Council. Thank you. I'm happy to answer any questions.
Thank you. Any questions from members of the Committee? 6 4/15/10 - FINANCE - BILLS 100184 & 186 Councilman Kenney.
Thanks. I don't really understand the need for the change. I mean, what is -- maybe explain it in another way, what the technical change is, because I don't -- I read your statement, but I don't totally understand it. COMMISSIONER RICHARDSON: Inside the legislation that was signed and approved back in January by the Mayor, it has the additions to the principal. What that means with regard to real estate taxes, the first year it's 15 percent of interest is accrued by January 1. That is then added to the principal. If we were giving everybody, as you know, 100 percent relief of penalty, 50 percent of interest, then we'd have to recalculate taking that interest on everybody for real estate taxes outside of that principal.
So this amendment is not requiring that to 7 4/15/10 - FINANCE - BILLS 100184 & 186 happen? COMMISSIONER RICHARDSON: Right.
Okay. The other issue I have is a more macro size issue, and, that is, when and how are you guys figuring out how we better identify what the tax liability actually owed the City is? We've had this discussion before relative to 25, 30, 35-year-old tax bills where the folks can't be found, it's an empty lot, it's a dilapidated building. We're never going to collect the taxes from it and we keep on adding interest and penalty to it, which gives the public a skewed view of how much money is actually owed. So when we have discussions about raising revenue, people say, Go collect the $400 million in back real estate taxes that's owed the City, but it's not 400 million in reality. It's a lot less, and a lot of it is not even collectible. So when are we going to have a 8 4/15/10 - FINANCE - BILLS 100184 & 186 real number so people don't beat us over the head with the 400 million? COMMISSIONER RICHARDSON: At the request you made back in February's hearings in regard to collections, we are working on that as we speak right now. We're looking to push forward with realistic numbers to provide to Council and to the citizens of this great city so they understand what the real collectible number is out there. Again, as you stated, banks traditionally write things off the books, and we're looking at that, what is realistic that is collectible and what can be written off. However, it still would be collected and we will still seek --
Will we stop adding interest and penalties to 22 or 30-year-old tax bills? Because what 23 happens is, the interest and penalty 24 number becomes so inflated, it's actually 25 more than the principal, and none of it 9 4/15/10 - FINANCE - BILLS 100184 & 186 is getting collected anyway. So why do we keep on adding interest and penalty to anything more than years old? 5 COMMISSIONER RICHARDSON: Even 6 if we write it off the books per se, it's 7 still going to collect interest and 8 principal, because we're not writing it 9 off traditionally like a bank is going to 10 do or a corporate company. It will be 11 off our books in the CAFA report, but you 12 still would be accruing interest and 13 penalty. So you won't see that number as 14 it will be reflected in the future, but 15 that is unfortunately what the taxpayer 16 has the responsibility to pay us. Again, 17 if they recognize that -- 18
Forever? 19 COMMISSIONER RICHARDSON: 20 Forever. And, again, they can come in and talk to us and we can sit down.
They could come in and talk to you if they were alive. COMMISSIONER RICHARDSON: And 10 4/15/10 - FINANCE - BILLS 100184 & 186 we're trying to address those people who were alive or businesses that are defunct as well. So once we resolve those issues, we can understand those, but I'm more concerned about that thriving heartbeat in the City.
As you've seen, it's difficult to have a reasonable conversation about raising revenue when folks keep throwing that $400 million at you like it's real. COMMISSIONER RICHARDSON: I understand.
Thank you very much. My question about this legislation is that when the tax amnesty bill was introduced and we had public hearings and then passed, why didn't we 11 4/15/10 - FINANCE - BILLS 100184 & 186 consider this then? It seems to me that the public will say the City giveth and then the City taketh away some. I mean, this is a recent bill. And we want this tax amnesty program. We just had a meeting with PIDC, a public meeting, just this week on Monday, I guess it was, where we talked about this tax amnesty program, as well as loans for emerging businesses. But I don't understand why we -- now we're saying, no, we cut it, but we didn't cut this much, because it's a glitch that it would cause a lot of work for the City, because the system is already in place. But I'm just asking for clarification, why we're here in the beginning. COMMISSIONER RICHARDSON: Again, when it was presented, we neglected to really look at that and realize it, so it's on our side. But, again, it won't stop the amnesty program. That train is going to continue to run 12 4/15/10 - FINANCE - BILLS 100184 & 186 and it's out of the station pretty much. So we're not stopping the amnesty. We're not going to stop offering the opportunity to those citizens in the City of Philadelphia who are having issues with their taxes, whether it be business or real estate. This is, again, a situation that -- as the amnesty states, it's 100 percent of all penalty, 50 percent of all interest and you pay all your principal. It would be a situation that we would have to really gut the tax system, and it would take us about eight months to a year to get this resolved. So, again, you're talking about going back into the '80s and potentially even the '70s on folks that may have real estate delinquencies who hopefully on May 3rd will be knocking on the door to pay that delinquency. This is a situation -- again, we're still doing amnesty. Nothing is going to change. It's just a matter for us, we wouldn't have the ample time to do programming to make some 13 4/15/10 - FINANCE - BILLS 100184 & 186 changes.
I mean, I realize it's just the first year and ten and a half percent that goes on, but we just like to send a clear message. Right now the public feels, businesses and residents, that they're being inundated, they're being nickel-and-dimed and sugar and everywhere you go and trash, taxed to death. Everybody, even businesses, are coming up with, they tell me you got menu labeling and now you got the water tax that's separated out. Everywhere you go people are saying they're just too, too, too, too many taxes, and a lot new start in July. And I don't like for us to be in a position where we say, Here's this amnesty program, and albeit it's ten and a half percent for the first year, it still means that we withdraw something we gave, and I would just hope that we not be put in this position, because it's just unfair to businesses and residential 14 4/15/10 - FINANCE - BILLS 100184 & 186 taxpayers who don't understand all this in the first place, because we don't know about all of these taxes. People write us all the time telling us, call us, e-mail us about bills and bills and bills. So I would just like us to stay on top of these things. Thank you, Madam Chair.
Thank you very much. Any other questions? (No response.)
I'd just like for you to again pretty much lay out what you're doing with this in terms of the first year of interest that has accrued on the tax bill for the first year. It doesn't impact the other years? COMMISSIONER RICHARDSON: No. 21 Again, it's already because -- after the first year, it goes towards the principal. So we're not impacting anything down the road with any taxes, any tax years at all. This is part of 15 4/15/10 - FINANCE - BILLS 100184 & 186 the principal, and it was stated it was part of the principal.
So instead of carving out the percent interest 6 for the first year, it stays as 7 principal? 8 COMMISSIONER RICHARDSON: 9 Right. 10
Is that 11 subject to litigation? 12 COMMISSIONER RICHARDSON: No. 13
Thank you. COMMISSIONER RICHARDSON: Thank you, Madam Chair.
The next bill is 100186. (Witnesses approached witness table.) 16 4/15/10 - FINANCE - BILLS 100184 & 186
Good morning, Chairwoman Tasco and members of the Finance Committee. My name is Janet Parrish. I'm the Executive Director of the Philadelphia Gas Commission, and seated to my left is Douglas Moser, who is the Senior Vice-President of Gas Management for Philadelphia Gas Works. We appreciate the opportunity to be before you in support of Bill 100186 this morning. We have submitted written testimony, which I will not read, but just note for a call to your attention that attached --
Thank you. Attached to my written testimony on 17 4/15/10 - FINANCE - BILLS 100184 & 186 behalf of the Gas Commission is a copy of the Gas Commission's Resolution and Order in this matter, which reflects the actions taken at the Commission's March 9th meeting, and, of course, the ordinance, the bill itself, reflects the Gas Commission's recommendations to City Council. And we are requesting a suspension of the rules on this so the bill may have first reading at the next session of Council. Just very briefly --
Why don't you read the first couple of -- your second paragraph, which pretty much explains what this bill does and the amendment.
All right. Summary of recommendations to City Council? Is that what you're referring to? 18 4/15/10 - FINANCE - BILLS 100184 & 186
Your introduction. You see the introduction, your testimony?
I think you're looking at Philadelphia Gas Works' testimony.
Why don't you just go ahead with yours and then we'll let him read it.
Thank you. The Gas Commission is recommending a further $1.24 million amendment to PGW's Fiscal Year 2010 Capital Budget, and this would support installation of what's called a combined heat and power project at PGW's headquarters building at 800 West Montgomery Avenue. Of this cost, $465,000 would be reimbursed via a grant that PGW has been awarded by the State 19 4/15/10 - FINANCE - BILLS 100184 & 186 Department of Environmental Protection. So the benefits of this project is that it will reduce PGW's operating expenses by generating electricity to meet a significant portion of PGW's own needs for cooling, for hot water and for electricity. It would also position PGW to demonstrate and market a new green technology to large institutions in Philadelphia and hopefully attract new load, especially as these institutions prepare for the expiration of the rate caps on electricity in January 2011. The other point I would make is that PGW, in response to our inquiries, has indicated and has committed to significant opportunity for disadvantaged business enterprise participation in this project. About half of the project cost is for purchase of a very specialized piece of equipment, a gas-fired microturbine. That is really available only through one manufacturer at this point, but the local supplier is a 20 4/15/10 - FINANCE - BILLS 100184 & 186 Pennsylvania-based company, and also, of course, there are some internal PGW costs associated with the project for overhead, for A&G, administrative and general expense, et cetera, but PGW has calculated that there's about a $705,000 DBE participation opportunity in the project and has established a goal of 10 to 35 percent for the project, of which 11 20 to 25 percent would be for 12 minority-owned business enterprises and 13 five to ten percent for women-owned 14 enterprises, based on what they know 15 about what's available in the market and 16 the types of work that have to be done. 17 And then the Gas Commission is requiring 18 that when PGW submits its monthly capital 19 spending reports, it will provide us with 20 a status update on how it's actually 21 implementing or achieving these 22 participation goals. 23 So that's pretty much the gist 24 of the project, and either Mr. Moser can 25 provide you with additional detail, we 21 4/15/10 - FINANCE - BILLS 100184 & 186 can answer questions at your pleasure.
I've submitted written testimony. I can answer any questions that you may have.
Do you want to just briefly outline Paragraph 2? Why don't you read Paragraph 2 of your testimony.
As provided in the amendment request contained in the bill, PGW seeks Council's approval to increase the budget authorization for Fiscal Year 2010 Capital Budget by an additional $1,240,000, resulting in an amended total budget of $76,007,000, an increase of $74,767,000 currently approved. The amendment will support inclusion of a new line item for the approved Fiscal Year 2010 Capital Budget defined as "Install 200kW Microturbine and 40-Ton Chiller at 22 4/15/10 - FINANCE - BILLS 100184 & 186 800 West Montgomery."
Thank you. In your capital projects, do you have the one percent for art requirement or is that not applied to PGW? For example, PECO is building a substation out in Southwest Philly somewhere, and as part of that investment, they are required to set aside one percent for public art. Not necessarily at that location, but -- I'm not trying to say you should be. I just wanted to know if you are.
We haven't gotten to that point yet. They haven't built anything.
The issue for PECO -- and this is something we were 23 4/15/10 - FINANCE - BILLS 100184 & 186 exploring with the Administration -- is if they could take -- when they build something or anyone builds something in a remote area where public art, no one is going to see it, that they could transfer that one percent requirement to another art project either in Center City or in some neighborhood, and we're exploring that possibility with RDA and with the Administration, but I just wanted to know if anything that PGW builds would be included in that, but it's not. So I appreciate the answer. Thank you.
Chairwoman Tasco, I too would be quite interested in the follow-up or follow-through of Councilman Jim Kenney's question at whatever juncture in your planning process you explore this notion of one percent art.
I truthfully don't know the answer to that question, 24 4/15/10 - FINANCE - BILLS 100184 & 186 but we will absolutely check into it and get back to you and check with PGW's general counsel as well.
I think it's a first that I've heard a quasi-public agency be posed that question, so it's not unusual to not have an answer.
Well, the reason that the issue was raised is, PECO as a private company builds facilities similar to utilities, so they build facilities similar to what PGW would do in the future or have done in the past.
And they're usually in locations that are not residential, so there's no sense in putting a statue or public art where nobody is going to see it. So they wanted to use -- PECO came up with the idea to use the money to promote art projects at other places where people actually see it. 25 4/15/10 - FINANCE - BILLS 100184 & 186
The nature of PGW's business is basically -- we're not constructing anything that would require that. If we come up with a proposal to provide construction of a building or some form of a capital program that would require building a new structure, that might come up, but most of this stuff has to do with internal, such as this turbine chiller. It's not --
It's not related to that. But let me just say this to you: They are very mindful of the comments that are made on this Committee, because you could see the inclusion of the minority participation. But the Gas Commission always asks as part of our discussion with PGW, but my folks are bringing it back to Council. 4/15/10 - FINANCE - BILLS 100184 & 186
And that was my next comment, to say thank you, because at our last Finance Committee meeting where PGW was up to testify, you heard us and it's reflected more than adequately in your testimony. So thank you very, very much. Thank you, Madam Chair.
Thank you. Thank you for your testimony. Did you ask for a suspension of the rules?
Mr. Richardson, you want a suspension of the rules? COMMISSIONER RICHARDSON: Yes.
Okay. That concludes our public hearing. We'll go into our public meeting. The Chair recognizes Councilwoman Blackwell for a motion on 27 4/15/10 - FINANCE - BILLS 100184 & 186 Bill 100184.
Thank you, Madam Chairman. I move that Bill 5 No. 100184 be reported out of Committee with a favorable recommendation and also a recommendation for suspension of the rules so that it may be considered at our next session of Council. (Duly seconded.)
It has been moved and seconded that Bill 100184 be reported out of Committee with a favorable recommendation and a recommendation that the rules of Council be suspended so this bill can be heard at Council's next session. All in favor will say aye. (Aye.)
There being none, the motion is carried. The Chair recognizes 28 4/15/10 - FINANCE - BILLS 100184 & 186 Councilwoman Blackwell to move Bill 3 100186.
Thank you, Madam Chairman. I move that Bill 6 No. 100186 be reported out of Committee with a favorable recommendation and also a recommendation for suspension of the rules so as to permit first reading at our next session of Council. (Duly seconded.)
It has been moved and seconded that Bill 100186 be reported out of Committee with a favorable recommendation and a request for the suspension of rules so that this bill can be heard at Council's next session. All in favor will say aye. (Aye.)
There being none, the motion is carried. 29 4/15/10 - FINANCE - BILLS 100184 & 186 There being no further business of this Committee, the Committee is adjourned. Thank you very much. (Committee on Finance concluded at 9:40 a.m.) 30 CERTIFICATE I HEREBY CERTIFY that the proceedings, evidence and objections are contained fully and accurately in the stenographic notes taken by me upon the foregoing matter on April 15, 2010, and that this is a true and correct transcript of same. ______________________________ MICHELE L. MURPHY RPR-Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)