COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, April 8, 1999 11:33 a.m. - - - Bill 990110 - Amending an ordinance approved February 8, 1999 (Bill No. 980845), which created the Pavilion Market East Tax Increment Financing District. . . Bill 990186 - Authorizing the Director of Finance of the City to enter into an agreement with the Philadelphia Parking Authority providing for the Parking Authority to issue and sell its parking revenue bonds. . . Bill 990114 - Amending an ordinance approved July 1, 1997 which created the Philadelphia Navy Business Center TIF. . . (Full text of all bills within transcript.) PRESENT: COUNCIL PRESIDENT ANNA C. VERNA, Chair COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DAVID COHEN COUNCILMAN JAMES F. KENNEY COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK DICICCO COUNCILMAN RICHARD T. MARIANO COUNCILMAN FRANK RIZZO CHARLES MCPHERSON, Chief Financial Off. - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 PUBLIC HEARING - COMMITTEE OF THE WHOLE I N D E X Bill No.'s 990110, 990186 William Hankowsky, President . . . . . . . . . 4 Philadelphia Industrial Development Corporation Whitney Reid, City Treasurer . . . . . . . . . 7 Rina Cutler, Executive Director. . . . . . . . 13 Philadelphia Parking Authority Robert Fina, PIDC. . . . . . . . . . . . . . . 48 Laurie Flynn, Vice President . . . . . . . . . 58 Goldenberg Group Charles Solomon, Director. . . . . . . . . . . 59 Economic Development Greater Philadelphia Urban Affairs Coalition Bill No.'s 990114 William Hankowsky, President . . . . . . . . . 124 Philadelphia Industrial Development Corporation 3 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 P R O C E E D I N G S
Good morning. I apologize to everyone for the delay. This is the public hearing of the Committee of the Whole. I would ask the clerk to please read the title of Bill No.'s 990110 and 990186.
Bill No. 990110, an ordinance amending an ordinance approved February 8, 1999 (Bill No. 980845), which created the Pavilion Market East Tax Increment Financing District by approving the amended project plan for the redevelopment of the district submitted to City Council by the Philadelphia Authority for Industrial Development, and making certain findings and declarations, all in accordance with the Tax Incremental Financing Act. Bill No. 990186, an ordinance 20 authorizing the Director of Finance of the City to enter into an agreement with the Philadelphia Parking Authority providing for the Parking Authority to issue and sell its parking revenue bonds to finance and to proceed with a project consisting of the acquisition and/or construction 4 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 of an off-street parking facility at Eighth and Chestnut Streets, including, under certain circumstances, acquisition of an adjacent property for development as additional parking facilities or for resale with the proceeds of any such resale to be used to finance completion of the mentioned garage facility or to finance additional or substitute parking facilities approved by City Council.
Good morning. Mr. Hankowsky, are you going to testify?
Please identify yourself for the record and proceed with your testimony.
Yes. I am Bill 18 Hankowsky, President of the Philadelphia Industrial Development Corporation. I might ask the Chair, are we also doing 990114?
Okay, thank you. We have three people to testify with regard to the Pavilion Market Street East project 5 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 and the garage -- myself; Whitney Reid, the City Treasurer; and Rina Cutler, the Executive Director of the Parking Authority. So I will begin. Today's hearing is required by the Pennsylvania Tax Increment Financing Act to amend a TIF district. Should the committee approve this bill, the Act requires that Council wait at least three weeks for final approval, which means that Council cannot approve the bills until its meeting of April 29, 1999. Since introduction of this bill, we (PIDC) have met with City Council, Council staff, and representatives of the School District to review the amended project plan. And on Monday, March 22, 1999, the School District agreed by resolution to participate in the district should it be so amended by Council. The amendment of the Pavilion Market East TIF was required, and is required, to accommodate the second ordinance that you have in front of you, which is the purchase of the parking component by the Parking Authority for $38 million. Although the Parking Authority is expected to make a payment in lieu of taxes, or a 6 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 pilot payment with regard to the real estate portion of that facility, it not pay use and occupancy taxes otherwise payable by private owners for parking facilities. The result is a decrease of $4.9 million in revenues to the School District over years, or approximately $245,000 8 per year. 9 In addition, this amendment allows the 10 Parking Authority or the developer to transfer all 11 or a portion of their respective interests in the 12 project at any time. So if I could, just for a 13 moment, step away from my written testimony. . . 14 So the amendment to the TIF is to allow 15 the evidence that the Parking Authority is 16 participating as a new funding source for the 17 garage and then subsequently amending the tax 18 analysis to show the deletion of the use and 19 occupancy tax. And thirdly, to allow these 20 transfers. The rest of the testimony which I've prepared is with regard to the naval business center, so I'll just hold that for that ordinance. And so in closing, we would ask for Council's favorable consideration of this TIF 7 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 amendment, which, as the other testimony transpires, you'll understand the garage aspect of this and how it all links together -- if that would be acceptable to the Chair.
Good morning. I'm Whitney Reid, City Treasurer. With me today is Rina Cutler, Executive Director of the Philadelphia Parking Authority. Miss Cutler and I are here today to testify in support of Bill No. 990186. The purpose of Bill 990186 is to authorize the Director of Finance to enter into an agreement with the Philadelphia Parking Authority, authorizing the issuance of bodies to finance the acquisition, expansion, or operation of parking facilities in conjunction with the DisneyQuest project, located at Eighth and Chestnut Streets. Matching the size of the proposed Series 1999-A parking revenue bond issue is not to exceed $53 million. And that consists of two parts: a $48 million revenue bond portion; and if necessary, completion bonds not to exceed $5 million. 8 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 So I am requesting your favorable consideration of the proposed ordinance and a suspension of the rules in order to obtain a second reading and final passage on April 22, 1999. The preliminary schedule for sale of the Series 1999-A bonds was early May, with closing scheduled for toward the end of May. I've enclosed with my written testimony a listing of the finance team assigned to the transaction. And this concludes my testimony. Miss Cutler will provide testimony proposed on the use of the bond proceeds. And afterwards, I'd be happy to answer any questions you may have.
Madam President, at this time, I'd also like to note that I have a couple amendments on the ordinance and the exhibit that I'd like to read into the record. If you prefer that now or after, it's --
Yes. Yes, ma'am. We've submitted copies along with written testimony to 9 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 Marie Hauser, and they should be forwarded to each of the members of Council.
Does everyone have copies of the amendments? It's a copy of the bill. I think you may have it in your packet. Does everybody have it? All right, Mr. Reid, would you please read the amendments that you're proposing.
Yes, ma'am. To Bill No. 990186, on , the second paragraph, we are changing the not-to-exceed amount, as noted. There are $45 million; we are changing that to $48 million dollar. And on , Section 1, you'll see a not-to-exceed amount of $50 million; we are changing that to correspond to the revenue bond change, so that now should read $53 million.
Okay, I have a couple more. There is an attached Exhibit A, which is a contract for parking services, and there are a couple changes there. The majority of the errors are typographical, but I will go through 10 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 them one by one. On the second page, the first "whereas" paragraph, again, you'll see a principal amount of $45 million, and you should have a black-lined copy of that, and you'll see that has been changed to $48 million to correspond to the ordinance. On the next page, , under Section 9 1, paragraph (b), you'll see a date there that says January 29th; we're amending that to read January 28th. The remainder of the changes are typographical. If you turn to , section 5, under "Parking Charges and Fees and Rents," you'll see we've added a subparagraph (a); and as a result of that, on the subparagraphs, the small Roman numerals have also been changed.
We added the small (a), and then underneath that are subsections of (a). So 11 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 they are now Roman numerals.
On my copy, it appears as though (a), (b), (c), and (d) are deleted. I think the (a) you're referring to in parentheses is immediately after the title "Parking Charges and Fees and Rents"?
Yes, that is a Roman numeral i, it's a small i. I'm sorry, it's a number 1, a Roman numeral, it's a small. . .
So (a) would be changed to i; (b) would be changed to 22?
Right, (a) is changed to i; (b) is changed to ii; (c) is changed to iii; (d) is changed to iv; and (e) is changed to v. And we go all the way through (h).
I think there are some changes on also, are there not? The very next page that we're -- oh, that's not 5. 12 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 Under Section 4 -- Section 5, I'm sorry. Under Section 5, when we turn the page, there are also some changes made?
Yes, ma'am. That is a continuation of the previous page. So we changed paragraph (f) to vi; paragraph (g) to vii; paragraph (h) to viii; and then we've inserted ix for the following paragraph.
And then also under Section 2(b), there have been some changes?
Yes, ma'am. We changed paragraph (j) to (b) and paragraph (k) to (c). On , under Section 11, titled "Authority Remedies," we've added the (a), we've denoted that as paragraph (a). And then below that, that has subsequently changed the other paragraph identifiers. So underneath that, we've changed paragraph (a) to (b), paragraph (b) to (c) and --
I don't see 13 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 why not.
Is there anything substantive in fact whatsoever on the material in front of us?
I don't believe so, but I think we're just about finished anyway.
Right. The only substantive changes were the date and the dollar amount. On , Section 12, again, we've inserted a paragraph identifier, (a). And then below that, we've changed the (a) to (b). And that concludes my remarks and the changes that I'm submitting.
My name is Rina Cutler. I'm the Executive Director of the Philadelphia Parking Authority. 14 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 I appreciate the opportunity to testify this morning in support of Bill 990186. The bill 4 will allow the Philadelphia Parking Authority to proceed with the acquisition of a 988-car garage located at Eighth and Chestnut Streets as part of the DisneyQuest project. There are three components to the ordinance: Item 1 is approval of the City contract in connection with the issuance of tax-exempt revenue bonds in an amount not to exceed $48 million; Item 2 is a City contract which obligates the City of Philadelphia to appropriate City funds to advance to a debt service reserve fund in the event that revenues from the proposed garage are insufficient to pay the operating costs and the debt service on the bonds -- which is Exhibit 8 of the ordinance. However, such payments made by the City will be repaid to the City if and when funds become available for such a purpose; Item 3 allows bond proceeds to be used for alternative garage projects with the approval 15 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 of City Council. 5 million in capitalized interest payments until August 2001 to ensure revenue flow to pay debt service until garage is delivered and fully operational; Allows for the use of an amount not to exceed $12 million to purchase the adjacent parcel along Eighth and Market Streets if necessary; Pay for related costs associated with the project, including professional services and issuance costs. Summary of acquisition agreement: The acquisition agreement dated 1/28/99 between the Philadelphia Parking Authority and 16 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 Pavilion East Associates (PEA) stipulates several significant dates which are important to understand: January 29, 1999: Philadelphia Parking Authority purchased land for $10 million at Eighth and Chestnut Streets for a 988-car garage, plus an obligation under certain conditions to purchase a completed garage in conformity with a completion schedule for the DisneyQuest project for an additional payment of $28 million. May 1 to May 15, 1999: Anticipated PPA bond closing. June 1, 1999: Date for Pavilion East Associates (PEA) to obtain full construction financing for DisneyQuest and related commercial development as well as garage facility. June 10, 1999: Ten-day period for joint vent negotiations to occur. July 10, 1999: Seller may elect to acquire all of PPA's parcel by paying all of PPA's costs related to this development, including all bond costs, or PPA will acquire all of the developer's interest. December 1, 1999: Date by which PEA 17 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 (Pavilion East Associates) must complete work on the portion of the DisneyQuest project to be occupied by Disney under the terms of the Disney lease. June 1, 2000: Date by which garage by completed under the Disney lease and the purchase of garage may occur. January 15, 2001: Latest date, if Disney lease deadline is extended, by which the garage must be completed and PPA purchase may occur. Any time between the construction loan of 6/1/99 through 1/15, 2001: If there is a default by PPA (Pavilion East Associates) PEA's lender may acquire PPA's full interest in the garage portion within 60 days by payment of all of the Parking Authority's costs. If PEA's lender declines to acquire the Parking Authority's interest, the Parking Authority will pay costs advanced by the lender to construct the garage, and acquisition agreement will terminate. Conclusion. In addition to this testimony, a briefing package has been prepared and submitted to City Councilmembers. This 18 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 package reflects my previous comments, Parking Authority revenue numbers, and a number of different scenarios which could occur in this project. Thank you for allowing me to testify in support of Bill 990186.
Thank you very much. Mr. Fina, is there anything that you want to add to the testimony?
Thank you. I would just like for the record to be crystal-clear. Mr. Hankowsky, would you please state for the record what taxes have been TIFed for this project.
Yes. The two taxes we're using for the TIF in this project are the real estate tax and the percent City sales tax.
What were the original project's estimated economic benefits to the City and the School District?
I consider that in two 19 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 respects. One is from a tax standpoint. We contemplated that with this project, over the 20-year life of the TIF district, the City would receive taxes in the amount of $54.9 million. And originally, we estimated that the School District would receive taxes in the amount of $60.1 million. I should add that in addition to those hard benefits to their budgets, this project contemplates the hiring of approximately 1,000 people once it is up and operational and tenanted. And in addition, we anticipate there will be about 750 construction jobs during the construction phase of the project. So it has both those direct tax results and those indirect economic results.
How do the benefits derived by the School District compare to the other TIFs that the City has approved?
In response to the various discussions we've had over the last several years with regard to TIFs in these chambers and at various briefings, in this particular project, we attempted to minimize the 20 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 effect on the School District or -- to put it on the other side -- maximize their benefit. So in this proposed TIF, we are not affecting any of the taxes that go to the School District directly -- for example, the use-and- occupancy and liquor-by-the-drink taxes. The only impact on School District taxes is their portion of the real estate taxes. So this was an attempt to create a TIF that was more beneficial to the School District. And, in fact, when you compare the benefits that we estimate will go to the School District versus the benefits that will go to the City, in fact in this TIF, which is unusual for one thing -- and perhaps it's the first one I've ever brought to City Council -- the District will fare better than the City.
Thank you. I have a number of questions I'd like to ask, but I don't want to dominate this. Why are we being asked to approve the issuance of Parking Authority bonds at this time?
President Verna, as I did explain during several Council briefings, in 21 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 December of 1998, the Parking Authority was asked to get involved with this project in order to allow the DisneyQuest project to move forward. We did an analysis relative to both the need for parking demand in general in the Market Street East corridor as well as specific demands for parking that would be related to Disney and the other retail uses in the DisneyQuest project. Initially, there was some thought -- the Parking Authority was not initially in this deal. There was some thought that the garage would be done and could be done as a private venture. That turned out financially to be not the case. The Parking Authority, as you know, is an economic development agency which deals with the parking components of development projects. We think the garage will be a huge success and have agreed to come before Council to request that a City contract be approved in order to issue bonds to buy a fully-constructed garage at this site.
Thank you, Madam 22 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 President. The major requirement of the Disney people is a thousand-car garage at this location for this particular project?
In fact, the garage we're going to build is just under a thousand spaces. The Disney lease does require parking on the location adjacent to their parcel, and I believe it's 800 spaces in their lease.
So between 800 and 1,000 spaces is their requirement in order for them to move forward with this project?
The major difference then today, as we sit here, is that the original belief was that it could be constructed and operated privately. And now the Parking Authority is moving forward because of the economic circumstances that precluded that to construct and maybe run or not run this particular garage at this location. Is that the major difference?
The difference is really -- the component change which is related to the 23 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 TIF specifically is that the parking garage will be a public parking facility, not a private one, that's correct.
And this is something that the Parking Authority does as part of its nature, I would guess, is construct and operate parking facilities.
That is correct. In fact, the State legislation, which creates the Parking Authority, anticipates that it acquire land and construct parking facilities as part of economic development.
In the worse-case scenario, if Disney is no longer involved with this location at this site, does the construction of a garage by the Parking Authority make sense as a stand-alone project, and why?
I think there are two parts to that answer, Councilman Kenney. The first is, as you're aware, prior to construction beginning on the site, this was a surface parking lot.
So to speak. Cratered as 24 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 it may have been.
But in fact, even in spite of its physical deficiencies, it did manage to generate a healthy profit every year, without anything else on the site. So the answer to part A is: yes, as a stand-alone parking facility, without anything else on the site, we would probably choose to build smaller facility, but certainly we would proceed with a parking facility in either case. Part B of that answer is that under a worse-case scenario, if there was no Disney on the site, the remainder of the site would still be a development location for something that would go there. And, therefore, the need for parking would increase over the current demand, without anything on the site, as is.
In the hopefully unlikely event that the developers cannot meet their financing deadlines, explain the special circumstance that protects the Authority and the City as it relates to the potential or the 25 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 required acquisition of this site in the event that those deadlines aren't met.
As part of the agreement that the Parking Authority and I specifically negotiated with Pavilion, we wanted to ensure that at a date certain point, the developer was either prepared to move forward or would not -- could not move forward. And that date in our current agreement is June 1st. If the developer does not secure financing for the remainder of the project, which requires a certain percentage of leasing at the site, we did not want to be put in a position where we could not either move forward on our own or find a different developer to come in and develop the site. So under those conditions and as part of this agreement with the City, we have put in a scenario which envisions that by mid-July of 1999, the Parking Authority has the option of purchasing the remainder of the site, which is the Market Street side -- Eighth and Market Street side of the site in order to move Ford with development. It would certainly be the City's desire 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 and intent to attempt to keep Disney on the site regardless of who the developer is. But in any event, we at that point would want to control the entire development parcel.
And is that an unprecedented or a special circumstance that would allow the City to in the, again, hopefully unlikely event that they cannot meet their deadlines, that we then become -- they're required to sell this site to us if we so desire.
Well, it goes, in fact, both ways. After June 1st, if the conditions have not been met, in fact, the developer also has the option of stepping forward to purchase the Parking Authority's interests and pay all related costs. But in either case, one of those entities will, in fact, have control of the entire site, after that point.
And, finally, Mr. Hankowsky, if Disney's out of the picture, what do you think the potential of the development of this particular site in that particular corridor is? Could you give an explanation of what you think the potential is of development for that location. 27 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
My estimate would be that if the Eighth and Market parcel were available, and -- candidly -- available with a capacity of parking adjacent to it, so it's even enhanced, it is an extremely valuable and marketable site. And there are probably parties that I've talked to over the course of the last two years who would immediately be interested in seeing whether they could put a project on that property.
There is fairly heavy interest in the Market Street corridor at this point.
Miss Cutler, I was distracted, and I don't know whether Councilman Kenney asked this, but what happens in the event that the developer does not secure his financing for this project? Will the garage be completed? And if so, who will build the garage?
There are several scenarios, and I'd like to try to walk you through 28 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 them. One scenario is that the Parking Authority purchase the remainder of the development site, find a developer who wants to develop that site, and then in fact will sell the remainder of the land to a developer, and will proceed with this bond money under public bid to build its own parking garage. A second scenario is that the Parking Authority will own the entire site at some point and will make a decision that it will proceed with the garage portion or the smaller parking garage until we know what type of usage would happen on the remainder of the site -- also under the same bond money that we are going to issue for this package. Or the best-case scenario is this proceeds as is, and at the end of the day, we purchase a fully built garage. But we also have the capacity to go out to public bid and construct our own parking facility.
And what are the remedies if there is a default after the closing of the construction loan? 29 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
After the developer -- on the assumption that the developer gets full construction financing by June 1st, there is a mechanism in place at that point which, in fact, allows the developer's lender to buy out the Parking Authority's interest, pay all costs expended to date, and take over the garage portion of the project. If the lender does not wish to buy out the Parking Authority at the point of a default by the developer, the Parking Authority will pay for the improvements on the garage site only, and then continue on and construct the parking facility ourselves.
Thank you. The Chair recognizes Councilman Rizzo.
Thank you, Madam President. Could you just go back over the changes, the amendments. How did we go from 45 million to 48 million, and from 50 to 53? Could you explain that again, please.
I will be happy to, Councilman. 30 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 One of the things that we always -- two of the things that we always include in our bonds issuance. We calculate the amount of time it will take for the construction to occur and for a fully operational garage to be bullet. Normally that is a window somewhere between two years and three years for the construction period. Because the City in essence guarantees those bonds, we do not want those bond payments during those years to have to come out of the City's General Fund. So we capitalize that interest in the bond in order to pay the interest out of the bond money until the garage is fully operational. Because there are buy-out clauses along the way here, which could, for some period of time, stop construction, we did not want the City's General Fund to be on the hook for the revenue, so we added an additional six months of capitalized interest into the bond issuance in order not to have to come to the City to pay for it before construction was completed. That also is -- that is how it got from 45 million to 48 million. That $3 million is the additional capitalized interest that has been put in there. 31 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 The other thing typical in Parking Authority revenue bonds and, in fact, was in the last bond deal that we did with Council last December, we build in the ability to issue $5 million in what we call "completion bonds" if necessary. So that at a point where we haven't adequately figured out all the contingencies that might occur particularly in a project like this one, where there are a lot of answers we do not have yet, the additional 5 million is for, in fact, completion bonds in the event the current amount is insufficient to complete.
My next question is, could you describe the Parking Authority's day-to-day operation. The Parking Authority owns certain parking lots and leases those to parking operations throughout City, I understand. There are various lots that you own and that other people operate. Could you describe the operation of this lot, whether you plan to operate it on a day-to-day basis.
Back in 1994 -- in fact, my first year at the Parking Authority -- the Parking Authority privatized the operation of all 32 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 of its parking garages. In fact, we (the Parking Authority) still operate all of our own surface parking lots, and there are 43 of those, and those are still operated by the Authority. But all of our garage structures are now operated under contract with private parking operators. Those contracts, while they are professional-service contracts, and in fact, under Parking Authority law, do not need to be bid, we generally bid them because we believe it gives us the best competitive price for the operation of those facilities. It is certainly the intent of the Parking Authority to not personally manage the garage at DisneyQuest, but in fact have it managed by a private operator.
Could you again describe -- you mentioned that you will put this out to competitive bidding. Could you be more specific and tell me how you're going to pick an operator of this facility?
In fact, it is not a competitive bidding process; it is a request for qualifications that gets issued in general. 33 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 In this particular garage, because the owner of the land, prior to our purchasing it in January, was in fact a parking company -- the entire site was owned by Central Parking, who in fact was given the opportunity to purchase and build a garage, and in fact chose not to do so. But as a condition of that land sale, they had the right of first refusal to operate this garage if and when it gets built. So it is my expectation at this point, assuming that this project moves forward as it's currently intended, that I will at some point negotiate a management agreement with Central Parking to operate the facility upon its completion.
Does that negotiation include -- are there standards, pricing, etc. that you establish? Or does that person have flexibility on fee structure and hourly rates, etc.?
Rates are, in fact, set by the Parking Authority; the operators do not set rates for our parking garages.
Thank you very much. 34 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 Thank you, Madam President.
Thank you. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. Mr. Hankowsky, on of your testimony and in response to an earlier question, you had articulated that the share of the tax revenues on the TIF aspect was a 60/55; is that correct?
I believe, Councilman Nutter, that in response to the Council President's question, I was asked, What were the original numbers? And those are the numbers I have provided. The amended numbers, pursuant to this change -- revised transaction, would be $54.9 million for the City, and $55.2 million for the School District.
-- for the School District; 54.9, City. Okay. Is my recollection just totally 35 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 incorrect, though, that the first original sheet we got on this had it at 65 - School District and 55 - City? Or am I just wrong about that?
I believe the original project plan that was the originally approved TIF was 60/54.
Okay, all right. And so on of your testimony, when you say the result is a decrease of $4.9 million that's going from the 60.1 down to the 55.2?
Okay, all right. Miss Cutler, you had some discussion just a little while ago, and it's mentioned in Mr. Reid's testimony about the completion bond, or maybe he just articulated it and I wrote it on the page of his testimony. Can you go back over that again? The statement I took down from you in response to an earlier question was, in case the current amount is insufficient -- I assume you're talking about the $48 million. 36 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
Then you have $5 million in completion bonds. And let's play the rest of this scenario out. There is some default and you have $5 million in completion bonds, what does that actually mean, what does that get you?
Well, the first answer to the question is, in all projects that we do -- at least that I have done -- there is a an ability to borrow an additional 5 million to complete a project.
In this particular case, as we do not know at this moment which of the several scenarios are going to play out here, we in fact are, for consistency purposes, building in an amount that it may take to finish the parking garage. It is only for the parking garage portion that there are completion bonds ever envisioned -- not for any of the other scenarios that come here, but let me give you a hypothetical. We issue $48 million in bonds; $10.3 million will go to pay back the bank for the 37 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 initial land purchase the Parking Authority made. In the event that the current developer does not have the ability to receive full financing and move forward, the Parking Authority, under that agreement, will pay up to an additional million 7 to acquire the rest of the site. 8 There may be a lag time between the 9 resale of that portion and the completion of the 10 garage. The 12 million that we will have put out 11 for the remaining portion, in fact, is needed to 12 build and complete the garage. So the completion bonds are just in there in the event we are three-quarters or nine-tenths the this project and need to complete the garage. But even the 48 million is a not-to-exceed number.
No, I understand that. So, I mean, it's almost essentially like a 10 percent contingency?
Okay. And let's say the project gets built, it gets built on time, gets built with the $48 million, what happens to the 5 million? 38 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
We will have never bonded for it. It's not in the amount we will go to bond for in June; it is just an authorization to go back and bond 5 million more if we need it down the road.
So your testimony is the deal you're putting on the street is a $48 million, but you're getting authorization for 53; and if in the event you need the additional 5, you don't necessarily have to come back to get authorization for it because you're getting authorization today, even though you're only going to go out for 48.
That is correct. And as it is not to exceed 48, it actually may be less than that.
Okay. Now, your earlier testimony, it sounded like you're going to put out an RFQ for the garage; is that correct?
No. In answer to Councilman Rizzo's question, I told him that the general process is not a competitive bid; it is really an RFQ process. But in this particular deal, as part of 39 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 the land sale to both Pavilion East on their portion of the project and the Parking Authority on their portion of the project --
There is a right of first refusal for Central to operate the fully completed garage. So while I have not negotiated the terms of that with them yet, as I don't know at this point know what size the garage will be or what it will have next to it, they will be, if they have the desire to, they will have first option on managing this facility.
No, I understand that; that's after it's done. I'm asking you a question about the actual construction. Who's going to build the garage?
The developer. This is not -- the Parking Authority is not building this garage. We will buy a fully completed garage with these bonds. 40 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
All right, so you're going to borrow the money, fund the construction, and then have a fully completed garage turned over to you; is that the way this transaction is working?
No, no. We are going to sell the bonds. Immediately upon selling the bonds, we will pay off the land acquisition price for our $10.3 million loan. The rest of the money, in fact, will go into an account, an investment account, and will be turned over upon the completion of the garage. So the funding of the construction comes from the developer, not from the Authority.
So the developer has to find the financing to construct the garage.
Okay. What's the 41 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 MBE/WBE plan for the garage construction?
Do you want me to -- yeah. I think, Councilman, the plan for the garage construction is the same as for the entire project. Back when we were before Council on the original TIF, a plan was developed at that time; that plan applies to the entire project. That plan will --
Could you in 12 words or less refresh our recollection about 13 that -- 14
There was a 18 construction workforce -- percentages of 19 workforce: 20 30 percent minority and 5 percent 21 female under construction contracting; 22 22 percent minority disadvantaged 23 business; 24 12 percent women disadvantaged; 25 And 2 percent disabled disadvantaged. 42 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 Then in the operational phase goals related TO permanent employees, there was the category for hourly and a category for management. Under hourly, it was 40 percent minority, 30 percent female, 2 percent disadvantaged. Under permanent management, it was 25 percent minority, 35 percent female, 2 percent disabled. And then there was, again, in the operational phase a goal related to service operational contracts of percent minority 14 disadvantaged, 12 percent women disadvantaged, and 15 2 percent disabled disadvantaged. 16 The Greater Philadelphia Urban Affairs 17 Coalition has been engaged by the developer to be 18 monitoring that activity. As you know, obviously, 19 I think we all know there is -- construction has 20 commenced, though it is in the early faces. At 21 this point, the employment goals in terms of 22 workers on the job are being exceed at this phase against those goals. There have been 20 percent MBE commitments and 7 percent WBE and percent on 43 1 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 contracting to date, but most of the contracting hasn't happened. The big packages are coming up, you know, the cement and steel, etc.
So I think there's a general feeling that the goals will be fairly closely met, if not exceeded.
I'm sure you've handed that up possibly in the previous Market East Pavilion hearing, but if you could give us, through the Chair, an up-to-date copy of that, that would be helpful.
Okay. I guess this might be for Miss Cutler. Can you tell us what the financial status of the overall project is? It's, I think, in response maybe to a question from Councilman Kenney, and you had kind of touched on some fits and starts. Where we today with the money in the financing of this project?
We are, at least at the moment, on schedule. Construction has begun, the 44 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 developer has until June 1st to complete the total financing package to construct DisneyQuest, the rest of the retail space, and the garage. Certainly, one of the requirements for the developer's construction loan is that they are sure that the TIF piece of the project is in place as well as that the garage piece of the project is in place. Hence, we had put the date out for closing the big construction loan from the developers to allow us the time to make sure that the other two pieces were in place for the financing package to move forward. We expect once this passes -- if it is the will of this body to so pass it -- the bank will then proceed with the remainder of the project financing, which is somewhere around $100 million.
Okay, all right. Last question. And thank you, Madam Chair, for your indulgence. Mr. Reid, attached to your testimony is the financing team sheet. I recognize that this is not a half-a-billion-dollar bond offering. But in terms of the bank side of this transaction, it 45 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 is exceedingly light as it relates to MBE/WBE. Is that the normal for Parking Authority financing?
Councilman Nutter, if I may, I think I can answer your question. At the point at the end of January when we closed on the land, in order to meet a variety of both construction and financing deadlines, and given the short amount of notice we had that we had to put a bond deal together to get this moving, we essentially moved fast. And hence, when we requested a bond team, we basically just said, you know, I need enough bodies to, you know, get this job done. So in fact, this is a much smaller team than you will see on any other bond deal -- certainly that I am aware of, and certainly that the Parking Authority has done. But, in fact, I might just state for the record that they have done yeoman's work to get us here in literally seven weeks to prepare the bond document, so I do need to point that out. But, yes, it's smaller.
Just for the record, I have no complaints about the composition 46 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 of the team. I happen to know some of the people on it and that they do excellent work. I think you know what my concern is, but I also, I guess, want to make sure that the record is clear. It's not your testimony that you move quickly and, therefore, could not find anybody.
No, Councilman, that is not my comment. And as I generally do not have a hand in picking the financing team, I can't tell you -- all I can tell you is it is smaller than it normally is on a Parking Authority transaction.
And I think there was some sense, and I certainly articulated it when we realized we were going to have to go into the bond market. That has been my experience, that the least number of people you have in a meeting trying to do the work, the faster the work tends to move. That is my testimony.
I understand that. I know some people that work pretty quickly, let us try not to leave people out of the room. Thank you. 47 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 Thank you, Madam Chair.
You're welcome. The Chair recognizes Councilwoman Tasco.
Thank you very much. I just need to have you walk me through this one more time. We're borrowing the money -- the Parking Authority's borrowing the money to acquire the land to construct a garage. The developer is going to construct the garage?
Okay. And then we purchase the garage from the developer?
The purchase price will not exceed 38 million, but we have already purchased the land for 10 million. So an 48 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 additional 28 million will be owed upon completion of the parking garage construction.
So what happens if there are cost overruns? Who picks up the cost overruns?
That is a maximum amount we will pay for the garage, so those would be the developer's costs.
Councilman Nutter asked about the WBE/MBE participation. If the developer is in charge of the construction, who is -- who oversees the minority female participation on the project?
It's -- there are -- I mean, this isn't a Parking Authority question, but I'll be pleased to try to answer it for you.
For the record, my name is Robert Fina, I'm with PIDC. William Hankowsky will return in a moment. But for expediency, I can answer the question. The developer has, at the suggestion of Council staff, has hired the Urban Coalition to monitor the total economic opportunities plan that they have prepared and that becomes part of the 49 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 documentation that the developer's obligated to adhere to. We will provide copies, as requested by Councilman Nutter, to the Chair for all Councilpeople to see that economic opportunities plan.
And so when the developer proceeds to secure financing for the project on the front side, he has to also secure financing for the purchase for the construction of the garage?
We have purchased the land that the garage would go on. We will not give the developer the remainder of the money until the garage is completed. In the event the developer cannot complete it, we now own the land and will move forward to build our own garage. Or we will come back to Council to use the bond money that we are asking for here to go to a substitute garage 50 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 project. Part of it depends, Councilwoman, on what stage the construction is.
So if we do not proceed with this developer, you have to build the garage. We get another developer; do we sell the garage to the new developer?
We certainly have the option of doing so. If the developer who's looking at the remainder of the site, in fact, requires that they control and own the parking, then, certainly, we could at that point sell the parcel, getting all of our costs back to a new developer.
There is in Exhibit A a statement about the City having to cover debt service. Do you see that circumstance ever happening?
There are preliminary numbers in this, and those preliminary numbers from both the Disney-projected attendance at the Eighth and Market facility as well as the parking study numbers done by Chance Management indicate that this garage will more than pay for itself. 51 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
Okay. Something you said earlier that -- if you would just clarify for me the statement that you made about building a smaller garage. Did I hear you say that you would build a smaller garage?
In the worse-case scenario that Bill Hankowsky was referring to, one of the options that we might have -- if in a worse-case scenario, there was no immediate development, Disney decided for whatever reason that they were not coming to Philadelphia, what I said was, at that point, we have the option of deciding we will build a 400-space garage while we figure out what will happen on the remainder of the site. So, yes, there is a scenario where we could build a smaller garage without knowing what type of other activity would happen on the Eighth and Market side of the site.
So when do you determine when you begin construction? Are you going to wait till June?
Well, certainly, construction has begun in terms of the site on the Eighth and Market portion. In fact, the Parking 52 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 Authority-owned portion on Eighth and Chestnut is still being used as a parking lot.
Okay, so you would build a smaller garage because the developer has to build a garage associated with this project.
Thank you, Madam Chair. I just have really one question as a follow-up on what Michael Nutter was doing. We had the Kvaerner problem, and you know that we then had to come back here in terms of the lack of minority participation in the contracting and minority contractors and so on. And I want to be assured this time that we don't find ourselves in the same sort of situation down the road, that there is in place, a mechanism in which African-American, Latino, and women contractors have full access to the subcontracts. 53 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 Who's the main contractor that has been hired in this project? Or has there been one?
I believe, and there are representatives from the developer here, so if I get this wrong, I'll ask them to jump up. But basically, Driscoll and Intech have the overall construction responsibility, which I believe is responsive to your question, as construction manager, that they are doing multiple bid packages as they go through each phase. And, Councilman, I do exactly appreciate your question, 'cause I don't want to be here either in that circumstance. And in this instance, I think what we see is that instead of after the fact bringing in someone to see what's going and kind of after the fact trying to catch up, this is a scenario where the developer puts somebody in place at the beginning. One is the plan was in place at the beginning, they hired their own -- the Urban Affairs Coalition to work with them to monitor at the beginning. They were monitoring it monthly so that there is the kind of information. And I cited to you -- I forget, but I 54 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 think it was in response to Councilman Nutter's question, kind of where it is at this snapshot in time so that we're much more collectively informed and on top of it than what happened in the other instance you cite.
And so if the African-American Contractors Association, the Latinos Contractors Association wants information or wants to be bidding in this project, then --
They should contact the Goldenberg Group, and I think the right person is -- Laurie Flynn is the right person on that team to contact, yes.
Okay. So that if there's going to be access information and accountability to us here at City Council as to what this is --
Thank you. If my memory serves me, I believe I heard that there was going to be some retail space within the parking garage. I don't think that's 55 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 been mentioned this morning. Are we still anticipating that to happen? And if so, who will operate that space?
Under the current project plan, the first floor along the Chestnut Street corridor will be retail space; it will be operated by the developer.
At this time, the Chair would recognize Councilman Rizzo.
Thank you, Madam Chair. Could you please provide to the Chair the documents associated with the transaction, the sale of this property to the Parking Authority -- specifically the language, the rights of first refusal that the parking operation has received in that deal?
You're welcome. The Chair recognizes Councilwoman Miller. 56 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
Thank you, Madam President. Mr. Hankowsky, I'd like to know exactly what the Greater Philadelphia Urban Affairs partnership does, step by step, when it monitors MBE and WBE participation on these types of projects.
Let me give you an overview. And as I indicated a moment ago to Councilman Ortiz, Mrs. Flynn is here, Laurie Flynn, who is the point person within the Goldenberg Group on that, and she may be able to further amplify these comments. But basically, the Goldenberg Group -- or in this particular instance, their Market Street Pavilion entity has engaged the Greater Philadelphia Urban Affairs Coalition. They are looking, for example, to give a specific example, at the payroll information monthly provided by the contractors of the workforce the contractors have engaged, to what degree is that workforce minority, to what degree is that workforce female, so that on a monthly basis, they can track that. They are looking at the actual bidding 57 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 of, for example, excavation as a bid package and what is that excavation contractor bringing in terms of minority and female and disabled firms as subs to that, what are the percentages, where are the contract, so that, you know, in a hard sense that there are contractual commitments in place. And then seeing in fact that those firms being employed, are they on the site, are they getting the percentage of the total package of that bid package that was evidenced in the contractual agreement. So they are sort of deep into following it on that kind of -- as it happens, on an ongoing basis.
I believe they report that -- they report it to the Goldenberg Group, and I believe specifically -- (Unidentified woman addresses Council inaudibly off mike.)
I'm sorry, I'm sorry, you're going to have to come up to the table and identify yourself for the record and 58 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 respond, please. Yes, Councilwoman Tasco?
I was going to ask if we could ask the Urban Coalition to come forth 'cause I had some questions around their monitoring also. Maybe we could ask them to come to the table.
Would you, please. (Laurie Flynn comes forward.)
My name is Laurie Flynn, I'm a vice president with the Goldenberg Group. And, Councilwoman Miller, just to give you a little bit of an idea of what the Philadelphia Urban Affairs Coalition does for us is, they visit the site usually three or four times a week and physically inspect people who are working there. They also receive certified payrolls from anyone who is working on the site, which indicate age and race and gender and address, so that we can measure how many of the people working there are Philadelphia residents, race, gender, and all of these items. 59 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 In addition to that, however, what they are also doing with us in this instance is not simply monitoring this information after the fact as we make awards. Instead, we are proactively trying to look at all of the bid packages associated with this project and match opportunities to capacities in the City -- minority-, female-, and disabled-owned firms. So that's what we're doing together. (Charles Solomon comes forward.)
Good afternoon. My name is Charles Solomon, and I'm the Director of Economic Development --
I'm sorry, Mr. Solomon, would you pull that microphone closer to you, please.
All right. My name is Charles Solomon, and I'm the Director of Economic Development of the Greater Philadelphia Urban Affairs Coalition. I'd like to speak to our efforts in terms of this project and talk specifically about the two areas that we are monitoring or facilitating and monitoring -- the first being the 60 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 cracking area. On a per-bid package, per-trade area, we are reviewing each element of the work and identifying minority- and female-owned firms and disabled firms that are certified by the City's Minority Business Enterprise Council, providing that information to the bidders on the project if, in fact, we do not have a minority or a female prime contractors for consideration. We work very closely with the L.F. Driscoll Company and with the owners in reviewing the responses. In the event that a contractor who bids and he's the apparent low bidder, he or she's the apparent low bidder, that contract does not respond to the 22, 12 and 2 participation levels, we'd like to know why and we'd like to work with that contractor. So far we have about five packages that are on that's been bid, if you will. One is (unintelligible) in a contract which is with the Winsinger Company (ph.). They have committed to a 22, 12 and 2 participation level. At this point, we're asking them to give us a more clear definition about who and which firms they're going 61 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 to use. On the other packages, we've got reasonable participation, but we are still meeting with those contractors assure that we do get good participation. This is all more a proactive approach as opposed to waiting until after the fact, when the contracts are in fact awarded and we're going back, trying to clean up something.
What happens when you don't get good whatever number or percentage that might be participation? And I ask this because we constantly hear from vendors and contractors that just cannot seem to get a piece of this TIF action, and I believe that we have to -- maybe it's lack of information, but the information that I receive continuously is from contractors who cannot get a part of the TIF. And if it has to do with capacity or whatever problems might be there, then I need to know about that.
Okay. Well, there are contractors who have the capacity to perform work, 62 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 and by and large, those contractors are participating. Now, there are other contractors who may have some difficulties -- maybe their pricing is not right, maybe they're unable to secure a bond, there may be some problems associated with that. But by and large, we're getting participation. Now, are we getting it at the level we'd like to get it on the project we're affiliated with? In some instances, we are; in some instances, we are not. But what we're doing is working -- in this case, we're working with the contractors, meeting, discussing their participation and offering options for them to get real participation, or better participation. We're also working with the minority and female contractors to help them kind of increase their capacity. For instance, on this project, we had one minority firm that was interested in prime participation on one of the smaller structural steel packages. He worked that package up to the point where he had become to -- he came to the realization that he couldn't 63 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 perform the work, so he backed off, and now we're trying to get him some subcontract participation.
What I'd like to point out to you is if have heard that problem about this project, that's really something we want to know about. And if anybody hears that problem about this project, please contact us. I would like to know if you've heard that complaint about this project in particular, and I certainly hope not, but if anybody does, then we need to be made aware of that immediately. So sometimes the information is simply lacking and we don't know that there's somebody out there who could participate with us on the project, so we want to know that.
I have not heard any specific examples, but people -- the general attitude is, Well, here's another TIF that you guys are approving and we're going to be left out. Now, if I wanted to get information on a participation activity, then I could call your office because this gentleman gives you the weekly report or the monthly report?
Monthly report. 64 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
Just for your information, it is also shared on a monthly basis with City Council technical staff, Marla Hamilton. So you can get it from us, you can get it from her -- a couple of ways.
And if we have a question about a particular contractor that's applied and hasn't heard anything, we can also get that information too, and if there's a capacity issue or any other issue then we'd know that, correct?
All right, thank you, Madam President. I don't have any more questions.
Thank you. The Chair recognizes Councilman Cohen.
I'll yield for 65 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 Councilwoman Tasco to continue.
Thank you. Mr. Solomon, how many projects are you monitoring that are associated with City Council action?
Seven staff members. Are these staff members required to go out and monitor the various projects?
We generally agreed to a schedule of once to twice a week, sometimes three, depending on the size of a project.
If you find that a prime is not in compliance and you are trying to get that contractor in compliance and you're not 66 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 successful, where do you go to let -- how do you let us know what's going to happen? Or do you let us know?
Okay. Well, since we're contracted with an owner in most cases, that information goes to the owner. A great deal of whether or not a project is successful or not has to do with the commitment of the owners. And if the owners are clearly committed to making this thing happen, generally we'll get the kind of participation we'd like to get because it's a bottom line when we're taking about sitting down and negotiating with each contractor to get the appropriate participation really. So in instances where we reach a dead end, that dead end is generally at the owners -- at the owners' --
So if the owner is not really forceful in negotiating, do you come back to Council and say that you're having a hard time? 67 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
Historically, we have not. I mean, again, we are contracted with the owners --
But through the will and desire of City Council to make sure what we bid on when we approve these contracts --
-- we ask, and everybody knows we're concerned about minority and women participation, so they go hire the Urban Coalition. And I'm like Councilwoman Miller; we constantly get complaints from contractors and workers that they are not on these projects, why do they ride by, they don't see any people of color or women on these projects. And nobody -- I don't hear from you saying that this is not happening.
And it's very frustrating that we sit here and we go through this charade every time and we are told we're going to have all this participation, and then we constantly have to spend a lot of staff time calling, trying to make sure that there is 68 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 participation on the project.
Well, I'd like to say this: you know, we do a great deal of research, if you will. We talk to the minority contractors, we talk to the majority contractors, and we're right on top of the problem. I think we've got a fairly good fix on why the problem exists, where there have been successes, where there have been failures. To solve this problem I think for us would be clearly to get some agreement from the owners. Again, we contract with the owners and get some agreement from the owners that we be able to provide City Council with whatever information they might want about a project, and we'll be glad to do it.
Well, I think that if there's public money in a project, I mean, we have a right to that information --
Thank you. 69 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
Councilman Cohen, do you still want to be recognized?
Well, I didn't realize it went off. Thank you, Madam President. Just pursuing that for a moment, who do you mean when you say "owner"?
In this instance, we're contracted with the Goldenberg Group, and they're the developers for the project.
The one that we generally call "the developer" in these, that's the same person. Does -- do you monitor the contracts between the subcontractor and the general contractor?
Because the most frequent complaint in that area is that general contractors retain a portion of the amount of money, usually about 10 percent. 70 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
And give to the subcontractor 90 percent. And then at the end of the work, when the subcontractor is getting his final payment and expecting to get all of the 7 percents that have accumulated, instead we're told 8 generally the subcontractors get a letter from the 9 contractor saying that you have not -- that 10 certain -- I'm using examples that may or may not apply -- windows or doors or other work was done improperly. Therefore, instead of getting, say, $10,000, which is the accumulated sum, you know, you're only going to get $2,000.
And is that monitored? If that happens, does your agency in any way offer any help to the subcontractor to determine whether or not that is a proper dispute? Most subcontractors believe that they are ultimately forced to accept a sharp reduction in the amount of money they feel is coming to them because otherwise, the contractor says, You're going to have to sue us, you're going to have 71 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 legal expenses, the case is going to go on for years, but if you accept instead of this $2,000 we're offered you or 3,000, you can have it now, otherwise we're going to give you nothing, and you're going to spend years, and most of these subcontractors are not in a position to get involved in litigation, pay the costs, and wait the time out. Now, does your monitoring include dealing with those kinds of problems?
Yes, it does. We take a look at final payment. We understand the retention approach -- the retainage approach, excuse me, where the 10 percent generally of the contractor's invoices is withheld pending acceptance of the work and the workmanship and the quality of the work. Now, in an instance where there is a dispute on projects that we're affiliated with, then we will sit down with both parties in trying to help resolve that issue really, you know, to the satisfaction of both parties. More often than not, the --
And you would 72 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 continue even beyond the end of the work period? Because often on the final payment, it only comes when the project is, as far as the rest of the world is concerned, completed.
We generally continue on a project 30 to 60 days after it's been accepted in terms of doing the final reporting, yes.
In the percentage figures that have been given as to the participation of female and minority employees, does the information that you monitor, does it include a breakdown by positions? Or is it an overall percentage, say, that there are percent 15 or 35 percent or 5 percent, whatever the number 16 may be, employed by this subcontractor or by this 17 contractor? 18
We break down the 19 employment in several different ways. We do it 20 based on the trade, the contract of the trade, the 21 individual's Social Security number, address, zip 22 code, etc. We have a fairly clear profile of each worker, where they work, and in what trade.
Well, if I told you that the general perception is that where the 73 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 overall figures appear to be good, it is generally because there is a heavy accumulation of employment at the lower levels; and as the skill level goes up, the percentage of participation goes down. Now, would there be truth to that? Would your statistics enable you to analyze that?
Yes. Generally, on a typical construction project, you have a heavy concentration of laborers on the front end. And as you get to the finishing trades and more skilled trades, the percentage of participation by skilled minorities and females tends to get lower. That's when we have to work a lot harder with the contractors, to make sure we maintain some type of reasonable level. But we keep a really clear detailed profile on each project. We track every hour of work, every person's work, where they work, and in what trade. And we develop the kinds of profiles that you're talking about each month, and it's available at any point really because it's a computerized program.
Excuse me. When you 74 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 talk in terms of maintaining a reasonable level of participation by minority and female employees at the upper levels, does that reasonable level, is that the same figure as the goals set forth in the contract? Or --
No, it's not. I mean, for instance, if a -- in this case, let's say for minorities, the goal's set at percent. 10
Now, that 22 percent 12 would be a combination of the participation at the 13 skill level and at the laborers' level, so it 14 would be a combination of the two that we speak to 15 total hours worked, 8 percent of total hours 16 worked. 17
Well, is it 18 possible, for example, that you may have a 19 situation which, at the lowest levels of pay, the 20 most unskilled, you might have 40 to 50 percent 21 minority, and at the upper levels of skill, you 22 might have as few as 5 to 10 percent, say, in an area where your overall goal may be 20 percent.
It's generally between the 15 and 20, 22 percent area for the field. 75 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
For the skilled trades. And it's true that the unskilled or labor areas is generally between 40 to 70 percent, depending on the project.
Excuse me. When you set goals, do you have separate goals for the skilled and the unskilled?
Well when, for example, Mr. Hankowsky gave at the earlier part of the testimony the goals and the apparent meeting of those goals, he was dealing with the overall percentages.
Right. He mentioned the overall employment participation of 35 percent -- 30 percent minority and 5 percent females. And that's the overall goal for employment for this project. There is another breakdown that we do in our reports. It breaks down the skill levels and the --
Would there be a 76 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 specific goal with respect to skilled trades?
No, there is not. On this project, we do not have a goal for skilled trades exclusively, no, we do not.
To the best of my recollection, we have not had that on any projects.
So then I gather that when you talk in terms of goals, what you do is to say, we'll have an overall goal covering everybody, and we'll work hard, without figures, without knowing precisely what the figure will be. We get as much skills, you know, get the highest possible percentage that we're able to get at the skill trades, but we'll meet the overall goal really because we will go far, we will far surpass the goals at the unskilled level.
The effort is really to get more participation at the skill level because the labor level is a no-brainer.
That's what I thought. 77 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
Roughly 80 percent of the laborers union are minority individuals, so that's not really an effort. We work more to get participation at the skill levels, and we do have an actual percentage on a monthly basis. We look at the skill level of participation and the labor level of participation each month, so we have a clear fix on just what that is at any given point in time.
Well, wouldn't it be more open and more direct then to speak not of the overall goals but to speak in terms of what our specific goals are at the skill level? Because I agree with you, I've never known -- I think I can say "never" known any instance in which there was a problem at the unskilled level. You know, if it happened -- you know, maybe it happened somewhere, but that's never been the problem. Except maybe for females, it may have been a problem, even at the very unskilled level.
But not the minority 78 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 participation. But we're really, when we're expressing our concern, we're expressing our concern at the higher skill levels, you know. And wouldn't it be more realistic and wouldn't we be in a position to have the better information so that we can deal with our constituents on it, if we knew at what level of skill, what the goal was, and how that goal was met? I know it would complicate Mr. Hankowsky's life because he'd have to tell us a number of goals rather than, you know, one single overall goal. But I think it would finally overcome this constant attention that the whole Council pays to this issue, because all us -- well, I can't speak for all of us, but I think the overwhelming majority of Councilmembers really want to be able to go to their constituency and say that if this projects develops, we want to make sure that there is a fair division of the work that goes to Philadelphians, that it's distributed fairly amongst all Philadelphians. I'm just concerned generally that the goals tell us nothing about those areas where the problems have existed in the past and which we're 79 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 aiming to correct.
Okay, well, let me say just the one thing. A part of the thought process behind the overall goal is to be able to measure economic impact in terms of dollars and taxes and that kind of stuff being paid. So that's part of that thought process, if you will. However, we clearly understand that the interest is really in getting more minorities and females into the skilled trades areas, and we're doing that. We try to work to offer as much opportunity as is available --"available" meaning the number of people available to work in the skilled trades areas. And we are augmenting that with training and apprenticeship programs and getting contractors to buy into that so that we can get more minorities and females into the skilled trades areas. And we are measuring it, but a lot of it has to do with availability.
Well, would it be a fair request to make of you or of Mr. Hankowsky or of Mr. Fina to tell us what your goals are for the skilled trades that are going to be involved in 80 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 the development of this project and then keep us informed as to the degree we're meeting that? Rather than dealing with the overall percentages.
And I would ask if that could be done, if it could be sent to the President who could then, you know, circulate it to the Councilmembers.
Right. Why don't we take a look at that. I only want to add for the record, though, that we do -- we are working with the owner or developers, present these plans, and actually, there is a dialogue between our office and Council's technical staff to do that. And I think perhaps, with the assistance of Council's technical staff, we could take a look at such a revision or perfection, or whatever it may be.
Well, I know that, but in addition to that discussion, could there be a calculation arrived at periodically as to what the goals are and how they've been met?
Could that be put in some written form to the President for circulation 81 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 to all of us? 'Cause all of us are not involved in these discussions with staff, and the staff has many problems that they're working on all the time, so that it isn't always convenient for them to get us the material at the time that we want it.
Yes. All right, very good then. That finishes that phase. I would like to ask if Miss Cutler would rejoin the -- oh, on that? Then I'll yield temporarily. Or I'll leave that to the President.
Just a moment, please. Councilwoman Miller, do you have questions of this witness? And you do, too, Councilman? Okay, your light's been on for quite a while, Councilwoman, so I would recognize you at this point in time.
Okay, thank you, 82 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 Madam President. Mr. Hankowsky, when you sit down in the initial stages with the owner of the project and discuss the minority and women and disabled participation levels, one of the problems that I keep hearing from various agencies, and as Mr. Solomon just stated, that if the owner doesn't buy into this, it doesn't happen -- or it's more difficult to get the participation levels that we really want without the owner. Are there any ways that you can think of that would help the owners, and perhaps Councilpeople could be informed? And maybe there's some resistance to participation. And sometimes it may not be the owner; it could be the persons that are sending the messages right under the owner. But I guess I'm just a little bit frustrated that we keep coming here and talking about the same thing each time there's a TIF -- with minority participation and just fair, equitable access to projects from everybody, all residents of Philadelphia. And I'm just thinking that maybe this is for a different later 83 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 discussion. But I wonder if there's something that you've come up with. I'm glad I heard Mr. Solomon say at the trade level, where you're talking about training programs and apprenticeship programs, and I would hope that you will work with the Philadelphia school system so that that could all be built in, and those types of needs could be built in to the curriculum. It's amazing. I did not know that someone is -- if you want to get into the sheetmetal workers' apprenticeship program, you needed trigonometry. I had no idea of that. But it told help us too. But what is it with the owners? We had Mr. Rafdal here from Kvaerner. He said he was very, very committed to meeting the goals of the project, but it appeared that it was the vice president, or whatever his title was, right under him that was not as committed to those goals. 'Cause I, as a Councilperson, am very committed. If we're spending public money, as far as I'm concerned, it has to be for everybody, and everybody should have an economic development 84 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 opportunity to participate. So that's what I'd like to know. What do you think? I know it's --
I'm not really sure what the question is, but let me just say that we, I think -- again, I'll never say "all of the time" because maybe once, you know, we didn't do it. But I think basically, in every instance where we begin a discussion, I think we always do it literally at that first meeting, when people are seeking, for example, a TIF or whatever. And we advise them that one of things that they need to understand, they need to appreciate, and they need to buy into is an equal, you know, opportunity plan that would be part that, that would have to be done prior to coming to this body, that would have to be something that, you know, quote/unquote, wasn't just "words on paper," but that they would have to actually execute and perform. And so we try to do that. And then, as Mr. Solomon points out, you know, in some instances, they engage -- the Urban Affairs Coalition or others to work with them to either 85 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 put that plan together, implement that plan in a proactive sense, and/or monitor that plan. There clearly are instances -- you know, there could be instances where, as you very, I think, correctly pointed out, where there's a commitment and something -- you know, it's some other person in the chain of command or whatever, it falls down, and that we try to jump on those problems as quickly as possible.
Well, I want to set up a meeting and just kind of talk about some of this later. I completely understood what you said, but there still must be a breakdown somewhere 'cause we would not hear from as many people as we hear from if things were going okay.
Thank you. The Chair recognizes Councilman Kenney.
Thank you, Madam President. I agree that there needs to be a 86 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 continuing effort to expand the skilled trades minority participation, female and minority participation. And, for example, I'll point to one in particular trade that has experienced a full points increase in minority membership 7 over the past three or four years, from a 7 8 percent minority component to almost a 20 percent 9 minority component. 10 The International Brotherhood of Electrical Workers have actually gone out and attempted to create programs to be attractive to African-American minorities and Latino and Asian minorities, male and female. And I think that that needs to be expanded and encouraged in those other skilled trades. But I don't want anyone reading this record to come away with the belief that somehow, the position of laborer and the contracts negotiated by the International Association of Laborers and Mr. Staten is somehow less dignified in wage-earning and family-raising work that someone reading this record might indicate. And for the record, if you know on this project and in general terms, what's the hourly 87 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 wage rate of a laborer under prevailing wage conditions? First, the hourly rate and then the benefit the fringe benefit rate. If you know that from your experience.
Not exactly, but I'll say the rate's somewhere in the 23, dollars per 8 hour. 9
So on top of that, 21 whatever the average percentage is, benefits 22 versus hourly rate, we're talking in the 23 $30-an-hour range? 24
See, again, I'll 88 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 preface my statement by saying that I want to see more minority men and women laying pipe and wiring and doing other types of rod-setting and other things. But to somehow characterize a laborer position at 30-some dollars an hour I think is a mischaracterization. And I think that if Mr. Staten were here today, he would be the first one to step to the mike to say that he negotiates the best wages and rates for his people. And if this job, as I understand it is, is a prevailing-wage job, then those protections, both Statewide and with the passage of our own prevailing wage ordinance, provides those protections for many individuals in the laborers union who are earning dignified, family-raising wages. Do you agree with that?
I agree with that totally. The issue was simply around what we'd want to call, I guess, "equitable participation." There is significant participation in the laborers union and viable participation in terms of people being employed, earning reasonable incomes. 89 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 The only concern was that when you look at the other trade areas, once you get passed the electricians and the carpenters, you see a sharp downturn in terms of overall participation. That was the only consideration there.
And I agree with you, and I also agree that those continuing efforts in apprenticeship, training, and other types of training, in order to get our young people from every neighborhood in the City involved in every aspect of the construction industry, I think is absolutely critical. But I didn't want anyone to go away from this room today thinking that somehow being a card-carrying union member of the laborers union somehow has put you in a second-class status as a result of the construction industry, and I think the laborers union would take objection to that.
My second question and final question is, in your opinion, as an individual who is involved in this day to day, what is your estimation of the efforts of this particular developer as it relates to this 90 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 particular project in trying to meet the goals that have been set initially?
I think from the very, very start, we started to talk about this project when we sat down to talk about participation levels. It's been very proactive. We've worked on it on an element-by-element basis. We've been very, very aggressive and very, very pointed in talking or dialoguing with the construction management firm and with contractors to speak to that participation as being real, and we really want this to happen. So, you know, again, we have four or five packages now, and we are scheduled to meet with four of the five contractors to talk about participation. We've also gone forward at the suggestion of the owner to identify capacity trade area matches, if you will, to start talking about where we can get better participation, knowing that on some packages, we will get less participation because of the lack of availability. And we will look at packages where there's higher availability to get better participating. 91 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 So I think this has been a win-win kind of a relationship so far.
Thank you very much. Thank you, Madam President. Just before I leave, though, I'd like to -- I have an appointment and I'd like to leave my vote -- aye on all three of the bills before the committee today.
Thank you. The Chair recognizes Councilwoman Tasco.
Excuse me, excuse me, Councilwoman. Councilman, are you also in favor of the amendments?
Yes. I'd like to be recorded as voting aye on all amendments and on the final bill coming out of committee.
One of the problems that causes the decline in the 92 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 participation of skilled workers on these projects is because of the lack of participation of at least minorities into the labor trades. And I'm glad that the electricians are improving their participation, and we have to hope that the others will follow suit. Because (unintelligible) does have far more people down there awaiting to work than when they probably would like to go into other skilled trades. The Mayor has an executive order which requires training on projects of this nature. And do we seek to train people in this? Do the unions agree to provide the training on projects of this nature? 'Cause this is the issue that is a constant refrain all the time around these projects, and we get sort of like some quick fix,"We're going to do this," and you and I know it doesn't happen. Can there be any training? It has nothing to do with the developer. You know, your intentions are good. But what happens and what do you do to see that the training takes place? Are you aware of the executive order?
Yes, I'm aware of it. On 93 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 this particular project, we've had some discussions with OHCD, and we've talked about being responsive to the Section 3 requirements and getting an agreement, if you will, from the contractors to employ more apprentices -- specifically from Congreso 'cause they're doing it already, they have some people on deck to take advantage of apprenticeship opportunities. Our role now is to develop those opportunities within the contracting community, those contractors on this project. The coalition. We're involved in several different training activities geared to the same thing in terms of the -- that are kind of project-specific to train individuals from the community, to get them to the apprenticeship test and pass, and then get those folks placed with the contractors.
Okay, we won't burden the record further -- at least I won't, but we do plan to come back to this issue. And Mr. Hankowsky, I appreciate your offer to Councilman Cohen to look at how we could probably incorporate in the contracts the skills 94 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 level requirements as opposed to a general overall participation.
Councilwoman Tasco spoke about the minority participation piece, and this gentleman here, you mentioned Congreso de Latino Unidos. Congreso has been working with me and a couple members of this Council in order to do exactly what you're talking about, and I've done some things with Alva Martinez and Congreso, Councilwoman. And what she is doing up there is way ahead of her time. The problem with the building trades -- and I think I can speak freely with that and openly since I came from the building trades and from the International Brotherhood of Electrical Workers that Councilman Kenney spoke about with our minority participation piece. What Alva has done is, she has taken 95 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 young Latino and African-American minority youths and schooled them in being able to take the apprentice test. But what everyone needs to understand is, there's not a gate open where there's -- the electricians can take a thousand people, no matter what color, shape or size or who they are. And the sprinkler fitters -- nobody mentions the sprinkler fitters. The sprinkler fitters are currently working with Alva and Congreso. The carpenters are working with Alva and Congreso. We're talking to the sheetmetal workers, we're talking to the plumbers, we're talking to the operating engineers. And there's just not a gate where there is a thousand people or even a hundred people. Every union -- the electricians I can speak for 'cause we negotiate in our contract how many apprentices we can take every year, so it's negotiated. If it's a three-year contract, we may take 25, 50, 100. But Congreso is one of the only organizations that I've found that is actively having people come up and take these tests. So 96 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 when that apprentice test opens in April -- in fact, the electricians is open now, this week and next week, and you come up, you fill out an application, you take a test. Now, you have to pass a test. You can know everybody in the union, but if you don't pass that test -- and it's not a fail/pass; it's low, medium and high, and they start with the highs, then work down to the mediums and then work down to the lows. But what happens is, if everybody comes in high and there's not enough openings, they'll have to wait another year and another year. So it becomes very burdensome. But Congreso has been doing great things. They have people train for the test. So if the electricians aren't available, the plumbers may be. It's pretty much the same test. It's a mechanical aptibility (sic) test. And you brought up Congreso, and they're doing things way ahead of time, and it's about time that all happens. Thank you.
Thank you. Councilwoman Tasco do you want to 97 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 continue? Thank you. Councilman Cohen, do you want to be recognized?
One more with him before Miss Cutler. You are a part of the Urban Affairs Coalition that's monitoring?
Yes. I am the Director of Economic Development Projects for the Greater Philadelphia Urban Affairs Coalition.
Where does Mr. Underwood fit in? He works for the City?
Who is the person in charge of monitoring for Kvaerner? Mr. Roundtree? And is Mr. Roundtree with the City or is he a part of the Coalition monitoring group?
And you're with the 98 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 Coalition, and the Coalition has been hired by the developer or by the City? Who hires the Coalition?
The developer hires the Coalition to see that these goals are met.
Very good. I just wanted that cleared up. Thank you very much.
Thank you. Can you stay here? (Addressing Mr. Solomon.)
I still have some things I want to speak about. My main concern, and every time we do a public project, we come up here and do the same thing. And the Urban Coalition piece, what you need to do here. I mean, are we trying to get minority contractors and minority tradeswomen and tradesmen? Is it a double thing we're trying to 99 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 do here?
Because what I would see is like if the contractor is a minority or isn't a minority, the contractor, especially if it's a prevailing-rate job and they're union, they have to go back to the same union hall and hire the same men and the same women. So if it's not a minority contractor, or if it's a minority contractor, they're the same workers. So is three anything that the workers actually -- not just the contractors -- the workers have to have a minority participation number?
Right. So if Michael Nutter owns the contracting company or I own it, we're going to hire the same people, okay? 'Cause if hiring electricians, we're hiring out of the same union hall. So if they have to be -- if there's 20 electricians and, what, 10 of 'em have to be minorities, we're going to get the 100 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 same people. Is that the goal here?
Well, no. The point for both areas as it relates to the contractors, we're looking to increase capacity. I mean, if contractors do more work, get more projects, an increase in the sophistication of their work, they're able to hire more people. Yes, there's a moving number of people in the electricians union at this particular point in time. But we also understand that in many of the skilled trade areas, there's an under- representation of minorities and even a greater under-representation of females. So what we're attempting to do, along with Congreso and other organizations, is to get more folks into the unions. Now, what we've been doing is to, on a per-project basis, talk to the contractors who are on the project and get their cooperation. For instance, the electricians is the only union that has helpers, which is a real easy fix for us.
Well, we only have helpers with the kindness of the business office and the kindness of the contractors, but that 101 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 could end tomorrow because there's really -- there's helpers but there's not helpers, ya know what I mean?
If the apprentices are out of work, there's no helpers.
If the journeymen are out of work, there's no apprentices.
That's correct. We're getting the cooperation of the unions across the board. We're working on them one by one, and it's just a matter of getting more apprentices in the pipeline, and that's working. So we want to see just where it goes.
While we're on this, there's a couple things I want to ask you and a couple things I want to say -- only because 102 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 I have a background.
And it's something that's been important for me, working with Congreso 'cause Alva has a great heart, and she understands. Getting kids to the table to take the test is great, but they have to be prepared to take the test, and it may take three months, it may take six months, it may take a year. But she has the wherewithal in trying to get her funds to be able to do that. The problem as I see it is with women. There's not a lot. I was an apprentice in 1977, 1978. There was a lot of women in my apprentice class, and I say a lot -- in that days, there was ten, and there's one left There's not a history in the building trade, and we look for it. I mean, we actively look for women. And maybe the first ten years, we didn't know where to look. But now (unintelligible) Congreso, we're getting women. But for a woman to come in here the last four years and decide, Whoa, this isn't for me, to do all this stuff, go through the whole training, waste all the money, and then 103 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 decide, Oh, ya know, I think I'm going to do this. There's no women in the building trades that are in their 50s and 60 years old that have been doing this. So what we need to do is to make sure -- and I don't know how you do that, but maybe you could help me and the building trades with that. Maybe you could -- is there a way? I mean, they have to be serious when they -- it can't be a ten-year fix, it has to be 15, years 11 to be able to last and get their pension and their 12 annunity. 13 'Cause, you know, one of the women in 14 my class is a contractor. One of the guys I 15 worked for is a contractor, Larry McCray (ph.), 16 and Larry does well because of where he is in 17 life. 18
The situation is changing 19 as it relates to women. We have one project that 20 we just checked a few weeks ago. There's 17, 18 women working on that project, which is --
Well, it's a blend, it's a blend, but it's probably half and half, which is 104 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 unusual. So it's changing. We've found also that women tend to do better in the apprenticeship testing and that kind of stuff. So the point is that we've got to keep working away at it and plugging away at it.
Well, I personally think women can handle the physical demands of the job but I just think there's no one to mentor them that's 50 or 60 years old to say, Look, kid, I've been doing this 40 years. I had my father, I had my uncle, I knew what was going to happen. There's no women in their 50s and 60s that can say, "Stick with it, there's a light at the" -- they should be out in their 50s anyhow, 55. But that's what we need to do with women. We need to make sure that they're serious about this because all they're doing, if they're only in it for two years, is taking the space of somebody else, you know. And in my world, it's whoever needs it really wants to be in it, you know, regardless of race or what sex they are. I mean, whoever can do it do and do the job and build the building, it's great if they're women, it's great if they're 105 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 Latinos. But, you know, we've got to make sure that there are people that understand this. This is a lifelong commitment and it's not easy. If it was easy, I wouldn't be sitting here right now; I'd be --
The one problem that when you get to the skilled trades in terms of the building trades and so on is that currently, the level of minorities in those trades doesn't rise to a very high percentage. And if you take 'em by trade -- carpenter, electrician and so on, and Congreso is doing a good program. But even if all of the individuals, for example, that Congreso trains, they may not rise up to being percentage of the membership of the electricians, for example. So what we have is that we have a -- 106 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 because of all those years, and we've been here since 1984 arguing about these issues. And which we had the Convention Center, we had the hotel boom from '84 to '91, and the percentages haven't grown. I've seen some of the new leadership that is coming into the trades and it's good because they're talking about really opening up the process. But the numbers are not there within the trades. The numbers don't reach -- at least from the Latino perspective, they don't reach even to a percentage -- in any of the trades. And if you go into African-American, I don't think we get to 6 or 7 percent of the trades at that level. So we have a problem that we have to be able to address very clearly in terms of as we go building all of these new buildings in terms with City money and City contracts. And I'm very glad that we have leadership like Johnny Dougherty and some of these other folks that are talking about opening up that process. But it is not yet there at that point.
Can I -- 107 4/8/99 - COMM. OF THE WHOLE - 990110, 990186
May I just say that I do want nine Councilmembers to be present in order for us to be able to vote this bill up or down. We are losing members because they have other commitments, so I would please urge, if there are questions or statements to be made, that they be very, very brief.
Back to Councilman Ortiz, can I just say ask the Councilman --
To Councilman Ortiz through the Chair, your statement, and I understand it, but what do we do, throw the baby out with the bath water? I mean, that's where we are, and I appreciate that. And I've only been here since 1996, and I've only been involved with the union, and I don't take that as a personal attack. But I mean, this is a question. So what do we do? I mean, we're trying to get the 108 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 minorities in, they have to be schooled, and I explained at the beginning that we continue what we're doing, but we have to have some faith in -- like you said, you mentioned the leadership up there, but that has to keep happening, you know? I mean, they get disillusioned there's other members in there who have been in there for years that may not have been -- that are not minorities, and they still have a fair shake at the jobs, too. So that's what everyone has to understand.
Miss Cutler, can you tell me, what's the specific mission of the Parking Authority?
There are several. Some are stated in law, as in the state-enabling 109 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 legislation which created parking authorities in the State. That is, in fact, to acquire and construct parking facilities. That is part of the enabling legislation of parking authority law in Pennsylvania -- and in fact, in most parts of country. There are internal policy missions as well. Obviously, since 1983, we have, on behalf of the City -- we have, on behalf of the City, done all of the City's on-street parking management. And so clearly, a mission for the agency is to manage a limited parking supply in order to move traffic, have goods delivered, and provide parking in the City of Philadelphia. So I would say that those are the two main missions of the Authority.
I raise that because it's always been my understanding that basically that second purpose that you mentioned -- I agree with the first purpose enunciated in the law, which was tied in with it, was for -- the public role in parking was to deal with those situations in which the private sector was unable to fulfill the need of Philadelphians or the need of people 110 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 who are within the area of Philadelphia at any given time, whether they're residents or not, to have ample parking facilities.
Well, it's not clear to me, Councilman, that there is a public-private piece in there. I mean, clearly, the overall mission of the agency at this point, both on-street and off-street, is to try and provide adequate public parking in the City of Philadelphia.
Even if, say, if the private industry were able to provide all of the parking needed, you think, nonetheless, there might be an additional public parking need?
I think there are many public-policy questions that certainly get answered when a governmental entity does parking as part of the mission, yeah. So I think there is a role for both the public and the private side to both develop parking and operate parking in any city.
Mm-hmm. Well, I'm not sure I may be in agreement on that. This was one area where I always conceded because, as you 111 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 know, I'm not wedded to the fact that only the private sector can do everything. I think there are public services that ought to be performed by public employees. Parking was one area where I always felt that the particular mission of the Parking Authority was to come in and provide for the parking needs of the City where the private sector couldn't, and I always felt that the private sector kind of had a prior right if they could do it. But all of this is generated -- my questions are generated that it seems to me that in this case, the Parking Authority is moving from being a -- and I'm not necessarily saying it's wrong; I'm just trying to define what it is. That the mission of a Parking Authority now involves an economic development role. And the reason for my concerns in general -- let me state the issue so you could, you know, deal in your answer with it. I have been kind of silently applauding the Delaware River Parking Authority for its sudden emergence at various times in the economic development field saying money is being made 112 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 available for this development or that development. It was something that I've been aware of, maybe have heard before, but I've only become aware of it over the last few years. I thought that means they're doing very well. They must have developed surpluses over the years and they're trying to, you know, invest it and help the economy generally. But then I read at the beginning of this week that they're thinking of raising the tolls by as much as 50 percent. And then I begin to wonder, Well, is it that the bridge-users are the ones that paying for the development? I don't know the answer as to whether there would be a need for an increase in parking tolls if the money had not been invested, you know, in economic development projects, the Delaware River Parking Authority money. Now, that's what's caused a lot of questions in my mind. What is the role? Is the Parking Authority now going to be cast in the role of being a partner? I'm not saying it's necessarily bad; I don't have any opinion on that, but I am wanting to get information. 113 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 Is the role of the Parking Authority changing? Are you going to be supplementing the PIDC or coming in where, for reasons they cannot or believe it's not appropriate for them, are you coming in to be a partner?
-- on the matter. Parking authority law was created sometime in the '50s. And, in fact, when with it was created across the country, its mission was to do economic development. Many cities, including both of the former cities I did this in used the Parking Authority to do economic development stimulus for the parking portions of the development. It had not been done in Philadelphia for a variety of reasons and has certainly been taking place in Philadelphia since my arrival here in 1994 because I believe that parking is an economic development activity. So we will certainly continue to get involved in developments where there is a need for 114 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 a public parking component. And I think that is both the legal role of the Parking Authority and the necessary role of the Parking Authority.
Why is there a need in this development for public parking? Wasn't there original contemplation that it would be a private parking development?
There was absolutely an original theory that it would be a private parking development. When the developers attempted to sell this project on the private side of the universe, they could not get anybody to pay them the amount of money I can pay them. And the reason for the difference is because I get to borrow tax-exempt, which is a much lower borrowing rate than a private business gets by for. So they tried, believe me. There was a great deal of discussion. The Parking Authority did not come looking to get involved in this project. This was done well after the fact of several private parking entities saying, We do not want to come into this deal, we cannot give you 38 million. So we stepped in, in fact, to keep this 115 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 project going, which is, in fact, I believe the role that the Parking Authority should play, which is the parking component of economic development projects.
Well, to Mr. Fina, does the PIDC pay a developer's role in projects? I know we give loans, you know, at favorable rates, that PIDC arranges a whole lot of things, puts them in order and tries to, you know, develop the necessary pieces that go together to, you know, create a project. But I don't have the impression that the PIDC has been a developer, you know, to the extent, for example, that the Parking Authority is going to be. Maybe that's not the role of PIDC. So I don't know, I'm asking. I'm trying to get clarification. It seems to me that the Disney project, which is a very attractive project and which has enormous public support because of the Disney name. Had the project been -- say if you had come to us originally and said, We have the chance for a Disney project but they're not really interested but they say if we take all the risks involved, they will be prepared 116 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 to put something on, we might very well have agreed to do that, you know, because of the popularity of Disney in general. I mean, that's a possibility. But looking at it from a development point of view, that's not been the approach we have used, and I am concerned that this Disney development is charting a new course. And if so, I think it just ought to be, you know, very fully discussed. It may well be the right course, but it might not be, but it's leading us in into, I believe, a different channel than we've ever done. And what's disquieting about it is that it's coming in sort of just like an amendment, as if it's not significant change. I think it's a really significant change. A significant change doesn't necessarily make it undesirable; it's just that it's a significant change, and I think we all ought to be aware of it. We tried to help projects with tax abatements, with TIFs, you know, with every kind of ordinary arrangement. But now we're into the risk-taking process. And that to me, you know, makes us a co-developer, and I don't remember us 117 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 being that in the past. And that's the whole question that I'm raising. When people have raised with me, Why are there public garages, why don't we permit private operators? The answer I've always given is that field's always been open to private operators; we only come in as a government body when the private sector doesn't meet the needs, and somebody's got to provide for parking, and that's the area where the public sector comes in. But here, it seems to me, that we're becoming a developer where we don't have to be. Didn't I read in yesterday or this morning's paper that there are two department store chains that are showing interest in the downtown area east of Broad, I think around 11th Street that the papers reported? It seems to me that this parcel of land is a very attractive parcel of land. And I just find it very difficult to see the City being a separate developer, but if it is to be, you know, or a co-developer, but if it is to be, I think it raises an interesting question which we ought to be talking about. Maybe this is the role. Maybe, you know, cities 118 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 are going to have to become developers, you know, if the private sector doesn't come back. But my understanding -- I think Mr. Hankowsky was the first one that mentioned it to me, and I've been observing it since, and he seems to have been right in that area, that there seems to be a return to an understanding in the private sector that urban areas are places where the private sector can operate successfully. So I've stated all of my concerns, and I would like to hear your responses from all of you at the table.
Am I right in my analysis, am I wrong? And where am I right or where am I wrong?
If I could, let me answer in part and let Miss Cutler answer part 2. With regard to the question of have we ever been a developer before? we'll start with the premise, and I was going to say, that we're not a developer in this deal. But to that question, the answer is, we've been a developer since 1958. We developed a 119 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 food distribution center publicly. Today, we own the seafood market, the produce market. We have developed a multi-tenant building on American Street because no one in the private sector would do it. PIDC owns it, and we've leased it out. In fact, we leased it out to a day care center that's employing welfare-to-work women who are getting jobs, so they have day care in that neighborhood that they didn't have before. If we hadn't built it, no one would have built it. We have been a developer. Through the Redevelopment Authority, the Reading Head House, the Hard Rock Cafe is a tenant of the Redevelopment Authority of the City of Philadelphia. We did that project because the private sector wouldn't do it and couldn't get it done. We have been a developer of One Parkway, where the City now houses itself. It's owned by PIDC, we lease it to the City, and we serve that role, again, as a way to do it in a most cost-effective way for the public. We were the developer of the project where -- which will open in about 60 days, I hope, 120 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 to bring the Amtrak Reservation Center here, bring 400 jobs, because the private sector wasn't going to put a proposal on the table and get those jobs here, and they would have been -- they weren't here in the first place, but they probably would have even left the region. So we have done many things in different instances to achieve the purpose of getting some project development and benefit done. All of that said, -- a segue, I'm going to hand the mike over, so to speak -- that is not what is happening here. And Rina might want to respond to that.
Yes. In this particular case, Councilman, I do not view my role as a developer. In this particular case, I am planning on purchasing a fully built garage at the end of the construction period for an agreed-upon price. So in this particular project, unlike other projects, I actually do act as a developer. This is not one of them. And in this case, I would like to reiterate, that way before the public side got involved -- the public side in this case being the Parking Authority -- this 121 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 garage was shopped to almost every large private parking operator that I am aware of in the City of Philadelphia, all of which said no. 5 At the point I came into this deal, this deal was going to die, unless the Parking Authority stepped in, looked at the deal, and purchased this garage at the end of the day.
Then let me ask Mr. Hankowsky, does what Miss Cutler just said indicate that Disney has such questions about the economic viability of this project that they're not really willing to put very much of their own credit on the line? Is that -- why -- they're a huge organization, financially speaking.
I think we're absolutely, in that question, mixing apples and orange.
Disney has signed a lease. Disney is prepared to pay rent, pay base rent, participation rent, occupy space, and invest their own $80-some million to outfit that space and put in all kinds of interesting attractions. They're committed to do that. That's their 122 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 commitment and it's their risk that people will come to it and pay such that they will get a return on capital. What they're saying is, We believe for that to be successful, you, the developer, who we have signed a lease with, need to do a couple of other things: rent some more space to some other people so that there's a critical mass of activity, and you need to do that, then there will be other tenants who will sign leases and will put their credit at risk to do that. And there needs to be a level of parking and a garage to service this complex. The Parking Authority has evaluated that economically. This is not a -- we are not granting this money to this developer such that, you know -- with no return. This is an economic transaction that says, Here's a parking garage that the Parking Authority believes, both by studies done by the developer and independent studies, that will create a revenue that will pay for the cost of this garage, that it makes sense. It has the ancillary benefit of being a condition to make the Disney project successful so 123 4/8/99 - COMM. OF THE WHOLE - 990110, 990186 that when people come, they have a place to park and, in fact, go there. So I don't think there's any relationship between the fact that Disney is putting their money at risk, equity in investing of the property, and putting a long-term commitment to pay their rent and do their piece, and other people need to do their pieces.
Thank you. Mr. Reid, I understand that you want to withdraw your request for suspension of the rules so that both bills could be moved at the same time.
Thank you. Do we have anyone else to testify on Bill No.'s 990110, 990186? 124 4/8/99 - COMM. OF THE WHOLE - 990114 (No response.)
Seeing none, I would please ask Mr. McPherson to read the title of Bill No. 990114.
Bill No. 990114, an ordinance amending an ordinance approved July 1, 1997 (Bill No. 970120) which created the Philadelphia Navy Business Center Tax Increment Financing District by accepting three certain areas from inclusion in the District by approving the amended project plan for the redevelopment of the District submitted to City Council by the Philadelphia Authority for Industrial Development, and making certain findings and declarations in ordinance with the Tax Increment Financing Act.
Before you go on with your testimony, I would ask all Councilmembers who are in their offices and listening to the testimony to please come down to the chambers so that we could cast a vote on these bills today. Thank you. Mr. Hankowsky?
I will, in respect for time, summarize. I've included written testimony 125 4/8/99 - COMM. OF THE WHOLE - 990114 that was part of my testimony on both TIF bills before Council today. This bill is fairly simple. We submitted it, as you know, which, because Council approved it, an application to create Keystone Opportunity Zones. That application has since been approved by the State. We included in that application a portion of the Naval Business Center. Previously, that had been inside a Tax Increment Financing District. We now need to take it out of the District. It represents 12 percent of the area of the original district. So this bill simply deletes it from the TIF so that those acres are no 16 longer eligible to be TIFed. They're in the Keystone Zone, and we readjusted in the project plan the tax projections, etc., to reflect that.
How were you able to make the determination of the acres that you wanted to be included in KOZ?
That's a great question, Council President. We actually engaged the accounting firm of Deloitte Haskins and did an analysis sort of 126 4/8/99 - COMM. OF THE WHOLE - 990114 from a business perspective, a client's perspective of the differential benefits of the TIF mechanism versus the KOZ mechanism in order to determine sort of what property might make sense. As an example, it seems as if KOZ's would attract manufacturers more than TIFs would attract manufacturers, so we have taken the Ship Yard, the portion not being used by Kvaerner, but the other industrial buildings, existing buildings, and put them in the KOZ so that we could actually have companies in by renting and putting in, you know, an assembly or pipe fitting or, you know, some type of manufacturing operation. And then we took the site that we believed was the most desirable from an office perspective. And, again, KOZ seems like it would drive office tenants more than TIFs would drive office tenants, which is right at the front of the Naval Business Center, and put that in the KOZ. It seemed for distribution and warehousing, TIFs would be better, so we left our Distribution Center in the TIF and did not include it in the KOZ. 127 4/8/99 - COMM. OF THE WHOLE - Public Meeting So there was a fair amount of actual thought in this.
Thank you. Are there any questions from members of the committee? (No questions.)
Anyone else to testify on this bill? (No response.)
Thank you very much. This will conclude our public hearing. - - -
We will now go into our public meeting. Again, I would ask all Councilmembers who are in their offices to please come down to the chamber so that a vote can be taken on the bills that were just heard. Councilman DiCicco, the bills were in your district, so I would like to recognize you regarding Bill No. 990110.
No, I believe 128 4/8/99 - COMM. OF THE WHOLE - Public Meeting the amendments are to Bill 186.
Okay. All right, I make a motion that Bill No. 990110 be reported out of this committee with a favorable recommendation. (Duly seconded.)
It has been properly moved and seconded that Bill No. 990110 be reported out of committee with a favorable recommendation. All in favor signify by saying aye? And the record will indicate that Councilman Kenney did cast his vote as "aye" before leaving. All opposed? The ayes have it, the motion carriers. The Chair recognizes Councilman DiCicco regarding Bill No. 990114.
Madam President, I make a motion that Bill No. 990114 be reported out of this committee with a favorable recommendation. (Duly seconded.)
It has been moved and properly seconded that Bill No. 990114 be reported out of committee with a favorable 129 4/8/99 - COMM. OF THE WHOLE - Public Meeting recommendation. All in favor will signify by saying aye. Those opposed? The ayes have it, the motion is carried. The Chair recognizes Councilman DiCicco regarding Bill No. 990186. And an amendment was proposed.
Madam President, I make a motion that the amendment to Bill No. 13 990186 be approved. (Duly seconded.)
It has been moved and seconded that the amendment, as read earlier today, be approved. All in favor will signify by saying aye. Those opposed? The ayes have it, the motion is adopted. The Chair recognizes Councilman DiCicco.
Madam President, I 130 4/8/99 - COMM. OF THE WHOLE - Public Meeting move that Bill No. 990186, as amended, be reported out of this committee with a favorable recommendation. (Duly seconded.)
It has been moved and properly seconded that Bill No. 990186 be reported out of committee with a favorable recommendation, as amended. All in favor will signify by saying aye. Those opposed? The ayes have it, the motion is carried. And this concludes the public meeting of the Committee of the Whole. Thank you very much. (Adjourned at 1:53 p.m.) - - - 131 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Thursday, April 8, 1999, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE OF THE WHOLE BILL NO.'S 990110, 880186, 990114 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter