COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Wed., 6/23/99, 10:34 a.m. - - - BILL 990453 - Amending Bill 970168 authorizing the City to sell certain delinquent real-estate tax claims. . . BILL 990454 - Amending Bill 970168, which authorized the City to sell certain delinquent real-estate tax claims. . . RES. 990468 - Appointing Michael Hoch to Board of Directors of Frankford Special Services District. RES. 990469 - Appointing K. Youngblood to Board of Directors of Frankford Special Services District. RES. 990470 - Appointing Ella Ryan to Board of Directors of Frankford Special Services District. RES. 990471 - Appointing G. Chimples to Board of Directors of Frankford Special Services District. RES. 990472 - Appointing Ralph Lewis to Board of Directors of Frankford Special Services District. RES. 990510 - Nominating Philadelphia residents for appointment to Police Advisory Commission. 15 (Full text of above attached to transcript.) 16 PRESENT: COUNCIL PRESIDENT ANNA C. VERNA, Chair 17 COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DAVID COHEN 18 COUNCILMAN JAMES F. KENNEY COUNCILWOMAN DONNA REED MILLER 19 COUNCILMAN MICHAEL A. NUTTER COUNCILMAN FRANK DICICCO 20 COUNCILMAN RICHARD T. MARIANO COUNCILMAN DARRYL CLARKE 21 COUNCILMAN FRANK RIZZO CHARLES MCPHERSON, Chief Operating Off. 22 - - - 23 VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters 24 Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 6/23/99 COMMITTEE OF THE WHOLE I N D E X Bill 990453, 990454 Stephanie Franklin-Suber, Esquire. . . . . . . 6 Philadelphia City Solicitor 7 Nancy Kammerdeiner, Commissioner . . . . . . . 17 Revenue Department 3 6/23/99 COMM. OF THE WHOLE - RES. 990510 P R O C E E D I N G S
Would all Councilmembers please come to the Council chambers. We're ready to start our public hearing. Thank you. Good morning, everyone. I apologize for the delay. This is a public hearing of the Committee of the Whole. I would ask Mr. McPherson to please read the title of Resolution No. 990510.
Resolution No. 990510, a resolution nominating Philadelphia residents 13 for appointment by the Mayor to the Police 14 Advisory Commission. 15
Thank you, Madam 18 Chair. 19 Madam Chair, I wish to report that at 20 your direction, a City Council Special Committee 21 on the Police Advisory Commission was established, 22 the members being myself as Chair, Councilman 23 DiCicco, Councilman Longstreth, Councilwoman 24 Miller, and Councilman Brian O'Neill as members. And in accordance with past practice 4 6/23/99 COMM. OF THE WHOLE - RES. 990510 regarding the sending of names to the Mayor for appointment to the Police Advisory Commission, as established through the executive order, the committee met on May 3, 1999, interviewed a number of candidates who expressed interest in serving on the Police Advisory Commission. They also filled out a questionnaire that was sent to them. And the committee is reporting today to the Committee of the Whole that the names that are listed in the resolution that is the subject of today's hearing, the committee took the action of reporting those names out with a favorable recommendation and asks the Committee of the Whole to act favorably on this resolution so that those names can now be sent to the Mayor for his subsequent appointment of the appropriate number of names from the list. And that is the report on the Special Committee on the Police Advisory Commission, Madam Chair.
Thank you, Councilman. It is my understanding that several of the people are here. I don't see any reason for 5 6/23/99 COMM. OF THE WHOLE - RES. 990510 them to make any statements unless they so desire. Since the hearing has been held, I don't think that there have to be any questions either by members of the committee. Is there anyone here who has submitted his name for the Police Advisory Committee who would want to be heard? (No response.)
Seeing none, you are all excused if you are here because we have other business to attend to. Thank you for coming in. I would ask the -- I would ask Mr. McPherson to please read the title of Resolution No.-- can we read them all at one time?
Resolution 19 No.'s 990468, 990469, 990470, 990471, and 990472.
Resolution 990468, a resolution appointing Michael Hoch to the Board of Directors of the Frankford Special Services District. Resolution No. 990469, a resolution 25 appointing Kenneth Youngblood to the Board of 6 6/23/99 WHOLE COMM. - RES. 990469 to 72 Directors of the Frankford Special Services District. Resolution No. 990470, a resolution 5 appointing Ella Ryan to the Board of Directors of the Frankford Special Services District. Resolution No. 990471, appointing George Chimples to the Board of Directors of the Frankford Special Services District. Resolution No. 990472, a resolution 11 appointing Ralph Lewis to the Board of Directors of the Frankford Special Services District.
Madam President, none of the people are here that were here to be named at this board could make it today. Four of the people are regular blue-collar people from Frankford, and Mr. Lewis is a senatorial aide. They could not make it but they asked me to speak for them. The reason we need these people on the board for the Special Services District is over the last year, it's a new board that's only two years old. People have resigned problems and they're having problems reaching a 7 6/23/99 WHOLE COMM. - BILL 990453, 454 quorum so it's important that we can get this done. Thank you, Madam President.
You're welcome. Are there any questions from members of the committee? (No questions.)
Seeing none, I would ask the clerk to please read the title of Bill No. 990453.
Bill No. 990453, an ordinance amending an ordinance approved May 9, 1997 (Bill No. 970168) which authorized the City to sell certain delinquent real-estate tax claims identified on Exhibit A to the ordinance to the Philadelphia Authority for Industrial Development.
I believe the City Solicitor is going to testify on this bill. Please approach the table. (Law Department panel members come forward.)
Miss Suber, do you think both bills should be considered at 8 6/23/99 WHOLE COMM. - BILL 990453, 454 the same time?
Thank you, Madam Chair. I hate to have to do this, but I'm about to chair another meeting outside of the chambers, and I wish to ask if I may both be excused and leave my vote for all bills and resolutions to be reported out of -- I see the head shaking.
I believe that another Councilmember is on her way to chamber so if you would please bear with us. Thank you.
I would ask Mr. McPherson to please read the title of Bill No. 25 990454. 9 6/23/99 WHOLE COMM. - BILL 990453, 454
Bill No. 990454, an ordinance amending an ordinance approved May 9, 1997 (Bill No. 970168) which authorized the City to sell certain delinquent real-estate tax claims identified on Exhibit A to the ordinance to the Philadelphia Authority for Industrial Development.
Good morning. Please identify yourself for the record and proceed with your testimony.
Good morning, Council President Verna and members of City Council. I am Stephanie Franklin-Suber, the City Solicitor for the City of Philadelphia. This morning, I'm here on behalf of the Law Department to offer testimony in connection with Bills No. 990453 and Bill No. 990454. ), Divisional Deputy City Solicitor for Tax; and Jim Zwolak, our Deputy City Solicitor who handles our foreclosure process. At the conclusion of my formal testimony, we would all be happy to answer any 10 6/23/99 WHOLE COMM. - BILL 990453, 454 questions you might have. By way of background to put this into context for you, you will recall that in June of 1997, the City and the School District sold certain delinquent real estate tax claims to the Philadelphia Authority for Industrial Development (PAID) under the terms of a purchase and sale agreement. That agreement was authorized by an ordinance of Council and a subsequent resolution 11 of Council. In June of 1998, last year, City Council amended what we'll call the "1997 Sale Ordinance" to add additional delinquent tax claims to the substitution pool so that the Law Department would be able to make substitutions for tax claims that had been sold under the purchase and sale agreement. Under the purchase and sale agreement, you may remember that we built in a mechanism to allow us to literally pull back tax claims that had been transferred to PAID. We do that in two situations. There's the concept of a mandatory substitution, where we have a legal obligation under the purchase and sale agreement to pull 11 6/23/99 WHOLE COMM. - BILL 990453, 454 back, substitute, replace a tax claim that is defective. In other words, there's some kind of legal prohibition to our actually enforcing and collecting on the claim -- bankruptcy, or there's an existing payment agreement. The other situation is what we call "a discretionary substitution," where the City at its option can pull back a claim that has been sold in order to deal with a particular circumstance, such as a taxpayer's financial hardship or to facilitate a community or economic development project. Today, we are requesting that City Council adopt two proposed ordinances which would amend the original 1997 ordinance. Each of the proposed amendments would simply add additional delinquent real-estate tax claims to our substitution pool. Again, this is a pool of tax claims which would be available to the Law Department to allow us to satisfy our mandatory substitution obligations or to deal with discretionary substitution situations. The proposed ordinances are amendments to the 1997 ordinance's Exhibit A. You may 12 6/23/99 WHOLE COMM. - BILL 990453, 454 remember that Exhibit A to the 1997 ordinance had different categories of real-estate tax claims. Category A-1 was the sale portfolio, and those claims were transferred. We then held back categories of tax claims in 1997 for substitution purposes. Those pools were depleted, we came back in 1998, and Council adopted ordinances to replenish that pool, and we are requesting essentially the same consideration this time. The first proposed ordinance, Bill No. 12 990453, authorizes the transfer for substitution purposes tax claims which are the subject of payment plan agreements which have defaulted. The second ordinance, Bill No. 990454, authorizes transfer for substitution purposes real-estate tax claims that were delinquent in 1998. The two ordinances, as I said, are similar to the two ordinances which Council adopted in June of 1998. It is important that we replenish or substitute -- excuse me, supplement the substitution pool in order to give us a broad-based pool of substitution claims. The substitution claims under the terms and conditions of the purchase and sale agreement and the 13 6/23/99 WHOLE COMM. - BILL 990453, 454 servicing agreement have to match in order for us to actually substitute a claim. The criteria are very narrow.
The claim to be replaced has to be comparable in terms of the type of property, the total value of the claim, the age of the claim, and the lien-to-value ratio. If we can't match claims through our substitution pool, then the City is required to make cash substitutions in the amount of the claim satisfaction value in order to deal with any defective substitution or discretionary substitution situations. So, generally speaking, in conclusion, the two proposed ordinances will enable the Law Department, working in concert with the Revenue Department, to satisfy the City's substitution obligations under the purchase and sale agreement. And, therefore, we are requesting City Council's approval. We'd be happy to answer at this point any questions members of Council may have.
Thank you. Miss Suber, the tax claims in Bill No. 25 990453 that are requested to be added to the 14 6/23/99 WHOLE COMM. - BILL 990453, 454 substitution pool represent liens on properties that have not been included in the original lien pool; is that correct?
Why has the Law Department requested to make these properties eligible for substitution instead of the City trying to collect on the liens?
It is important that we have a large broad-based pool of replacement claims available in order for us to satisfy our obligations under the purchase and sale agreement. The criteria for matching claims is so narrow that we have to satisfy a variety of criteria -- the type of property, the total value of the claim has to be comparable, the age of the claim has to be comparable, and the lean-to-value ratio has to be comparable. Given the severe limitations of the criteria we have to satisfy, if we are unable to find a match, we then have to pay cash. So it's important, to at least minimize the use of cash to make substitutions, that we have a broad-based pool that we can use for this purpose. 15 6/23/99 WHOLE COMM. - BILL 990453, 454 It also does not mean that we would not be taking enforcement action on claims. Simply because a tax claim is available for substitution, it doesn't mean that it will in fact be used. It just gives us a broader pool for substitution purposes. And it doesn't mean that we stop collecting. The City continues its enforcement collection efforts.
Can a Councilperson have a property removed from the substitution list? And if so, can you tell us what the procedure should be?
At this point, since it wouldn't actually be a formal substitution request, a Councilperson could simply send a letter to my attention, give us the property address and information, and we will work with them to make sure that we flag that property. And if we are able to make sure that it is not used for substitution purposes, we will make every effort to do that. So the short answer is yes.
And it's -- the properties that are included in Bill No. 90454 16 6/23/99 WHOLE COMM. - BILL 990453, 454 are for properties whose prior liens have either been sold or are currently eligible for substitution; is that correct?
That is correct. Bill No. 990454 authorizes new delinquent 1998 real-estate tax claims. Many of those claims are against the same properties that liens were previously transferred.
And what is the priority of liens with respect to payment? Is it that the older liens have to be satisfied first?
That is correct. The oldest liens, generally speaking, have to be satisfied first. There are three exceptions to that, which I will identify and then I will ask the Revenue Commissioner to elaborate if you would like. The three exceptions include situations where there is a current payment agreement; where a senior citizen, I guess, has satisfied or applied for a rebate program; and the third is the low-income installment program. In those three situations, the payments are applied to the 17 6/23/99 WHOLE COMM. - BILL 990453, 454 current-year taxes. (Nancy Kammerdeiner comes forward.)
This is Nancy Kammerdeiner, Revenue Commissioner. If I could just elaborate a little bit on that, the City Solicitor mentioned payment agreements. If someone is up to date on a payment agreement -- and most of our payment agreements do require that they pay their current-year taxes as well -- there is an exception to the priority payment regulation that lets them pay not only against their delinquent payment agreement but also their current-year tax. And that holds true whether that payment agreement is with the City or with the servicer for sold liens. And in terms of the senior citizens, the exception that was mentioned is for senior citizens who are applying to the State for their real estate tax rebate. In order to get that rebate, they have to have paid their current-year tax, and so we've provided for them to do that even if they have outstanding delinquencies. And the third, as was mentioned, is the installment payment agreement program. That 18 6/23/99 WHOLE COMM. - BILL 990453, 454 program was established for low-income taxpayers and is established for the payment of their current-year tax. That is also an exception to the payment of the oldest liens first so that they can take advantage of a program for which they are otherwise eligible.
Thank you. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. I appreciate the accommodation. I need to ask permission to leave, and I wish to be recorded as voting aye with regard to the favorable recommendation of any of the bills or resolutions in front of the Committee of the Whole today.
Thank you, Madam President. Madam Solicitor, is there a financial impact or a legal impact in year s we didn't use before? Does this have a financial impact?
Councilwoman, 19 6/23/99 WHOLE COMM. - BILL 990453, 454 we can't hear you.
Thank you. My question was, is there a financial impact for the City since we're going after other substitutions? And how does this relate to the last bill in terms of that?
The relationship to the last bill is probably the one that we should tackle first. This is very similar to the bills that you approved a year ago. It provides a substitution pool that would be available for substitutions, as has been described. There are different properties on this list than the last time, but the purpose and the process for using them would be very much the same. In terms of the financial impact, if we are not able to provide a property-for-property substitution, we would need to pay cash for the return of properties that have a mandatory defective designation. In other words, a property that we have identified a problem at the time of the sale and we had to bring that property back under the terms and conditions of the agreement, and if we don't have any tax claims to substitute, 20 6/23/99 WHOLE COMM. - BILL 990453, 454 we would need to make a cash payment for the return of those tax claims.
Our understanding was when we passed these bills, it was extremely controversial, that it would be a one-time thing. Unless my memory serves me wrong, we thought we'd be doing this to generate some money for the City, and then it would be over.
The one-time aspect of the 1997 transaction was the sale of tax claims. We are not here to request authorization to sell any tax claims. In 1997, as I touched on a little earlier, there was an exhibit to the ordinance. It was called Exhibit A. We had different categories within Exhibit A. A-1 was the sale portfolio, and those claims were transferred and sold. And that was to generate -- you're correct -- revenue for the School District. And in the A-1 sale portfolio, we sold tax claims on 33,000 properties and generated what, over $106 million. But also on Exhibit A, we contemplated at the very beginning of the transaction the need to have a pool of delinquent real-estate tax 21 6/23/99 WHOLE COMM. - BILL 990453, 454 claims available for substitution, and we had two categories of tax claims on Exhibit A. We never transferred them, we held them back, but they would be used for substitution if necessary. And the Law Department continued collection efforts on them. They included high-end commercial properties that we thought it would be more cost effective for the Law Department to enforce and also properties that we had already listed for sheriff's sale. So we are here -- we came back last year to replenish the substitution pool. We are doing the same thing now. So we are not transferring these claims; we are simply continuing to keep a pool of tax claims available. Number one, Law continues enforcement with Revenue, but these are the claims that we use when we get calls from member of Council if there's a financial hardship situation, if there's a community or economic development project, these are the claims that we then turn to to enable us to pull back claims that have been transferred. But also, as I said, it's not just the discretionary pool. We have an obligation under 22 6/23/99 WHOLE COMM. - BILL 990453, 454 the purchase and sale agreement to pull back claims that are just legally defective. That's the majority of claims that we deal with. And so when you put it into context in terms of a financial impact, our strong preference is to substitute with other comparable real-estate claims as compared to having to substitute with cash. That's why it's important to keep the pool sufficiently replenished.
Could I just have the City Solicitor repeat what she just said, please.
Councilman, can you speak closer into the mike, please. We can't hear you.
Would the City Solicitor just repeat the part dealing with the legal obligation of the City.
Yes. Under the purchase and sale agreement, we have a legal requirement, we are legally required to pull back to substitute and replace a comparable lien or cash for liens that we may have transferred but that are for a legal or other reason the servicer 23 6/23/99 WHOLE COMM. - BILL 990453, 454 is unable to collect on. And an example includes a bankruptcy situation or a situation where we have transferred a lien, we've sold it. And then we find out that the taxpayer really had entered into an agreement, and we should not have, so we pull it back.
So the legal obligation is to keep a certain amount of money, a certain amount of tax claims in the pool?
No. The legal obligation is to make sure that we substitute, whether it's with a tax claim that's comparable or by cash. And so if we have defective --
The concept of substitution is, we've transferred in and we can pull claims back and substitute a different claim.
Yes. It has to be 24 6/23/99 WHOLE COMM. - BILL 990453, 454 comparable.
And the criteria include the type of property -- residential for residential, commercial for commercial. It includes the age of the claim, it includes the lien-to-value ratio. Because the idea is that we sold the portfolio with a certain value, so if we're going to adjust the claims within the portfolio, we have to make sure that we substitute it for something that's recently comparable. And that's another reason why when we substitute the claims for claims, we have to satisfy criteria and we need a pool that gives us the ability to match.
You're welcome. Councilwoman Blackwell, do you want to continue the line of questioning?
Just one point of clarification. So Bill No. 990453 allows you to act on 25 6/23/99 WHOLE COMM. - BILL 990453, 454 those who defaulted in payments under the lien agreement? And the other bill allows you to deal with the 1998 real estate?
All right, thank you. I'm finished, Madam President.
Thank you. The Chair recognizes Councilman Clarke.
Miss Suber, I looked at some of the properties listed on this replacement pool in my Councilmatic district, and a substantial portion of those properties were -- the liens were as low as $200. From a cost-effective standpoint, what purpose do we have those in that pool as replacement properties?
I think maybe I can take that one. 6/23/99 WHOLE COMM. - BILL 990453, 454 The liens that we sold in many cases were of a similar value. We excluded from the sale liens under, I believe it was, $100. And, therefore, when it comes time for substitution, we also need to have in the pool some of those properties that have lower-cost liens in order to have them available for substitution. And so we do, in order to have a broad cross section to be able to provide for appropriate match, need also to have some of those lower-dollar liens available in the pool. That doesn't mean, as has been mentioned before, that we will not continue to try, through our normal enforcement means, to collect on those and to do so at the least costly way of collection. And, certainly, anyone who comes forward and pays or enters into a payment agreement prior to the time that property might be identified for a substitution would -- that property would clearly not be substituted; we would have the collection here at the City.
So what would the cost of now deleting that property from the substitution pool be? I mean, wouldn't it 27 6/23/99 WHOLE COMM. - BILL 990453, 454 outweigh the cost of the value of the lien?
There's no cost to removing something from the substitution pool; we would simply not make it available for substitution. But it could mean that at a later date, there would be a need for a substitution from those properties that had already sold liens, and we wouldn't have a comparable and would then be paying cash to bring it back.
If there are particular properties that you are concerned about, it would be helpful if you would identify them and send it over to my office, and then we can try to work with you in terms of flagging those or setting those aside, in terms of making them available for substitution. But, again, what we are talking about here today is not transferring those liens. We are simply putting them in a pool so that they're available. It doesn't mean that they will actually be used for substitution purposes. We still keep them in our inventory here at the City.
Okay. This leads me to my next question. I'm glad you brought that 28 6/23/99 WHOLE COMM. - BILL 990453, 454 up. Earlier you had talked about working with CDCs, nonprofits, and making sure that you wouldn't necessarily include some of those properties that they were interested in in the development process. Who and how is that done?
Generally, we work -- the Law Department and Revenue work closely with the District Council members. And so we use the substitution process as the way -- a vehicle through which CDCs contact the District Council person. The Councilperson then makes a substitution request. They let us know the liens that would be of interest in terms of an economic development project, community development project, and then we go forward and we try to work with Council and the CDCs to see if we can work it out.
Okay. So if that CDC, if that nonprofit does not contract the District Councilperson and that District Councilperson then contact your office, then the potential is that those properties will be gone.
That's correct. 29 6/23/99 WHOLE COMM. - BILL 990453, 454 The arrangement that we work out with City Council at the time the transaction was done in 1997 was that the CDCs would work directly with District Council. So we do not deal with them directly unless we have already communicated with the District Councilmember.
Thank you, Madam Chair. Miss Suber, what I'd like to know is, I think during the first lien bill, the lienholders, the collection agency said it didn't want to go into the real-estate business, and now it's almost to years. What is happening to the properties that they're not able to collect taxes on? I think I recall they said that they would make sure that CDCs or religious organizations and other people were able to get those properties. I'm sure that they haven't had 100 percent success on collecting taxes on properties.
You're correct, they haven't had 100 percent success, but they are 30 6/23/99 WHOLE COMM. - BILL 990453, 454 initiating some foreclosure processes in order to try and get those properties that are not occupied or are not owner-occupied to a situation where they're available for purchase by those who might be interested. They've had some meetings with the Commerce Department and representatives of those who may be interested in development projects. They're trying a number of things in order to find purchasers of properties or to identify ways for those who do have those properties to enter into agreements to pay. They have worked with mortgage companies and in other ways attempted to provide a vehicle for those who wish to pay to enter into agreements. So there's no one answer to that. There are a number of things that are underway to encourage payment and to identify those who might be interested in a property if the current owner is either not to be found or is no longer interested in maintaining the property. So there are a number of initiatives underway in that regard.
Okay. I'd like 31 6/23/99 WHOLE COMM. - BILL 990453, 454 to get more information because periodically, I get calls from constituents or groups about properties that are right maybe on their block and whatnot, and we just need to know how to help serve them best.
Well, I was going to say if it's a community group or a CDC, as I said previously, that's interested in trying to put together an economic development or community development project and you bring it to our attention, working with your office, then we will try to make sure that we can pull back the liens and see if we can work out an arrangement that's acceptable.
So is there a time frame for how long the tax collection agency can work on that particular property in terms of trying to collect the lien?
Well, generally speaking, the way that we structured this, 32 6/23/99 WHOLE COMM. - BILL 990453, 454 technically, a servicer can enforce on a lien, and even after notice has been sent of foreclosure and petitions have been filed with the court and hearings and so forth and so on, we literally have up until an hour before any sheriff's sale to substitute and pull back. And that you may recall from the lengthy hearings that that was something that we were adamant about. And so we have not reached that point yet with any of the tax claims that have been transferred. And so, again, a variety of different collection and enforcement efforts are underway. Certainly petitions for foreclosure have been filed. We haven't had any actual foreclosures yet. But, again, we rely on members of Council to bring to our attention any situations where even after, you know, five notices and, you know, opportunity for hearing, you know, we always want to make sure that we are getting information about potential hardship situations or the elderly or what have you that may not be paying attention to the notices so that we can try to jump in in any event. So there's generally time for any 33 6/23/99 WHOLE COMM. - BILL 990453, 454 taxpayer to work out an agreement.
Thank you. The Chair recognizes Councilman Cohen.
Thank you, Madam President. I'm having difficulty understanding why there's a need for these ordinances. Is there something being changed in the basic ordinance, or is it that we're merely substituting tax claims in Exhibit A? And if so, then I don't understand why there's a need for ordinances, why the original ordinance didn't say, and if there are, you know authorizing substitutions. Or is it that we have to get Council action every time a tax claim is going to be transferred? In other words, I'm trying to find out, what it is the basis for these bills? I -- I --
I'm going back to the original issue I think raised by Councilwoman Blackwell, and I'm looking for an answer and I don't hear any. 34 6/23/99 WHOLE COMM. - BILL 990453, 454
Let me try again, Councilman Cohen. I apologize. In 1997, there was an exhibit attached to the original ordinance, and it listed all of the liens. It was divided into categories. A-1 were liens that we sold. So we no longer have those. There were additional liens on Exhibit A. We'll call them A-2 and A-3 -- liens that we kept in our inventory here in the City that Council reviewed and approved for substitution purposes that we retained. Over the course of time, we have made substitutions, we have used those liens, we have depleted that pool. So we came back in '98 and we asked that we replenish the pool. We had two ordinances at that time. Since then, we have again used those liens for substitution purposes. That's how we satisfy requests when we have to satisfy defective substitutions and discretionary substitutions. So we have again depleted the pool. And we are here with additional liens that we want to put into the pool to make them available for substitution. So it's an ongoing process. 35 6/23/99 WHOLE COMM. - BILL 990453, 454 And when we originally came before Council in '97, we talked about the fact that we would come back on a yearly basis because each year, for example, we get a new group of delinquent real-estate tax liens that -- revenue liens on property that we've already transferred liens on. So we transferred in '97. For example, if you have one property, we may have transferred delinquent liens up to 1996. Well, there may be now delinquent liens from 1997. And, again, 1998. So instead of transferring those liens, we're simply putting them into the pool to make them available for substitution. Again, we're not transferring anything; we're simply replenishing a pool to allow us to satisfy our obligations under the purchase and sale agreement.
Well, why isn't there in the original agreement -- or in an amendment to the original ordinances a provision that authorizes the City to do what you're doing without having to come to us in City Council? I mean, it seems like a mechanical process that's taking place. Is there a time limit in the 36 6/23/99 WHOLE COMM. - BILL 990453, 454 original ordinance which Councilwoman Blackwell was getting at? Because --
Well, the notes are outstanding until 2004. So remember, there is an end to, generally speaking, the program itself. And to be candid with you, Councilman Cohen, City Council want to do make sure that it had an opportunity to have the discussion we're having today, even when it came to putting tax claims in the substitution pool, and that was one of the requirements when we came before Council in 1997.
Could I have just a moment. Yes? (Mr. McPherson confers off the record with Councilman Cohen.)
Thank you. Are there any other questions? The Chair recognizes Councilman Kenney.
Thank you, Madam President. Miss Suber or Miss Kammerdeiner, is 37 6/23/99 WHOLE COMM. - BILL 990453, 454 there any benefit to getting these bills out of committee today since we're not going to be able to pass them until September? Was there some timing issue that required us to deal with these two bills the day before our final session date? I'm just curious as to -- is there something that keeps the process flowing if these bills are voted out of committee today? I'm not suggesting we don't. I just -- I know usually when we get to this week, we're not voting bills out of committee because they can't be passed finally before the last day of session anyway. I just. . .
We had originally hoped that these two bills would have had a hearing in time to be approved before your session ended. Unfortunately scheduling didn't develop that way, and so we would like to have approval as early in the session as after you return from summer recess as possible and so the hearing date was set up for today. But we know that we would not be able to have these additional properties and these tax claims available in the pool until sometime in 38 6/23/99 WHOLE COMM. - BILL 990453, 454 September.
I mean, it's not a major issue, it's just a curiosity for me as to why we're --
During the summer months, we will be working with a more constrained pool for matching, and we may have some situations that will develop where we will have to turn to a cash match instead of a property tax claim match because we can't otherwise match within the existing pool. But I don't think that there will be any major difficulties with delaying until September on that.
We're not in a crisis situation, but the pool is depleted and it does make it difficult if we've got a major economic development project that we are trying to accommodate to come up with a configuration. It also takes a bit of time operationally between Revenue and Law to actually get all of the liens into the system and make sure that we're ready to move smoothly but we don't need suspension of the rules or anything of that nature.
I understand, but 39 6/23/99 WHOLE COMM. - BILL 990453, 454 my question that this action by the committee today, putting it on the calendar for September, doesn't benefit you in any way until we finally pass it in September.
But I believe the administration did ask for a public hearing to be scheduled, and we did schedule it today. Councilman Cohen, did you have another question?
What is this pool? What is the amount of money in the pool? We keep talking that we've got to replenish it and that we may have to give them cash. I assume that means General Fund money if we don't have something else. But what is the pool we have to --
Let's see. I'll try to put this into a context for you, and we would also be happy to provide the information to you after the hearing. But generally speaking --
You also have to 40 6/23/99 WHOLE COMM. - BILL 990453, 454 provide what?
We'd be happy to provide it to you in writing after the hearing if you would like. But generally speaking, currently --
Yes, it is. It changes every day. This is an ongoing day-to-day process.
I thought there was sale of a certain amount of tax claims and that we sold it for something like 70 percent of its worth. And the profit would come, you know, if, say, they made the collection of 100 percent, which was unrealistic, but if they did it, they'd make a 30 percent profit from which they'd have to pay expenses and get to a net present profit. And I thought there was a specific amount.
The confusion comes in because we are not talking about the sale portfolio; those liens are not at issue today. We've transferred those liens. We transferred A-1. That was the sale portfolio. It was liens 41 6/23/99 WHOLE COMM. - BILL 990453, 454 on 33,000 properties. That's not the subject of these ordinances at all what. What we held back for substitution purposes was A-2. That consisted of, in '97, 2,965 properties.
But may I interrupt you. You're not answering my question. Is it that there was never a specific amount that was sold? That actually, it's a shifting kind of thing? My understanding and my memory was that we sold a very specific amount of which -- and we were going to get a specific return, a percentage of what we sold.
And that had nothing to do with Exhibits A, B or C. It dealt with how much we were selling and what we were receiving for that.
But it did have to do, Councilman Cohen, with Exhibit A. Exhibit A had A-1, which was the sale portfolio. It was very specific. It identified 33,000 properties. We sold the liens on those properties. That is not at issue today. They are gone. And you're 42 6/23/99 WHOLE COMM. - BILL 990453, 454 absolutely correct, we got over $100 million. What I'm talking about are the different categories of liens on Exhibit A that we kept, we did not sell them -- Category A-2 and Category A-3. At the time, in 1997, in Category A-2, we had liens on close to 3,000 properties. We sold liens on 33,000, we kept back liens on about 3,000 to 4,000 properties for substitution. This is the pool that has been depleted over time, and all we're trying to do is add new leans to that substitution pool to enable us to satisfy requests for discretionary substitutions if there's a financial hardship or if there's a defective lien to substitute. It is a small pool. But it does change every day because every day, we are dealing with substitution requests. But it's a small pool. It's not the liens that we sold.
Well, but there was a certain amount. What did we sell it for? Can we talk numbers? 'Cause I'm having -- I'm just 43 6/23/99 WHOLE COMM. - BILL 990453, 454 trying --
We sold liens on 33,000 properties, and the amount of money that we got was $106,319,079.
That's the amount of the claims, but those were sold. 106.
No. We sold them. And if there's a defective, we pull it back and we substitute a comparable claim.
That's correct. Of what we sold -- you're absolutely correct. The overall value should never change except, except when we substitute a claim, we do build in the amount that the servicer charges for collection. So there is an additional cost for substitution. It's not just at the time we sold the claims, that the tax claim was sold for, you know, principal and interest, whatever, let's say, 44 6/23/99 WHOLE COMM. - BILL 990453, 454 the face value of the claim. And now we add on attorneys' fees and collection costs.
Could you give us on idea of what kind of figure that is? Well, maybe we ought to go to the memorandum because as it's discussed, it always seems unclear, and yet it seems to me it ought to be a very simple thing.
We can give you information about the number of claims that were available in 1997 for substitution purposes.
Really, I'm not interested in that. What I'm interested in is, what did we sell it for, and is that what we have to provide them? We have to give them claims from which they can make the same amount of money as they would have made if we never substituted? Is that the goal?
The concept really is that we have to preserve the overall value of the portfolio that was sold. You're absolutely correct.
Right, that I understand. 45 6/23/99 WHOLE COMM. - BILL 990453, 454
And if we cause them to spend more by substituting, we've got to pay them for that.
Correct, because they collected over time on particular liens. That's correct.
You know, if they're not using that as an excuse to get more money from us.
Then why can't we just get a simple explanation? Like how much are we short now, what do we owe them, what do we owe to bring that up to date? Are we current with them now? Are we in good shape?
We are current on 46 6/23/99 WHOLE COMM. - BILL 990453, 454 that issue. That is not the issue, however, that is before Council. We really are talking about --
No, I understand that, but isn't that really the issue? Isn't that why you're having a substitute pool because you're expecting that there may be a need for substitutions which may be initiated by Councilmembers?
Because, as I read the original agreement, the City didn't have to have a reason except that the City made a decision that it wanted to pull something back.
That's correct. We have liens that we can use right now for 47 6/23/99 WHOLE COMM. - BILL 990453, 454 substitution purposes. What we can't project -- I mean, we can tell you what's pending. What we can't project, however, is what may arise in the upcoming year. You know, there could be a major economic development project that we need to try to work through in the upcoming year. We can't project at this stage, you know, what we may need. We just need to have a pool available.
If you could furnish that to the President, I think that would be fine.
Yes, yes, we can 48 6/23/99 WHOLE COMM. - Pub. Meeting do that.
Thank you. Are there any other questions from members of the committee? (No further questions.)
Do we have anyone else to testify on the two bills that we just heard? (No response.)
We will now go into our public meeting. The Chair recognizes Councilwoman Blackwell regarding Resolution No. 990510.
Madam President, we move that Bill No. 990510 be reported out of committee with a favorable recommendation. 49 6/23/99 WHOLE COMM. - Pub. Meeting
It has been moved and seconded that Resolution No. 990510 be reported out of committee with a favorable recommendation. All in favor will signify by saying aye. Those opposed? The ayes have it and the motion is carried. The Chair recognizes Councilman Kenney regarding Bill No. 990453.
Madam Chair, I move that Bill No. 990453 be reported out of this committee with a favorable recommendation. (Duly seconded.)
It has been moved and seconded that Bill No. 990453 be reported out of committee with a favorable recommendation. All in favor will signify by saying aye. 50 6/23/99 WHOLE COMM. - Pub. Meeting Those opposed? The ayes have it and the motion is carried. The record will also reflect that Councilman Nutter is voting in the affirmative. The Chair recognizes Councilman Kenney regarding Bill No. 990454.
Madam Chair I move that Bill No. 990454 be reported out of this committee favorably. (Duly seconded.)
It has been moved and properly seconded that Bill No. 990454 be reported out of committee with a favorable recommendation. All in favor will signify by saying aye. Those opposed? The ayes have it and the motion is carried. The Chair recognizes Councilman Mariano regarding Resolution No. 990468.
Madam Chair, I recommend that Resolution No. 990468 be voted out 51 6/23/99 WHOLE COMM. - Pub. Meeting of committee with a favorable recommendation. (Duly seconded.)
It has been moved and properly seconded that Resolution No. 6 990468 be reported out of committee with a favorable recommendation. All in favor will survey by saying aye. Those opposed? The ayes have it, the motion is carried. The Chair recognizes Councilman Mariano.
Madam Chair, I recommend that Resolution No. 990469 be voted out of committee with a favorable recommendation. (Duly seconded.)
It has been moved and seconded that Resolution No. 990469 be reported out of committee with a favorable recommendation. All in favor will signify by saying aye. Those opposed? The ayes have it and the resolution 52 6/23/99 WHOLE COMM. - Pub. Meeting will be placed on our calendar. The Chair recognizes Councilman Mariano regarding Bill No. 990470.
Madam Chairwoman, I recommend that Resolution No. 990470 be voted out of committee with a favorable recommendation. (Duly seconded.)
It has been moved and properly seconded that Resolution No. 11 990470 be reported out of committee with a favorable recommendation. All in favor will signify by saying aye. Those opposed? The ayes have it and the motion is carried. The Chair recognizes Councilman Mariano.
Madam Chair, I recommend that Resolution No. 990471 be voted out of committee with a favorable recommendation. (Duly seconded.)
It has been moved and properly seconded that Resolution No. 53 6/23/99 WHOLE COMM. - Pub. Meeting 990471 be reported out of committee with a favorable recommendation. All in favor will signify by saying aye. Those opposed? The ayes have it, the motion is carried. The Chair recognizes Councilman Mariano.
Madam Chair, I recommend that Resolution No. 990472 be voted out of committee with a favorable recommendation. (Duly seconded.)
It has been moved and properly seconded that Resolution No. 17 990472 be reported out of committee with a favorable recommendation. All in favor will signify by saying aye. Those opposed? The ayes have it and the motion has been carried. This concludes the public meeting of the Committee of the Whole. Thank you all very 54 6/23/99 WHOLE COMM. - Pub. Meeting much. (Adjourned at 11:39 a.m.) - - - 55 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 Wednesday, June 23, 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 990453, 990454 RESOLUTION NO.'S 990468, 69, 70, 71, 72 and 990510 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter