COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COUNCIL COMMITTEE ON APPROPRIATIONS - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, 5/24/01 8:55 a.m. - - - BILL 010262 - Authorizing transfers in appropriations for Fiscal Year 2001 within the General Fund from the Mayor's Office of Information Services, the Department of Licenses and Inspections, Director of Finance - Fringe Benefits, and the Department of Revenue - Sinking Fund Commission to the Mayor's Office of Information Services, the Managing Director, the Fire Department, the Department of Recreation, Fairmount Park Commission, the Department of Human Services, Philadelphia Prisons, the Department of Revenue, the City Representative, and the Director of Commerce and the Sheriff. BILL 010337 - Authorizing transfers in appropriations for Fiscal Year 2002 within the Grants Revenue Fund from the Director of Finance - Provision for Other Grants to the Mayor - Office of Housing and Community Development. PRESENT: COUNCILWOMAN JOAN L. KRAJEWSKI, Chair COUNCILMAN MICHAEL A. NUTTER, Vice Chair COUNCILWOMAN JANNIE L. BLACKWELL COUNCILMAN DARRELL L. CLARKE COUNCILWOMAN DONNA REED MILLER COUNCILMAN BRIAN O'NEILL COUNCILMAN ANGEL L. ORTIZ - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 5/24/01 - APPROPRIATIONS COMMITTEE I N D E X Bill 010337 Herbert Wetzel, Executive Director. . . . . Philadelphia Redevelopment Authority Bill 010337 Robert Dubow, Budget Director . . . . . . . 9 James Cuorato, City Representative. . . . . 10 and Director of Commerce 11 12 13 14 3 5/24/01 APPROPRIATIONS - BILL 010337 P R O C E E D I N G S
Good morning. The Committee on Appropriations is now in session. We will hear testimony on Bill 010337 and Bill 6 010262. Bill 010231 will be held. Will the clerk please read the title of the bill.
Bill No. 010262, an ordinance authorizing transfers in appropriations for Fiscal Year 2001 within the General Fund from the Mayor's Office of Information Services, the Department of Licenses and Inspections, Director of Finance - Fringe Benefits, and the Department of Revenue - Sinking Fund Commission to the Mayor's Office of Information Services, the Managing Director, the Fire Department, the Department of Recreation, Fairmount Park Commission, the Department of Human Services, Philadelphia Prisons, the Department of Revenue, the City Representative, and the Director of Commerce and the Sheriff. And Bill No. 010337, an ordinance 24 authorizing transfers in appropriations for Fiscal Year 2002 within the Grants Revenue Fund from the 4 5/24/00 APPROPRIATIONS - BILL 010337 Director of Finance - Provision for Other Grants to the Mayor - Office of Housing and Community Development.
Is there anyone here to testify on Bill 337? (Witness comes forward.)
Good morning. My name is Herbert Wetzel. I'm Executive Director of the Philadelphia Redevelopment Authority. Madam Chairperson and members of the Appropriations Committee, I am here to testify in support of Bill 010337. This bill would transfer funds from the Finance Department to the Office of Housing and Community Development for the purpose of funding an acquisition recycling program. The acquisition recycling program is a result of a City Council hearing jointly conducted in June and November of 1996 by the Finance, Commerce, and Economic Development committees. Very often, the Redevelopment Authority condemns properties where the fair market value is exceeded by the amount of outstanding City tax liens. In this event, the Redevelopment 5 5/24/00 APPROPRIATIONS - BILL 010337 Authority's payments are essentially forwarded to the City of Philadelphia as satisfaction of those obligations at the time of settlement rather than to the property owner. For the purpose of maximizing Philadelphia's community development block grant funds, the transfer ordinance would be employed to return those funds to OHCD, the funding agency for the Redevelopment Authority, so they can be used for future acquisitions and subsequent recycling. I respectfully request the approval of this bill, along with a suspension of Council rules so as to permit the first reading on today's calendar. I'd be glad to answer any questions the committee may have.
Thank you, Madam Chair. Mr. Wetzel, I have read your testimony three times and listened to it closely this 6 5/24/00 APPROPRIATIONS - BILL 010337 morning; I have no ability to understand what this is about. And I remember those hearings.
Okay. What it is, is that when a property is condemned, the Redevelopment Authority is required to pay the fair market value of the property.
Okay. So why don't you just kind of slowly walk me through the short version of the story.
Sure. There's two ways in which settlement occurs. One is that we were able to identify the owner of the property and settle with the owner. In the event that that settlement takes place, the title company will take the City taxes that are owed by that owner and transfer them to the City of Philadelphia.
The taxes that are owed on that property. For example, we'll condemn a property that may have a $5,000 fair market value 7 5/24/00 APPROPRIATIONS - BILL 010337 and may have 4,000 in City tax liens on it.
So when we settle with the owner, the title company will collect that $4,000 and transmit it to the City of Philadelphia in satisfaction of those liens.
In the event that an owner is not found, in that same case, that $5,000 would be paid into court, and we notify the City that the funds are in court, and then the Revenue Department collects those funds from the court. So in either case, that --
The $4,000 in back taxes are -- become a part of the City's revenue at that point in time.
And the idea here is, essentially, we have not collected this money from a third party; we've actually collected it from ourselves because we're the party that's paying the funds in the court. So the idea here is to take those funds then and recycle them for more 8 5/24/00 APPROPRIATIONS - BILL 010337 acquisitions. In other words, take that $4,000, multiply that by --
The Redevelopment Authority is paying it from funds it received from the City of Philadelphia.
Well, then this would authorize up to 3.2 million of those collections to be returned to OHCD to fund more acquisitions. So, essentially, it creates a recycling pool of funds to continue to acquire more properties.
Are you anticipating collecting any more of the tax dollars from these owners?
No. In many cases, the taxes owed on these properties exceed the fair market value, so we don't even collect 100 percent of the taxes that are owed. A lot of times, there's a fair market value in that same case of 9 5/24/00 APPROPRIATIONS - BILL 010337 $5,000, and there's like 12,000 in real-estate taxes, and all we can collect is the $5,000 at that point.
Okay. So -- I'm sorry, maybe it's the time of morning. I'm still not understanding what the difference is between what presently happens and what this proposes to do.
What presently happens is those funds remain in the City treasury. They are not recycled for future acquisitions.
Okay. And this is the way to segregate those dollars and make sure that you have a pool available?
And return them for future acquisitions. So in essence, we're paying ourselves, you know, and --
Yeah, we are. We're essentially paying ourselves, and the idea here 10 5/24/00 APPROPRIATIONS - BILL 010337 was if we're going to pay ourselves, at least let's keep that as a resolving fund to continue to do acquisitions.
Will that help to resolve the problem where, let's say, a neighbor wants a property and we get these assisted and unassisted budgets, and in the unassisted case, the City wants the person to pay upwards of $25,000 for a property that might be worth 10 that needs about $25,000 worth of work, and therefore, they never buy it?
Yeah, those funds could be recycled for that activity. In other words, we have a fixed amount of money that we can use for acquisitions. This would increase the pool because of the collections being made and then return to the pool itself. So there's the possibility that those properties that you describe could be a part of that program.
Okay, I appreciate that. Now, are you prepared to commit that I'll actually see some of these dollars recycled for some of the projects that I'm trying to get 11 5/24/00 APPROPRIATIONS - BILL 010337 done?
The City is on board. We are negotiating with the School District. As you're aware, of the real-estate taxes collected, 55 percent go to the School District, 45 to the City of Philadelphia.
We've made substantial progress with the School District. And if we can't make it all the way with the School District, we're going to just go ahead and proceed to try to recycle the 45 percent, but would be nice to be able to recycle all of it. And the reality is, this is not new money; we have not created a new dollar in the system by condemnation activities. And we believe we've made significant progress with the School District and I think we're prepared to go ahead even if the School District doesn't sign on.
Before we 12 5/24/00 APPROPRIATIONS - BILL 010262 continue, I'd like to note that we do have a quorum. With us is Councilman Ortiz, Councilman Clarke, Councilman Nutter, Councilwoman Miller, and Councilman O'Neill. Are there any other questions? (No further questions.)
Now we'll continue with Bill 010262. Who's here to testify? (Witnesses come forward.)
Good morning. My name's Rob Dubow. I serve as the City's Budget Director. I read the testimony at the earlier hearing. Would you like me to read it again or do you want to go right to questions?
Councilman Ortiz. 13 5/24/00 APPROPRIATIONS - BILL 010262
Madam Chair, we're going back to the same issue we had before.
And I don't think the questions we asked, whether if we gave money to NEDA, whether they could hire an executive director. Obviously, they're a corporate entity. If they get money, they can do with that money whatever they want. What we were saying, and I think the thrust of our questioning is that, what type of employees were these? The individuals that we're going to be hired were going to be hired and paid with City general funds, and then they were not going to be City employees. And I think the expectation is that then it would be the money for their salaries and -- would be continuously be appropriated by this Council. I think that's what we were going in our questioning and trying to find answers to that. I think if you give money to NEDA, 14 5/24/00 APPROPRIATIONS - BILL 010262 obviously, they can hire an executive director, Director which is what Ken Trujillo says here.
And I agree with that. The question is, is it the role of this Council to give money, to appropriate money to hire staff for a corporate entity that then has no 10 responsibility to this Council and no 11 accountability to this Council? (No immediate response from anyone.)
Good morning, Madam Chair and members of Council. I'm James Cuorato, City Representative and Director of Commerce. Councilman, in response to the question, NEDA would be established for economic development purposes. So, as the Solicitor outlines in his letter, there would be no legal 15 5/24/00 APPROPRIATIONS - BILL 010262 restrictions to having the money flow to them for the purposes set forth in the Solicitor's letter. As far as accountability, they certainly would be accountable to us as the department which would be the source of the City funds. I also expect that City Council will have representation on the board of directors of the New Economy Development Alliance, so there would be direct participation be Council in that regard as well.
The money for this corporation will be appropriated by this Council, right? And this corporation is -- expects to have ongoing funding from this Council. Is that true?
And we're supposed to, in essence, transfer our authority to PAID. PAID then gives NEDA the money, right?
Yes. Well, actually, it would come through Commerce to PAID, and then PAID transfer the money to the New Economy Development Alliance. So there would be a series of contracts with --
And these 16 5/24/00 APPROPRIATIONS - BILL 010262 individuals are not City employees.
Okay. And they do not come under the aegis of the City as such, but they do get monies appropriated from this Council to that corporate entity.
And this Council's only role in this whole aspect is to appropriate the money to them.
Well, what we're asking Council to do is join with us on an economic development initiative aimed at this sector of the economy.
But we have a fiduciary responsibility, according to the charter, in the manner in which we appropriate money and to whom we appropriate money to. I mean, we go through hoops trying to get some money for the school system, and here you're asking us to just, in essence, yearly just give money to an entity that we have -- that they have no 24 accountability to us whatsoever. Commerce comes before us, everybody else, but this corporate 17 5/24/00 APPROPRIATIONS - BILL 010262 entity does not.
Well, Councilman, you're correct. Ultimately, the responsibility for the flow of funds would be with Commerce and with me. City Council would be represented on the board of directors of the new corporation, though. So there would be accountability there as well.
First, I apologize for -- I know there was testimony that may have been somewhat brief at the last Appropriations Committee hearing, which I missed. I have gotten updated on that. Let me kind of go back to the beginning. Who is in charge of this organization? 18 5/24/00 APPROPRIATIONS - BILL 010262
The organization will have a board of directors of approximately 4 members that will be comprised of leaders in the 5 region, City officials, as I said, representation 6 from City Council. So it would be a diverse board 7 that represents all of the interests that are 8 involved in this effort. 9 The plan is to hire an executive 10 director -- 11
Before you go into 12 that, why don't we stay with that for a little 13 bit. Is there some written material about this entity. Where did the 13 members come from, had they been appointed, who appoints them, how do you know that there will be representation from City Council? Where is that material?
There is descriptive material about the need for this effort, about the reason why it's being structured this way as a separate entity with a separate board of directors. There is written descriptive material that talks about all of that.
Where is all of 19 5/24/00 APPROPRIATIONS - BILL 010262 that? Is that a part of our package here today?
It is -- a summary of it, Councilman, is contained in the testimony that I submitted for this hearing. This is a summary though.
It is being incorporated. The documents are being drawn up now.
Only -- I believe only five appointments have been have been made. So there's still a number of other appointments that will be made by the Mayor.
Okay. And so the board is responsible for this entity? 20 5/24/00 APPROPRIATIONS - BILL 010262
Okay. And what's the nature of their relationship with the City.
Well, for the funding that we're requesting here, there would be a contract between -- as I said, a series of contracts between the City and PAID and PAID and the New Economy Development Alliance that would set forth specific criteria as to how the funding can be used. So I would expect we would have approval rights over the budget and the types of uses that are proposed for the --
You said that there is going to be a lease between the City and PAID and PAID and NEDA. Are those lease documents coming back here?
I wouldn't -- Councilman, I don't believe they will be leases; I believe they'll be funding agreements. And no, I do not --
All right, are the 21 5/24/00 APPROPRIATIONS - BILL 010262 funding agreements coming back here?
No, I don't anticipate that they would be coming back here. What we're asking Council to do is provide the money to Commerce for what is an economic development initiative. And, you know, we would then take the responsibility for making sure that the goals of this program are met by the funding being provided to NEDA.
All right. So how would a business access these funds? I mean, some of these funds are going to be used for seed money for start-up for businesses in this new economy, however that's defined?
Well, we're still in the very formative stages. The funding that we're asking for is really -- there are two purposes that I've outlined. One is just basic start-up costs to get an organization in place, a staff hired, an office location, equipment fit-out, and the normal things associated with starting up a corporation. That's the first half of the request. The second half -- 22 5/24/00 APPROPRIATIONS - BILL 010262
The second portion of the request is to establish basically a separate economic stimulus fund for the New Economy Development Alliance soley targeted at high- technology and biosciences businesses. And what -- the plan that I have outlined that I want to present to the New Economic Development Alliance board when it is fully formed would involve us looking for matching funds from the State and other entities so that we have a fund that we can -- that the alliance is formed and can start to market the City and that there's a separate economic stimulus fund that could be used for whatever -- however it best can be used in a most creative fashion to get these businesses into the City. And the distinction that I make, Councilman, is that in this sector, there likely are going to be ways that those funds can be used to help those businesses which don't apply to the 23 5/24/00 APPROPRIATIONS - BILL 010262 traditional businesses that we help through the traditional programs that currently have in place.
Well. . . thank you. Let me at least put on the record -- I think you're aware from some brief conversations that we've had and the longer discussions that your staff have participated in, there is a proposal kind of in its embryonic stages, the same as this idea, where, out in the West Parkside industrial park in the Empowerment Zone, there is an interest in some new-economy, high-technology type businesses that may have an interest in something like this. So my interest, quite honestly, is heightened beyond my normal interests in something like this because I do want to know how businesses throughout the City, wherever they may be located, would have an opportunity to access these funds. And so I clearly have an interest in this and I want to register that concern today, as we work through this process and help to ensure that neighborhood businesses are able to participate in this kind of program. I know it's early, I'm not asking for a 24 5/24/00 APPROPRIATIONS - BILL 010262 commitment at the moment, but I want the concern duly noticed and that we're going to go forward looking at how those business might be able to participate in something like this. If you're asking us to go out a little bit on a limb with you to get something started up, I want to know that there's going to be some return at the end of the day in a couple of areas that many of us might have an interest in.
Okay. I would just like to add that for those in attendance on 010231, that bill will be held till June the 5th or the 6th. Thank you. Are there any other questions? Councilwoman Miller.
Good morning. Mr. Cuorato, I'd like to know, what is the projected dollar amount for this new economic stimulus fund under this program?
Councilwoman, the request 25 5/24/00 APPROPRIATIONS - BILL 010262 that I submitted was for a total of $2.5 million. At this point, the way I see that request breaking down is for half of the money to be used to actually start up the corporation from its very basic beginning. The other half would be used as a separate -- as seed money for a separate economic stimulus fund soley devoted to high-tech businesses. And, as I just mentioned in response to Councilman Nutter's question, I think what we're going to have to do with that program is look at some new creative ways to help businesses because the needs of high-tech businesses are somewhat different than the needs of the traditional businesses that we serve. And I would hope that we could take this money and leverage it to build up a larger stimulus fund from other sources so that we really have a basis to help businesses.
Okay. And I have one other question. Can you tell me, who are the board members of PAID, who are members of PAID? Is there anyone new since Mayor Street became -- I used to know who it was under Rendell; I'm just not clear about who sits on PAID board or who 5/24/00 APPROPRIATIONS - BILL 010262 makes up PAID at this point.
PAID is the Philadelphia Authority for Industrial Development. It's the financing arm of PIDC, if you will.
There are five members, Councilwoman. I know that I'm one. I believe there's one vacancy. The other members are, I believe, Bill Harvey, Cheryl McKissick (ph.), James McManus (ph.), and I believe there's one vacancy. It had been Councilman Longstreth but he has resigned and I don't believe that fifth position has been filled.
Thank you, Madam Chair. I came to this meeting this morning because I learned about this -- I learned about this issue yesterday in a talk with the Council President and the Chair of this committee. And certainly, I hope that the committee will consider 27 5/24/00 APPROPRIATIONS - BILL 010262 supporting this, with the caveat that Council is included every step of the way on this and that they do have membership on the committee. We've kind of reached a crisis, Mr. Cuorato, in Council about receiving information. It's creating a big problem for us and we don't want the possibility of losing a great program that could generate or bring businesses and banks, etc., to the City. But by the same token, the Chair of this committee and the committee is concerned about just being a conduit for money and not inclusion. So we are asking that you -- every step of the way, if you would keep the chair of this committee informed and establish through her whatever inclusion on this board that she deems appropriate so that we can feel a part of things. It's a big, big issue for us, and certainly we ask that you please take that into consideration if you really, really want to get these things done.
Thank you, thank you. 28 5/24/00 APPROPRIATIONS - BILL 010262 Thank you, Madam Chair.
Thank you. Are there any other questions? (No further questions.)
There being none, this session is now -- we will go into our public meeting. Yes?
I want to ask for a suspension of the rules for consideration at today's meeting.
Thank you. - - - 29 5/24/01 APPROPRIATIONS - PUBLIC MEETING
Now we'll go into our public meeting. Councilman Nutter, for the purpose of voting out Bill 010262.
Thank you, Madam Chair. Madam Chair, I move that Bill No. 9 010262 be reported out of this committee with a favorable recommendation and a further recommendation that the rules of Council be suspended so as to permit first reading at our next session. (Duly seconded.)
All those in favor? Those opposed? Councilman Nutter, Bill 010337.
Madam Chair, I move that Bill No. 010337 be reported out of this committee with a favorable recommendation and a further recommendation that the rules of Council 30 5/24/01 APPROPRIATIONS - PUBLIC MEETING be suspended so as to permit first reading at our next session.
All those in favor? Those opposed? Therefore, Bill 010262 will be reported out of this committee with a favorable recommendation and with a suspension of the rules so as to permit first reading at our next session of Council. And Bill No. 010337 will be reported out of this committee with a favorable recommendation and with a suspension of the rules so as to permit first reading at our next session of Council. Thank you all very much. (Adjourned 9:26 a.m.) 31 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, May 24, 2001, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE ON APPROPRIATIONS BILL NO.'S 010262, 010337 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter