COUNCIL OF THE CITY OF PHILADELPHIA2 COMMITTEE ON FINANCE3 Room 400, City Hall6 Philadelphia, Pennsylvania Tuesday, November 29, 20117 10:15 a.m. PRESENT: COUNCILWOMAN MARIAN B. TASCO, CHAIR10 COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL CLARKE11 COUNCILMAN FRANK DiCICCO COUNCILMAN W. WILSON GOODE, JR.12 COUNCILMAN BILL GREEN COUNCILMAN WILLIAM K. GREENLEE13 COUNCILMAN CURTIS JONES, JR. COUNCILMAN JAMES KENNEY14 COUNCILWOMAN BLONDELL REYNOLDS BROWN BILLS 110733, 110758, 110787, 110788, 110789,16 110830 and 110832 - - -18 2
Good2 morning. We're going to call the3 Committee on Finance to order. Prior to4 any action on any of the legislation, we5 will have to establish a quorum. The6 Councilmembers will be here. However, we7 want to begin the testimony, because some8 members have to leave -- some witnesses9 have to leave because of some emergencies10 that have come up. So we'll begin the11 testimony, and before any action -- this12 will be the hearing. Before we go into13 the meeting, we'll have a quorum.14 I'd like the Clerk to read the15 bills that will be heard today.16
Bill No. 17 Bill No. 3 Bill No. 15 Bill No. 21 Bill No. 9 Bill No. 1 Bill No. 12
Thank you13 very much.14 We will now recognize the15 Councilmembers who are here. We do have16 a quorum in the presence of Councilman17 Kenney, Councilman Green, Councilman18 Greenlee, Councilman Goode, Councilwoman19 Blackwell and myself.20 We will now call on Mr. Alan21 Greenberger to testify on Bill No.22 110758.23 (Witness approached witness24 table.)25 11/29/11 - FINANCE - BILL 110733, ETC.1
Good7 morning, Chairwoman Tasco and members of8 the Committee on Finance. I am Alan9 Greenberger, Deputy Mayor for Economic10 Development. I appreciate the11 opportunity to present testimony in12 support of Bill No. 100758, introduced by13 Councilwoman Tasco on behalf of the14 Administration. The bill would amend the15 The Philadelphia Code to change the name16 of the "Business Privilege License" to17 the "Commercial Activity License." It18 would also change the name we use to19 refer generally to our business taxes20 from the "Business Privilege Tax" to the21 "Business Income and Receipts Tax."22 The proposal to rename the23 Business Privilege License and Business24 Privilege Tax is meant to send the25 11/29/11 - FINANCE - BILL 110733, ETC.1 message to businesses and entrepreneurs2 that the City of Philadelphia is a3 welcoming place to do business. The4 phrase "Business Privilege" is an5 anachronism that sends a less than6 welcoming message to businessowners about7 our desire to promote business and create8 jobs in Philadelphia. We want to send a9 message that we are eager to see10 businesses relocate to and expand in11 Philadelphia and that we want12 entrepreneurs to think of Philadelphia as13 presenting unique opportunities as a14 locale in which to start a business.15 This proposed change is, of course,16 largely symbolic, but it comes on the17 heels of the enactment of two substantive18 tax and fee reduction bills designed to19 make the City more competitive in20 attracting businesses. Together, these21 changes should send a message to the22 business community that Philadelphia is a23 great place to do business, create jobs24 and contribute to the local economy.25 11/29/11 - FINANCE - BILL 110733, ETC.1 Business attraction and2 retention has been a focus of the3 Administration over the last four years4 and will continue to be a major part of5 the Mayor's agenda during his second6 term. During this Administration, the7 City has established a strong track8 record of successfully attracting and9 retaining both large and small companies10 in a variety of key economic sectors. In11 the financial services sector, we12 attracted Aberdeen Asset Management PLC,13 a global investment management group14 which relocated its offices into the City15 in 2008. In the clean tech sector,16 Energy Plus, a growing energy supplier,17 expanded into a larger space in West18 Philadelphia in 2010. In the logistics19 and distribution sector, Teva20 Pharmaceutical, one of the largest21 pharmaceutical companies in the world, is22 currently constructing its North American23 distribution facility in Northeast24 Philadelphia. And in the information25 11/29/11 - FINANCE - BILL 110733, ETC.1 technology sector, YIKES, Incorporated, a2 web design firm, moved into a larger3 space on Girard Avenue in 2010 to4 accommodate its rapidly growing staff.5 These are just a few examples of the6 types of companies that have decided that7 Philadelphia is a smart location for8 their business.9 We hope that the scheduled10 restart of business tax reductions and11 the messages we are sending to the12 business community will demonstrate the13 City's commitment to add to this list of14 successes and to create jobs in the City.15 Lastly, we have provided to the16 Chair a proposed technical amendment to17 the bill to make the legislation18 effective on May 1st, 2012, which will19 give the affected operating departments20 sufficient time to change forms and make21 other changes necessary to implement the22 law.23 Thank you for the opportunity24 to testify. I would ask that the rules25 11/29/11 - FINANCE - BILL 110733, ETC.1 be suspended so this can have its first2 reading, I believe, on Thursday, and I'm3 happy to answer questions.4
Thank you5 very much.6 Are there questions from7 members of the Committee?8 (No response.)9
Thank you10 for your testimony.11 DEPUTY MAYOR GREENBERGER:12 Thank you. Have a good morning.13
The Chair14 recognizes Joe McPeak and Jim Pecora,15 Philadelphia Library.16 (Witnesses approached witness17 table.)18
Good19 morning.20 MR. McPEAK: Good morning,21 Chairwoman Tasco and members of the22 Finance Committee. I am Joseph McPeak,23 Associate Director of the Free Library.24 Siobhan Reardon, the President and25 11/29/11 - FINANCE - BILL 110733, ETC.1 Director, apologizes for not being here.2 She is attending the funeral of Trustee3 Jerry Clothier today.4 I am here today to testify in5 support of Bill No. 110832, which6 authorizes the Library and the7 Procurement Commissioner to enter into a8 sublease agreement to lease public9 computers from the Philadelphia Municipal10 Authority for the use of the Free11 Library's staff and customers.12 More specifically, we are13 seeking to lease 775 personal computers14 and related equipment, plus maintenance15 and installation. This lease will cover16 equipment at Parkway Central and our17 materials processing division at the18 Rodin Place, the Library for the Blind19 and Physically Handicapped at 919 Walnut20 Street and the three regional libraries -21 Lucien E. Blackwell Regional Library at22 125 South 52nd Street, Joseph E. Coleman23 Northwest Regional Library at 68 West24 Chelten Avenue and the Northeast Regional25 11/29/11 - FINANCE - BILL 110733, ETC.1 Library at 2228 Cottman Avenue.2 The contract will last four3 years and will provide for an additional4 transition period of approximately five5 months for delivery, installation and6 removal of the old PCs. A multi-year7 contract is essential to provide8 financing for the lease and will be more9 efficient in light of the number of10 computers that the Free Library leases.11 In the past, the Library has had one-year12 leases with options for three one-year13 renewals. We stagger the replacement of14 our equipment and anticipate replacing15 the branch computers in two years. If16 Council approves this ordinance before17 year end, the Library will have the new18 computers installed and operating by July19 1st, 2012.20 Free access to public computers21 is one of the most vital services that22 the Free Library provides to the citizens23 of Philadelphia. Forty-five percent of24 households are without Internet access,25 11/29/11 - FINANCE - BILL 110733, ETC.1 and the Library provides a crucial2 lifeline. With the support of City3 Council, we will continue to deliver this4 service.5 I would also like to request a6 suspension of the rules to allow for the7 first reading of this bill at the next8 session of Council, and I would be happy9 to answer any questions.10
Thank you.11 Are there any questions?12 Councilman Green.13
Thank you,14 Madam Chair.15 Is the contemplated source of16 funds for the lease payments the Free17 Library's operating budget?18 MR. McPEAK: Yes.19
So the22 payments would not start until next July,23 so they would be covered in next year's24 operating budget presented to Council?25 11/29/11 - FINANCE - BILL 110733, ETC.1 MR. McPEAK: Yes.2
And is this4 an increase in the operating budget for5 the Library or is it just replacing lease6 payments that exist?7 MR. McPEAK: We are budgeted8 for this, yes.9
Okay. Have10 you done a cost comparison between11 leasing and purchasing?12 MR. McPEAK: I'm going to defer13 to Jim.14
We've been using a15 leasing strategy for a number of years.16 We have done the comparisons. What17 throws it is the maintenance, the18 disposal costs that we get included, the19 configuration. That usually swings it20 towards the lease.21
So the22 answer is yes, you've done a cost23 comparison?24
So you have6 not done a new cost comparison to7 determine whether or not that this is the8 most economically viable solution today?9
So given the12 price of computers are far less than they13 were years ago and a number of other14 factors, I'd like to ask you, even if we15 give you the authority today to do this,16 to go ahead and actually do the17 comparison and forward it to the Chair.18 MR. McPEAK: Yes, we will. Not19 a problem.20
Okay. Can21 you -- I just noticed this and I'm22 curious about this. In City23 responsibilities under the agreement, it24 says the Authority's reasonable25 11/29/11 - FINANCE - BILL 110733, ETC.1 counsel -- Philadelphia Municipal2 Authority's reasonable counsel fees, an3 amount not to exceed 15,000, will be paid4 by the City. Is that just a standard5 thing, the Philadelphia Municipal6 Authority doesn't use the City7 Solicitor's Office, so they have to --8 MR. McPEAK: I'm going to defer9 on that.10 (Witness approached witness11 table.)12 Michael Athay, Chief Deputy13 Solicitor.14 It is standard in PMA15 agreements in the event that outside16 counsel is needed. We would not17 anticipate that outside counsel would be18 needed.19
Thank you.20 And it also -- there's a lease21 extension provision in Section 6.3, and22 is there any limit on that extension?23
Three to six24 months is customary. We usually never25 11/29/11 - FINANCE - BILL 110733, ETC.1 think beyond that.2
Well,3 there's a provision actually somewhere4 else limiting it to a seven-month5 extension, but this language does not6 limit it at all, and I'm just wondering7 if 6.3 is subject to the seven-month8 limit so that you would have to --9 basically after four years and seven10 months, if you want to do this, you'd11 have to come back to Council.12
That's the14 question.15 MR. McPEAK: I think the idea,16 the extra month idea, is for17 installation.18 So the PCs themselves are19 leased for four years, correct, and20 there's the installation on top of it?21
Well, if you22 don't have the answer off the top of your23 head, if you could just provide it to the24 Chair --25 11/29/11 - FINANCE - BILL 110733, ETC.1 MR. McPEAK: Sure. We can get2 that.3
The Chair10 will recognize that Councilman DiCicco11 and Councilwoman Brown are present at12 this meeting.13 There being no further14 questions, thank you.15 MR. McPEAK: Thank you.16
Next we17 have Nancy Winkler, NTI bond.18 (Witness approached witness19 table.)20
Good morning,24 Councilwoman Tasco and members of the25 11/29/11 - FINANCE - BILL 110733, ETC.1 Committee on Finance. I am Nancy2 Winkler, City Treasurer for the City of3 Philadelphia. I am here today to testify4 in support of Bill No. 110773. This bill5 authorizes the Redevelopment Authority to6 issue refunding bonds to refinance7 certain outstanding bonds issued under8 the neighborhood transformation program,9 and reconfirms the commitment by the City10 to pay debt service on these bonds. The11 bill provides for the sale of refunding12 bonds pursuant to the current service13 contract's limitation that the annual14 debt service requirement on the program15 bonds not be in excess of $20 million16 annually. No bonds will be issued to17 fund any additional capital projects.18 Rather, this transaction is a simple19 refinancing of existing bonds previously20 issued to fund the neighborhood21 transformation program to achieve a more22 favorable interest rate. The bill also23 authorizes a supplement to the existing24 service contract between the City and the25 11/29/11 - FINANCE - BILL 110733, ETC.1 Redevelopment Authority to confirm that2 the debt service on the refunding bonds3 will be paid as part of the service fee.4 The 2012 refunding bonds will5 be issued subject to favorable market6 conditions to refund all or a portion of7 the Redevelopment Authority of the City8 of Philadelphia revenue bonds, Series9 2002A, the City of Philadelphia -- which10 is named the City of Philadelphia11 Neighborhood Transformation Initiative,12 which these bonds are going to become13 callable on April 15th of 2012. It's the14 City's general practice to issue15 refunding bonds when the average debt16 service savings to be realized is at17 least 3 percent.18 Pursuant to the revision of the19 existing service contract, the City will20 confirm its covenant to unconditionally21 make all service fee payments to the RDA22 which securitize these bonds. The23 existing bonds are currently obligations24 of the General Fund of the City, and the25 23 11/29/11 - FINANCE - BILL 110733, ETC.1 refunding bonds will remain so.2 Thank you for your3 consideration of Bill No. 110733. This4 concludes my testimony. I am happy to5 answer any questions if you have any at6 this time.7
Thank you,10 Madam Chair.11 I'm just curious about how much12 we're going to save compared to the cost13 of the transaction.14
Great. So at the15 moment, as you know, the market is quite16 volatile, so we're -- I'd just like to17 give you our most recent projections,18 which is that we would be able to refund19 102.355 million of outstanding Series20 2002A bonds and that we would achieve21 9.624 million in present value savings,22 which is equivalent to 9.4 percent of the23 refunded par amount of the bonds, which24 is way above the City's normal level of25 24 11/29/11 - FINANCE - BILL 110733, ETC.1 savings that it uses to -- we've been2 waiting actually, if you want to know the3 honest truth, because I mentioned in my4 testimony that the bonds are currently5 callable on April 15th of next year, and6 so we're going to just watch and see how7 to maximize those savings. But once they8 become currently callable, the savings9 just diminish over time because of the10 time value of the call.11
I mean, if12 you refund, you're likely to have far13 more bonds called than if you don't,14 because people will be getting -- or, no,15 I guess that's not right. So in a16 refunding, we'd be requiring back all of17 the current bonds?18
Explain to20 me how this process works. I mean, in21 other words, if you could expand on your22 last answer, because I'm not sure I fully23 understand how the recall is going to24 impact what the savings will be.25 25 11/29/11 - FINANCE - BILL 110733, ETC.1
So the City --2 typically when the City sells most any3 fixed-rate bond issue, it establishes a4 contract with bondholders, which imbeds a5 right of the City to call the bonds in6 early. Typically the City has been7 putting in ten-year calls, and the8 contract provides that with no premium9 paid to the bondholder, after the tenth10 anniversary of the issuance of the bond,11 more or less -- sometimes it is slightly12 a different date -- we can call the bonds13 in and not pay a penalty. Prior to that14 point in time, we cannot call the bonds.15 And so if we'd issue a refunding bond16 issue earlier than 90 days prior to the17 call date on the bonds, under the federal18 tax law that's deemed an advance19 refunding, and we're limited under the20 tax law to one advance refunding. We21 don't want to do an advance refunding22 because we want to preserve our future23 economics of another refunding if that24 were to ever be available again on these25 26 11/29/11 - FINANCE - BILL 110733, ETC.1 bonds. So we're going to wait and do it2 as a current refunding. So within 903 days of the April 15th call date, we4 would anticipate to issue the bonds and5 exercise that call option where we can6 bring those bonds in without any premium.7 And then I guess the other factor is8 because we're getting so close to the9 call date --10
Well, right, we16 would issue the new bonds, deposit the17 money in an escrow, which would be18 invested in triple A-rated securities,19 which will be solely available legally20 only to pay the bonds when they are21 called and then call the bonds.22
Legally we can't24 call the bonds -- we wouldn't want to25 27 11/29/11 - FINANCE - BILL 110733, ETC.1 call the bonds until we know we have the2 money.3
So have we4 chosen the underwriters and legal5 counsel?6
We have chosen7 legal counsel because we have legal8 counsel under contract as a general --9 under the advisor related to all10 general -- related General Fund-supported11 obligations.12
That is Cozen and15 O'Connor. And the minority counsel on16 that is Gonzalez Harlan.17
We have not gone20 through a process yet to pick21 underwriters.22
Is this a23 small enough transaction to not be a firm24 underwritten offering?25 28 11/29/11 - FINANCE - BILL 110733, ETC.1
You know, it's2 something we're thinking about. I think3 it's not so much the size, to be4 perfectly honest, as it is the5 Redevelopment Authority and the kind of6 maybe the story that might need to be7 told around the security and the nature8 of the Redevelopment Authority underlying9 projects. So to me, it's more of a --10 maybe potentially more of the issue,11 which isn't a bad story, but it's just a12 story that investors may have a number of13 questions about and could be helpful to14 have -- in my view, this would be15 probably more appropriate for negotiated16 sale.17
Except for18 the difference between the time you issue19 the new bonds and you do the call and20 refunding, does this impact in any way21 the City's debt limit?22
No, it does not.23 The law provides that if the monies are24 invested in this escrow that's solely for25 29 11/29/11 - FINANCE - BILL 110733, ETC.1 the purpose of paying the future bonds,2 we no longer have to treat the bonds3 we're calling as obligations to the City,4 because the City's obligation has been5 extinguished once we've actually set the6 money aside in the escrow.7
Thank you12 very much. You want a suspension of the13 rules?14
You know, we15 didn't ask for a suspension of the rules16 because we don't intend -- we need to17 have this passed by the end of the year.18 If that's possible without suspending the19 rules, that's fine. We wouldn't be20 issuing these bonds until sometime next21 year.22
However, I'll ask24 for suspension of the rules in case --25 30 11/29/11 - FINANCE - BILL 110733, ETC.1
We'll do2 it. It will be out of here, it will be3 done. We'll do it. Thank you.4 Next we have -- I'm trying to5 get these short hearings out before we go6 into this lengthy hearing. Bill No.7 110830, Philadelphia Gas Works pension8 benefits bill.9 (Witness approached witness10 table.)11
Good morning,12 Chairwoman Tasco and members of City13 Council's Finance Committee. My name is14 Joseph Bogdonavage. 1 overview of the Defined Contribution2 Plan. 8 Keith Holmes has provided testimony on9 behalf of this. 11 Generally, the benefits option12 will be the same for all participants13 under the Pension Plan. If, however, a14 contributing participant separates from15 service before vesting in the plan, the16 contributing participant may elect to17 receive immediate payment of the18 aggregate contributions he or she made to19 the Pension Plan. 22 Under the Defined Contribution23 Plan -- the DC Plan is a Defined24 Contribution Plan. 1 participant's benefit, upon retirement or2 other separation of service, is3 determined by reference to the aggregate4 amount of his or her contributions into5 the account, plus any interest earnings6 or losses. 1 menu of investment alternatives that are2 authorized by PGW. 24
Could you25 35 11/29/11 - FINANCE - BILL 110733, ETC.1 tell me what the purpose of these changes2 to PGW's Pension Plan? Is it fair to say3 that the goal is to reduce PGW's future4 pension costs?5
Madam6 Chairwoman, that's exactly what this bill7 will do. PGW recognizes, along with the8 City, that the pension obligation is a9 very large component of PGW's rate base,10 and we're looking at all possibilities11 reducing future pension costs by now12 allowing a Defined Contribution Plan and13 not allowing any new participants to be14 in the Pension Plan except on a15 contributory basis.16 In the short term, there won't17 be a lot of change in PGW's pension18 expense, but over the long term, this19 will have a reasonable opportunity to20 reduce costs in future ratepayers.21
Have you22 calculated the cost that will be realized23 in the next maybe 10 to 20 years?24
Right now25 36 11/29/11 - FINANCE - BILL 110733, ETC.1 PGW's Pension Plan is funded at about 782 percent. Over probably the next decade3 or so, depending on where the market is4 with equities as we go forward, PGW will5 probably be seeing about a 2 percent6 reduction in annual pension costs beyond7 the decade still to come. So there would8 be somewhere around about maybe a half a9 million to three-quarters of a million10 dollar in pension expense that would be11 lowered as a result of this program.12
As I13 understand it, the two new Pension Plan14 choices will go into effect as of May 21,15 2011; in other words, retroactively for16 anyone hired for unionized positions17 since that date, because that is one of18 the terms the union agreed to in their19 collective bargaining agreement with PGW.20 But for non-union personnel, the new21 Pension Plans will not go into effect22 until the effective date of this23 ordinance. Let's say that would be in24 mid December.25 37 11/29/11 - FINANCE - BILL 110733, ETC.1 PGW has known it needed to set2 up a new Pension Plan since May.3 Realizing that there wouldn't have been4 enough time to draft the legislation and5 have it considered by Council, why didn't6 PGW submit this bill for approval as soon7 as we returned to session in September?8
Basically PGW9 was drafting the Defined Contribution10 Plan and also changes to the benefit plan11 after we had the agreement by the union12 back in May. I would hope that we would13 have been able to get this into Council14 sooner than that, but the way -- we were15 working on language changes and getting16 all of the Solicitor's opinions and other17 opinions of our outside legal counsel.18 We did not make the early timetable of19 the September deadline, and we're sorry20 for that at this point, but right now we21 have all the language changes drafted and22 hopefully Council will approve the23 changes to PGW's Pension Plan.24
So how25 38 11/29/11 - FINANCE - BILL 110733, ETC.1 many non-unionized personnel have been2 hired since mid September?3
Probably only4 a handful. I would say probably less5 than five.6
I've been9 told it's only one person who has been10 hired since September.11
Okay. So12 how many are likely to be hired before13 mid December?14
None?17 Okay. So the savings associated with18 moving these new Pension Plans has been19 lost with respect to any new hire. So20 you haven't had any new hires.21
Okay.24 Since the new Pension Plans can't go into25 39 11/29/11 - FINANCE - BILL 110733, ETC.1 effect until this bill becomes law, what2 has PGW done in the interim with respect3 to the participation or future4 participation of both union and non-union5 employees?6
Internally at7 the company we've had our Human Relations8 Department sit down and advise the new9 hires of their rights under this pension10 bill so that they have the opportunity if11 they wanted to stay in the plan, they12 could contribute to it, or if not, upon13 the passage of this bill in May, PGW14 would be participating in giving 5 and a15 half percent of their compensation into16 the funds.17 So they have been advised of18 their rights, and they have to make an19 irreconcilable election of which plan20 they would like to be in. So PGW has21 provided some counseling to all of our22 new hires.23
Councilman24 Green.25 40 11/29/11 - FINANCE - BILL 110733, ETC.1
Thank you.2 What is the current3 contribution, if any, by unionized4 employees to the Pension Plan?5
Councilman,6 PGW right now, no one contributes to the7 Pension Plan. It is all provided through8 ratepayer assistance.9
So to10 participate in the Pension Plan in the11 future, they're going from 0 to 6 percent12 essentially?13
We currently18 have a 457(b) plan, which probably about19 500 to 600 people are participating in,20 and that is totally voluntary on their21 behalf. PGW makes no contributions to22 that plan up to -- we do -- I think it's23 percent -- 10 percent up to $500 is our24 contribution.25 41 11/29/11 - FINANCE - BILL 110733, ETC.1
So what's2 the difference between a 457(b) plan and3 what are you calling it, a 401(a) plan?4
Can I just5 have our outside counsel give you6 probably a better determination than I7 would.8
Good morning. My12 name is John Nixon and I'm partner at the13 law firm of Duane Morris.14 The difference, to answer your15 question, the fundamental difference16 between a 457(b) and a 401(a) is a 457(b)17 is voluntary. The employee elects to18 make the contribution, and it's made on a19 pre-tax basis. So it's the equivalent of20 a 401(k) plan in the private sector.21 A 401(a) plan is a plan that,22 by and large, is contributed solely by23 the employer. The employer makes the24 contribution on behalf of the employee.25 42 11/29/11 - FINANCE - BILL 110733, ETC.1 So the rationale for setting up a 401(a)2 plan separately is because of sort of a3 peculiar twist in the tax law. If the4 employer made the contribution to the5 457(b) plan, which it could, that would6 reduce the maximum amount that the7 employee could contribute.8 So to give you a simple9 example, the maximum amount that an10 employee could contribute is 16,500. If11 PGW were to contribute, say, 5,000 on12 behalf of an employee, that would reduce13 the maximum amount that the employee14 could contribute to 11,500. So the15 401(a) plan gives PGW a mechanism to16 contribute to the plan, but not harm17 participants in terms of their maximum18 contribution to the plan.19
So I've been20 curious about this with respect to police21 and other situations, and, that is,22 understanding what you just said, why23 wouldn't it be far cheaper for the City24 from a management perspective to just25 43 11/29/11 - FINANCE - BILL 110733, ETC.1 simply have 80 percent go into the2 current pension system with a 6 percent3 contribution if people elect -- I don't4 know whether this is similar to the fire5 or it's an either/or, pension or 401(a).6
Then I'll17 withdraw my question. Thank you very18 much.19
Councilwoman,22 we would just like to request a23 suspension of the rules so that it can24 have its first reading this Thursday.25 44 11/29/11 - FINANCE - BILL 110733, ETC.1
Thank you.5 Okay. Now we're going to hear6 Bill Nos. 110787, 110788, 110789, those7 who plan to testify.8 (Witnesses approached witness9 table.)10
Good morning,11 Councilwoman Tasco and members of the12 City Council Committee on Finance. 15 Apologies for my voice. 17 I'm here to testify in support18 of Bill Nos. 1 Authority to enter into agreement for2 guaranteed energy savings programs; and3 authorize the financing for this project4 through the issuance of bonds. 10 The Mayor's Office of11 Sustainability is responsible for12 coordinating the implementation of13 Greenworks Philadelphia, the City's14 comprehensive sustainability plan. 18 Greenworks Target 1 sets an ambitious19 goal of reducing the City's energy20 consumption by 30 percent. 1 project and thus each year's repayment2 obligation. The municipality's payments3 are designed to be funded from the4 utility savings achieved from the5 improvements and are guaranteed by the6 ESCO, who must pay the difference if7 there is a shortfall in the projected8 energy savings. This guarantee gives the9 municipality assurances that it would10 otherwise not have. While new to the11 City of Philadelphia, GESA is a12 well-tested program within the13 Commonwealth. To date, the program has14 implemented over $370 million of projects15 across the state, which are delivering16 over $435 million of verified and17 guaranteed energy savings. 1 up-front budget allocation. 6 This process began for us in7 2009 with the issuance of a competitive8 RFQ to all state-qualified ESCOs to9 elicit interest in the project. From the10 eight responses we received, three ESCOs11 were selected as finalists to advance to12 the RFP stage, which included a13 preliminary audit and proposal to the14 City. 18 Within public and office spaces, there19 will be upgrades to lighting by changing20 bulbs and fixtures to more efficient21 models and adding controls like occupancy22 sensors. 1 fixtures to low-flow systems in all four2 buildings. The measures also include one3 capital project, replacing a boiler in4 the Municipal Services Building that has5 reached the end of its useful life and is6 a cost-effective addition to the overall7 project. 12 In addition to the nine13 selected energy conservation measures,14 many opportunities clearly exist in the15 quadplex and throughout the City's16 building stock for additional energy17 efficiency projects that can yield18 significant savings for the City over19 time. Because this is the City's first20 energy performance contract using the21 GESA model, the project stakeholders22 chose a project size and scope that the23 City can currently afford and manage at24 this time. 1 project of this scope allows the City to2 minimize risk while gaining familiarity3 with program implementation. 7 The proposed project would be8 financed using a combination of revenue9 bonds and a portion of the City's10 Qualified Energy Conservation Bonds,11 which were allocated to the City by the12 American Reinvestment Act. 15 Noresco has made substantial16 efforts to meet our commitment of working17 with the City of Philadelphia's Office of18 Economic Opportunity to contract with19 certified firms and to offer mentorship20 and capacity-building services in the21 specific areas of energy efficiency22 improvement services. 1 assistant and paid for coursework2 relevant to the energy conservation3 industry. As the project moves to4 implementation, Noresco has partnered5 with a number of M/W/DSBE subcontractors6 and has committed to a participation7 range of 23 percent overall for the8 project, which would be 54 percent if9 work done on proprietary systems is10 excluded. 13 Today we are proposing14 amendments to address items raised by15 City Council conversations in our16 November briefing. 21 Should City Council approve the22 project, the City will complete its23 technical review and prepare for project24 implementation. 2 After construction is complete, the3 project will enter its performance period4 and payments will be due annually on the5 money borrowed. 13 We believe this is a good14 project for the City.
By implementing15 these energy conservation measures, we16 will make much-needed basic improvements17 in all four critical buildings, yielding18 a guaranteed 2 percent or more reduction19 in General Fund energy use and costs,20 along with anticipated operations and21 maintenance savings. These energy22 savings will also help to reduce23 greenhouse gas emissions and improve air24 quality. 16 Thank you. 24
Councilman25 55 11/29/11 - FINANCE - BILL 110733, ETC.1 Jones, would you like to ask your2 question now or wait for the other3 members to testify?4
Okay. Well,9 thank you, Madam Chair.10 A couple of quick questions.11 First of all, thank you for the work of12 your department and its ability to13 achieve goals of savings of energy over14 periods of time. It's my understanding15 you've exceeded some of those citywide16 goals, so for that, our budget thanks17 you.18 I would be interested in19 knowing two things. One, you guys are20 participating in what is called from PECO21 Demand Response, and could you explain22 that to the Committee? And are we going23 to include that as we expand this project24 beyond the triplex?25 56 11/29/11 - FINANCE - BILL 110733, ETC.1
Will we expand2 participation in the Demand Response3 program?4
Would you10 identify yourself, please, for the11 record. Would you speak into the12 microphone.13
My name is Adam14 Agalloco. I'm the Energy Conservation15 Coordinator in the Mayor's Office of16 Sustainability. I'm also the Project17 Manager for the project we're speaking18 about today.19 The Demand Response program20 that the City participates in currently,21 essentially what it is is during peak22 time, critical moments on the grid, PGM,23 who is the regional operator of the grid,24 asks entities to reduce their energy25 57 11/29/11 - FINANCE - BILL 110733, ETC.1 consumption. By participating in that2 program, the City earns revenue at those3 critical times or they also earn money4 just by participating and by willing to5 volunteer to be able to reduce if an6 event is not called.7 For this project, we're not8 looking to incorporate any of the savings9 from the Demand Response program into the10 project, though we do feel that the11 energy conservation measures will enhance12 our ability to generate savings and, in13 turn, revenue from the project.14
So I guess15 as we look to monitor the savings on the16 triplex project, as we start to expand17 out to recreation centers, police18 departments, other major -- we have over19 1,500 PECO accounts -- that at some point20 we will ask departments to participate in21 that, considering it is successful, we've22 been able to achieve savings. Can you23 speak to what those savings have been?24
Yeah. Right now25 58 11/29/11 - FINANCE - BILL 110733, ETC.1 we are only using Demand Response and2 that program specifically within our3 largest energy users, our 14 largest4 accounts throughout the City. That's5 because they have the most opportunity to6 take advantage of that. Typically the7 providers that deploy demand response as8 a tool are interested in those larger end9 users. So, for example, a recreation10 center would not be a good candidate site11 for the Demand Response program, but it12 still is an excellent opportunity and an13 excellent location to reduce energy14 consumption, and really that's the way15 that we're going to drive and reduce our16 costs in the long term.17
Well, that18 leads to my second question. As we start19 to look at varying departments and trying20 to change a culture -- and I think we had21 this conversation -- a culture of massive22 consumption of energy in spite of what23 the costs are, do you think -- and I know24 it's above your pay grade maybe to make25 59 11/29/11 - FINANCE - BILL 110733, ETC.1 this decision, but do you think that2 incentivizing, giving back to the3 departments that manage the savings,4 might be a good inducement for them to5 participate a little more?6
I think that7 generally the first step we need to do is8 expose departments, operating9 departments, to their energy costs and10 their energy use. I think that that's11 the first step. Once they have exposure12 to those costs and that use, I think then13 you start to have the conversation as to14 is there a way to incentivize reductions,15 whether that be monetary or otherwise.16
Well, as a17 Council and I guess this body might want18 to think about this in the budget cycle,19 if indeed we're looking at individual20 departments in a line item way and we21 find that that kind of thought process,22 culture of unlimited usage exists, we23 might want to take a harder look at that24 and incentivize it in a different way.25 60 11/29/11 - FINANCE - BILL 110733, ETC.1
Councilman, just2 to respond in addition, I think that we3 should be making -- we should be doing4 that kind of lifecycle cost analysis on5 every project, and that should be the6 norm. That shouldn't be an exceptional7 behavior of a department. And we're8 hoping to figure out how we make that9 transition so that we're making smart10 decisions on every capital project, on11 every lighting improvement project. And12 that's not necessarily the structure13 that's in place now, but we've been14 working with Gary Knappick, with15 Department of Public Property and others16 to try to understand how we can reframe17 some of these structures to build in that18 kind of process. And I think you're19 right, if there are departments that are20 absolutely committed in being aggressive21 towards achieving additional savings and22 building smart projects, we should figure23 out how we can support those efforts.24
Councilman25 61 11/29/11 - FINANCE - BILL 110733, ETC.1 Kenney's office has been a vanguard of2 looking at water production and working3 to incentivize the Water Department,4 because I had no idea how much electric5 goes into the production of a glass of6 water. So we're looking at that as a7 body to try to hold departments a little8 more accountable on their energy usage.9 So we're with you on that.10
Thank you.14 Are you saying that these other15 witnesses are prepared to testify?16
Nancy Winkler,17 the City Treasurer, will provide brief18 testimony on the financing component and19 then we'll open it up to questions.20
Good morning,23 Councilwoman Tasco and members of the24 Committee on Finance. I'm Nancy Winkler,25 62 11/29/11 - FINANCE - BILL 110733, ETC.1 City Treasurer for the City of2 Philadelphia.3 I'm here today to testify in4 support of Bill No. 110788. The5 financing ordinance authorizes the6 Municipal Authority to issue up to 13.27 million of bonds, plus cost of issuance,8 to initiate the project that Katherine9 has just described. The financing plan10 anticipates two separate series of bonds.11 One, authorized in the amount of 6.412 million would be issued as taxable13 Qualified Energy Conservation Bonds,14 which we refer to as QECBs. QECBs allow15 an issuer to issue taxable bonds and then16 claim a federal subsidy equal to 7017 percent of the tax credit bond rate18 published by the federal treasury on the19 sale date, typically resulting in20 substantially reduced interest costs21 versus a traditional tax-exempt bond.22 The remaining portion of the23 project financing will be traditional24 tax-exempt bonds. The breakdown of25 63 11/29/11 - FINANCE - BILL 110733, ETC.1 projects to be allocated between the two2 series is based on energy savings by3 building and is based on guidance4 received from the City's bond counsel.5 The QECBs will use a portion of6 the City's allotment of such bonds, which7 have been granted to the City by the8 American Reinvestment and Recovery Act.9 The financing ordinance also authorizes10 the execution of a service agreement11 between the City and the Municipal12 Authority confirming the City's annual13 obligation to pay the debt service costs14 of the project through the agreement,15 which debt service costs may be16 semi-annual or possibly monthly depending17 on the final debt structure.18
Thank you for21 your consideration of Bill No. 110788.22 This concludes my testimony.23
Any24 questions?25 64 11/29/11 - FINANCE - BILL 110733, ETC.1
Yes.2 COUNCILWOMAN TASCO:3 Councilwoman Blondell Reynolds Brown.4
Good5 morning. I echo Councilman Jones'6 observations that this department in our7 City begins to make -- continues to make8 significant strides in making our City9 greener.10 I'm curious about a few things11 here. One is, on of your12 testimony it says that an estimated 26413 jobs will be created. Be specific. What14 types of jobs? And you say estimated15 based on what? What kind of variables16 factor in to that estimation?17
Yeah.20 That was a number that was21 included in the proposal, the latest22 proposal, from Noresco, so I'd actually23 like to ask Paul Boyd from Noresco to24 speak to exactly how that number was25 65 11/29/11 - FINANCE - BILL 110733, ETC.1 created and what's included in those2 jobs.3 (Witness approached witness4 table.)5
Good morning. I'm6 Paul Boyd from Noresco.7 And the numbers actually are in8 the government publication called9 Political, and it's broken down into10 direct jobs and indirect jobs, and the11 way it works is, there is like ten direct12 jobs which is associated with the actual13 ESCO companies themselves and then14 there's about 12 jobs -- this is per15 million dollars of contract value. So in16 total, there's like 22 jobs per million17 dollars, and we've got a $12.3 million18 project. So that's where the calculation19 comes from the 264 jobs.20 Political actually was given21 their figures from the national22 association of Noresco's, and that23 information came from, I believe, the24 Berkeley Laboratory and the Labor25 66 11/29/11 - FINANCE - BILL 110733, ETC.1 Department.2
Okay. Types of5 jobs, you get the direct jobs, which is6 engineers, consultants, project managers,7 et cetera, that's doing the actual ESCO8 work itself. You've got subcontractors9 who are actually doing the installation10 works. You got the manufacturers of the11 equipment that's provided to actually12 implement the ECMs, and you've got --13 there's possibly some service companies14 associated with that as well. There's15 already incumbent contractors, for16 instance, from the City working in the17 controls part of the project.18 So there's basically direct and19 indirect. Does that explain --20
That's21 helpful. Let's dig down a little deeper.22 So you mentioned the professionals, the23 line of professional position24 opportunities. Speak to the type of25 67 11/29/11 - FINANCE - BILL 110733, ETC.1 position or jobs that do not require a2 college degree. You said installation.3
Okay. The energy4 conservation measures that's been5 proposed is a number different6 opportunities, such as maybe putting in a7 boiler plant, putting in filters.8 There's various things that can be done.9 There's subcontractors that's used to10 actually do those works, and each of11 these subcontractors, which are minority12 business companies predominantly, with13 the exception of controls, have different14 obviously grades of people involved in15 that type of work. So it's like any16 other subcontractor company, you will17 have the boss of the company down to18 apprentices joining that company.19
Okay.20 Tell us a little bit more about Noresco.21 Where are you from, how long have you22 been in business, where you have other23 relationships in other municipalities by24 way of background.25 68 11/29/11 - FINANCE - BILL 110733, ETC.1
Basically the6 company has been around, I think, since7 1984. We're actually Carrier Air8 Conditioning, which everybody is familiar9 with, the parent company, and UGC is the10 parent company of Carrier. So that's the11 family tree in terms of where we come12 from.13 There is a number of energy14 conservation -- rather, energy services15 contractors out there within the United16 States. There's probably five or six of17 the bigger companies. You probably heard18 of Honeywell, Johnson, et cetera.19
So there's like a22 pool of the bigger ESCOs out there, and23 Noresco is certainly one of those24 companies that's been around, as I said,25 69 11/29/11 - FINANCE - BILL 110733, ETC.1 since 1984. Most of our business is East2 Coast, but we also have a West Coast3 operation as well. We've worked for a4 number of different counties and states5 throughout the East Coast. A lot of it6 is actually in the mid-atlantic region,7 which is kind of from Boston down to8 Virginia.9
That's10 helpful. Please provide for us some11 background on Noresco's track record with12 regards to MBE, WBE, DBE participation,13 examples where Noresco has met goals in14 other municipalities.15
Can I give you an16 example of what we've done in this17 project?18
On this particular21 project, we recognize that the industry22 needs people who can learn, train in this23 type of profession. So we actually24 worked with Team Clean, who is a25 70 11/29/11 - FINANCE - BILL 110733, ETC.1 registered MBE company for the City, and2 we took on board a girl to help her3 understand how the audit side of the4 business was carried out. During the,5 what we called, Investment Grade Audit6 phase, we've got to go on site, look at7 the four buildings and take data that8 helps us do our calculations and work out9 the best energy conservation measures for10 the City. So this girl, Theresa is her11 name, we took her on board where we kind12 of mentored her in terms of how this work13 was done. She spent a lot of time with14 our site auditors. And we also paid for15 Theresa to go on courses like heating,16 weather stripping, boilers, different17 courses that she could learn this type of18 industry.19 So I think Team Clean would be20 the best person to give testimony. I21 think they've actually given some letters22 thanking us in what we've done for this23 girl. But she's a good example of24 someone who has had the opportunity to25 71 11/29/11 - FINANCE - BILL 110733, ETC.1 learn about this industry, and hopefully2 what we've taught her and what she's been3 educated on will still help her go4 farther forward in this industry.5
Why is the6 position, and I quote here, a temporary7 auditor assistant? And then further in8 the testimony, it states that there's a9 commitment for participation rate of 2210 on the project.11
They're really two12 different things. Theresa was helping13 with the audit phase of this Investment14 Grade Audit stage of the project, whereas15 the M/WB commitment is related to the16 subcontractor companies that will carry17 out the installation works. So they18 really are two different things.19
Okay. It20 states on the last page of the testimony21 that "provide reports to the City on an22 annual basis." Who at the City will23 receive the reports?24
I believe we've been25 72 11/29/11 - FINANCE - BILL 110733, ETC.1 working with Adam. This is in terms of2 the verification reports. We basically3 come normally every year and just check4 how the system is performing, how the5 function and sort of the guaranteed6 savings are met. So we're always looking7 out for the City and ourselves to make8 sure that we guarantee those savings.9 But for this project, we're actually10 doing it more frequently the first three11 years. So I believe the person that we12 probably worked with on that would be the13 project manager for the project.14 Would that be fair to say?15
Right. So we'll20 have an implementation team that will21 include representatives from our office,22 the Department of Public Property, who23 will be reviewing the performance of the24 project along the way, and Joe Palantino25 73 11/29/11 - FINANCE - BILL 110733, ETC.1 is here and can speak more about the2 implementation process if there are3 questions. But we'll convene very4 regularly, especially in the first couple5 of years, to make sure that that project6 is performing as guaranteed. So there7 will be a lot of interaction, a lot of8 project review, and that will certainly9 be information we could share out with10 Council.11
We would12 appreciate that, because, again, this is13 a first, correct?14
It's the first15 time we've implemented energy16 conservation measures following this17 process, yes.18
And so,19 therefore, if this is a first in the way20 you just described, then it's also a21 first where MBE, WBE, DBEs in the22 categories you're talking about, it would23 be a first for them as well; is that fair24 to say?25 74 11/29/11 - FINANCE - BILL 110733, ETC.1
So we will4 look forward to those reports. And for5 all contractors who end up doing business6 with the City, we've learned to never7 assume that department heads are being8 real clear with regards to our interest9 in making sure that those persons who get10 opportunity for work look like11 Philadelphia. So there's an expectation12 that citizens, consumers, voters in13 Philadelphia are, A, made aware of the14 opportunity and then, B, are given a fair15 shot to apply for those opportunities,16 with a look at making sure that the17 employment base looks like Philadelphia.18 Philadelphia is 82 percent female, black,19 brown and yellow. So we expect that the20 employment base will reflect that.21 Thank you very much.22 Thank you, Madam Chair.23
In looking24 at City Hall, have you thought about or25 75 11/29/11 - FINANCE - BILL 110733, ETC.1 looked at the lighting in terms of2 installing efficient lighting but that3 would be brighter? If you notice, the4 fourth floor is very bright, the fifth5 floor and other floors are very dark.6
I have noticed.7 We'll be doing lighting upgrades8 throughout City Hall. That's included as9 one of the measures.10
Thank you.11 The Chair recognizes Councilman12 Clarke.13
Thank you,14 Madam Chair.15 Good morning. A couple of16 quick questions. The Energy Authority,17 I'm assuming you all are familiar with18 such an entity. During the course of, I19 guess it was, last year, we were talking20 about creating an Energy Authority, and21 the thought was matters such as this and22 matters beyond this, that the Energy23 Authority would be the vehicle for which24 we did any long-term agreements or any25 76 11/29/11 - FINANCE - BILL 110733, ETC.1 bond deals relating to energy2 consumption. We actually did a book, a3 document that talked about some of the4 opportunities to save energy in the City5 of Philadelphia, and I always talk about6 this, putting this solar panel up on the7 roof of the MSB because of the long-term8 sun opportunities.9 Is there a particular reason10 why we didn't use the Energy Authority11 versus the Municipal Authority?12
Yeah, and Barry13 can come speak to this more. As this14 project was moving forward, I believe15 that the Energy Authority wasn't yet16 incorporated, and so for this particular17 project, they weren't up and running in18 time to start needing to make some of the19 decisions around the financing, but our20 intention would be if there were21 subsequent projects like this, that they22 would go through the Energy Authority.23
Barry,24 could you come up, please, and I hate to25 77 11/29/11 - FINANCE - BILL 110733, ETC.1 put you on the spot.2
You're5 going to get put on the spot.6 (Witness approached witness7 table.)8
Good morning. I'm9 Barry Davis. I'm with the Law10 Department.11
We moved a15 project a few months ago, energy related.16
I think you're17 talking about the Northeast Cogeneration18 Project, yes.19
And at the20 time, it was our understanding having21 this conversation about when we utilize22 the Energy Authority is that that23 particular project was time sensitive, so24 therefore we proceeded under traditional25 78 11/29/11 - FINANCE - BILL 110733, ETC.1 model and in subsequent projects, we2 would look at utilizing the Energy3 Authority. Maybe I was wrong, but4 thinking that this was probably going to5 be the first one out of the box.6
That's correct, and7 we've looked at providing for the8 assignment of that cogeneration -- biogas9 project, more properly, to the Energy10 Authority to provide it with the11 opportunity to have an administrative12 function and potentially a source of13 income for managing that project. In14 discussions with the members of the15 Energy Authority, which met for the first16 time in October, they did not appear to17 be ready to undertake a major project18 like this one in the sense of not having,19 I think, a good feel for all of the20 pieces of how a project like this would21 come together.22 Similarly, this project, in23 terms of the ongoing measurement and24 verification of the project, could be25 79 11/29/11 - FINANCE - BILL 110733, ETC.1 assigned to the Energy Authority, with2 the idea that going forward we would3 have -- all of the energy project4 portfolio would reside with the Municipal5 Energy Authority.6
The reason7 I bring that question up, because, one, I8 was very impressed with the individuals9 who are on the Energy Authority, as I'm10 sure you all are, people with the highest11 level of knowledge on this particular12 industry. Councilmen Kenney and Jones --13 I'm not sure if there was another14 Councilman -- and myself actually had a15 meeting with them earlier in the year to16 discuss them getting up and running, and17 I was a little concerned about the level18 of support that was provided to them. So19 I'm hearing now that whatever support20 that needs to happen as it relates to21 them getting up to the point where they22 can kind of take some ownership or some23 respect to some of this activity is24 moving ahead?25 80 11/29/11 - FINANCE - BILL 110733, ETC.1
I certainly think2 it is, and I would expect that maybe as3 early as the spring, we would see a4 project with the involvement of the5 Energy Authority. I know that they have6 discussed some work with the GPIC center7 down at the Navy Yard as a potential8 project, and I know that there's some9 other projects that are under10 consideration that might come to the11 Authority. Whether or not they would be12 in a stage of development by the spring,13 I wouldn't know.14
And just to add,15 we do intend -- we've told them that we'd16 like to do a briefing for them around17 this project so they're familiar and so18 they also understand the GESA project19 should there be subsequent projects in20 the future that would go through them.21
Before22 passage of the bill? I'm just a little23 concerned, to be honest with you, and I24 know we have to move on, we have a number25 81 11/29/11 - FINANCE - BILL 110733, ETC.1 of questions. The purpose of creating2 and getting the quality and caliber of3 people that we have on there was for4 this.5
I think it was6 just a matter of timing in terms of what7 the project schedule was for this8 particular project and where the Energy9 Authority was in coming together and10 being able to formalize and taking on11 these projects.12
All right.13 One last question on this. In terms of14 the project costs -- and actually I'm15 obviously all in agreement of everything16 you're trying to do here today, but the17 issue is -- reducing the energy costs18 obviously works, but the question is, can19 you do it without borrowing money20 essentially, by doing an asset sale and21 applying the proceeds from the asset sale22 into what we're talking about doing here23 today? That's more of a financing24 mechanism. Because I just thought that25 82 11/29/11 - FINANCE - BILL 110733, ETC.1 based on the document we prepared, it was2 a more prudent way. We have a number of3 proposed asset sales that can raise more4 than enough money to then retrofit these5 buildings so we won't basically borrow6 money to save money, which is7 traditionally not a good model as it8 relates to financing and economics. And9 I guess that's more not necessarily you.10 I'm asking for Nancy.11
Excuse me. I17 have not been asked to take a look at any18 asset sales. I gather others are within19 the Administration examining various20 asset sales. They have their own21 timeline and challenges associated with22 executing asset sales that typically take23 a long time and particularly if there are24 any assets to be sold which would have25 83 11/29/11 - FINANCE - BILL 110733, ETC.1 associated outstanding tax-exempt bonds,2 there would be a fairly complicated3 process that would need to be taken to4 just in general, I know this, to complete5 an application of the receipt of proceeds6 to pay off bonds.7 This project really is ready to8 proceed, and it also benefits, as I9 mentioned in my testimony, from the10 ability of about 50 percent of the11 project to be financed with the Qualified12 Energy Conservation Bonds. And we're13 estimating based on the current market14 that the Qualified Energy Conservation15 Bonds will be saving about over a hundred16 thousand dollars a year versus17 traditional tax-exempt bonds. I mean, I18 don't want to say it's free borrowing,19 but it's close to zero interest costs.20 So we have been trying to work21 with Katherine and her team to try to22 maximize the ability to apply this23 particular financing vehicle to this24 project because of the very high level of25 84 11/29/11 - FINANCE - BILL 110733, ETC.1 subsidy that the federal government is2 offering.3 So it would seem to me that if4 we were to choose assets to finance with5 the sale of assets, one might want to6 select assets which wouldn't necessarily7 benefit to the degree that we benefit8 here from this other federal program. So9 it would be my thought that perhaps there10 would be other projects which wouldn't11 have the benefit of the Qualified Energy12 Conservation Bonds that might be better13 candidates for the use of asset sales.14
I clearly15 understand we're a little too far along16 to reconsider the financing mechanism,17 unless we just wanted to, but I'm just18 throwing it out there, because just19 fundamentally from an economic20 perspective, I just don't think you21 borrow money to save money, because I22 think there's a better way of doing this.23
Councilman, I think24 one of the --25 85 11/29/11 - FINANCE - BILL 110733, ETC.1
This is not2 a significant project cost. I mean,3 significant in the overall scheme of4 things. I know we have a number of5 assets that we could move forward to pay6 for this particular project.7
I would tend to8 agree with that to the extent that you9 could designate the sale of the asset to10 a particular purpose, which is not within11 my expertise. But the great thing12 about -- the great aspect of this13 particular type of project, the14 guaranteed energy savings project, is15 that it's all geared around creating a16 positive cash flow, and so --17
I'm on18 board a million percent. Thank you.19 Thank you, Madam Chair.20