COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING BEFORE THE COUNCIL COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, May 12, 1998 1:30 p.m. - - - Bill No. 970586 - Amending Section 17-104 of The Philadelphia Code prerequisites to the execution of City contracts by adding a new subsection requiring that businesses contracting with or receiving financial assistance from the City or City-related's agencies pay their employees no 11 less than a living wage sufficient for a family of four to live at or above the poverty level; and provide such employees insurance with family health-care insurance benefits; and requiring that a specified portion of new employees hired to perform work on City or City-related contracts or projects for which financial assistance is granted be former welfare recipients or persons referred by union or neighborhood hiring halls; all under certain terms and conditions PRESENT: COUNCILMAN MICHAEL A. NUTTER, Chairman COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DAVID COHEN COUNCILWOMAN ANNA CIBOTTA VERNA COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN HAPPY FERNANDEZ COUNCILWOMAN MARIAN B. TASCO COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK DICICCO COUNCILMAN RICHARD T. MARIANO COUNCILMAN FRANK RIZZO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 I N D E X NYC Councilman Salvatore Albanese. . . . . . . 19 Joseph Rauscher, President, Phila. AFL-CIO . . 66 Art Dougherty, Pres.,, Phila. Postal Workers 66 Rita Rosella . . . . . . . . . . . . . . . . . 69 Hotel Employees/Restaurant Employees Union Kathy Black, Pres., Phila. Chapter, CLUE . . . 75 Joe Shields, SEIU. . . . . . . . . . . . . . . 81 Rosalind Spiegel, Jewish Labor Committee . . . 86 Thomas Cronin, District 47 Head. . . . . . . . 89 Wendell Young, AFL-CIO Vice President. . . . . 97 Charles Pizzi, Phila. Chamber of Commerce. . . 108 Joe Procacci, Procacci Brothers. . . . . . . . 115 Sidney Gable, Industrial Realtor . . . . . . . 140 Leo Goronski, Esq., Barthco International. . . 143 Stan Moat, Owner, Contour Packaging. . . . . . 146 Linda Jensen, Wallace Faberton Todd Designs 148 Lance Charon, President, DocuShred . . . . . . 155 Scott Simons, Founder, Laser Labs. . . . . . . 167 Al Taubenberger, President . . . . . . . . . . 172 Northeast Philadelphia Chamber of Commerce Nick Kromberger, Owner, Kromberger Company . . 176 Edward McBride, PECO County Affairs Manager. . 204 Mickey Rowley, Executive Director. . . . . . . 205 Philadelphia Hotel Association 3 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 (Index, cont'd.) Aqil Sabur, Executive Director . . . . . . . . 207 West Philadelphia Financial Services Institution Commissioner Louis Applebaum . . . . . . . . . 215 Procurement Department James Roundtree, Executive Director. . . . . . 218 Minority Enterprise Council, Stanley Shapiro, Chief . . . . . . . . . . . . 222 Philadelphia City Council Technical Services Unit Robert Brand, President. . . . . . . . . . . . 227 Solutions for Progress Donna L. Allie, President/CEO Team Clean . . . 253 Bob Struthers, SFS Correctional Group LTD. . . 258 Commissioner Joan Reeves . . . . . . . . . . . 262 Department of Human Services Carol Hemingway, ACORN . . . . . . . . . . . . 269 Cora Kenlaw, ACORN . . . . . . . . . . . . . . 281 Reverend Fitch, NAACP. . . . . . . . . . . . . 286 William Hankowsky. . . . . . . . . . . . . . . 294 Curtis Jones . . . . . . . . . . . . . . . . . 303 Dr. Howard Wial, Keystone Research . . . . . . 316 Andrew Buck, Temple Univ. Economics Professor 318 Barney Auer. . . . . . . . . . . . . . . . . . 321 Western Pennsylvania Living Wage Campaign 4 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 P R O C E E D I N G S
Good afternoon, ladies and gentlemen. Good afternoon, ladies and gentlemen. It's a pleasure to have all of you here this afternoon. This is a meeting of the Committee on Commerce and Economic Development. I am Councilman Michael Nutter, Chair of the committee. To my right is Councilwoman Fernandez, the Vice Chair. To her right is Councilwoman Donna Reed Miller, and to my left is Councilman DiCicco. Now having a quorum, the committee is in session. I'll read the title of the bill. There is a witness list. If you are concerned about your place on the list, I assume that the young lady to my left, Wanda, from Councilman Ortiz's office, you should get your name to her. Let me read the title to the bill. Bill No. 970586, amending Section 17-104 of The Philadelphia Code prerequisites to the execution of City contracts by adding a new subsection requiring that businesses contracting with or receiving financial assistance from the City or 5 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 City-related's agencies pay their employees no 3 less than a living wage sufficient for a family of four to live at or above the poverty level; and provide such employees insurance with family health-care insurance benefits; and requiring that a specified portion of new employees hired to perform work on City or City-related contracts or projects for which financial assistance is granted be former welfare recipients or persons referred by union or neighborhood hiring halls; all under certain terms and conditions. Let me say at the outset it is cheer that there is a great amount of enthusiasm and anticipation regarding this particular bill. (Applause.)
Having participated in a couple of those, and I think my colleagues will agree, we enjoy and applaud all of your enthusiasm, but we also have a very long witness list. We want everything, to the greatest extent possible, to be heard. And all I will ask primarily, as Chair of the committee and on behalf of my colleagues, that we are able to hear everyone and respect 6 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 everyone. You may or may not hear some things that you do or do not like but that is our committee process and that's the process that we'd like to conduct this afternoon. So to the extent that everyone can hear and listen and get information, we will ask, I'm sure, a lot of questions for a lot of different reasons. Again, some of those questions, you may like, some you may not like, but they are all in the interest and purpose of gathering information so that the Council can do its business. I have just received the newest witness list; it is actually still warm. So we will start with that list, but some of my colleagues on the committee may have statements they may wish to make.
Thank you, Mr. Chairman. Mr. Chairman, today we are here to begin a dialogue about Bill 970586 -- the bill 7 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. " This bill was introduced as another effort by this legislature to level the playing field in terms of wage equity. 15 an hour, a worker who's employed for 40 hours a week can earn $10,712 a year. Such is a salary places that worker below the federal poverty level. It is estimated that percent of 13 Philadelphia residents are living in poverty. 14 After the welfare-reform laws, there has been much 15 talk about back-to-work programs, job training, 16 and placement, and other initiatives in order to 17 accommodate those coming off of the welfare rolls 18 as well as the many thousands that are currently 19 unemployed. 20 These programs, no doubt, are 21 desperately needed. Job creation is fundamental 22 in a city that has been experiencing more job 23 loses than gains. Clearly, there is a need to 24 attract businesses and responsible employers to 25 the City. 8 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. " Philadelphia spends millions of taxpayers' dollars to lure businesses to the City. So Wal-Mart and Marriott have been built, and some limited manufacturing has come back into the federally subsidized Empowerment Zones. But too often, when these jobs are created, they tend to provide low wages and inadequate health benefits, particularly in the service industry. While local government has had limited influence in shaping the private sector, it has demonstrated that it can influence the corporate behavior of those entities that do direct business with the City. Minority business set aside ordinances where businesses are required to hire minority and women contractors. Or prevailing wage ordinances like we just approved the other day are very good examples of this. And by the way, there is very little difference between the prevailing wage that we approved the other day and what we're talking 9 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 about here today. The fight to enact laws which connect wage and benefit requirements to government assistance is becoming a viable alternative to State and local government officials who believe that federally-required minimum wage is inadequate as it only helps to promote poverty conditions. " Today we will explore living wage legislation which ties wages to City contracts. 90 an hour, plus health benefits. But this bill would go one step further. It would propose that 15 percent of new workers hired come from the welfare rolls, a key provision in response to the current dilemma we are facing, and placing former welfare recipients in decent jobs. Mr. Chairman, there will be those who come before this Council and attempt to use scare tactics by alleging that these bills will narrowly be an incentive for business to flee the City. 10 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Mr. Chairman, similar allegations were made against past minority set-aside requirements and prevailing wage legislation. To some detractors of this bill, it seems that it's all right for PIDC to use taxpayers' dollars to provide the private sector with $4 billion in development and financing but it's not all right to ask for a simple return on those dollars. Is it asking too much for companies that benefit from government business to provide way wages benefits which do not perpetuate poverty? Are we saying that, in this day and age, with 34,000 people coming off the welfare rolls, we should not ask for basic concessions which could prevent workers from becoming homeless? I admit, Mr. Chairman, that the establishment of a living wage is no panacea. 90 an hour for a 40-hour week generates an income of barely $16,000 dollars a year; but at least it represents a 48 percent increase over the minimum wage poverty wage. Mr. Chairman, this is an opportunity to establish a positive precedent in the same way 11 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO.
970586 that other cities have. 70 hour by this year there. Milwaukee, New York City, Portland, Jersey City, Des Moines, San Jose, and Los Angeles all have adopted varying versions of living-wage laws. They all have recognized the need to level the playing field when it comes to wage equity. Mr. Chairman, we in Philadelphia should do no less. Thank you very much. )
Thank you Councilman Ortiz. The Chair recognizes Councilman Mariano.
Mr. Chairman, we just heard Councilman Ortiz give the educated Columbia Law School opinion of this bill. Well, I'll give you the blue-collar Juniata Park opinion 12 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 of this bill, okay? Every year, thousands of bills come in front of you and I and the rest of the members of this Council. And a lot of them, frankly, don't mean diddly-squat to my constituents and your constituents and everyone at that table's and everyone that sits in this room's constituents. This is a bill that is very simple. Every year, Philadelphia gives millions of dollars in assistance to companies in a form that ranges from City contracts, from services to tax abatements to loan guarantees. The City is giving these companies a chance to survive and grow. This legislation would do the same for individuals that they are hiring, providing these companies give the minimum wage of 7.90 an hour, plus health benefits. The wage of 7.90 an hour was determined by calculating what a family of four -- a family of four -- needs to stay 100 percent above the poverty line. I view this as a social contract between the companies we help -- and we want to help them, Mr. Chairman, we want to bring them here, we want businesses to come here. 13 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Now, as the Administration brings in Mr. Applebaum and the Steve Mullins of the world -- maybe we'll even get David L. Cohen in here -- and they're going to tell us everything is wrong. It's going to remind you of the Lost in Space robot -- danger, danger, danger, the sky is falling. That does not compute. (Applause.)
Well, that's not what's going to happen here today because I have faith in my fellow Councilpeople. And if there's one bill -- we went and talked about a bill last week till our heads were exploding, and it may have affected 100 people, 100 people. Now, I'm not telling you that bill was bad or that bill was good, but this bill will affect thousands and thousands of people, people that truly need it. (Applause.)
By the way, people that will vote or not vote for all of us next year. So I implore everyone that sits on this committee, Councilwoman, Councilwoman, Councilman 14 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 DiCicco, my good-looking twin -- Frank, pay attention -- Michael, pay attention -- everybody pay attention, because this is going to be important today. Okay, this is going to be real important. What we do here today, and if we don't let the Administration back us off -- I got calls I didn't Charlie Pizzi. I didn't think Charlie Pizzi knew what my name was. Frankly, I thought he thought I was Frank DiCicco. I said we have your attention now Mr. Pizzi. And ya know what? My wife owns a business in Philadelphia, okay? So I'm not trying to chase businesses out of Philadelphia. And Councilman Ortiz. That's not what we're trying to do. So before Mr. Applebaum -- Lou, I know you're in here, one of my constituents. Lou, if I lose your vote on this one, I'm sorry, but this is one that really, really means something. So fairly, sit here fairly and listen. Maybe if we get lucky, the Mayor will come in and tell us what's wrong with it. They told me yesterday that it hasn't worked in Boston. I 15 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 found out today from Steve from ACORN that it hasn't started in Boston till July 1st, the fiscal year. So, obviously, somebody's not telling the truth here. So before we get in these long hearings, think, think what's important to the people that truly sent us here. Thank you, Mr. Chairman. (Applause.)
Thank you, Councilman Mariano. What we'd like to do is to start the testimony. The first witness is the Honorable Sal Albanese, of the city of New York. He is a councilman in the city of New York. While he is coming to the table, Council Ortiz, I understand that you have some amendments which, by agreement, we are not at the moment going to read the amendments in the record, but you will point out where they are and what they are. They may address some issues that could be relevant to some of the testimony or issues that have been raised previously about this bill; is that correct? 16 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Why don't you proceed, and then we'll have testimony from the Honorable Sal Albanese.
Thank you, Mr. Chairman. This is some amendments that go to some of the problems that we had with the bill. They addressed mostly grammatical and some clarifying changes.
Are these amendments in a packet that was circulated, Councilman?
They're part of a packet that was circulated to all members of the committee and all Members of Council.
(Reading.) It says, number one, limited exception for nonprofits. And nonprofits who's highest paid full-time employees earn less than six times the wages of the lowest paid employee are exempt, exempt, because they had been worried that these organizations were going to be put into this package. 17 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 And this should exempt all but the largest charitable religious and community organizations. Number two, modification of the living wage amount. The base living wage minimum would be increased from 7.60 to 7.90 an hour. Low to begin with for a true living wage, the wage level should clearly be raised given the effects of inflation nearly a year since the introduction of the legislation. Number three, revised formulation for provision of health benefits. We had been advised that due to the possibility of ERISA preemption, the bill's direct mandate to provide health-care benefits is problematic. The amendment would offer employees the alternative of paying an additional 1.50 per hour wages in the event that health-care benefits are not provided. Following the structure of the recently enacted Los Angeles ordinance, health-care benefits would be defined as the payment of at least $1.50 per hour for health-care benefits. More inclusive definitions of employers -- number four -- of employers and employees. 18 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Employees getting the protection of the bill would specifically include those classified as full-time, part-time, temporary, and permanent. The definition of employers required to pay the living wage would be clarified to include subcontractors, lessees and sublessees as long as their work is funded by a City contract or City assistance. Number five, only contracts for services -- not those for goods -- would be covered. It is recognized that application of the bill's provisions to contracts for the provision of goods would be impractical at this time. Thus, contract coverage would be narrowed to those dealing with services. Number six, Council would get information annually from City agencies implementing the legislation and holding public hearings thereafter. To ensure the legislation works as intended, Council would get detailed reports from all City agencies with covered contracts for grant programs. And the Commerce Committee -- this committee that is hearing this legislation -- would hold public hearings at least 19 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 once every year on the success of the program. We believe that these amendments provide improved tools and a clearer focus for the basic concept of this bill, all of which are fully preserved. If you have any questions or comments, we'll be available, and the technical staff will be around. Thank you.
Thank you. (Applause.) (Councilman Sal Albanese, New York City, comes forward.)
Councilman Albanese, welcome to Philadelphia City Council. Please identify yourself for the record and begin your testimony.
Sal Albanese, from New York City. First of all, Mr. Chairman, thank you for allowing me to testify, and I want to commend you and members of the committee for entertaining this legislation. Let me begin by commending 20 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Councilmember Ortiz and the other sponsors for having the courage to sponsor a living-wage bill. (Applause.)
Hopefully, Philadelphia will join New York City and other 7 municipalities in adopting living-wage 8 legislation. 9 When I introduced my bill in February 10 of 1995, I was only able to muster 3 cosponsors 11 out of 51 Councilmembers. The Mayor of my city 12 called it too frivolous to comment on, and some of 13 my colleagues thought we wouldn't even get a 14 hearing on the issue. 15 On July 11, 1996, the legislation 16 passed by a vote of 41 to 7. The Mayor vetoed the bill, and we easily overrode his veto. New York City struck a blow for working people, placing our town on the cutting edge of a national effort to provide a living wage for the men and women who are working harder than ever and falling further and further behind. I believe that our victory in New York and the publicity that it generated nationally played a strong role in inspiring other municipalities to adopt similar ordinances. 21 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 I'm hoping that my appearance today contributes to passage of the law in this City. (Applause.)
Now, this is a spirited crowd. Just like at New York, I feel right at home, Mr. Chairman.
Living-wage legislation plays a strong symbolic role in shifting a city a low-wage economy to a living-wage economy. It not only allows workers who are contractors who do business with the City to live with dignity, but it benefits all workers. Additionally, in New York City, it marked the beginning in the battle to reverse the slide toward a city of the very wealthy and a majority of poor working people having a harder time than ever trying to uplift themselves into the middle class and into the working class. This phenomenon is reflected nationally. Despite the fact that the new economy has created many jobs, the prime issue for most Americans -- and I'm sure that it's true in Philadelphia as well -- is not how many jobs there 22 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 are, but what kinds of jobs, what kinds of lives they let people enjoy, and what kind of future is ahead for their children. Passage of the bill in New York City would not have been possible without a strong coalition across racial, ethnic, and religious lines. Besides our Mayor's vehement opposition, all the daily newspapers in New York editorialized against my bill, and many in the business community spoke out against it. However, with a strong push by community-based organizes, organized labor, and some visionaries from the business community, it sailed through the City Council. One of the strongest arguments for passage was made by a business group representing the General Contractors Association. They pointed out that a living wage not only increases a worker's dignity, but also their productivity. In other words, if you pay workers a fair wage for an honest day's work, they tend to perform better. The arguments against the bill were predictable and easily rebutted. They included hypocritical critics that claimed government has 23 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 no right to tinker with the marketplace. However, many of these laissez-faire proponents did not have a problem with the hundreds of millions of dollars in corporate welfare that our city was doling out. The argument that the living wage will increase costs to the city is a faulty one as well. In New York City and Baltimore, the pioneers in this area, the costs have been negligible. Furthermore, what is never calculated is the increase in disposable income the workers who recycle additional dollars to the city's company enhancing the tax base. Additionally, workers who earn living wage are less dependent on public subsidies. Some of the bill's critics claim this legislation will stifle privatization. But if privatization, as its advocates claim, is really about creating competition to deliver quality services, they should welcome this bill with open arms. By establishing a living wage for private-sector contract employees, true competition is created between the private and public sector. And the focus will be on 24 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 efficiency and productivity rather than driving down wages and benefits. The minimum wage has eroded over the past decade. You can help reverse this trend by passing this bill. More importantly, a message will be sent out that no one who works full-time should be mired in poverty. (Applause.)
This is the essence of living-wage legislation. Passage is the morally-correct thing to do, it is the fiscally-right thing to do. It's fiscally prudent to pass living-wage legislation, as I pointed out. I urge this Council to swiftly adopt this legislation and strike a blow for economic and social adjustments. Thank you, Mr. Chairman.
Councilman Albanese, just one quick question. From reading some of the materials, was it your bill that was passed in September 1996 in New York?
It was passed in 25 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 July of 1996.
July of 1996. And is it my understanding that the bill -- that your bill covers employers of city contractors for security services, temporary, cleaning, and food services, that they be paid in applicable, I guess, living wage --
-- for the industry to be determined by the city comptroller in New York, is that correct?
That is correct. And it includes security as well. It's four areas.
Right. Security temporary, cleaning, and food service.
It's four areas, which basically are the areas where there's the most abuse in the city of New York, where people COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 are being paid minimum wage with no health benefits by contractors.
Okay. How are the other city contractors for what I assume is a wide variety of services that people provide businesses provide to the city of New York? Are they covered by the bill?
In the construction trades, we have a prevailing wage law which covers all construction workers throughout the state of New York.
The other contract employees are not covered but there's pending legislation to expand to those other workers. My bill impacts about 16,000 workers in the city of New York, and those are the areas where the most abuse was taking place. But there is a bill right now pending for the City Council to expand it to day-care workers in the city and nurses' aids as well.
Okay. (Applause.) 27 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
All right. So lastly, and I mean obviously, we weren't in New York when you were crafting the legislation. You chose to go after a number of particular industries or sectors of the larger employment picture in New York, either based on egregious activity or where you thought this kind of legislation might have the most benefit? I mean, was that the --
That was the objective. Obviously, as you know, the original bill was much broader in scope.
And, as you know, with all legislation, my bill covered all city contracts.
But, as you know, in the give and take of the legislative process, we basically compromised to hone on those areas 28 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 where the most abuses were taking place and hope to expand into the other areas into the future.
That was some of the questions I had. What were some major differences between the bill as we see it today with the amendments, if you had a chance to look at it, versus the bill that actually passed in New York?
Well, as I heard Councilman Ortiz's amendments, they're basically -- most of what passed in New York really included those amendments. The only thing, as the Councilmember pointed -- out as the Chair pointed out, we did not include all contracts because there was opposition, stiff opposition by some quarters, particularly in the nonprofit sector, which, I think, Councilman Ortiz just referred to. So we pulled away from that, and we're going to expand that into the future. So that basically the differences are the same. Our bill -- my bill was providing for a 29 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 higher living wage of $12.10 an hour because, obviously, New York City is a much more expensive place than Philadelphia, so our bill was higher in scope. And indeed some of the workers, particularly in the temporary area, office temps, are earning about $12 an hour, up from $5 an hour, as a result of our legislation. So one of the differences would be that with our bill in New York, the contract employees will be getting paid more than they would be paid under this legislation.
So would you name the four areas again? Security --
Security, all temporary workers. The city contractors out a lot of office temps. They hire many contractors to provide clerical help. Janitorial and cleaning services, and food processors. Those are the four areas.
And what about areas of your community development block grant? Did that fall into it?
They were not 30 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 included.
Because most of the entities are nonprofits that are involved with that. And I happen to think nonprofits should have been included, but we'll fight another day on that one.
And then other kinds of contracts under what we might call broadly "economic development," you know, any projects -- if I'm reading the bill before us here in Council, it could be any contractor who in any way gets public dollars.
Let's say, for a housing development, for a development of an industrial park, where there's any public dollars involved.
Any tax -- any tax abatement -- I see what you're saying. No, we did not include it. That was in the original bill; we did not include that in the final version. But, once again, there is legislation 31 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 pending to address that. My personal opinion is that it should include any grant money that a contractor receives. Any largesse from the city should include a living-wage component. That is my personal view. (Applause.)
What I'm trying to get at is if we wanted to figure out what kind of effect your bill that passed had on New York City.
It was much narrower that than this current bill?
It's limited to services we call -- that have been privatized or directly contracted out, many of which used to be city functions but now were privatized or contracted out.
Right. 32 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
That's correct. As a matter of fact, the city, under Mayor Giuliani, privatized services like custodial, like clerical help. We used to hire more civil servants in the city of New York since the Mayor came into office. Some of those services were privatized, particularly in those areas -- security. And these contractors, by and large, were not paying the workers a living wage. And those -- that's why we targeted those four areas. It includes a lot of workers 15 to 16,000 workers. And it's in those areas where those services were privatized that we saw the largest abuse by contractors.
Okay. And security people. Those -- here we have -- I mean, did -- are these like private security guards.
Right. 33 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
For example, homeless shelters in the city, they have to hire security officers at those homeless shelters. Prior -- a few years ago, maybe ten years ago, the Human Resources Administration provided those employees. They were civil servants. As of late, they were privatized. So those security officers were being paid $5 an hour, whatever the minimum wage was. As a result of our bill, it increased. But there are a number of areas where security officers are used -- in welfare centers, in hospitals. The city does a lot of contracting out because security is an important service. And that is an area that we focussed in on.
And has your office or the city or the Mayor's office in New York made any analysis of the effect -- of the economic effect of the bill?
That's interesting. 34 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
It's been in effect two years now. And it's interesting because one of the primary arguments against this bill is that it will cost the city an awful a lot of money -- $16 million, which is a drop in the bucket, in a $34 billion budget was laid aside to deal with this alleged increase to the city of New York. I can tell you that the increase was negligible. I don't think we even came close to spending more than 10 million. And the other interesting aspect of this is that the administration who opposed this bill won't even release the numbers. But we do have numbers from Baltimore. It's been in effect there since 1994, and there's been virtually no increase to the city's expenditures as a result of this legislation. And we maintained early on that many of the contractors could absorb the increase -- slight increase in wages. And, as you know, they can choose not to bid for these jobs, but there's been no 35 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 shortage of these people bidding for these jobs, which means the profit is there, and it's handsome. No one has said, since this bill has been passed, "We don't want to bid on this work anymore." The bidding continues and it continues extensively. So what we said originally, the proponents of the bill, was accurate; it had no 10 economic impact at all. There's been no move to reverse the legislation. The only move is to expand it to other areas. (Applause.)
So are you saying that the city of New York, the government of the city of New York, has or has not done any significant analysis of the effects?
The controller's office has done a preliminary analysis which shows very little impact, almost no impact at all, but we're still collecting data as we go along.
Is that a 36 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 public document?
So it's the controller's office in New York. CO0UNCILMAN ALBANESE: Right. Allen Hennessey (ph.) is the controller. His office was charged with doing the analysis. You can certainly solicit it from him.
Councilman, one last quick question, at least for myself. What's the total workforce for the city of New York?
The civil service workforce? It's 190,000. These are civil servants, municipal workforce, 190.
Yes. It's more people than live in my district. Okay.. 37 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Are you asking about the contracting-out workforce, is that what you're asking about?
Well, yeah, because you mentioned, I think, the figure of 16,000.
And I just kind of want to do complete the rest of that equation.
We do not -- one of the problems that we have in New York City, which we're trying to address, is the contracting-out budget of the city is a huge budget, $8 billion.
And there's very little information of how many employees are, what they're paying these employees. We will know now, in these four sectors, how many employees there 38 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 are and what they're paying these employees. As far as the rest of --
-- for private contractors, people who are not members of the municipal workforce --
That's right. Now, I happen to believe, and some others, that there's of fraud and there's plenty of collusion involved in the whole contracting-out budget. And it's almost like a dark hole. No one can really find out how many employees there are, what the contractors are paying people. And there's a lot of work that has to be done in that area. So I can't -- I cannot give you any numbers as far as how many are working for 39 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 contractors, but we do know -- we do know that in those four areas, we'll have accurate information. And one of the objectives of this bill 5 was to help the taxpayers as well because the taxpayers have a right to know how many people work for contractors and what they're paying these contractors.
It was almost like a Sunshine Law kind of effort. Not only was it to help the workers but also to help the taxpayers discover what is going on.
Are there any abuses going on, we need data, we need information. And that information is still not available, with the exception of these four areas.
Okay. The Chair recognizes Councilwoman Tasco and then Councilman Cohen.
I'm not clear on 40 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 the four areas that your legislation covers in New York.
Food processors, people who process food and serve food in the city, who work for contractors. For example, there's a company called Marymount (ph.) that makes meals, prepares meals for homeless people in homeless shelters in the city. They're food processors. They work -- there's a company --
Who subcontract with the city. 41 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
In other words, the city of New York has an agency, Human Resources Administration. They're responsible for general welfare for the welfare program in the city of New York. They contract out with contractors to prepare food, and I'm just giving you the example of one company 'cause that was -- there was a scandal involved called Marymount. The other area are janitors, custodial workers who take care of buildings for the city of New York. And a lot of those services have been contracted out. Security guards that are hired by contractors who are in contract with the city. And office temps. There's a huge army of temporary workers the city's hiring. We had a witness who testified he was being paid $5 an hour by a contractor. The contractor was being pay by the City $16 an hour to provide the service -- the worker got $5, the contractor got $11. So that under our bill, he will be earning $12 an hour, or $10 an hour in that particular area. 42 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 So that's what we're talking about. Those are the four areas. Is that clear or --
Sure, that's clear. Now, you said you might want to go to day care.
You run day-care programs, the city runs day-care programs?
For day-care services. There are many contractors who provide those services. Those workers are not covered by this legislation. There's pending legislation to help those workers. Home health aids, for example, that take care of senior citizens are not covered by 43 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 this legislation. There are thousands of those workers that are being paid $5 an hour, or whatever the minimum wage is now, 5.25 an hour, and we want to see their wages elevated as well.
But these are home health aids workers who would have employed by the city but you contract those out?
So all of the work that your legislation covers has to do with --
-- with contracts with the City of Philadelphia (sic).
Tell me about the nonprofits. We have community development block grant providers with the City of Philadelphia. Are they covered in New York? People who have community development block grant money run programs funded by the city, are they covered?
No nonprofits are covered by this legislation in New York. I think they should be covered, but they're not covered. 44 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Okay, let me see Wait a second here. . . Now, who monitors the program in New York? The reports are filed with what department?
The New York City controller. We have a controller who's been charged with the auditing of city services and certifying the budget. He's elected by all of the people in the city, and he's charged with reporting mechanisms for making sure that the information is accurate. And we have some stiff penalties in there for contractors trying to get around the law, stiff fines. And, also, if you're a repeat offender, you could be jailed. So it's a pretty hard and fast effort to make sure that they comply with the law. But he's in charge of that audit.
This question may have been asked earlier, I thought it was. My hearing is not too good, I'm getting old ears. Did you say that there was no 25 significant increase of the cost of him to do 45 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 this?
That's correct. And the city of Baltimore, which has had this bill 9 in effect since 1994, has even better data which shows very little increase to the city, if any at all.
When a company is bidding on a city contract, do they submit to you a budget for what they plan, how they plan to spend the money? Do they have to submit that? They just bid on the contract?
They bid. They're supposed to -- they bid on the contact. It's the lowest responsible bidder, that's the standard that's used in the city of New York. If an agency puts out a contract, they bid on it, they have to provide some schematic of how they will accomplish their objective. There's a time frame that they have to buy into. But the contract in our process in the 46 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 city could really use some shoring up in New York. I don't know how it is Philadelphia, but the information is of a general nature with a price, and the contractors then are chosen by that standard, the lowest most responsible bid.
Well, wouldn't you be able to get a feel for how they plan or what they plan to pay if, in the bidding process, they outline what they plan to spend on wages? I mean, we need to know how they determine -- how they get to the bottom line of the lowest of the bids?.
There is no -- there is no mandate in the contracting process for demonstrate -- for pointing out what you're going pay today workers. That's not in the document when you apply for a contract for the city of New York. Under our bill, under the living-wage bill that we passed in those four areas, the contractors now have to submit certified payrolls with how many employees they have on staff and what they're paying those employees to make sure that they comply with the living-wage law. 47 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 But, as I pointed out before, the contracted-out budget of the city is huge budget, $8 billion. And a lot of what goes on there, in my opinion, is done in a very -- almost secretive fashion. I mean, it's not clandestine, but there's a lot of -- (Interruption by unidentified person shouting from audience.)
Excuse me, excuse me, excuse me. (Continuing interruption by same unidentified person in audience.)
Ma'am, I said earlier, we are trying to conduct a dignified public hearing. If you have something that you'd like to say, please put your name on the witness list, we'll be pleased to hear you at the table. The Councilwoman's asking a question, the gentleman's trying to respond. These kinds of outbursts are not helpful. Thank you.
If. . . Oh, is all of your subcontracting done through your procurement department, or can individual 48 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 departments contract out?
The general contractor hires the subcontractors, and they're covered under our legislation. In other words, there's a general contractor; he or she can hire subcontractors.
And that's what I wanted. The question is: The contractors that do business with the city, are they -- do they all bid through your procurement department, or can they bid through individual city agencies?
They bid through individual city agencies, but there's a policy procurement board that oversees the whole process. They bid through individual agencies. The bid goes through those agencies. And then they're also under an umbrella of the policy procurement board, which checks to make sure that the contract is of a reasonable price. But, as I said before, the oversight is really skimpy at best, but it's through the direct agencies.
What was the average wage that was being paid during the course 49 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 of your hearings? Did you discover the average costs being paid to the average worker?
We had many witnesses that came forward during this period of testimony. And in the office temp area, it was $5 an hour at that time 'cause the minimum wage was 4.25 an hour. While in the private sector, in the non-contractor sector, office temps were being paid $12 an hour. In the area of security guards, it was $5 an hour. In the areas of janitorial services, it was the minimum wage.
So you were paying minimum wage, but they were paying more than that in the private sector.
A quick question from Councilwoman Fernandez, which, I think, was a follow-up to Councilwoman Tasco, and then Councilman Cohen. 50 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Okay. Councilman, in your bill that passed in New York, how do you -- what formula do you use to continually adjust the amount of what's considered a living wage? Do you gear it to the consumer price index or poverty level? Or what id you use?
We used the federal poverty guidelines for a family of four. In New York City, it was about $24,000 a year. Under the bill that passed, what the controller does is, he does a survey of the prevailing wage in the private sector in those four areas to also weave that into the equation, into the formula for adjusting wages in those areas.
Councilman DiCicco. 51 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
You may have said this earlier, but I may have missed it also. I, too, like Councilwoman Tasco, am getting a little bit older, and my hearing's starting to fail. What was the living wage in New York now as a result of your bill?
It varies based on what they're paying in the non-contract private sector. In the area of office temps, it's between 10 and $12 an hour. In the area of security, it's about $8 an hour. So it varies based on the controller's analysis and audits.
Do you have any idea as to what the cost of living in New York versus the cost of living in Philadelphia? And do you know how that would relate to the number that you reached to determine what the living wage should be for a particular job?
Well, my original 52 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 bill called for wages of $12 an hour for contract employees with the city of New York based on the federal poverty guidelines. I think Councilmember Ortiz's bill is doing is calibrating that to the cost of living in Philadelphia, which is about $7.90 an hour, which would bring a family of four over the federal poverty guidelines.
That's right. And it's much more expensive, as you know, in New York City. The rents are through the roof and --
Would you happen to know if there was any increase to the city's budget that was realized as a result of the implementation of the living-wage bill?
I can tell you 53 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 there were $16 million that were laid aside that were budgeted for the living-wage bill. And I don't think it went over million. As a matter 5 of fact, I'm trying to get the information now. I 6 believe it might be even less than 5 million. 7 The costs have been negligible because 8 -- the Administration, who vetoed this bill, 9 would have used that information by now and would 10 have said, Look, we told you so. This is going to cost an astronomical sum of money. It certainly hasn't gone over what we budgeted. Now, in New York City we have a $34 billion budget. And we give away literally hundreds of millions of dollars in tax breaks to corporations and real estate developers in the city. I mean, even if it cost $16 million, I mean, look at the inequity here. When it comes to workers who live in the city of New York, who have to survive in the city of New York, they're going to make a big issue of $16 million? And some have. Well, we're giving away the store to big business in the city. They should be balanced. But my point is that it's negligible in 54 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 terms of cost because the contractors usually eat the increase, which is the way it's been working in other cities.