What I'd like to have is Mr. Applebaum, Mr. Roundtree Mr. Feder and Mr. Brand is already there. Mr. Shapiro, and I don't know the other individuals up at the table. At this point, I'd like to talk about some of the particulars of the bill and its potential impact on various City agencies who either have to implement it or maybe are effected by it. Can we have the Sergeant-at-Arms receive the document from Mr. Brand. Good afternoon, gentlemen. Please identify yourself for the record. If you have a brief state that you'd like to make, we'd like to get into question and answers. 215 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 COMMISSIONER APPLEBAUM: Good afternoon, Councilman. I am Commissioner Louis Applebaum, Commissioner of the Procurement Department. I have prepared my testimony prior to this morning, when many changes to the bill were made. I understand we've excluded goods, which is a major impact.
That's my understanding, yes. COMMISSIONER APPLEBAUM: So the items that I had originally reported are somewhat changed. But the impact of this legislation incalculable. Because it would be physically impossible now for all service vendors now to comply with this requirement, they could just cease building with the City of Philadelphia. Lack of competition would drive up costs, and the City could be faced with many no-bidder situations. Vendors, such as Team Clean, and I have a representative that's here today, would be in default of their contract. They are minority subcontractors for work at the Municipal Services 216 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Building, One Parkway, and Vets Stadium. Donna Allie, the President of that organization is here, and she can comment on that. Aramark Struthers Food Joint venture, and Mr. Struthers, who is also here today will comment on his contracts, which would be in violation. They have contracts with the City for prison food services. They also operate the Baines Restaurant at the airport, that also would be a contract that would be in violation based on this new ordinance. The contract requirement burden that this ordinance will attach to our many vendors will be an enormous cost to be absorbed by the vendors who, in accordance with the bill, must submit with the Procurement Department a workforce profile -- and this was mentioned earlier, but I'll repeat it -- containing all job descriptions, number of employees, hourly wages of current employees, non-wage employee benefits, and residency of employees by zip codes. These reports must be filed by the vendors with the Procurement Department every six months. Many of our smaller vendors, many of 217 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 the minority vendors do not have the people or computer equipment to prepare these type of reports. I must also note that this payroll information is confidential, and many companies will resist releasing it. As you know, bidding with the City of Philadelphia is a difficult and onerous task, and we heard that earlier from some of the companies that we talked to. This ordinance will just add another level of complications for bidders and would require more bureaucratic City of Philadelphia costs to monitor. And in the end, it will most likely reduce our pool of competitive bidders that we are trying very, very hard to increase. This would have a definite reverse effect on our goal of increasing bidders, increasing competition. Elaine Reardon, an economist with the Milligan (ph.) Institute, expressed serious concern over the possibility that the higher wages might lure a different workforce, and I'm quoting her: I don't think the policy will have the impact they expect because as you increase the 218 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 wage, you'll attract higher-quality workers. So you might get college kids who are now willing to do these kinds of jobs, and the people you'll hurt are exactly the less-skilled welfare-ish population. So that's the end of quote. This concludes my testimony, but I will be glad to answer your questions, and I would like to introduce, after these speakers, some of the vendors who are here today.
Good evening, Mr. Chairman, I'm James Roundtree, and I'm one of the Deputy Finance Directors and the Executive Director of the Minority Enterprise Council, which is charged with the task of administering the City of Philadelphia's anti-discrimination and affirmative action purchasing procedures under Executive Orders 193 and formerly 17-500 of the City Code. As the Director, I have reviewed this bill, this living-wage bill very carefully and (unintelligible) complications, both real and perceived. I respectfully submit to Council that 219 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 this bill is not in the best interests of the disadvantaged business community. The program which I administer create to overcome the barriers that these businesses are facing trying to achieve fair and open competition in City contractings. By enacting this legislation such as this, it would impose Council in creating a barrier for participation for disadvantaged businesses in a way that puts a undue financial hardship. As proposed, a standard minimum wage and health benefits for employees working in the City or on City-funded or approved and related contracts will require these businesses to pass the costs onto the City and others in order to control its overhead. By passing these costs on, businesses which are already perceived as being less competitive cost-wise become even less attractive. Further, in those instances where businesses have contracts both with public and private, it will become necessary to standardize the minimum wage and extend benefits to all employees to provide the same or similar services 220 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 within the company in order to keep harmony among its employees. This living wage bill does not encourage or promote equal access to opportunities for disadvantaged businesses; instead, it creates an additional burden for those businesses struggling to compete in a closed environment. Thank you for allowing me to share my opinions on this bill. I'm available for any questions.
Thank you. Let's enter into the questioning. Mr. Applebaum, you said you've had a chance to review the bill. COMMISSIONER APPLEBAUM: Yes, I did.
Okay. On , under the definitions, it talks about a business entity -- (.1) and (.2) is the City, (.3) is a City agency, and (.4) is a City-related agency. Based on your reading and understanding of the bill, what is City entities are covered? For instance, does this cover the Redevelopment Authority, the Philadelphia Housing Authority, PIDC, the Philadelphia Parking Authority, PAID, 221 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 and the School District? COMMISSIONER APPLEBAUM: If you're asking me who is covered, I respectfully request that I don't really know who's covered. I think the folks who drafted the bill 7 would be better prepared to answer questions about the bill than I am. I had difficulty in understanding it myself.
Okay. I appreciate that. The reason I asked you is because, later on in the definition, the department is defined as the Procurement Department -- COMMISSIONER APPLEBAUM: That I saw, yes.
And you would have responsibility for implementation. So I guess I just wondered whether you knew what you might be implementing. COMMISSIONER APPLEBAUM: Well, I understand that there are many, many departments that we would have the responsibility to review, many, many more than we have responsibility today. So we would be crossing over other boundaries that I am not real familiar with. 222 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Okay. Is there a person who was involved in the drafting or proposing of the bill that might be able to answer that question? COMMISSIONER APPLEBAUM: My friend, Mr. Mariano, I would imagine.
I don't really care who answers the question. I'd just like to get an answer.
I'm Stanley Shapiro. I'm Chief of the Technical Services Unit of the Technical Staff of City Council. At the request of Councilman Ortiz and Mariano, I drafted this bill. And it was drafted in this initial draft to be very broad and apply to all Philadelphia government agencies which receive funding from the City of Philadelphia or have contractual relations with the City of Philadelphia. 223 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 So it would include the School District if it has a contract with the City, the Philadelphia Gas Works, the Housing Authority if it has contracts. I mean -- and these things would be determined based on the facts of each circumstance. And I did not make a specific review of all the relationships that the City has so I can't tell you on a factual basis, but the intention basically is that if the City has either a funding relationship with an agency or a contractual relationship with that agency, and it is governmental in nature, then that entity would be covered.
Mr. Shapiro, can you explain the language again on , under (.4), City-related agencies, double small i, have entered into continuing contractual or cooperative relationships with the City. What is a cooperative relationship?
This, by the way, is language which I believe applies -- is the language in the prevailing wage ordinance that the City now has. 224 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 And basically, again, as I interpret it, this would be a relationship where the City has services that it receives in exchange for some level of funding. And I think that that would include the School District, I think that it would include the Housing Authority, I think that it would include the Philadelphia Industrial Development Corporation. It's not a defined term. And if it's not a defined term it carries the meaning, the ordinary meaning that the dictionary gives to it. So that if the agencies cooperate through some sort of contractual relationship, then that agency would be covered.
Okay. There was discussion of -- although the actual amendment was not put forward, but for point number 5 on , the definition of a covered employee seems to have expanded from either full-time or part-time to both of those terms, plus on either a permanent or a temporary basis. And then later on --
Now, are you looking at the original or the amended definition?
I'm looking at the 225 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 amended definition.
The amendment is either on a permanent or a temporary basis, correct?
All right. And then later on in the same definition, which, I believe has not been touched, it says: A covered employee does not include any person employed in construction or any person 13 years of age or younger employed during the summer 14 months in the City-funded program to create summer 15 jobs for students and teenagers. 16 Can you just explain for the record the 17 exclusion on persons employed in construction? 18 Why is that? 19
Because they are covered by a prevailing wage legislation. UNIDENTIFIED SPEAKER: They're covered elsewhere.
All right, no 226 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 problem. And in the financial assistance section, point 7, again, just so we understand what's going on here, how is it decided that the threshold would be 50,000 or more and provided to an employer of at least employees? 8
That was difficult. 9 Basically, that seems to be the middle ground of a 10 variety of ordinances which are in place and which 11 have been proposed. 12 The problem, as has been pointed out in 13 the past, is that there's not a lot of data that 14 the City collects in terms of the employees and 15 what their wages are and exactly where the needs 16 are, which is a gap which would partially be 17 filled by this ordinance, which would require -- 18 especially under the amendments, which would 19 substantial reporting. 20 And frankly, it, to some extent, is a 21 number which is there because of a lack of a 22 another number that I'm aware of. Now, there are 23 other -- there are people who work and have 24 examined the bills in other jurisdictions who 25 might be able to give guidance on whether that is 227 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 in fact the best number that we could come up with. So it is not a scientifically selected-number. UNIDENTIFIED SPEAKER: It is a number that's designed to get a majority vote to put the City in the business of trying to --
Oh, I'm Robert Brand. I'm President of Solutions for Progress. I am a very much ashamed member of the Philadelphia Chamber of Commerce, and I run a business in Philadelphia. It was a number designed to help get the City into the business of using its money to end poverty, the greatest threat to the City of Philadelphia. We have sat here for hours listening to people talk about the difficulty of filling out forms and the difficulty of paying wages. (Applause.)
This is a living-wage ordinance because a lot of the jobs that have been talked about don't pay a living wage. And if they 228 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 don't pay a living wage, it means that the people that have those jobs live in poverty. And if they live in poverty, their children are one and a half to three times more likely to die in childhood.
-- of why a living wage is important. And it's not just the problem of filling out forms; it's the quality of human life must.
And it's a question of whether the billions of dollars a year spent by the City of Philadelphia in contracts from people who want to do business with the City and in economic packaging for people who want the assistance of the City will help us get 10,000 families out of poverty.
Right. Now, let me 229 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 -- I think we understand what the -- (Applause.)
I think at this point in the day, we are fairly well versed and have a pretty good understanding of the purpose and intention and need of this legislation. I'm now trying to understand from a technical standpoint and a drafting standpoint and a legal standpoint what the bill is, what it does. And if I don't understand why someone set number at a particular number, I'm just trying to understand their thinking.
The bill has -- I mean, there's a lot of drafting elegance which you can make more elegant, at least Stan can. But at its base, this bill says that the City plays a major role in this economy, in its contracts through the Department of Health, in its contract through the Department of Human Services, in its contracts through all City departments, especially 200-class purchase of service contracts.
And the City provides 230 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 economic financing assistance to the people who ask for it. All we're saying is that when people voluntarily bid on City contracts, and when people voluntarily -- these small businesses, these new start-ups like Marriott come forward and ask for City assistance, ask to go on the dole, that they should pay a wage that keeps families out of poverty. (Applause.)
And, sir, you can write this in as few words as do that, in as few words as get the nearly $2 billion a year that the City spends on contracts and economic development to assure that every worker has a living wage, health insurance, and a pension. That's fine.
Mr. Chair, I think 231 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 to try to be cognizant of the aspect of small business, it's very difficult to seek the definition. But, obviously, a Marriott is not a small business.
A company that has workers or less, I think we wanted to put a 9 fair classification in there vis-a-vis all of the 10 other bills that we have seen in similar cities 11 such as Boston, Baltimore and so on. 12
So in terms of small 14 businesses, it's 25 or less. If you have 500 15 employees, I don't think you're going to qualify 16 as a small business at this point. 17 And, also, the situation -- you know, 18 stated about the MBEC, the Minority Business 19 Enterprise -- by the way, when MBEC was being 20 discussed in this Council, the Chamber of Commerce 21 came in and said that if we approved MBEC, that 22 business would leave Philadelphia, that jobs would 23 run away, that they would take (unintelligible). 24 And, actually, all we are saying was that minority 25 contractors and minority business people had to 232 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 have a level playing field at that point in time. We're saying the same thing in terms of jobs and wages at this time. So I think we should be cognizant -- very cognizant of the history of development and not let ourselves be fooled by the statements of dire consequences that will accrue if we pass this legislation.
Mr. Applebaum, I wanted to go back to your testimony and I'm not clear who's representing the Administration here, so I'll ask it of you. And then if you can't answer it, maybe someone else could. The bill, as I read it, is broadly drafted to include all -- I mean, it could be read all agencies that get -- all agencies and businesses that get public dollars. COMMISSIONER APPLEBAUM: Correct.
In some kind of contractual form of $50,000 or more. I wanted to start back a little bit and 233 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 clarify some other points. I always feel that before we tell someone else what to do, it's always better to get your own house in order. And so my first question would be: Are there any, and if so, who are they and where are they -- are there any City employees who are not earning 7.90 an hour? COMMISSIONER APPLEBAUM: I would have to assume that all City employees are earning in excess of $7.90 an hour there's.
Could you make sure -- COMMISSIONER APPLEBAUM: There's no one here to verify that. But from the best of my knowledge, I would assume that they are. And I can look into that and get that information for you.
That would be my first question. COMMISSIONER APPLEBAUM: I think we should assume that they do, but I'll check that out for you.
Okay, that would be my first data request. 234 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 The second would be: Of all the services that have been privatized or contracted out during this Administration, since '92, do you have any information about how many of those contracted-out privatized services that used to be City civil service employees in those companies are people being paid $7.90 an hour? COMMISSIONER APPLEBAUM: More or less than?
Less than. COMMISSIONER APPLEBAUM: Less than 7.90. I know in many privatization contacts, we stipulate in the RFP a level the wages that must be paid. And generally, they're over that. And others where we have not stipulated that, we do not really know what the wage rates are, and we have no -- we could ask them, but there's no reporting process where these private companies report back to us with their wage levels. So we only know the ones where we have stipulated that they must pay a certain wage rate.
Well, I think that would be important information for this 235 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Council to know as we try to examine what our options are. Because I think what I learned today from the Councilman testifying from New York is they essentially limited their living-wage bill to any contracts that have been contracted out in certain areas. And it sounded to me like they were primarily in areas that we would have -- say, had been privatized, and it sounds like they might have privatized more than we did. So I would think our first responsibility is to make sure that we have no 14 City employees who are paid less than $7.90 an hour, that none of the services that have been contracted out, and then go on from there. So I would like the Administration to provide that information. COMMISSIONER APPLEBAUM: Well, we can find that information for you, but I do know for a fact that the prison food service contract was one that we did privatize. And ARA Struthers -- Aramark Struthers is the vendor. And Struthers has indicated to me -- and they're here, they can comment on it -- that 236 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 they do have a starting wage rate of starting employees at that facility at $7 an hour. So there are a few that we have that the wage rates are less than 7.90. But we would have to do a study of about 40 or 50 contracts, items, initiatives that we have privatized. We would have to make a survey of all of those companies to determine the wage levels. And we can do that.
I'd like to see that. COMMISSIONER APPLEBAUM: Okay.
Mr. Applebaum, I was intrigued by a statement that I think I heard you make, which is that in some cases, you do require certain wage levels in contracts, and in other situations, you don't. Did you say that? COMMISSIONER APPLEBAUM: Yes, I did. There are certain contracts such as many of our security contracts. And in conjunction with the Labor Standards Board in the City of Philadelphia, Deputy Mayor Jerry Murphy and Public Property and Procurement, we have determined certain wage 237 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 levels to assure that we are getting the appropriate people in the appropriate jobs. So yes, that does exist. And in some of the janitorial contracts, we have those in the RFPs and the bids, certain levels of minimum wages that must be paid. And in both cases, I believe they were over the $7.90.
Why don't you do it in all cases? Why do you pick some and not others? COMMISSIONER APPLEBAUM: In some cases, there is not sufficient guidance from the Labor Standards Office to initiate that, and it -- they just do not occur.
Are you saying that the service is so unique that they're the only ones that are providing it and no one else provides that service and we can't figure out what anybody else is paying for that particular service? COMMISSIONER APPLEBAUM: No, I'm not saying that at all. I'm saying that in the specific -- 238 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
So there's data out there, but you haven't -- COMMISSIONER APPLEBAUM: In the specific contracts that I mentioned, we wanted to assure a certain level of service. And in order to ensure that, we were guided to put in certain wage levels that assured us of that level of service.
When we did the privatization of a number of the jobs, assuming that the City employees performing the services prior to privatization were making more than $7 an hour or 7.90 an hour, our assumption when we privatized this workout was that the companies would pay less than 7.90 an hour? That's why they were able to do the work for less money? COMMISSIONER APPLEBAUM: No. 21
And with no 22 benefits? COMMISSIONER APPLEBAUM: No, no, that's not true at all. The economic analysis that we developed 239 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 comparing our total cost of City -- City workforce, City benefits, City fringes, City wage levels, and the cost of the City providing that service, was matched against the cost of the private company. And in every case, the private company's costs were lower. And they were not basically lower because of the wage rates, but lower because of efficiencies, more productivity, better equipment, and -- I have to say it -- better management. So that in the balance, it was not strictly --
Well, those seem like areas where the City might want to beef up and match the companies and try and increase productivity, better management. Why would we want to shirk our responsibility in those areas and give it off to a private company? COMMISSIONER APPLEBAUM: We would love to see the City ramp up. In every case, we gave the City the opportunity -- the City being the union workforce -- the opportunity to bid on those particular privatization initiatives, and they 240 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 never did. If the City workforce could have come back to us at the same cost structure that the private industries had, they would have been given the process.
What impact on the minority participation level in the City, what impact has the court decision had on the participation of minorities in the City?
It has had a very negative impact but it's -- it would depend on the commodities. But also it has had a negative impact. We in public --
What percentage of participation did we have, and where are we now?
Councilwoman, I can -- if you give me a range of years, I can prepare it for you. I don't have it off the top of my head, but I would like to prepare that for you.
But across the board, the level of minority participation in City contracts is very, very low. 241 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Not very, very low. It is not where we think we could be. And I'll give you an example just off the top of my head. On Public Works, I think that minority and women business participation is around to 7 16 percent. 8 Around supply, service, and equipment, 9 it's dramatically lower; it may be around 10 or 11 10 percent. 11 In professional services, we do it very 12 differently. And it's as dramatically low as 13 around 5 to 8 percent. 14
But you would say 15 that prior to the court case, it was much, much higher.
And it was higher, and there was more participation because of legislation.
Right? 242 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
The same thing here. People just don't do things because it's the right thing to do, right? Right?
They do it because there's some reason for them to do it, right?
My only concern, Councilwoman, is that the version of the bill that I read was very broad. And trying to apply it to each of those areas that we were just talking about gave tremendous peaks and valleys. It excludes Public Works, for instance. So it won't affect people in contracts -- construction contractors. It would affect, if we had construction-related companies, supply companies where they would be getting in a participation level or being credited for participation, it would affect them in any service or equipment. Again, I haven't seen the amendment so I would have to assume that for this discussion that they are still in, it would impact them.
So it's not 243 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 totally wrong for Council to try and provide some support and help to its citizens?
I would endeavor to say it's not a problem for Council to take on any kind of obstacle.
Mm-hmm. Construction is not included in this because it's a prevailing wage.
Mr. Applebaum, what -- COMMISSIONER APPLEBAUM: The prevailing wage rule for Public Works contracts has been in existence for a number of years. What was passed last week or two weeks ago had to do with off-site fabrication. But actual prevailing wage for construction has been in effect for I don't know how many years, but that's been in effect.
(Inaudible, off 244 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 mike.) COMMISSIONER APPLEBAUM: You broadened it to include fabrication of materials outside of the work site.
Remember the hearing we had here, and I think you said a couple things there that you got Mr. Roundtree saying today are pretty much the same thing. These poor people that have these small businesses can't fill out papers. I'm shocked. I had to go ask Councilwoman Blackwell because I knew she wouldn't take it wrong. I says, "Can't Black women fill out papers?" Now, I know that's not true -- please don't write that in the papers, but what they're saying.
Councilman, this has nothing to do with filling out papers. This is an additional financial burden. I haven't heard any of the banks 245 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 testify, I haven't heard any of the insurance testify. What my concern is and the reason why you don't see a lot of other minority businesses here today was because I had very little time to prepare for this. But the factors that I'm worried about is that -- that multiply. It a perception that in order, as Councilman Ortiz stipulated, it is a perception to do business with minority women and disabled businesses in this town was going to cost them more money. When you add this incentive on top, as it is written, only as it is written, then the burden for them on their Workman's Compensation increases because they're at a noncompetitive rate as it is. So when you add that to it, it increases. So it has nothing to do with the intellectual portion of filling out the form.
You know I was being facetious, but I got your attention.
Mr. Roundtree. 246 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
In 1978, when I worked as an electrician-apprentice with a journeyman named Larry McCrea (ph.), who's an African-American man.
Because when Larry wanted to go in business, they told Larry that it would be an unfair burden and he wouldn't be able to. But now if we walk out this building and look across the street, Larry's doing the electrical contracting on that building that burned down. So in ten years from now, the people 247 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 that you're saying can't do this --
Councilman, it is an unfair comparison to compare it with the construction versus a service. That is an unfair comparison.
Everybody who participates is participating from the same supposedly --
But the union only sets the wage rates here because this is a prevailing-rate town from the federal days.
So it is unfair, it is truly unfair to compare the two industries where you have something that is totally regulated and 248 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 something that you're going to legislate.
But if Larry could do it, couldn't someone else do it?
'Cause we're going to set the wages here, and we're going to say it's 7.90 an hour. That makes it easy 7.90 an hour. That's what I believe.
You know, that idealogy is not fact. I mean, I have reviewed approximately 5,000 jobs that are now contracted by the City of Philadelphia. They've been contracting these jobs for decades. This isn't privatization. I looked at mental health, mental retardation, drug and alcohol, and human services jobs. Actually, it's about 12,000 jobs, but we looked at good data on about 5,000 of them. The difference between union and nonunion is not at the top. The top rates for doctors and or master social workers are virtually the same. The difference is at the bottom. It's how many workers earn more than $8 a hour. It's how many workers have family health insurance. 249 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 And in the union shops, it's better. It's not better enough. We still have in the $1.1 billion from just those two departments, health and human services, that the City contracts every year thousands of people who get their money one stop from the taxpayers' dollar and who live in poverty, who don't make wages that let them live out of poverty, and who don't have health insurance. And that data can all be prepared by the City. You can count much more elegantly than I've been able to count, but the data that Councilwoman Fernandez asked for, wages is part of it. But another part of it is health insurance and just to have a health-insurance policy that someone has to pay in $200 a month is meaningless for someone making $8.20 an hour. So these data simply establish a floor, and they establish that floor very well. And if you don't establish that floor legislatively, what we have found is that thousands and thousands of Philadelphians paid for with City monies under contracts largely to nonprofit corporations will 250 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 continue to be condemned to live in poverty by City policy.
Well, I think what I'd like to ask at this point -- you've touched on a couple issues -- is to ask our Commissioner of Human Services to switch seats with yourself. I'd like to hear about the impact of the proposed legislation on one of our probably largest City agencies that grants -- that has contractual relationships with outside entities. I'd also -- I think some of our economic development agency people are here as well, and I'd like to get a little better understanding of either their perspective or what their understanding is. So why don't we do that. And what I'd like to ask Mr. Shapiro, while they're getting ready, is the proposed amendment on talks about amending Section 17-104(b) contract requirements. And now it seems to add in not only the business entity entering into the contract but also its subcontractors, lessees and sublessees. Is that correct?
Yes, yes, that is 251 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 correct.
So take me through that in a kind of cascading fashion. A company bids on a contract with the City of Philadelphia, generally, I guess, called "the prime contractor." They then subcontract with other businesses for whatever the particular job is. So the person who wins the contract, they would be subject to the bill and the living-wage component. Then the subcontractor would be subject as well, and the sublessee -- or I guess you technically have a sub subcontractor. Anyone in the chain is subject to the provisions of the bill, is that --
To the extent that they are providing services to the City or are the beneficiary of financial assistance.
Okay, all right, I just wanted to have that understanding. 252 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Mr. Applebaum? COMMISSIONER APPLEBAUM: Yes, Councilman. There were two people here that are minority vendors who we brought in that I think you might like to hear from them before we leave. Could you have them speak now or could you talk with them now? That's Donna Allie from Team Clean, and Mr. Struthers from Aramark/Struthers.
We also have a witness who's a professor from Temple University, who, as I understand it, has analyzed living-wage bills from all around the country, who can compare the impacts of this bill to --
I will do everything that I can to get them all on. It's only a matter of the order. Commissioner Reeves, with your continued indulgence, if we could briefly hear from the business people who have had this kind of impact -- or may potentially have this kind of impact, and then Commissioner Reeves will talk about the department which I think is probably larger than many of the businesses. 253 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 (Donna Allie comes forward.)
My name is Donna L. Allie, and I am President and CEO of Team Clean Incorporated. And, first of all, it is very difficult for me to answer questions about this or even speak about this because I am a former-welfare- recipient-turned-businesswoman. I am in favor of increased wages, but I'm just afraid of the impact that, from what I've been hearing and reading, it will have on my business, number one. There are contract in the City that I am currently involved in that pay lower than the 7.90 an hour. And if, you know, my concern is if in the middle of these contracts that we do have to increase to 7.90 and pay health and welfare benefits, that would just knock us totally off the box. I mean, we would not be able to survive like that. Other companies -- i.e. ISS and Aramark and large corporations like that -- would be able to pay the 7.90 in health and welfare benefits. 254 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 But, as the Commissioner said, for us, it is a hardship. We have -- with the increase in wages, we have things like Workman's Comp., we have cash-flow things that we have to concern ourselves with, other insurance costs. And so it definitely would be a hardship for my company, but I'm glad to hear, like Councilwoman Tasco, that this is just a talking session or. . . So that's really all I have to say.
Let me try to -- very quickly try to understand the nature of the hardship. Is that because the contract that you're operating under, you bid at a particular price, you base your wages, I guess, on either your total revenues or what comes in contract by contract, and are you saying that if you had to change wage rates in the middle of the contract that that would put you in a difficult position?
Oh, yes, yes. Because, you know, we bid based on a certain dollar amount with overhead and burden on top of that. So, for instance, we're in a contract 255 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 now where we do pay less than $7 an hour. And we're in that contract for four more years if we do well. So if you were to change and say well, you know -- if the City says they want us to now pay 7.90 an hour, well, the difference between what we're currently paying and the 7.90 an hour plus health and welfare benefits, that would be a cost to us.
Could I ask what you're paying -- (Interruption by unidentified person shouting from audience.)
Hold on, we will not have that. We will not have back and forth unrecognized. Councilwoman Fernandez.
Could you tell me what you currently pay your employees, and do they have health benefits?
Well, in different -- well, in some contracts that are seasonal part-time contract, we do pay 5.50 an hour, and there are no 25 benefit. 256 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 In other contracts, we do pay up to 10, $12 an hour and benefits. It just depends. It depends on the type of work, it depends on the market, it depends on what the other bidders are bidding. We are in a competitive bid situation.
Some, yes. For example, Veterans Stadium. Veterans Stadium is a contract where we pay 5.50 an hour. Now, they are increased over a period of time, but that is very normal in every city. I heard you mention Baltimore. Well, I've worked at Oriole Park at Camden Yard since the beginning. Last year was the first year that I didn't have it. And, same thing, 5.50 an hour, no benefits. There's others -- Shea Stadium excuse me, I can't say Shea Stadium, but there are other stadiums that are like that. That's the nature of stadium work.
Part-time. It's part-time 257 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 seasonal.
Thank you, Mr. Chairman. Miss Allie, are any of the part-time employees that you have, are any of them working for you on a part-time basis, as a second job? Because I know a lot of stadium employees are people who have a full-time job during the day and take a stadium position at night to earn extra income. Are any of your employees -- do any of them fall into that category?
Yeah, some do, some do, yes. But we have to be very careful about that because if they go over 40 hours, then --
I don't have a problem with that, I'm just curious to know. So there are some employees that would fall under that category --
-- as having second jobs and have full-time jobs during the day with benefits, whatever. And they're just 258 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 supplementing their income by working a second job.
Yes. My name is Bob Struthers, and I'm with SFS Correctional Group LTD. My relationship at the Philadelphia Correctional Facility is we provide food service there. In this particular instance here, it's to the City. At this point in time, we have close to about 20-some employees. We pay about 7.50 an hour. I would say, on average, it's getting to about $9 an hour at this point in time. We do have benefits. The only their lacking is, I would say, a medical plan at this point in time. We are assessing that at this point. Our relationship is a very unique one. Over the years to Jannie Blackwell and a couple of other people in here, Mrs. Tasco, and yourself, 259 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Mr. Nutter, we've formed a strong relationship with Aramark. We look and seek to have a joint venture. A lot of minority companies ask us in terms of how that works. We stand alone in terms of a minority company, in terms of when we provide this particular service, which we're trying to learn correctional feeding at a very high level. To understand the total systems and things, we indicate to any company that we get involved with us to a joint venture that tends to wrap around the medical plan as well as other benefits. So at this point in time, I would say that we live up and beyond the 7.50 or close to $9 an hour at this point. And we have almost all benefits in place at this point, but the only thing lacking is the medical, which we are evaluate at this point in time. And that's about all I can say on that matter.
So just to clarify, you do not necessarily give health benefits to your employees at this time? 260 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
At this time, you do not provide health benefits?
We don't have it at this time right now, that's correct, yes.
It's interesting when you put -- right now, there's a piece of business going out with respect to commissary. I think we, as a minority employer, we would live up to all the expectations if the City or any State agency would put some harder mandates on, I will say, the majority partner or a prime contractor in terms of being creative, let's do a joint venture. Let's look at that, let's give higher points than that. That helps a lot.
Thank you. Councilman DiCicco -- I'm sorry. Councilwoman Tasco and then Councilman DiCicco.
I just want to go back to the young lady. You talked about your 261 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 cleaning service at the stadium. It is part-time?
So you don't require full-time employees to perform that service.
Your other contracts, where the employees make above the minimum wage, they are steady full-time positions?
Do your employees have health benefits in those positions?
Okay. And you prorate those costs when you are bidding on your contracts, right?
As well as other contractors who are competing for that same service?
So we separate the 262 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 full-time employee from the seasonal Vets Stadium, Shea Stadium employee which maybe have a part-time job at night after the cleaning?.
Thank you. I'd like to reconstruct the panel as it was earlier at the table. I think Joan Reeves was at the table. COMMISSIONER REEVES: Good afternoon, Chairman Nutter and Members of City Council. I'm Joan Reeves, Commissioner of the Department of Human Services. And I am here today to give testimony about Bill No. 970586, the living-wage ordinance. First let me say that the ordinance 25 represents a laudable goal for families to have 263 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 incomes above the poverty level. And I also understand that there were some amendments proposed earlier on that I do not have the full information on, so what my comments are on is the bill that we looked at the other day. I think, as you know, the Department of Human Services knows the importance of families living above the poverty level, but I also would like to share with you what we think the ordinance 11 -- the impact the ordinance will have on our private-provider system, which does serve some of the most vulnerable children in Philadelphia. And I would like to also takes some time to comment on what we see as a budgetary impact for DHS and the City and also would hope that Mr. Brand could provide us with some data done of his analysis of salaries in the Human Services contract.
I would be happy to if you would also share your data. COMMISSIONER REEVES: Absolutely. It's public information. Our mainly concern is that the strides we have made to vulnerable children and families 264 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 might be eroded. We have aggressively developed in-home services to prevent placement. We have returned children who have been placed out of the State to Philadelphia, to receive services from Philadelphia agencies, and this has increased the City's provider base. This expansion and program development may not be able to be continued with the enactment of this ordinance as I had seen it earlier. The Department currently purchases approximately $275 million in various social and professional services from 227 private provider agencies. While almost all of these agencies are nonprofit, and they at least partially subsidize the services purchased with their own resources, they would all be covered by the ordinance 18 provisions, and many would be forced to increase their operating costs to comply. These cost increases would need to be fully covered by corresponding increases in the standard rates paid by the Department, or many of these agencies would be forced to stop doing business with the City. For example, few if any of the 35 265 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 day-care agencies presently under contract with the Department would be able to renew their contract serving 341 children without a huge rate increase. Among every -- almost every provider is likely to have some staff being paid at or near the minimum wage. The budgets of these agencies for this year and next have not anticipated this increased costs, and full City reimbursement will be demanded during contract negotiations. Raising the wages paid to an agency's lowest-paid staff could also trigger wage increases to higher-paid staff in order to maintain the existing salary structure, and also increase the base upon which future cost-of-living increases could be calculated. If DHS is required to raise its standard contract rates to reimburse its providers for the costs associated with compliance with this ordinance, the cost of DHS programs will certainly increase in terms of City dollars required for State and federal funding matching. Since many of the low-wage job categories that would be impacted by this 266 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 ordinance involve non-placement services like in-home child care and homemaking services, there would be no increase in the federal revenue currently used to offset City cost. The federal Title IV-A Block Grant is already fully expended. And, thus, any rate increase given to non-placement service-providers would be strictly City and State-funded. In addition, State matching funds would also be unavailable in the short term because every year State Act 148 Allocation is fully accounted for before the start of the fiscal year. No excess State funds will be available for unanticipated provider-rate increases. The State needs base budgeting process, requires plans and budget to be developed more than a year prior to the start of the fiscal year. DHS will need to start planning now if it was going to build rate increases such as these into the City's needs-based budget request for the State DPW Fiscal Year 2000. There's no guarantee, of course, that these rate increases would be approved by DPW. Any form of City-imposed wage increase 267 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 would have to be phased in over time in order for DHS to incorporate this increase in the needs-based budget and to draw down the State and federal revenues necessary to offset some of its costs. Even with the long-term phased-in approach, it is not certain that all of the Department's contract agencies can or will comply, and essential services may become unavailable.
We can envision providers who may opt to utilize part-time employees in order to stay in business and to continue to be considered for City contracts. Others would become discouraged with doing business in the City. DHS would prefer that City Council find another means of enhancing the economic security of low-income workers. I appreciate your giving me this opportunity to testify about this important legislation. Thank you.
No. Just to add for the record, I think the proposed amendment 268 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 relating to nonprofits -- it would be nonprofits who receive a contract of over $50,000, according to the way it's written now. And also nonprofits would be exempt if the gap between their lowest-paid employee and highest-paid employee was not more than --
Also, they'd have to have 25 or more employees to be subject to the ordinance.
Which would -- I mean, once you start to play that out, it would be interesting to know how many agencies then -- 'cause that was certainly an issue I had raised with the designers of the bill, what about nonprofits, particularly small nonprofits. COMMISSIONER REEVES: And I think with the amendments, we'd need to do an analysis of how many of our contract agencies would then become exempt and how many would fall under the bill.