Thank you. The Chair recognizes Councilman Goode.
Thank you, Madam Chair. Mr. Hankowsky, without a State statute, it is actually illegal to have different tax structures for businesses, is it not?
Without a State statute? Well, without a State statute, the City can't do anything with taxes. You know, all of our powers with regard to taxes -- (Not completely intelligible; parties talking over each other.)
So it fundamentally is illegal to have different tax structures for businesses.
No, let me be fully responsive if I could, if you don't mind. Without a State statute, we can't do anything with taxes.
The State can make a 47 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 determination that there are various classes of taxpayers. So the State, for example, does differentially treat how we can apply abatements, so it kind of authorizes us to do commercial and residential years, and it can decide we can do 7 residential 20 years. And the State, for example, 8 under the business privilege tax, we treat 9 different businesses differently. So there's a 10 manufacturer's exemption, there is a Securities and Exchange exemption. So there are instances where, as a matter of tax policy, even with the -- and you're correct, there's that overarching thing called the "uniformity clause" in the Constitution. But even with that in place, the legislature has determined, and then this Council has enacted, differential treatment by it, but it has to be done by a class of taxpayer. What is different with TIFs is it's transactionally, one at a time. So it's not done by a class. And in that sense, it's different.
Okay. And that really leads to my question. Of course, that was a setup question. 48 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223
The real question is, included in your documentation supporting these bills, I saw no analysis of financial need for any of these projects. Could you submit to Council any documentation reflecting financial need for any of these projects.
You mean that there's a gap? That, in fact, the projects need the TIFs?
That there's a gap and that there is no available capital market other than through public or quasi-public means.
Right, yeah. Well, what we submit to Council -- and, again, I'm not -- we're not trying to not be responsive. If anything, at least I try to be responsive. The project plans are actually -- the content of them is actually prescribed by the statute; there are things you're supposed to put in them in order to meet the statute requirement, and that's what the project plans do.
Okay, so you'd be happy to -- 49 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223
Yeah. I'd be happy to sit down with you or your staff or however you think it would be appropriate and walk you through -- I mean we do do a -- we do look at a proforma, which is, I think, responsive to what you're asking about, to see, Well, do you really need to do this? I mean, can't this project pay for itself, so to speak? And can't the marketplace, therefore, provide you the capital?
But you did not consider submitting any documentation relating to financial need on these projects?
We haven't been asked to, and we haven't for the previously. But we 16 do do an analysis; that's all I'm saying, we do do 17 an analysis. 18
But why would you 19 not present that analysis to City Council?
But I'm assuming that we only do TIFs because of financial need.
So why would you not 50 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 demonstrate that financial need and present the reason for asking for TIFs?
Well, again, we haven't been asked to previously. We come to Council, we represent that we've made that analysis, and --
In other words, we're supposed to take your word for it, that there's a financial need on the project.
Well, usually we've -- many of these project, you know, have a District Council perspective, and often we sit in a much more intense way with the appropriate District Councilperson because we always look there first to say, you know, here's our analysis, do we collectively think that this project should proceed to come before all of you? And we do do that on a one-on-one basis with the appropriate District Councilperson.
So that is a TIF program policy? That is, you deal with the District Councilperson related to whether there needs to be a TIF or not?
I think that is not only our policy; I think that is this Council's 51 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 policy since you will not introduce a bill unless the District Councilperson agrees to it.
That's not my question; my question is, in determining whether there is financial need, is that a discussion that needs to take place with the Committee of the Whole or the whole Council, does it need to be a demonstration of needs that these taxes are being taken away from the entire City and the School District?
I really apologize. I'm not sure what the question is. Are you asking me, do I think it should happen here or --
The question is, what it was before is, why have you not submitted any documentation that need? Your response to that was that you had a discussion with the District Councilperson.
Right. We also meet with Council staff people before we bring these forward, so we meet with Council technical staff.
But there was no 24 need to demonstrate the financial need to the whole Council? 52 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223
There hasn't been previously, no. We meet with the technical staff, we meet with the District Councilpeople, then with some understanding, and we proceed from there.
Which raises another question in terms of equitable access to the program. Is there any geographic boundaries to this program in terms of where the taxes are being forgiven? Are we doing TIFs all over the City?
I can't answer that off the top of my head, but I think probably pretty close.
I don't know off the top of my head. I'd have to look, but it's pretty close.
You don't know off the top of your head at all, you couldn't take a guess? 53 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223
No. I don't want to get caught taking a guess. I'll be happy to take a look at it and get you a response today.
Okay. Is there an actual program designed for the application for TIFs?
Okay. Last is just a general economic development question related to TIFs. Is it in your estimation that the City is 54 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 in a position of strength economically to continue to do TIFs? Has there been any long-term policy established that shows at what point we are, quote/unquote, TIFed out, or are we ever TIFed out?
That's obviously a very broad question, and let me make a couple of responses. One, there is a statutory limit on how much of your total assessed valuation I think can be TIFed, and I think it's 10 percent of your total assessed valuation, which clearly is a very big number for the City of Philadelphia, so we're nowhere close to that number, but at least there is a statute limitation. The issue of sort of being TIFed out implies that we have these dollars that we're handing over, and I think back to my answer to Councilwoman Reynolds, that the notion -- the concept here is that on a transactional basis, we look to see whether a project, in fact, has a gap and whether it's appropriate to use this technique to solve that gap, and we are always -- if you believe in the assumption that these can't happen 55 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 unless we help solve the gap, we are always, in a tax perspective, better off with the transaction than without it. The most fundamental issue that your question sort of implies, which I am a very strong believer in, is that there needs to be a continual recognition -- and I know this Council has had various deliberations on this more general topic -- of the issue of our competitive position, the cost of doing business here versus somewhere else and the need to address that. So if, for example -- and I'm being -- as Councilman Nutter said, it's a nice day, we should reflect it. You know, if you could eliminate the wage tax, you know, or something dramatic and level the playing field, I might have a very different response as to whether you need these techniques on a transactional basis, if you were to change the economic, you know, dynamic of the situation. So for example, we would, you know -- and I think Keystone Opportunity Zones -- I mean, there's all these other techniques out there.
Mr. Hankowsky, I 56 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 understand your position that we have a bad tax structure, we're not competitive. But in the context of having a shrinking tax base, do you really believe that using TIFs over the long haul is actually increasing that tax base?
Because I believe that without doing them, these projects will not occur, and your base will, in fact, not be added to.
Well, we'll take your word for that since we don't have any demonstration of financial need. Since you don't know when projects are being done, we don't know what the market is like in those areas because you don't where these projects are being done. Thank you very much.
One second. 57 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223
Madam Chair, if I may, I have to be out of the chamber, and in case I'm not back before the hearing is over, I'd like to leave my vote as aye on all of the bills and any amendments.
You're welcome. Following on Councilman Goode's question, have we ever had a request for a TIF and it was denied or it wasn't followed through on, and the project proceeded, to your knowledge?
That's a good question. I know there are TIFs that we have said no to. I mean, there are people we say no we're not doing that. I can't think of one. I'd like the liberty of thinking about it longer, but I can't think of one where we said no and then it did proceed anyway.
Councilwoman, 58 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 could I follow up on that?
(Not completely audible, off-mike.) . . . but really actually adjusted the TIF on the developers on the 15- and 20-year TIF for the luxury high-rise apartment at Eighth and Walnut. And because of some of the things that Bill already described, they said no, it's either take ten years or we're not going to do the TIF.
I mean that's as close that I know of that something has not yet happened, but there has been --
To see the request and compare that to the projects to see of they proceeded?
That would give us some idea of whether or not -- you know, whether the request will just go away because they don't get the TIF. It seems to me that some of these projects --
Well, could I just make one comment on that, Councilwoman?
Just to be very clear, sometimes we say no because we believe that there really isn't a but-for gap. In other words, we look and it and we say no, no, no, you should be able to borrow the money privately, you don't need us to do this. And sometimes we're right, so I think there may be situations where we have said that and they have proceeded.
This project at 1500 Spring Garden being developed by the developer who has a track record in the City of developing properties, why would they have a 60 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 problem getting the money from the bank with a long track record? Why would they need a TIF?
I want to be very clear. Well, let me start with the fundamentals. Can this developer go a the bank and borrow money? Absolutely. And, in fact, will do that for the majority of the cost of the project. What this developer is, We could do that, we'll fit out the 700,000 square feet of a telecommunications hotel, but we can't borrow the money for the e-commerce piece. The math doesn't work, and banks look at that math, and the bank is going to say, Is there enough rent out of that to pay for the cost you're spending to fix the space to justify us lending you the money? And our believe is that there is, in fact, a gap, that a bank would only go so far and not provide all the money necessary and that what we're doing is we're closing the gap.
Okay. So now are you saying that this project at 1500 Spring Garden is a hotel in addition to the e-commerce --
No, and I apologize for the use of the word -- 61 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223
We should come up with another phrase. No, it's not a hotel, it nothing to do with residential, it's not a hotel. It is a telecommunications center.
Right, I understand that, that's fine. You keep saying "hotel."
Yeah. The jargon in the industry is "telecommunications hotel," but forget -- I'll stop using the word the place.
It's a where the residents of the hotel are equipment -- servers, generators that service the industry.
Councilman Nutter may have asked this question, but have those tenants been identified in terms of who will --
The developer is working with various potential tenants now for that, yes.
Let me ask you 62 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 another question. As Councilman Brown said, and we are also interested in this, the Code requires that on new construction, a percentage of the work requires -- of art work -- a percentage of the cost has to go to art work, it has to provide 5 percent, I think, for art work in front of the project.
No. I think -- I'm not -- I'm not an expert on the percent for the art program.
Well, (unintelligible) has art work, most buildings have art work as part of their --
There's two different programs, just to be very -- and I don't mean to -- but we also get stuck on all these details. There is a City requirement where we 63 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 spend generally our capital dollars when we build a police building or rehab the municipal services building or something like. And there's a requirement that where we spend our dollars -- I may be off, I think it's a percent, 1 percent for art. There is a separate program administered by the Redevelopment Authority where the Redevelopment Authority says, Where you come in and use Redevelopment Authority property or condemnation that will acquire property, that they have a separate requirement for percent for art. So you'll see -- I think there's no better example than right across the street here at Centre Square with the close pin -- you know, we talk about meeting at the close pin.
That was a Redevelopment Authority acquisition of that parcel, and that public art was a requirement of the Redevelopment Authority. We do not have a general percent for art requirement if it's -- if it doesn't fall into one of those two categories. 64 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223
Mm-hmm, okay. So our interest is to look at a percent of the TIF money, the public money, being utilized for youth development. How many Tax Increment Financing Districts have we created? And if you don't know this right off the top of your head --
We have created 19, and you have 4 before you today, so that would take you to 23, if Council is so disposed, and we have one other before you whose hearing is in two weeks.
And we have some that you've granted where the project hasn't proceeded? Have most of the projects have proceeded, are they in construction?
Eight have proceeded either through construction or to completion, and the remainder have not yet started construction. That's right.
Well, that has 65 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 started.
Well, I guess, what is the longest standing project, whether it started or not?
Okay, the first TIF, which is the answer to that, the very first TIF was in Council President Verna's district. It was the PNC Operation Center in Eastwick.
It both -- it is completed, Phase I was completed. And just a month ago, we dedicated Phase II. So it now is up to 1500 jobs and about 350,000 square feet of building, and you see when you take the ramp going to the airport, it's that building. That was our first one.
Well, have we begun to realize any revenue from that yet?
Oh, yes, absolutely. Clearly we reaping -- the City of Philadelphia is realizing a significant increase in wage tax because I think -- and I may be slightly wrong -- 66 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 there are 800 new jobs there that were not in the City of Philadelphia before we did that.
Mm-hmm. That is the City, not Tinicum Township, right?
I'm sorry? Yeah, that project's in the City. It's a couple hundred yards from the edge, but it's in the City. No, we're not giving the taxes to Tinicum Township.
Okay. Have we realized the goals that we anticipated for general employment and construction jobs? Or have they been greater or fewer than projected on these various TIFs?
Again, doing this off the top of my head, and I think Councilman Nutter sort of asked this in the sense of, could we give a report on the ones that are done.
But my general sense is that, yes, for the TIFs that are completed, we are clearly within the rough range of the jobs we anticipated would be created. The PNC one we're over because we had Phase I when we were before 67 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 you, and that's already open, Phase II. The Loews Hotel, I think we had -- you know, that's open with 500 jobs. So I think, you know, in almost all those instances, we're pretty much on the mark.
Now, if we commit a TIF to a project and the project doesn't proceed, does that tie us up in terms of the amount of TIFs we could give here?
No. It's not the same way that like the HUD 108s or something where we committed dollars and they're sort of tied up until, you know, we let the project go. It doesn't prevent us from proceeding to look at other TIFs, it does not -- unless we ever got to this 10 percent max, which --
Okay, thank you very much. 68 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223
Thank you. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. Just a quick question, Mr. Hankowsky. In the -- and I know we've done a few of these, but there's so much time in between that we just end up going over some similar territory. Where is the component in the project plan with regard to either neighborhood employment or minority, female business opportunities or just kind of jobs in general? My recollection from the past is, that is in response to, I think the question from Councilman Goode, often the District Councilperson works with you or the developer on those kinds of issues, but I thought also in the past, that issue was usually raised, or there was some document or kind of an economic opportunity plan that is often discussed, but --
But where is that in this whole -- what is that and how does that relate to the project plan? 69 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223
Yeah. We advise developers, and I'm dealing with TIFs today, so I'll talk about in each TIF transaction, that there must be an economic opportunity plan as part of the overall transaction. It is not required by the State statute to be in, quote/unquote, that project plan.
I was going to ask you that. What's the basis of your telling the developers that?
And I think it's clearly a reflection of the sentiment of this body at a minimum.
And historically, we also advise the developer that they need to work 70 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 with Council staff to have those reviewed, and we look for Council technical staff to advise us that they are comfortable with that. That is, in fact, happening on all four of these at this time, and we will not close the TIF note until that has been signed off on.
Now, what actually ever happens to those -- this is the economic opportunities plan?
Do they ever come back here? I mean, do we ever actually see --
They do come back, they are provided to Council's technical staff. I can't honestly answer on how they're then subsequently circulated. Generally, you are also right, Councilman, that to the degree the Councilperson tends to be more directly involved in the transaction than the district, generally that office also would, you know, have it.
Right. For the TIFs that are completed, as you mentioned earlier, the eight, are there economic opportunity plans 71 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 available for those? And since they are complete, you'd be able to match up or compare what was put together at the time of the TIF or shortly thereafter versus the reality of the project that's now up and running and people are doing whatever?
I think we can probably do that. My only caveat there may be one or two -- to be quite candid, I just want to be, again, candid, if nothing else. One of the very earliest TIFs may not have happened, the first one or two. They just may not have existed.
I think we've -- but for those that have, I think we could add to your information request or a report on that also.
Sure. And do they eventually become a part of the documentation that goes with the TIF that ends up in the Chief Clerk's Office?
No, they don't end up -- no, in a pure mechanical sense. They don't end up in the Chief Clerk's Office because they're not a part of that -- I'm going to use my term for 72 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 the moment -- the required legislative package, which is the ordinance and the TIF plan. They are part of the document --
So the State statute says you have to have a project plan and then a --
Right. And then there's a requirement that there be a resolution, so we end up with these sort of tiers of documents that are simply the prescribed documents that the, quite candidly, lawyer for the developers and the 73 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 lenders, you know, want to see all of that there so that they can (unintelligible) TIFs there perfectly in place.
The opportunity plan does become an attachment to the loan documents. So it's in the -- if you went to the lawyer that did the closing binder, you'd find it in that.
All right. So you need a project plan and you need an ordinance. Your policy is, you have to have an economic opportunity plan. You attach that to the loan documents, although you could make that a part of the project plan, I guess, if you wanted by policy, even though at the time of the project plan, the economic opportunity plan is probably not completed because that usually ends up being a part of the longer-term negotiations subsequent to passage of the bill and the project plan.
Yeah, and sometimes it happens in the period -- you know, I think we're all aware of this, sometimes it's happening in the period like from the hearing to the final 74 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 passage.
My only -- and I'm not a lawyer and plan claim to be, but my only caveat is that we -- that I think everybody wants to keep -- just so they can write that legal opinion and say, yeah, there's all that stuff that's required by the statute and that that's sort of -- I don't want to, you know -- very straight forward and understandable. And to the degree we -- and I'm not, you know, I'm making no posture as to whether we should have them attached or filed with the Clerk -- if we filed them with the Clerk, it would be easy, if that's the request. But just that we don't (unintelligible) to the documentation that somehow in a legal sense becomes, you know, does a TIF note unwind or, you know, does the lender not have a mortgage, or, you know, those kind of very basic questions that people legally are going want to know. I mean, we don't file the TIF does either, you know, the legal -- the actual loan documents. 75 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223
With the Clerk. I mean, there are documents that happen subsequent to this action.
Yeah, I don't think so. You know, they are probably recorded down in Records 'cause it's a mortgage, you know.
But there's nothing to stop you from adding it to the --
Right, I understand. Now, lastly, what are those standards with regard to those economic opportunity plans? I mean, is it project by project, or is there a base standard of either how many jobs, how many people, numbers of minority/female/disabled businesses? I mean, how do you determine what the elements or the components of the economic opportunity plan are?
Again, I don't want to 76 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 -- I don't want to be a lawyer again, but I think -- I think we're all aware that there's a whole series of cases out there about what you can require people to do versus what they should voluntarily agree to do. So that -- so that the plans aren't susceptible to a legal challenge.
We basically advise the clients of what the City would generally be looking for if it were executing the project.
And say that that seems to be a pretty good place to start thinking about this.
And then -- you're right, it may vary with projects, by idiosyncracies of, you know, how many is construction, and there may be something peculiar in a project or whatever.
I mean, the projects in front of us today, I mean, are -- at least one of them is very different than the others. I mean, the Networks project -- I mean, 77 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223 not to highlight it or pick on it but, I mean, that's a very different project than a commercial project --
-- where you have, you know, basically one-story buildings, a whole lot of stores, and kind of people running around, as opposed to a high-rise.
And you have distinctions between -- you know, I think Networks is an example where there's developer asking for our assistance, the -- there are things that are clearly under the developer's control, you know, how they construct the project, the staff that's going to maintain the building.
It's another thing to talk about creating requirements on the e-commerce companies that are tenants that sort of at the moment have nothing to do with the project.
Right. 78 05/17/00 - WHOLE - BILLS 000212, 221, 222, 223
So, you know, but with that, we then put the developer in contact with Council staff so that they become directly involved in looking at the proposals that the developers are putting forward and what is deemed appropriate.
One last quick question. With regard to the economic opportunity plans, and I know most of the focus will always be on either the contracting of the job opportunities, obviously, with adults. Has there ever been -- for more of the commercial retail projects, has there ever been discussion about youth employment?