So if we were able to get the information on the electrical service, you can then determine pretty much what the -- short of a physical inspection, and we agree that sometimes a physical inspection doesn't determine specifically, an exact science, that that property is vacant, but we would have a good barometer that that 395 property is probably not being utilized if there are no utility services whatsoever in the building?
To follow up, Ms. Kammerdeiner, you will have your people or somebody will check and see if we can have some access to records on service by PECO? COMMISSIONER KAMMERDEINER: We'll see what we can learn, yes.
You'll see what you can learn? COMMISSIONER KAMMERDEINER: In terms of getting access to the records. We'll check into it.
Can you notify me as to the response you get? If it's a positive response, can we then work on trying to determine if the technology will allow us in expeditious way to determine the status of these properties? Can I at least get that agreement from you today? COMMISSIONER KAMMERDEINER: We'll certainly get back to you as soon as we have 396 some information on it and then we'll continue to work with MOIS.
Councilman, I was just saying to Mr. McPherson, I don't see any reason why any of us should not be able to get all of that information on our computers really.
I know the PGW is available because I had a guy check a property and the water came up and the PGW came up. It told the time when the service was terminated and everything. And I just off the top of my head, I can't remember if the electrical service was included, but I'll check when I go back to the office.
Thank you, Madam Chair. Commissioner, I'd like to go back to the -- I'd like to get a better understanding. 397 If you need to provide us a document, that's fine. I'd like to get a better understanding of the credit card issue and the agreement that was made. In many other on-line transactions, if you're buying books, if you're buying an appliance, I mean, any number of things that you can currently purchase on the Internet or pay bills through your bank, you set it up or you tell them who you want to pay, put in all the information, and you pay the bill without any additional charge. So I'm trying to understand. There must be some benefit to the City by making it easier for people to pay any number of bills or access things over the Internet. So why are we charging? COMMISSIONER KAMMERDEINER: The other types of bills you're talking about with a retailer, that retailer is paying the fees. They're absorbing the fees. If you go into a store and you use a credit card in the store or you pay for something over the Internet, the retailer involved is absorbing that fee and paying it to the credit card provider. 398 Governments generally do not absorb those fees. The general feeling -- and I'm using that statement because I've read a number of articles about other governments and the deliberations they went through in this process. They generally do not absorb the fee. They have the user of the service pay the fee because there is a perception that in general the taxpayer shouldn't be paying for a service that's used by a few.
Used by what? COMMISSIONER KAMMERDEINER: Only a few. And that we should not have that charge paid by the general treasury for service that is used only by a few people and that those people should pay for that.
In this context, what's a few? COMMISSIONER KAMMERDEINER: I think that is an issue that almost every government will deal with at some point in time in terms of when it becomes beneficial to the government to absorb that fee and have it be out there as something that we pay for as 399 opposed to something that the individual user of the service would pay for. That definition may be different for every type of service in every situation.
Now, you mentioned that the fee is a function of how much you pay. Is this a percentage issue or is it a dollar amount issue? COMMISSIONER KAMMERDEINER: Usually it's a percentage. When you have a lot of volume of activity that is for the same dollar amount, then generally the provider of that credit card service will agree to a set fee that goes with either that dollar amount or a range of dollars.
Well, what's the percentage fee that we've negotiated? COMMISSIONER KAMMERDEINER: I don't want to misquote, so let me get that for you and verify it. It's, I think 2 and a quarter percent, but I'm not sure.
How much? COMMISSIONER KAMMERDEINER: It's around 2 percent, but I'm not sure. I said 2 400 and a quarter, but I don't misspeak, so let me get the fee.
So whatever that number, it's that number times however much you're paying; is that right? COMMISSIONER KAMMERDEINER: Yes.
Now, does the City make or generate any revenues from this arrangement? COMMISSIONER KAMMERDEINER: Again, I'll get the exact amount for you. There is a small amount that comes to the City for the processing charges that we incur in terms of actually implementing the service. It's a few cents on each transaction.
So in the example earlier, if a person paid their bill 19 and there was a $18 charge, how much of that goes to the credit card company and how much comes back to the City? COMMISSIONER KAMMERDEINER: That's the kind of thing I have to get for you so that we have a clear picture.
Now, what is the 401 benefit to the citizen to pay on-line, end up with, even if it is 2, 2 and a half, and a quarter, whatever the number is, pay a 2 and a half percent or so fee, which on a fairly large bill could be some amount of money, versus getting a stamp and putting it in an envelope and writing a check? COMMISSIONER KAMMERDEINER: That would be for each person to determine. I know that a number of people will pay --
Isn't it something you're trying to promote? COMMISSIONER KAMMERDEINER: A number of people would find it very beneficial to get miles or points, depending upon the kind of credit card they have. And they find that the benefits that they get from processing this payment on their credit card far exceeds the fee that they pay in order to have the convenience and the service paying with the credit card. So that's going to be an individual decision in terms of whether it's worth it to them. Some people will say that that fee is too high and it is not worth it to 402 them, they would rather write a check and put a stamp on it.
Do you have any expectation that to the extent that we make it easier for people to pay the different bills that you might actually increase collection rate? COMMISSIONER KAMMERDEINER: I have said in discussions about this internally that if we want people to pay using the credit card, and that is our preferred method of having them pay because it is cost effective for us, then we should absorb that fee, whatever that fee happens to be for the payment. To the extent that we're provide this as a service for the taxpayer or citizen, then they should be paying the fee for the use of that service. At some point in the future after we have enough use of the service, we can start to do that kind of analysis effectively, see what charges from the bank that we have now for processing checks that we no longer have because a credit card transaction replaces it. Those analyses 403 really have to take place after we have some experience, and then I think we will be recommending that we absorb the fee for certain types of transactions.
Let's move to the -- I don't know whether you were able to find your document. COMMISSIONER KAMMERDEINER: Yes, I was.
First, on the Water Fund, am I reading this correctly, that as of June 30, 2004, there was a little over $170 million in outstanding water bills? COMMISSIONER KAMMERDEINER: Yes. We've talked before in some other settings. We have receivables for 15 years on the water database. And so these are receivables that have been accumulated over a long period of time.
That seems to break down 106 million in the doubtful collectable and 64 million in the collectable. I mean, at what point in time do you just decide that you're not going to be able to 404 collect a certain amount? I don't know if we're able to write a debt off, but why do you keep carrying it? COMMISSIONER KAMMERDEINER: After 6 years, we actually take it off the database. 7 In between, we have identified accounts that 8 are older as being less likely to be 9 collected, and that's why you see such a large 10 amount in the doubtful account column. We 11 have different standards according to the type 12 of charge because there's some things here 13 that are less likely to be collected than 14 others. 15
When you flip the next few pages -- I need to walk through this a little bit. Is the second page a continuation of the first page? COMMISSIONER KAMMERDEINER: I think there may have been attached in the wrong order. I apologize for that. The last here that starts out with General Fund property taxes should actually be the first of those two pages. It was collated wrong.
I understand. 405 So let's go through this. We've got General Fund property taxes. These numbers are all as of 6/30/04. COMMISSIONER KAMMERDEINER: Correct.
$160 million. COMMISSIONER KAMMERDEINER: Yes, but I call your attention to the first line which is real estate current. That was not yet delinquent at June 30th. So that 49.8 million that you see there was really not delinquent until January 1 of 2005 if it was still due at that point.
So why don't we call that at the moment 112 million. COMMISSIONER KAMMERDEINER: Yes.
Then we have self-assessed taxes, a total of 291 million. And then sales, miscellaneous, real estate transfer tax and meter sales of million, 21 giving us a grand total of somewhere in the 22 neighborhood of probably $425 million? COMMISSIONER KAMMERDEINER: Some of that would have been really current. For example, on the sales tax and the realty 406 transfer tax, meter sales, those were due on June 30th, but they were timely paid in July. When you take a snapshot at a particular point in time, and this is true of most of the self-assessed taxes as well, some portion of that money that is due on a given day may still be timely in its payment in the following month. So it's a little bit misleading in terms of looking at it as being a long-term delinquent.
And then $140 million related to either traffic court or other? These are from agencies? COMMISSIONER KAMMERDEINER: The other there is primarily the very old L&I demolition, stucco, cleaning and sealing. You'll notice that we have classified all of that as being uncollectible. It's very unlikely that we'll collect anything on those.
That's $96 million? COMMISSIONER KAMMERDEINER: Generally speaking, if L&I has gone in to do cleaning, sealing, stucco work, demolition, 407 it's because the owner of that property has walked away from the property and is not forthcoming in actually paying. We sometimes collect on that as a result of liens that are filed so that if a property actually sells, we'll get something. But by the time it reaches our agency receivables, most of that's already been dealt with. By the time Revenue gets it from L&I, we're talking about something that's two or three years old. We've used collection agencies and received under 1 percent in terms of payment from a collection agency that's been out there attempting to collect on those debts.
And then it looks like maybe another 11, maybe $12 million between aviation, hotel, vehicle rental, and a couple others? So is it fair to say that we're looking at, at that point in time, somewhere in the neighborhood of about $480 million in outstanding taxes? COMMISSIONER KAMMERDEINER: A substantial portion of which we don't expect we'll ever be able to collect, but yes. 408
I think some questions were asked earlier about our collection efforts and outside organizations and the like? COMMISSIONER KAMMERDEINER: Yes.
I'll look forward to receiving that information. I just have one last question. On real estate taxes -- I'm sorry. I think business privilege taxes, you're showing in your document estimated collectable of $40 million as of 6/30/04, but in the budget detail book it appears that you're showing $42 million. It's on of the budget book. And for wage tax, you seem to be showing $78 million but only $19 million being collected in FY '06. It just seems to be a little bit of disparity between the -- COMMISSIONER KAMMERDEINER: I see that. I don't at this moment have an explanation for you about the differences in those numbers. I'll see if I can determine how they were achieved and why they're different. 409
That would be helpful. Thank you. Thank you, Madam Chair.
You're welcome, Councilman. Commissioner, can you give us just a little explanation as to the over $1 million estimated uncollectible with the Aviation Fund? COMMISSIONER KAMMERDEINER: Most of that --
Why would that be? COMMISSIONER KAMMERDEINER: Most of the Aviation Fund activity is really handled by them. I can't give you an explanation on that without checking with Aviation. They do the primary collection work on that. I will check with them and get a full explanation for you.
Would you advise us please? The Chair recognizes Councilwoman Blackwell. 410
Thank you, Madam President. I have several questions, but I think I'll ask my last one first at least. I'm concerned about where you talk about incoming calls and services. It's very difficult to read that little information under the chart. It's three lines. But we're concerned about you're increasing the percentage of incoming calls and servicing, because based on the chart it appears that you have more calls but you talk about the inability to answer them. COMMISSIONER KAMMERDEINER: That is correct. Our staff has declined to a point that we're unable to answer as many calls as we had been in previous years. We were recently authorized to hire some additional staff. They started coming on board at the end of December and early January. They have to go through a substantial training period in order to learn either the water and sewer side of the operations or the various taxes, so they're not yet on the phones. They're still 411 in a learning period. We expect that in the next month or so the water call center was augmented by these new employees. There were nine hired and are going through training now, and we have authority to hire nine more as soon as we get through this group. On the tax side, we've recently hired I think it's people who are going 10 through training right now. In terms of 11 training on the tax side, it's actually a much 12 longer learning curve period. They really 13 won't be able to be on the phones during this 14 tax season but should be starting to work on 15 phone support and walk-in support as well in 16 the next several months and they'll graduate, 17 build up their skills and knowledge, and 18 hopefully by this time next year will be full performance in terms of helping us to keep those numbers down. When you don't answer calls when they first come in, people call again and again, so our number of calls continues to increase and we know and understand that the taxpayer frustration increases with that. And 412 believe me, it increases our frustration as well because we know we have many more calls out there than we can answer. Unfortunately, we're suffering through it this year until we get fully trained staff on the phones to be able to resolve those issues. We're working hard at having that happen.
Can I have point of clarification, please? Commissioner, in Fiscal '05 you were budgeted for 300 full-time positions in the General Fund. And you are requesting 264 full-time positions for Fiscal '06. COMMISSIONER KAMMERDEINER: Our actual filled position in '05 went down to about between 220 and 240. I forget the exact number that we went down to at our lowest point before we started to hire.
But you were budgeted 300 in '05. COMMISSIONER KAMMERDEINER: We are budgeted for more positions than we were authorized to fill through the Budget Bureau, yes. 413
Is it 33? But the Commissioner was saying that they hired or they were hiring 18? Is that what 8 I understood you to say? 9 COMMISSIONER KAMMERDEINER: Yes. As 10 of the last pay period, 2/27/05, we had 268 11 employees in the General Fund. We were down 12 to -- I think it was about 240 employees in 13 the General Fund before we hired this most 14 recent group. 15 We've been very hard hit by DROP. 16 And in the last Fiscal '03 and Fiscal '04 in 17 each year we actually had a decline of 24 18 positions in the General Fund in terms of year-end numbers each year. So that from Fiscal '03 and Fiscal '04 alone, we lost 48 people.
Commissioner, I am looking on -- Councilwoman I'm sorry. This has to be clarified for me. 414
On Section 5 10, , you were actually budgeted in '05 for 300 full-time positions. COMMISSIONER KAMMERDEINER: I understand that, but we did not have that many bodies.
Why not? Why wouldn't you have that many bodies if you're budgeted for them? COMMISSIONER KAMMERDEINER: Because we weren't authorized to fill them. We have to have approval from the Budget Bureau in order to fill, and we were not authorized to refill positions when we lost the people. We went for four years without really hiring much of anyone. Yet, during that time period --
Then I would ask you, what is the additional amount of revenue that you would collect if you were restored the 300 in your budget? COMMISSIONER KAMMERDEINER: I can't give you a dollar estimate on that, but I know 415 we were --
You must have some indication. COMMISSIONER KAMMERDEINER: We were barely able to just keep things moving, thanks to automation and increases in technology, we've been able to keep the basic operation moving absent the staff. But now we're not providing the taxpayer service because we're missing those staff people. The basic money comes in with the bills, but we do find that we do have a delay payment and many cases a lack of payment because you don't have staff to provide taxpayer service Taxpayer services in 2000 we had 120 people, as of June 30, 2000. And on June 30, 2004 we had 76. And we were down to 72 by the end of December of '04. That's where we've hired most of the people recently.
Thank you 416 very much. I agree. How many employees are retiring under the DROP Program? COMMISSIONER KAMMERDEINER: I didn't bring the DROP numbers with me, but I think it's something like in the next year. I 8 can get the exact figures for you year by year 9 and we'll divide them between General Fund and 10 Water Fund because that's instructive, too, in 11 terms of which fund they hit. 12
And what 13 was the imaging project that was eliminated 14 that you refer to? 15 COMMISSIONER KAMMERDEINER: Which project?
Imaging project. COMMISSIONER KAMMERDEINER: It wasn't a project that was eliminated. We had been imaging for our checks and our tax returns, and the technology was becoming outdated. We work with MOIS on a new RFP and last year implemented a new imaging system that's Web based that provides easier and 417 better access to those images by our employees. And it also has now become the City standard and so other departments can, with authorization, access those images. For example, the Law Department will now be using the images of checks in their execution on judgments to help identify where taxpayers that they're seeking have bank accounts. So if that taxpayer has paid us in the past, the Law Department would be able to access the image of the check on which that payment was made and determine where they might be able to go to attach assets to execute on a judgment.
How much was the loan from the Productivity Bank? COMMISSIONER KAMMERDEINER: I will have to get the exact amount. It was a small dollar amount. It was, I believe, under $250,000, but I'll get the exact number for you.
How much is the new Internet system intended to save? COMMISSIONER KAMMERDEINER: How much? 418
How much is the new system, this new Internet system you refer to on intended to save? You said you had a new system. COMMISSIONER KAMMERDEINER: You're referring there to the credit card process. It's really not intended to save as much as it is to provide a convenience for taxpayers and another avenue of payment. We will ultimately see some savings in terms of check processing and our ability to put the account information on-line, post it to the appropriate accounts more quickly. But I think most of what was intended there was the increased convenience. But I will verify whether we had some savings also built into that productivity application.
Thank you. Is the $44,883 in Class 800 funds a one-time payment? COMMISSIONER KAMMERDEINER: I believe it's two or three payments -- I'm sorry, I'm being corrected. It's four payments all together. So that would be a little over $200,000 for the total amount that 419 we're repaying.
Okay. With regard to our collection agency contracts, how much money is owed the City and how much do we plan to recoup through this collection agency? COMMISSIONER KAMMERDEINER: We've just been talking in terms of the receivable reports about the overall amounts that are owed to the City. Not all of that will go to collection agencies, but because some of that's been staged to the Law Department for enforcement, we tend to stage to the collection agencies the amounts that more recently become due within a short period of time they become delinquent. And so that's really a current and ongoing amount. And the amounts that we refer will really depend upon how much becomes delinquent during the life of those contracts.
Finally, we noticed a decrease of 1.5 million in Class 200 funds. What contracts from the last fiscal year have been eliminated from this fiscal year? 420 COMMISSIONER KAMMERDEINER: You must be looking at the Water Fund when you're asking that question.
. COMMISSIONER KAMMERDEINER: Most of the contracts in the Water Fund right now in addition to the collection agency contracts relate to the new customer billing system. I think if you look at -53, you will see there a comparison of the Class 250 and Class 251 obligations, the estimated obligations from '05 and obligations that we're asking for funding for Fiscal '06. And the primary differences are in terms of less money for Oracle because we'll be at the later stages of payment on the contract for the Oracle Development Services, a reduction in the amount of money for the quality control consultant, and a reduction in the amount of money for the project management contractor. So it's an combination of support service contracts for the development of the billing system because we expect that billing system to be completed before the fiscal year is 421 over, but part way through the Fiscal '06 so we won't have full-year costs on those contracts.
You're welcome. Are there any other questions of the Commissioner? (No response.)
Seeing none, I thank you. COMMISSIONER KAMMERDEINER: Thank you very much.
Our next witness is the City Treasurer. Good afternoon. Welcome. We do have a copy of your testimony. We will give it to the stenographer. She will transcribe it in full. And I would ask you to simply abbreviate your remarks. (Full testimony attached to transcript.)
Sure. Good day, Madam 422 President and Members of City Council. I am John Nacchio, City Treasurer, and I appreciate the opportunity to testify before you about the FY 2006 Operating Budget. In this budget, there are some reductions in staffing. As the testimony reads, the other classes remain the same. My enthusiasm for the department is to bring a more proactive approach to the department and make it more contemporary in the coming Fiscal Year.
Could you please forward to the Chair a copy of your resume. As you're well aware, there have been 423 a number of concerns, serious issues related to the office. I don't know you and want to get to know you, and one way of doing that is knowing where you've come from. Tell us a little bit about your background and how you've been in the department.
I've been a lifetime resident of the City of Philadelphia, educated in public school, South Philadelphia High School. I've gone to Drexel University both for undergrad and for my MBA.
And more importantly, you still live in South Philadelphia.
I live in South Philadelphia, one of the more active parts of South Philadelphia. And I came with the City in 1973 and I've been in a variety parts of the Finance Department, be Operating Budget, the Capital Budget, and also City Treasurer's Office. For the last four years, I've been involved in the investments in the Treasurer's 424 Office handling the cash, management side of that. And in April, I was appointed acting City Treasurer. And this month, the Mayor appointed me to be treasurer.
You're welcome. Are there any other questions of Mr. Nacchio? (No response.)
Thank you very much. The Committee will stand in recess until tomorrow, March the 9th at 10:00 a.m. Thank you all so very much. (Council recessed at 3:45 p.m.) - - - - 425 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Tuesday, March 8, 2005, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE OF THE WHOLE FY '06 OPERATING BUDGET _________________________ Lisa C. Bradley, RPR