COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania November, 18, 1998 9:38 a.m. - - - Bill No. 980549 - Convention Center Garage TIF. Bill No. 980705 - Jump Street TIF. Bill No. 980719 - St. James Court TIF. Bill No. 980746 - Brewery Park TIF. Bill No. 980794 - Amending Subcode PM of Title 4 of The Philadelphia Code entitled "The Philadelphia Property Maintenance Code". . . Bill No. 980621 - Sidewalk Behavior Bill No. 980641 - " " Bill No. 980685 - " " Bill No. 980715 - Re Naming of Public Buildings, Facilities (Full Text of Bills Attached.) PRESENT: COUNCIL PRESIDENT JOHN F. STREET COUNCILWOMAN AUGUSTA A. CLARK COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DAVID COHEN COUNCILWOMAN ANNA CIBOTTA VERNA COUNCILMAN JAMES F. KENNEY COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK DICICCO COUNCILMAN RICHARD T. MARIANO COUNCILMAN W. THACHER LONGSTRETH COUNCILMAN FRANK RIZZO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 PUBLIC HEARING - COMMITTEE OF THE WHOLE I N D E X Page TIF Bills William Hankowsky, President. . . . . . . . . 5 Philadelphia Industrial Development Corporation 6 Brett Mandel, Assistant City Controller . . . 69 Kevin Babyak, Assistant City Controller 7 Sarto Schieckel . . . . . . . . . . . . . . . 80 Architectural and Urban Designer John Lawson, John Lawson Architects . . . . . 97 Center City resident Bob Pearson, Private Citizen. . . . . . . . . 100 Philadelphia Resident Bill No. 980794 Blaine Bonham, Jr., Executive Vice President 103 Pennsylvania Horticultural Society, Deborah McColloch, Deputy Director . . . . . 125 Office of Housing and Community Development Phyllis Martino. . . . . . . . . . . . . . . 163 Director of Economic Development, IMACT Lucy Ramos, Community Leader . . . . . . . . 164 North Philadelphia Empowerment Zone Miss Bodie . . . . . . . . . . . . . . . . . 167 28th Ward, 6th Division Linda Wallace, Block Captain . . . . . . . . 170 1700 block of Marshall Street, C. Charles Carmichael. . . . . . . . . . . . 173 North Philadelphia Resident Rosa Lacend. . . . . . . . . . . . . . . . . 176 Mt. Airy Civic Association 3 PUBLIC HEARING - COMMITTEE OF THE WHOLE (Index, cont'd.) Helen Green, Block Captain. . . . . . . . . 179 for Southwest Germantown Reger Street. Maryanne Patterson, Block Captain. . . . . . 182 1500 block of Wade Street Janet Bernstein. . . . . . . . . . . . . . . 183 Frankford Group Ministries Paul Malvey. . . . . . . . . . . . . . . . . 184 New Kensington Community Development Corporation Sidewalk Behavior Bills Michael Nardone . . . . . . . . . . . . . . 188 Deputy Managing Director Special Needs Housing Estelle Richman . . . . . . . . . . . . . . 191 Commissioner for Public Health John Gallagher, . . . . . . . . . . . . . . 193 Advisor to Police Commissioner Timoney Dean Kaplan . . . . . . . . . . . . . . . . 200 City's Budget Director Paul Stienke, Executive Director. . . . . . 212 University City District. Amy Williams, Chair . . . . . . . . . . . . 212 University City Community Council Abdul-Malik Muhammad. . . . . . . . . . . . 213 Ruth Burchette, Founder . . . . . . . . . . 254 Heritage Community Economic Development Corp. Paul Stiencke, Executive Director . . . . . 259 University City District (No testimony on Bill No. 980715) 4 11/18/98 COMM. OF THE WHOLE - TIF BILLS P R O C E E D I N G S
Good morning, ladies and gentlemen. This is a hearing of the Council Committee of the Whole. We have a whole series of bills that are scheduled to be heard today by us. Bill No. The 980621, 980641, 980685, 980715, all of which have to do -- no, except 980715 -- have to do with the sidewalk behavior bill. Then we have Bill No. 980715 regarding signs, naming city name -- signs naming city building. And then we have Bill No. 980794, which extends the emergency nuisance abatements programs to cover vacant lots. In addition to those bills, we have four bills which cover proposed Tax Increment Financing Districts. What the Chair will do, at the request of Mr. Hankowsky and representatives of the administration, is take testimony on the four Tax Increment Financing bills first. We appreciate their being here today. I understand that they have another presentation before another governing body, whose approval is important to the 5 11/18/98 COMM. OF THE WHOLE - TIF BILLS implementation of any of these bills, after which, we will hear the other bills. So if you are here on Bill No. 980621 or 614 or 685, or 980715 or 980794, which is the abandoned lot program, we probably will not be getting into those bills until about an hour or an hour and a half from now, at the earliest. So if there are people here on those bills, you have no 10 interest in the other, and you want to get lost for a little bit, this would be your time to take a break. Now, I'm advised that a quorum of the Council is present. And if I could have the attention of all Councilmembers, may I have the attention of all Councilmembers. I'd like to discuss with you what we do, how we handle the portion of the testimony that relates to the Tax Increment Financing Districts. We can do one of two things. We can have testimony on each of the bills, and then have discussion; or we could have testimony on all of the bills that are in front of us, all the Tax Increment Financing Districts, have the testimony on each of those bills, and then have discussion 6 11/18/98 COMM. OF THE WHOLE - TIF BILLS -- and anybody who has any question on any of Tax Increment Financing District bills that are in front of us, we can have that discussion. Having been through this before, I would prefer it if we just have the testimony on the four bills and then have anybody raise any questions that anybody may have on any of the bills. Is there anyone who objects to that way of hearing these bills? (No response.)
We'll just ask Mr. Hankowsky -- the testimony, I understand, has been made available to Councilmembers prior to this hearing. We could have him and Mr. Fina tell us about each of the projects, and then we can have a discussion of any that we want. Seeing no objections, the Chair recognizes Mr. Hankowsky. I will first read titles of the bills. We are now on a public hearing on: Bill No. 980549, an ordinance creating the Convention Center Garage Tax Increment Financing District; Bill No. 980705, an ordinance creating 7 11/18/98 COMM. OF THE WHOLE - TIF BILLS the Jump Street Increment Financing District St. James; And Bill No. 980719, an ordinance 5 creating the St. James Court Increment Financing District; Bill No. 980746, an ordinance creating the Brewery Park Increment Financing District (Bill Hankowsky comes forward.)
Thank you very much. Good morning, President Street and Members of City Council and today's Committee of the Whole. My name is William Hankowsky, and I'm the President of the Philadelphia Industrial Development Corporation and am appearing also on behalf of the Philadelphia Authority for Industrial Development or PAID. I'm here today to testify in support of Bill No. 980549, Bill No. 980705, 980719 and 980746. Today's hearing is required by the Pennsylvania Tax Financing Act to create or amend a TIF District. Should the committee approve these four bills, the TIF Act would then require 8 11/18/98 COMM. OF THE WHOLE - TIF BILLS that Council wait until its meeting of December 10th for your second reading and final passage pursuant to the Act. Since the introduction of the four bills, PIDC representatives has met with City Council, Council staff, and representatives of the School District to review these project plans. On Monday November 9, 1998, the School District agreed by resolution to participate in all four of the districts before you today should they be created by City Council. For the remainder of my testimony, I would like to describe each project, review its benefit to the City and School District, and summarize any changes that have been made since introduction. These changes would then be reflected in the project plans. They've already been -- the new project plans have been provided to the city clerk. Let me start with the Convention Center garage. Approval of the Convention Center Garage TIF will enable construction of a 7-level parking structure to accommodate approximately 900 cars and 26,250 square feet of retail at the ground 9 11/18/98 COMM. OF THE WHOLE - TIF BILLS level. This development will include foundations and column reinforcements for future development above the garage. million in incremental tax revenues over the 20-year life of the TIF. million in use-and-occupancy taxes. And I should note here that this represents 50 percent of the U&O tax; the remaining 50 percent would be continued to be provided to the School District. $600,000 in sales tax and $300,000 in business privilege taxes. 5 million to the School District over the 20 years the District exists. Since introduction, several changes have been made to the project plan. First, the property owner Filbert Streets Associates, will be composed of Theodore 10 11/18/98 COMM. OF THE WHOLE - TIF BILLS and Maria Bollt and Parkway Corporation, but they may or may not be in that partnership in a 50/50 general partnership, which is the way it was in the plan. The percentage may change once they finalize the partnership. Number 2, increases in total project costs up to percent, which were originally to 9 be funded from "non-TIF sources," now will be more 10 specifically funded from private debt or equity. 11 Number 3, incremental use-and-occupancy 12 taxes have been limited by excluding any increases 13 due to the millage rate. 14 Number 4, the prepayment provision in 15 the TIF Note has been clarified to indicate that only the principal on the TIF Note might be prepaid. Number 5, the substitute loan provision has been clarified to indicate that the refunding is capped at the outstanding principal balance of the TIF Note at the time of the refunding. And 6 and finally, a new project schematic has been submitted that eliminates the pedestrian bridge to the Convention Center and reduces the Arch Street ramp area from 30 to 15 11 11/18/98 COMM. OF THE WHOLE - TIF BILLS feet in width. The project plan, as I mentioned, as been restated to reflect the changes made since introduction is on file in the city clerk's office.
I also want to note on this project, an agreement in principal has been reached between Parkway and the Reading Terminal merchants, whereby a discounted parking program would be put in place to benefit the Reading Terminal using this garage in order to provide them with a solution to a long-term problem, which is a parking solution for the market. Jump Street. Approval of the Jump Street TIF will enable construction of a 245,000 to 320,000 square foot structure to accommodate retail space, a movie theater, and surface parking. 4 million in incremental tax revenues. 4 million in sales tax. 12 11/18/98 COMM. 4 million in tax revenues to the City, and 2 million to the School District over the 20 years the District exists. Since introduction, several changes have been made to the project plan: Number 1, certain residential properties which front on Cecil B. 7 acres to approximately 5 acres; Number 2, tax revenues were revised to show what I guess we now call the "liquor-by-the-drink tax," benefitting the School District. 4 million. And a decrease in the base use-and-occupancy tax from 6,000 to 5400. 4 million in the project plan. Tax increments 13 11/18/98 COMM. 4 under scenario B; Number 3, the District effective date was changed from July 1, 2000 to December 31, 1999 to more accurately reflect the project construction schedule; Number 4, the method and time of the financing section was amended to note that private funding may be substituted for all or part of the HUD 108 funds without further amendment to the project plan; 5. The prepayment provision of the TIF Note has been clarified to indicate that only principal on the TIF Note may be prepaid and that additional tax increments may be used to reimburse a guarantor, if any, of the TIF Note. 6. The substitute loan provision has been clarified to indicate again that refunding is capped at the outstanding principal balance of the TIF Note at the time of refunding; And 7, the section concerning related code changes was amended to indicate that a streets ordinance to widen and close off portions 14 11/18/98 COMM. OF THE WHOLE - TIF BILLS of Carlyle Street will be required in addition to several zoning variances and permits. And those, obviously, will come before Council as this project proceeds. Again, the project plan has been restated and is on file with the chief clerk. St. James Court. Approval of the St. James Court TIF will enable construction of a 33-story tower and renovation of existing buildings to accommodate 328 residential units, 90,000 square feet of common or service space, 17,000 square feet of retail space, and a 332-car parking garage. 7 million in incremental tax revenues over 12 years. I should note that this is the one TIF that is not the full 20, but simply 12. And this was done in part to emulate the tax abatement we have put in place through Council's action to rehab older buildings and give them a 10-year abatement, so it was sort of a parity argument that we used here. Incremental tax revenue that is 15 11/18/98 COMM. 4 million in real estate states and 300,000 in use-and-occupancy taxes. 9 million in tax revenues to the City and 8 9 million to the School District over the 20 years 9 of the District. That's just to give you apples 10 to apples in the 20 years. 11 Since introduction, again, several 12 changes have been made to the project plan: 13 1. The gross square footage has been 14 reduced by 10,000 to 554,000. And the number of 15 apartments has increased from 320 to 328; 16 2. The number of construction jobs has 17 been corrected to 324 down, from the initial 612. 18 Project costs have been increased by 2 million, 19 which increase will be funded privately; 20 3. 9 million. 6 million to 9 million. And the 25 tax increment has increased from 15 million to 16 11/18/98 COMM. 7 million; 4.
Increases in initial project costs up to percent, which were originally to be 5 funded from "non-TIF" sources, will now be more 6 specifically funded from private sources; 7 5. Again, the prepayment provision of 8 TIF Note has been clarified that only the 9 principal may be prepaid; 10 6. And, again, the substitute loan 11 provision has been clarified that you can only 12 refund the outstanding principal balance of the 13 TIF at the time of the refunding. 14 And, again, the project plan has been 15 restated and submitted to the chief clerk. The final TIF is Brewery Park. Approval of the Brewery Park Tiff will enable renovation of a 250,000-square-foot, 7-story building to accommodate a supermarket, drug store, large apparel store, and several smaller retail outlets. 5 million in incremental tax revenues. 9 million in real estate taxes, 17 11/18/98 COMM. 7 million in sales tax. 8 million in revenue to the School District over the years of the 8 TIF. 9 The changes in this project plan are 10 two: 11 One is the prepayment provision 12 clarifying that only the principal of the Note may 13 be prepaid; 14 And the second is the clarification 15 that if there is a refunding, it can only be for 16 the outstanding principal balance. 17 And, again, the project plan has been 18 restated and filed with the chief clerk. 19 In closing, I would like to note for 20 the record that the analysis of each of the TIF Districts that PIDC has proposed indicates that the City and the School District will receive more tax revenue during the term of the TIF than if they had not approved the District and no project had proceeded. In essence, the City and the 18 11/18/98 COMM. OF THE WHOLE - TIF BILLS School District are generating more than enough tax revenue for the TIF Notes by stimulating development of underutilized land that would not occur but for this TIF approval. We would ask for your approval of the four new TIF bills. And, again, we don't really need a suspension of the rules. What we need is, first reading can happen any time, but final passage can happen no sooner that three weeks, or your session December 10th. I should note that there are representatives here from each of the four projects from the development teams should you have any questions that you would like to address to them directly. Thank you.
Thank you very much. Is there anything else Mr. Hankowsky? Mr. Fina, do you have any remarks?
Thank you very much. The Chair recognizes Councilman Nutter.
Thank you very much. Good morning, Mr. Hankowsky and Mr. Fina. 19 11/18/98 COMM. OF THE WHOLE - TIF BILLS Mr. Hankowsky, I actually do not have any direct questions so much about the four TIF Districts in front of us. I do want to focus, though, on a couple policy areas and on the last page of your testimony. We've had discussion in the past with regard to these TIFs. I guess it's important for me to state for the record that I do think that the tax increment financing tool is a good tool to have in the arsenal and, when used appropriately, can, in fact, stimulate development in areas where virtually nothing may take place under certain circumstance. So I start with that premise. Can you refresh my recollection, though, based on the statute that allows us to do TIFs, what tax are eligible to be "TIFed," if you will, and what taxes are not eligible?
Yes. Under the statute, the taxes that are "TIF-able" -- if that's a term -- are real estate taxes.
It is in Philadelphia. Real estate taxes, use-and-occupancy taxes, which 20 11/18/98 COMM. OF THE WHOLE - TIF BILLS are 1 percent of the sales tax, and the business privilege tax. Taxes that are not TIF-able include the wage tax, transfer tax, amusement tax, parking tax, the liquor-by-the-drink tax. So those are not TIF-able.
Okay. And so of the taxes that are eligible -- real estate tax, use-and-occupancy tax, real estate tax -- there's a split of 45-55 between the City and the School District, and use and occupancy is all School District?
The 1 percent sales tax essentially comes to us to help fund our outstanding PICA debt. And the last was --
Business privilege taxes all of the City of Philadelphia. But between and amongst that array of four, certainly real estate use and occupancy are the largest generators of tax dollars. Well, business privilege is significant in the City. 21 11/18/98 COMM. OF THE WHOLE - TIF BILLS
Well, in terms of these kinds of transactions specifically versus sort of the City General Fund budget, yes, real estate and use and occupancy, in almost all instances, out of the TIF-able taxes, are the largest generators. And additionally, from a financing perspective, in other words, understanding that what we really do here is provide a revenue stream that services a debt service on effectively a mortgage. And the technique we use here is to, in fact, say to the prospective developer, It is your obligation to go find these funds, borrow them, and then we allow you to use this stream to pay them off. So in terms of their then subsequent negotiations with that lender, the real estate and U&O are viewed as the most stable, predictable, dependable debt-service payers.
Okay. And that is why, in most of the deals, with the exception of one we're seeing in recent times, when the project plans are on the fact sheets, when we talk about the return back off of those taxes, out of these deals, that is generally why there's a fairly 22 11/18/98 COMM. OF THE WHOLE - TIF BILLS significant difference between the taxes coming back to the City versus the School District because of the impact that the "TIFing," if you will, of real estate and use and occupancy has a much greater impact on the School District than it does on its City of Philadelphia. Is that a fair statement?
That's a fair statement you're right. If you look at the history of the program, you know, there have been instances where we've done just real estate. So in that instance, the School District gets all the U&O. And if it's a proportionality -- if the proportionality seems good, if you just do real estate and U&O, the proportionality doesn't look as good.
And because of the statute, I mean, we have no ability, unless someone was to go off and want to spend a couple years of their life trying to rearrange the array of taxes that you can abate or not abate, we're 23 11/18/98 COMM. OF THE WHOLE - TIF BILLS stuck with the four, and we try do the best that we can by way of putting these deals together. Is that accurate?
You know that I've expressed a concern -- both privately and, I believe, in past public hearings publicly, and I'm sure we'll continue this discussion -- about the impact of these deals when you break out the taxes or look at what's coming back, the disparity between the City and the School District, but we are stuck with the array that. We've also had discussions, though, about how we can rearrange the returns to those two entities. And I've pretty much taken the position that between these two separate governmental entities, the City is certainly in a much better fiscal -- not perfect, but certainly much better as compared to the School District and what opportunity is there to change the mix on the return of whether, because of statute constraints or policy positions that we take on how the taxes are going to be redirected once they come back. I asked you about a day or so ago, and 24 11/18/98 COMM. OF THE WHOLE - TIF BILLS you and Mr. Fina probably unfortunately put in a few extra hours putting together a chart for me of all of the TIFs that are even done -- there are eight -- and now proposed, which are six, four of which are in front of us today and the other two will have their own public hearings, and I appreciate that. Do you have copies of that chart that I asked you to put together?
Right. Well and you didn't correct the mistakes I didn't catch, right? (Laughter.)
If I could ask the sergeant-at-arms to get those charts. And I don't want to go through all the mechanisms, but it does lay out what comes back to the City over the 20 years and over the annual.
It looks at the totals on the private financing that's gone into all these deals as well as the public support, 25 11/18/98 COMM. OF THE WHOLE - TIF BILLS whether through TIF or other sources of funds.
And, one, from a development standpoint, it tells a pretty good story, that we have with these four deals about $2 billion worth of investment taking place throughout the City. And in many of these deals, I think we could agree probably would not happen without a TIF. There are others that we may have some dispute about, but we won't argue about those here in this forum. Is there any ability or is there any prohibition when you look at the difference between what comes back to the City under the TIF circumstance or if you evaluated all these deals without a TIF and if they all happened, which we could agree may not be the case, but if they all happen without a TIF, then there's a fairly significant difference between what comes back to the City and the School District tax-wise versus what comes in under the TIF circumstance. And I would only pose the question for today as to whether or not we can try to evaluate these deals and look at the mix of taxes that do 11/18/98 COMM. OF THE WHOLE - TIF BILLS come back under TIF or what would come back with no TIF and try to make up the gap or the deficiency between what the District could get and what the District will get. If you believe in the numbers on this sheet as compiled by yourselves, we do make presently some annual contribution to the School District by agreement, and I know it's been a one-time thing for the past couple years. But if there's a policy decision made that we would like to at least leave them in a hold-harmless position, I would like to at least pursue and explore that possibility. The second is -- and we've asked about this before -- is the policy on how you decide whether a project gets a TIF or not. And I don't want to take these four projects through that discussion. What I would like to ask is, soon, and very soon, if we could have anything that is written as to how you evaluate whether a deal should get this particular tool or other tools that we've put on the table. Because I am left in a position and we seem to create an environment that says if you don't ask for one as a developer, you could virtually be considered negligent -- 27 11/18/98 COMM. OF THE WHOLE - TIF BILLS
-- on your client's behalf. That almost anyone with a good idea or a good proposal could or should, in fact, get this tool and -- I recognize you have to make a fair amount of investment to encourage companies to get here. My concern is, where does it stop?
And how far do we go? And the numbers are starting to get up there. Your chart indicates that we are close to about a half a billion dollars in TIFs for those 14 deals.
Are there any statutory caps on this? Or how far can we go?
The statutory cap is a function of your total assessed valuation. You cannot TIF more than 10 percent of the total assessed evaluation of the City. That's the what it's capped. We are far from there.
I think our total assessed valuation is somewhere in the trillion-dollar range or something, isn't it? 28 11/18/98 COMM. OF THE WHOLE - TIF BILLS
Okay, all right. Those are the two concerns that I have. The deals are the deals themselves, I'm not going to nitpick through the particulars.
Can I just make two comments in response. I appreciate -- those really weren't questions per se. But, one, on the issue of how this technique affects the City versus the School District, and as you indicated, we've discussed this several times and I'm not here today to speak on behalf of the administration (unintelligible) on School District funding, which is a complex issue.
No, we could bring one of the administration people up and rake them over the coals.
But I think the only point I want to make is that on the one hand, we're sort of given a statute that Pennsylvania wrote, the legislature wrote, that was a kind of one-statute-fits-all.
So, you know, it may not have included wage tax because, in fact, you know, not many communities have it and we have the biggest one, etc. So we kind of looked at it, and okay, what does everybody have more in commonality.
And then they made some decisions, and they did it. So we're basically handed a technique and we attempt to use that technique the most efficient way we can to effectuate the projects. But then the question does become one that's at another level, which is then, given we've done that, how between the City and the School District should there been some subsequent reconciliation of the support each has provided to these projects. And I don't deny that's a question that deserves some discussion at some time.
-- the direct 30 11/18/98 COMM. OF THE WHOLE - TIF BILLS discussion about the deals.
We could look at what happens at the end of the year --
We could take your numbers for what they are and say, Without a TIF, the District would get in annual revenues for these deals $25 million a year. 12
Right. We did -- at different points, we have taken a look at whether there's, in effect, any way within the TIF process to do this reconciliation. And it seems as if legally, there is not.
In other words, if we don't TIF the tax or if we -- we can't in the TIF process then say, Okay, School District, now you're going to get the sales tax on this one.
I mean, you know, the 31 11/18/98 COMM. OF THE WHOLE - TIF BILLS statute says what happens.
I mean, if that's the constraint, I mean, then the question is, if the City, without a TIF, would get $59 million and the School District would get million, and that 7 with the TIF, the City gets 26 and the District 8 gets 11, then at least on the School District 9 side, there's a $14 million gap. 10
And then you ask, 12 Well, if the City's in a better financial position 13 than the School District and away from the TIF 14 project process and constraints, should the City, 15 in fact, do something with the School District to 16 get them back to where they would be without a TIF 17 for a project that might happen anyway? 18
I mean, that for me 20 is the question. And that's a function of who's 21 in the better position to do anything with their 22 finances, especially when you're talking about net 23 new money. 24
Right. And my only 25 last two comments, and I'll try to make them 32 11/18/98 COMM. OF THE WHOLE - TIF BILLS quickly is, we've tried to be sensitive to this issue generally.
So to the degree, except on the garage project, we sort of pushed back and said, You can't have all the U&O, how about -- you know, would 50 percent be enough so the District would have a revenue source.
There's one that's coming that is not a subject of today where, in fact, the U&O was not TIFed at all. So we try to be sensitive; though, in all cases, it doesn't work.
The second point I wanted to make -- my last point, actually -- is with regard to providing this technique and evaluating etc. PIDC, I guess we probably do about a hundred financial transactions a year, at least in the last couple years. Times have been good, so business has been good. And, as you indicated, we've got eight historic TIFs and 4 today and 2 33 11/18/98 COMM. OF THE WHOLE - TIF BILLS others in the process currently before Council. So this is not a technique that we aggressively -- we don't market this. We don't go out and say, Please apply for TIFs in the way we do, you know, let's all go after SBA loans and let's all go after State loans. We do look at transactions to see whether they can be done without this technique, through the more -- I'll use the term "standard economic tools" we have available. And so at least, for the record, I'd like to -- I mean, we look at this to some extent as a technique of last resort, one that we would not want to use, you know, all the time. And -- but when we get there, then we make a decision, an evaluation. And I appreciate -- we all then, in the end, share the judgment of whether without this technique can this proceed. And our judgments are that, in these cases, they would not.
My last comment would be, though, that the fact that they have been used and they are fairly well-publicized does put you, though, in a difficult position. 34 11/18/98 COMM. OF THE WHOLE - TIF BILLS
Yeah, we are saying "no" more often. That is accurate. People are now coming in, saying, Can I get one of those? and we say no. 6
Right. Because the last guy got one and I really need it.
And so you do reach a point where someone does have to say no. 11
And are there other things that we can do to help you out.
And, you know, versus, Well, you know, everybody else got one; I should get one.
So, I mean, I'm concerned about -- I'm not saying that you're over-abusing it.
Having 14 in 2 years, I mean, in the scheme of 2, 3, 400 transactions is not a whole lot. They're big, 35 11/18/98 COMM. OF THE WHOLE - TIF BILLS high-profile deals, significant impact, and I'm concerned about how far we go down the path without clear guidelines.
At least guidelines that are clear to us. They may be clear internally; they're not clear particularly to me or to the general public.
Mr. Hankowsky, one of Councilman Nutter's questions caused me to have a couple questions.
Do I correctly understand that the base taxes that are applicable to the City and the School District on these projects don't change?
They do not change. 36 11/18/98 COMM. OF THE WHOLE - TIF BILLS
You exclude the real estate, U&O, or any taxes that -- whatever it is currently coming in going to continue to come in.
Whatever it is currently coming in is going to continue to come in.
So that what we are doing is, we're saying, If we do this, if this is done, fundamentally, the private investment with the public investment is likely to yield this, whatever it is. And then we say, If it yields this, that this is likely to be divided into these parts: School District, City. Because it is only the School District and City that are the recipients of any of these taxes.
That is correct. Oh, except if we do a hotel, and then we -- 37 11/18/98 COMM. OF THE WHOLE - TIF BILLS
But our analysis is what we do here and how it benefits the City and the School District. I just want to make sure that in all of this discussion, nobody is taking anything away from the School District.
That's right. We're not taking anything away. The question is what if any rational approach we have to dividing up the increased spoils or taxes that result from this economic activity we're stimulating with the use of this device called "TIF." Is that correct?
And is it fair to say that the share of the real estate taxes that get pumped back into the City and into the School District, after whatever it is that happens, when the TIF Note is up and it's paid, it goes back to these two entities in the same proportionate share 38 11/18/98 COMM. OF THE WHOLE - TIF BILLS that it currently is.
Right. And is it also fair to say that the big benefit that the City gets that the School District doesn't get is the wage tax.
Right. So that when you see the difference in what the School District nets out of all of this and what the City nets out of all of this, the thing that drives the City number up is the wage tax. Is that it?
Oh, yes, absolutely. As you know, it's, what, 40 percent of our total General Fund tax revenue?
So that if we wanted to increase the yield of all of this to the School 39 11/18/98 COMM. OF THE WHOLE - TIF BILLS District, we have to do some kind of swap. I mean, we'd have to give the School District a higher percent of the wage tax, we'd have to at some point in time shift millage to the School District, from the City to the School District if we wanted the School District to get more money out of all of this. We couldn't do it in this transaction.
So that if, some years from now, this money starts materializing, and if we wanted to say, Well, we think we want to do a little bit more for the School District than what we would do is, we could shift millage from the City to the School District to compensate for the fact that the School District is getting less of a return out of the TIF program than the City is getting.
Yeah. If 100 percent of the real estate taxes went to the City and some percent of wage went to the School District, these 40 11/18/98 COMM. OF THE WHOLE - TIF BILLS numbers would change dramatically.
But the way that we could -- if we thought we wanted to as a matter of public policy put more money into the School District as a result of all of this, at whatever point in time, the appropriate thing to do or a legal thing to do would be to shift millage from the City to the School District because, in theory, the City would be getting the wage taxes. Councilman Nutter?
Thank you, Mr. President. Or, just on the same point, or, as I mentioned earlier, with kind of the ongoing one-time transfer that we've been making to the School District.
We could just increase the one-time amount by whatever the difference is between what the District would receive in a no-TIF situation versus what the 41 11/18/98 COMM. OF THE WHOLE - TIF BILLS District receives in a TIF situation. And based at least on the chart, that difference is $14 million. So we would say at the end of the year, I mean, whatever it is we're giving now, if we believe in the numbers, when all of this is done, we would add $14 million to that figure and then not touch millage rates or anything like that because we're going based on what the chart tells us and what the calculations are. We could do it that way.
Well, I think that's probably something we could do. We might want to allow some time to make sure that these numbers do what it is they say they're going to do.
And the reason I would suggest that is because we make that evaluation every year based on what's going on. If we start changing millage rates, then we're locked into that --
-- or every year, we're messing with tax rates and, you know, it then becomes the "T-word." 42 11/18/98 COMM. OF THE WHOLE - TIF BILLS If we make the annual decision based on what actually comes in and what the results are, you know, it's $14 million one year, maybe it's million, maybe it's million. But then we're 6 making that decision based on what actually comes 7 in without touching tax rates. 8
And if I could, one 9 supportive comment is, these annual numbers are 10 the average. It's the only way to do it. So we 11 look at -- you assume inflation and everything, so 12 it's not this number every year. It actually 13 starts much lower. It's much higher the 20th 14 year. This is simply the average. 15 So it's dangerous -- I just want to 16 make the point that when these open, you don't have 14 million that year.
Thank you very much. The Chair recognizes Councilman Cohen.
Mr. Hankowsky, can you explain to us the difference between a TIF and 43 11/18/98 COMM. OF THE WHOLE - TIF BILLS a tax abatement?
Yes. A tax abatement is a situation whereby, again, legislatively, there's State statutes and then generally Council must, by ordinance, enact those abatements. Whereby a party -- and, as you know, there are many -- there's a residential one and an industrial and commercial, and now we have one for rehabable old buildings. But nonetheless, whatever it is, where, if you execute a project pursuant to whatever the abatement rules are, that then for some period of time -- and they vary under the various programs -- you simply pay no real estate taxes on the increased value of whatever it is you have built. You continue to always pay what's called "the base," whatever it was when you started. And so it is a tax elimination program, so to speak. That's what an abatement is. It's a cost not levied on a project for a discrete period of time. What happens under a TIF is that all taxes are due and payable. In fact, you cannot have an abatement if you have a TIF. You must 44 11/18/98 COMM. OF THE WHOLE - TIF BILLS pick one technique or the other. So if you have a TIF, you pay all taxes due and payable and then by project, and this is the way it works under the statute. Then a determination is made and, again, with Council's concept to take that tax stream and, in effect, put it back into the project to pay the debt service on a borrowing. And that borrowing pays a portion of the cost of the project. Those are the distinctions between the two.
Specifically to a particular corporation, which is the more beneficial approach?
There would be no 17 general answer to that question because it may well vary by the corporation and by what it is -- what business it's in or whatever. The TIF technique deals very much with the question of financing a real estate development project. It really doesn't deal with the business that's going to necessarily occupy the space. So -- and what I mean by that is, when 45 11/18/98 COMM. OF THE WHOLE - TIF BILLS people look at trying to finance, you know, the PNC operation center or a hotel or whatever, they'll either look and say, We can borrow this much money in the private sector but we have a gap, the private sector won't lend any more, could you fill the gap with the tax stream and then we can borrow more money because we have the tax stream to pay the debt service. That would be what I would call an "access-to-capital" problem. The other time it comes up -- PNC, I think, is an example of this, the operation center -- is a situation where people are looking at the cost of doing business and looking at, in that case, if you recall, which was the first one we did, there was a severe competition underway. New Jersey was trying to induce this operation to both leave us and take the growth of it. And so for us to be competitive, the TIF was dealing with the cost of doing business. The one problem that you have between abatements and TIFs is abatements -- and I'm not a lawyer, so I don't have an esquire, Councilman, but I'll try to a little bit go into this. Abatements, under the state uniformity 46 11/18/98 COMM. OF THE WHOLE - TIF BILLS clause, generally we have to set up a class of taxpayer. And then an abatement is a matter of right. So no matter who you are, as long as you meet the test of eligibility, you get the abatement. We cannot negotiate abatements in Pennsylvania. If you read The New York Times, you'll see that in New York City, "New York City Negotiates to Save NBC," and they're going to provide them $100 million in tax relief. Well, that's actually literally a negotiation. They have the capacity in New York to negotiate an abatement. No such capacity exists in Pennsylvania by the Constitution. TIFs, because the taxes are paid, end up being a technique that can used with a very sort of precise transaction, you know, one transaction at a time. We can say yes, we can say no. And if we say yes, we can say how much and when and under what set of conditions. So it is not a matter of right that you can just get a TIF by meeting some test. We all have to agree each one each time.
But from the point 47 11/18/98 COMM. OF THE WHOLE - TIF BILLS of view of the corporate benefit achieved, isn't it largely a distinction without a difference? You have different procedures applicable to the abatement, I think. But to the world, in general, as well as to the corporations, it's one way or the other way of obtaining a benefit that other citizens don't get? And I raise it particularly. Yesterday, I had occasion to meet with two groups of people. One was a community group out in the Northeast that talked about the fact that they can't get street lights improved on their particular street; and yet, it seemed to them, the City was giving way money to big, rich corporations. And then I met with a group of artists who said they've been trying for years to get some special consideration for their needs. They thought artists were a special, unique group in Philadelphia. Probably we're the most friendly town generally, historically over 100 years to artists than any other place in the country. Yet the struggle of individual artists just falls on deaf ears. For example, they look 48 11/18/98 COMM. OF THE WHOLE - TIF BILLS for cheap real estate where an artist, say, can play a cello, you know, without disturbing too many residential folks, where they have very small incomes. And they say they've been never be able to get any relief from anybody in the City government; and yet, they see these giant corporations getting those huge sums of money. And it's very difficult for us to explain that kind of situation, you know, to folks out in the community who aren't as well versed as you. And perhaps even us, even we're not too well versed in abatements and TIFs. So that's the reason I raise the question. Aren't these just different forms of making resources available to various corporate structures, developers who produces a Disneyland, Kvaerner, you know, Rittenhouse Hotel, you can name all kinds of groups. How do you justify that as a matter of City policy? And what would you say to the community groups?
I would make a perhaps a simple argument; whether it would be persuasive is a different question but -- 49 11/18/98 COMM. OF THE WHOLE - TIF BILLS
I can tell you, it is a real difference. I tied to explain it.
But I didn't get any applause when I-- (Unintelligible; parties talking over each other.)
It's pretty simple, Councilman. I think there's a fundamental truth that we must all keep in front of us, which is for all of the success, for which this Council should be congratulated, over the last several years of bringing the City fiscal stability. You know, it's nice to be able to say we have surpluses, it's nice to see our bond rating go up. We are still in a massive competitive fight to keep jobs and business and activity in this city. As you may have noted a couple weeks back, an independent study group annually looks at the cost of doing business and business taxes in various cities across the United States. And though Philadelphia was in first place for the largest decrease in business taxes, we still ended 50 11/18/98 COMM. OF THE WHOLE - TIF BILLS up being in last place -- i.e., we were still the most expensive environment for business to operate in out of the largest cities in American. And these companies and businesses and job, unfortunately, are very mobile today. And they can be here or not. And so I do not look at this as, quote/unquote, corporate give-aways. We do not look at these as ways to make these businesses more profitable. What we, unfortunately, are forced to look at is a situation where they can be as profitable in Philadelphia as they could be if they weren't here. And if keep them here, as was mentioned earlier in the questioning and comments, then we do enjoy the wage taxes, parking taxes. Whatever the activity is, we enjoy a tax stream that's available to pay for street lighting and do the other activity that this city undertakes. So what you could -- what I look at, then, is not just the column of what is going to the project; I also look at the columns about what's going to go to The city and School District if we do these projects. These taxes will not be 51 11/18/98 COMM. OF THE WHOLE - TIF BILLS available if don't do them. Then you all -- and I appreciate you. I only have to deal with a little subset of decisions; you have to deal with all the decisions of public policy. And then determinations have to be made once you have those additional increases on how we should apply them. Should we increase funding for the School District, deal with street lighting, whatever. And that's the classic opportunity cost of public policy. But I think this is essential. I wouldn't be here if I didn't believe that it was essential that we do this to remain competitive, to have the benefit of this activity in Philadelphia.
Let me ask you, in carrying out your work, is it essential that you read articles like the article in Time Magazine by Steel and Bartlett, the Philadelphia reporters who now work for Time? Or is it required that you not read that article?
Well, for your carrying out your official duties. 52 11/18/98 COMM. OF THE WHOLE - TIF BILLS
I am -- read both praise and criticism. So I read the article. I would have to say that I think the analysis is significantly flawed.
Well, because the particular transaction they critiqued in Philadelphia was the Kvaerner transaction. And they had a little box that --
They made a little box. And I think everybody needs to understand what's going on in the world. We had a 90 percent probability that that shipyard was going to be mothballed forever, and tumble weed would roll through it, and there would never be a job there. There are closed 53 11/18/98 COMM. OF THE WHOLE - TIF BILLS shipyards around the world. The French just closed one of their national shipyards in the last month. So shipyard capacity is not something that's, you know, so valuable that people run in and take it and open a shipyard. So in order to have the capacity --
Mr. Hankowsky, I'm going to ask you to shorten that answer 'cause we have a whole lot to do here today.
Okay. The bottom line is, I think it was a good deal. And we had to do it to make it happen. And I think the benefit clearly justified the transaction.
Thank you very much. You know, I want to make just a very brief comment. There was a time in this city when you would never have -- this Council would never have had in front of it a Brewery Park TIF or a St. James Court TIF or a Jump Street TIF, which are neighborhood-oriented developments. And I will tell you that I think that this is precisely what we need to be doing and I don't have -- I have no quarrel whatsoever with 54 11/18/98 COMM. OF THE WHOLE - TIF BILLS any of the issues raised by Councilman Nutter about what we do with whatever money is generated. We decide that every year on an annual basis. And sometimes we give more money to the School District, and sometimes we put other money in other economic development activities. Those are annual decisions that we make. But I think that this administration, including the men sitting at the table, ought to be congratulated for hearing us as a Council and hearing people in this city when they have said, What about us in the neighborhoods? I'm telling you, in north central Philadelphia, we've been talking about having a 45, 50,000-square-foot supermarket where people from Fairmount and Spring Garden and North Philadelphia, all the way up to the Strawberry Mansion, can go to get first-quality food and have all the amenities that everybody else has in the neighborhood. And this is going to help do that. And, you know, we can nitpick around the edges at whether or not the broad policy questions. This city doesn't live in a vacuum. And people who write articles for Time and all 55 11/18/98 COMM. OF THE WHOLE - TIF BILLS these things, they can pick and choose the things that they want to take. It is possible to pick apart anything that we ever do at any time, it really is. But those people, they don't have the responsibility of looking into the faces of people out there and having them say to us, What about a supermarket? There are people, for example, who shop at Progress Plaza who are working overtime to get that supermarket open. There are people who lived in --
That's right. There are people live in Yorktown -- and Councilwoman Clark will tell you -- who go to the supermarket Progress Plaza every day, hoping that it's open, every single day. People live in and around there are people in and around Cecil B. Moore Avenue who have been looking to see something happen out there for 30 years, 30 years. And now they have some hope, now they have some hope. And, you know, I care a lot about the School District and about the mix and how we 56 11/18/98 COMM. OF THE WHOLE - TIF BILLS should do something about all of that. But what we should do is take whatever tools we have to spur economic development in this city, and we ought to use them in a way that takes care of Councilman DiCicco's concern and all of our concern that we have parking in and around a facility, a convention center that we have put $500 million in. And we ought to make sure also that we do some of the things that we can do in the neighborhood. I think, frankly speaking, that we are trying to show a little balance here, we are trying to show a little balance here. So however flawed this process is, whatever anybody can take and write bad about it, what we're trying to do is make sure that all of the citizens of this city benefit, they benefit because we're trying to shore up a significant part of our economic development strategy, and they benefit because we're taking this device and using it in neighborhoods under circumstances and terms and conditions that 10, 15 years ago, people would have said is impossible. And I know that because that's what they were saying then. 57 11/18/98 COMM. OF THE WHOLE - TIF BILLS And so I think the fact that we have in front of us three neighborhood TIFs that provide some hope for people out there that, A, there's going to be jobs for them, and B, there are going to be services for them that otherwise would never be available, is something that's a good thing. It is a good thing. Now, there are going to be people around, you know, who are never going to understand or never agree. God bless them, because they're entitled to their opinion. And I think, Councilman Cohen, we have a right to respect their opinions, to hear their opinions. But we can't stand still, we have to do what we can, whatever tools we have to make sure that everybody in this city benefits from our economic development strategy. And this is a part of what I see this as being. Councilwoman Clark?
Yeah. With respect, say, to the supermarkets, you and I attended the 58 11/18/98 COMM. OF THE WHOLE - TIF BILLS same sessions together with several other hundred other attorneys, continuing legal education. And I think you and I were in the same seminar where a representative of Mr. Hankowsky's organization spoke. I think you had to leave a bit earlier for another meeting that day. I raised the questions of supermarkets. Progress Plaza, the one particularly in my area at Broad and Godfrey, and throughout the whole city, where neighborhoods are struggling without it. I don't see the relevance of the TIF situation where the projects are going to take many years to fulfill and dealing with those supermarket problems now. And my experience has been dealing with the City in relation to particularly the supermarket at Broad and Godfrey, and I've been watching the problems at Progress Plaza. I don't see the connection because the folks that want the supermarket say, Why aren't we given that kind of assistance to build up our neighborhoods? All of the projects -- I'm not arguing with any of those projects, they're all 59 11/18/98 COMM. OF THE WHOLE - TIF BILLS worthwhile. But I'm saying that the City support ought to also go out to neighborhood economic developments that would provide us with --
Councilman Cohen, that's what 31st and Thompson is, that's what Broad and Cecil B. Moore is that's what St. James Court is. I mean, these are neighbor projects. And maybe we need to get to -- I know the Commerce Department and Mr. Hankowsky, they're working overtime trying to make certain that supermarket in Progress Plaza, even though it's small even though it's not what typically happens, they're working overtime to try to get it to happen. If we need to get PIDC and others involved in a discussion about what happens and what can be done to deal with Broad and Godfrey, then we ought to be doing that. Nobody's opposed to that.
I certainly agree we ought to be doing much more in those areas.
If I could just note for the record, I mean, we did yesterday, at PIDC, approve a loan for Progress Plaza 48 hours after we got it. So we're, I think, aggressively trying 60 11/18/98 COMM. OF THE WHOLE - TIF BILLS to pursue that one. We also financed earlier this year the acquisition by a Philadelphian of two closed food stores in West Philadelphia. So, again, I mean, we are --
Mr. Hankowsky, and I don't want to get into it 'cause I know the Councilwoman is waiting. But you know what? And I appreciate that, but there's nothing you can do for the one at 26th and Girard. We lost a supermarket at 26th and Girard, and people complained and they demonstrated and they said bad things about us, we couldn't save it. But we were able to do -- to have this proposal before us today to put one at 31st and Thompson. So, some we can and some we can't. But we do the best we can under the circumstances, and I wouldn't want anybody to now start having a big problem with the Tax Increment Financing proposal now that we have -- we have sort of refined an approach to moving it out in the neighborhoods and trying to do some things. We had discussions about this, the mayor and myself and other people, way early on, 61 11/18/98 COMM. OF THE WHOLE - TIF BILLS that if we're going to be able to do TIFs, we have to be able to do 'em in neighborhood and do some things that people out there in those communities are looking for. And that's what we have here today. I see Councilwoman Clark looking at me as if to say, "Can I be recognized."
Right. I'd like to have the next presidential moment.
I really do think that we ought to be able to use this device which is at our hand to make a difference in neighborhoods. I'm particularly concerned about the supermarket situation because, to follow onto Mr. Cohen's comment, how does it help? A supermarket adds to the quality of life in a neighborhood -- I'll pick up Jim Kenney's term," QOL. This is a quality-of-life issue. And if you've got to get in a car and drive blocks and blocks and blocks to get jus such a basic as groceries, you are hurting the neighborhood that you leave, you are taking dollars away getting, and you are giving that 62 11/18/98 COMM. OF THE WHOLE - TIF BILLS level of employment to somebody else's neighbors, not your own. And to the degree that you're taking money out of your neighborhood, you're harming the neighborhood. So, of course, we need to have supermarkets. And if we're not doing enough of it, then we need to raise the volume on our insistence until the Godfrey Avenue market gets the responsiveness that it deserves. I'm particularly eager to see projects in North Philadelphia get wings and dollars because there has not been any substantial investment in North Philadelphia since the riots of the sixties, when banks redlined us and insurance companies wouldn't touch us it, and it became impossible to get any major and substantial development going on. And what I like about a TIF is, a TIF is whatever you say it is. Now, we used to think that a TIF was only a downtown process. It's whatever you say it is. Just by this list we have before us today, we now know that there is no set number of years that a TIF has to work. Some of them can be 20, some of them can be 12. 63 11/18/98 COMM. OF THE WHOLE - TIF BILLS I'm glad about that. I think they ought to be adaptable to the circumstance. Otherwise, we have such ridged formula, if it doesn't fit on all fours, you can't use it. I think that's a mistake because our communities, while compatible, are not identical. So we must have the capacity to make the vehicle fit the actual circumstance, rather than trying to stretch the circumstance to fit the vehicle. I'm really very glad to see us doing this. We know it works because it worked downtown, so let's take it uptown, let's take it west, let's take it to the great northeast, let's take it to where the people are who pay the bills and who have some pride not only in a vibrant Center City but also in the neighborhoods where they live.
Thank you very much. The Chair recognizes Councilman DiCicco and then Councilwoman Verna.
Thank you, Mr. President. Much of what your comments were some things that I was going to touch on. But I think 64 11/18/98 COMM. OF THE WHOLE - TIF BILLS you stated, Mr. Hankowsky, that there are about TIFs that have been done in recent years.
There are 8 that are 5 approved and then we have 6 pending -- 4 today and 6 2 more. So if Council acts favorably, we will be 7 at 14 at year end. 8
So assuming that 9 the 14 are completed, do you know what the value 10 of those TIFs are in terms of the jobs that they 11 will have created? 12
Yeah. The range of 13 those -- because, in some cases, we give you a 14 range -- we create somewhere between 6500 and 10,000. The ones in front of you today are 900 new jobs.
And as to -- in your opinion, in your opinion, would you be able to give me explanation -- not an explanation. Would you be able to tell me how many of these TIFs do you think -- how many of these projects would not have gone forward had there not be a TIF in place?
My believe is that none of them would have proceeded without a TIF. 65 11/18/98 COMM. OF THE WHOLE - TIF BILLS
So conceivably, we may not have had the 10,000 jobs that we will have at the end of the TIFs. 5
And some of the 10 comments you made about shopping centers in the 11 neighborhoods, and I think the only comment I 12 would like to make about that is, although the 13 majority of these TIFs did happen in the Center 14 City section of Philadelphia and may not necessarily have happened in the neighborhoods, people -- you can build all the shopping centers in the neighborhoods that you want to build, but if people don't have jobs, they're not going to be able to afford the money to buy the groceries in those shopping centers. And, if not mistaken, of the hotels that have been built to date, most of which have been built by way of TIFs, there are about 4,000 jobs that have been created in the hotel industry. And about 3200 of those jobs are for 66 11/18/98 COMM. OF THE WHOLE - TIF BILLS Philadelphia residents. So Philadelphia residents basically are getting something in return and, it's not this so-called big give-away of government money to big business.
Thank you. Mr. Hankowsky, I would just like to say that I think the first TIF that we ever considered was in the Eastwick area, PNC who was threatening to go move out of the City. I think that is definitely a success story. They built a magnificent edifice. It's beautiful. We were able to retain 800 jobs. It is my understanding that they are presently building a second, they're in their second phase of building, and we're looking at 400 additional jobs. So I certainly think that that has been off and running and certainly a success story that we could both boast about. 67 11/18/98 COMM. OF THE WHOLE - TIF BILLS
I totally agree, Councilwoman. I mean, PNC did exactly what they told us they would do. They built it, they occupied it. We saved 800 jobs; 200 more were created initially. There was 1,000 people there today and we're looking at another 400 when this expansion that's under construction is open. They started the expansion sooner than they had to or planned to.