Well, I think that what's fundamentally important is the City has to be transparent in all aspects, and that bidding requirements, I think, are an effective way to open up the process to be as transparent as possible. So, I think that everything should be bid.
I don't know how 2377 Operating Budget - 4/5/05 these are numbered. For the document that we received attached to the testimony, why don't I just call it the last page. Could we go to the last page? Can you tell me what process you utilize for these professional services contracts from the Controller's Office? They're about, it looks like, about of them. Maybe or in the current 11 fiscal year, but it looks like 11 for FY'06. 12 What's the process that you utilize? 13
Many of these are people that have or companies that have done work in certain areas for two or three years. Usually about -- I usually circulate and we go through our process upon which accounting firms are submitted every three years, so that we don't have the same firm doing economic forecasting for more than three years, computer training for more than three years. Some of these are listed as to be determined, that the largest one is the $180,000 for performance audits which is done 2378 Operating Budget - 4/5/05 where post audit asked for solicitations for -- depending upon the topic, the categories that we have in the office for firms in the City and in the region who do that type of work.
The performance audits are competitively bid. Some of them...
...the $180,000 line item. That's the firms to be determined?
I mean, University of Pennsylvania is... I just use University of Pennsylvania. Sometimes I use Drexel for economic models.
So, in terms of whether any of the contracts are competitively bid, what's... 2379 Operating Budget - 4/5/05
I would say over 50 percent of them are competitively bid, as the process moves forward.
Okay. And what; do you put them out either through an R.F.P. or you advertise the contract is available?
Yeah. And we have an ongoing system with the Pennsylvania C.P.A.s as to what is available.
Okay. Can you tell me or could you forward to the Chair recent audits with regard to the Finance Department? Has there been a recent audit of the Finance Department?
Well, it's an operational department, and we do an annual audit of the Finance Department, in relationship to its operational side, yes.
Okay. All right. And, so, how many of these audits does the office actually conduct each year?
40 audits a year? But all the operating departments every year?
Okay. And for any of these departments, given some of the current public activities swirling around a couple of them, did any of these audits raise any red flags about some of the operational aspects of those departments?
We had findings in 2381 Operating Budget - 4/5/05 a good number of them. The most recent audit of the Treasurer's Office, we've made a couple good recommendations on their operating process.
One was to... I have it right here. We made recommendations to the Treasurer to more accurately present the cost of departmental operations, that off-the-book activity be budgeted and expended through the City's normal disbursement process, and subject to the City's centralized accounting and internal control systems. We also identified in the Treasurer's Office about $15 million in unclaimed bond proceeds that are being held by a custodial bank. The City's policy says that after two years that money should be returned to the City and could be used for normal operating -- to meet normal operating expenses. We recommended that the Treasurer pursue that also. 2382 Operating Budget - 4/5/05
It's on a sliding scale. Every two years additional money sits in the bank.
So you're saying that presently there's $15 million available to the City.
There was at the time of our last audit. It's down now to about $12 million. I don't have the exact number, but I sent it over to Council.
Okay. Okay. Did I understand Councilman Clarke's question earlier, with regard to the recycling investigation, that there are no particular guidelines or criteria, I'm assuming other than good judgment, that determines whether 2383 Operating Budget - 4/5/05 an investigation is conducted or not?
The guidelines of what are topical during the year and what is occurring within the City of Philadelphia so that the office can be relevant to your decision-making, the public's decision-making, and the Mayor's decision-making.
Okay. Last question. You've expressed fairly loudly a concern over the past few years about our debt service level and borrowings, any number of borrowings, because of the -- and I know you issued a report on this particular issue. When these bond deals come forward, now, because of your position, there is something called a bond committee?
The bond committee only exists when you pass an ordinance. The bond committee has never been part of the City Charter.
So, the bond committee which has never met, technically when you 2384 Operating Budget - 4/5/05 pass an ordinance based upon habit, when Council passes these ordinances, based upon habit --
Habit in the sense of tradition. I mean, tradition is probably a nicer word. But it's the Mayor, the Controller and the City Solicitor.
Which in the years 14 that I've been Controller, and I also went 15 back. I can't find any meeting that was ever 16 held of the bond committee. So, it is -- When I -- When the Controller signs off on a variety of bonds, it's ministerial in effect, by me stating that the debt limit has not been reached, that the City's statements are correct based upon accounting standards. And then I sign a statement saying that whatever disbursements were made were the amount of the disbursements that were made. 2385 Operating Budget - 4/5/05
Yes. In 1990 I didn't sign a bond deal because I believed the City did not have the ability to pay it back.
Right. No; I understand that. I recall. Remembering that, and I guess juxtaposing that with your publicly expressed concern with regard to increasing debt level or are we at the right debt level or should we slow down in the borrowings, I guess I'm just trying to understand. Given the previous action, I mean, you've -- I mean, you've signed off on each of the line numbers.
And that it was below 2386 Operating Budget - 4/5/05 the debt limit.
Okay. Do you think similar to the 1990 action any refusal to sign off may have triggered other actions by the government or possibly cause... I don't know... the other two parties who get to weigh in on this to reevaluate their position?
Yeah. I take the fact that I didn't sign off, even though it's ministerial, but because of my background and my relationship as a lawyer and a C.P.A. with the rating agencies in New York prior to me becoming Controller, was a dramatic and meaningful step that I had to take in 1990 because the City was going down completely.
What I have always said is that Council and the Mayor should say that there was a certain amount of money that we're going to put out on bond. And then you ought to prioritize that list, and then there has to be somewhere where you say no. 2387 Operating Budget - 4/5/05 The problem with the way that the bond issuances are done is that each independent bond, you can say that it's for a good cause. But the problem always is that when you look at the totality of the bond issuance, that it straps the City for generations to come. I have not -- I have always felt that unless it affects the immediate payment system and ability to pay back very quickly, that the City doesn't have enough cash, what I trigger the mechanism where I wouldn't sign, even though ministerial, the fact that I didn't sign created the last nail in the coffin for the creation of P.I.C.A. So that I take very seriously. But it's really based upon my background and my experiences, more than it is the Office of Controller. And that's the way I've looked at it.
Right. No. I understand. But, I mean, obviously the cumulative effect of all of those deals over 2388 Operating Budget - 4/5/05 time leads to the conclusion that you and the office have reached, with regard to the level and the amount, and what that does in terms of strain on the current operating budget. I mean --
-- each deal is separate in and of itself, but it's added onto what we already know to be the fact. And we know that there will be future borrowings. At some point in time --
I mean, you've got to draw a line and say you're not doing it any more.
Council needed to draw a line, too, before it even got to me. I mean, Council has to pass -- It goes through City Council. What my job and my responsibility is to broadcast the facts as I see them. And the legislative body has a responsibility to 2389 Operating Budget - 4/5/05 decide whether they want to move forward on a bond issuance or not.
Well, I mean, that is certainly true. And at the same time, we have slightly different roles.
And at the same time we have slightly different roles.
We do. But it only gets to me for a verification of debt limit and the statements. And in 1990 it was my firm belief that I couldn't sign that we were a going concern. And by not being a going concern, we don't have a right to issue debt.
You're welcome. Are there any other questions. (No response.)
Seeing none, thank you very much. 2390 Operating Budget - 4/5/05
Again, I want to thank all members of Council for my years of being Controller, and thank you for your friendship and being part of the family.
Thank you. We will now hear from the Board of Revision of Taxes.
Good afternoon, everyone. Mr. Glancey, we do have a copy of your testimony. We will give it to the stenographer. It will be transcribed in full. And so I would respectfully ask you to summarize your testimony, please.
Thank you. Good afternoon, Madam President and members of City Council. Let me just introduce the folks who are with me before I begin the summary. We have board members Deveril Silverstein, and 2391 Operating Budget - 4/5/05 our newest board member, Joseph Russo. Glad to have you here. We have the Executive Director, Rick Foglia. We have the Secretary of the Board, Bob Nix, and I might add, our newly elected just a month ago Vice Chairperson of the Board, Charles Runnymede.
If you don't mind, Madam President, rather than summarize the testimony that I have presented, in the last couple of days I just wrote a few notes concerning going forward, concerning the full value project that we have. I'd be happy to answer any questions anybody has about obviously about the budget, and obviously about that testimony. But this will be a very short summary of where I think we're going and what it might mean to City Council, and it might be of some interest to you. As you know, I normally spend some time discussing the prior and current taxable 2392 Operating Budget - 4/5/05 assessments. We're not going to do that this year. This year I thought it might be best, however, to devote time allotted for my direct testimony to the current reorganization and re-engineering of our department, which will culminate in valuing all City real estate at its full market value, and that is the price that a property will realize in the open market targeted for tax year '07. And I'd like to approach this by kind of summarizing this in three ways. What does full market value mean to the property owners of Philadelphia? What does it mean to our department? And finally, what does it mean to you as City Council members? First the property owners of the City. This change offers to our citizens a property valuation system that is clear, transparent and understandable. Properties will be valued based on their sales and sales of comparable properties using real world prices. No more 2393 Operating Budget - 4/5/05 fractions of market values, no more fractions of assessed values. Market value will be the assessed value. If your market value is $100,000, that figure will be multiplied by the millage rate to calculate real estate taxes. No more calculated -- No more complicated formulas. T.? Well, let me give you a little history. We started this in January 2004 with the public announcement. We've been doing lots of due diligence ever since then. In May of 2004, we began looking at about the ten companies in North America that can do this kind of project. We interviewed nine of them twice, each of them twice. And we also had demonstrations in our office of what this project can do, and we haven't stopped that due diligence. P. out for this. We've received responses back from five vendors. We are now in the process of reviewing all five of those responses to the proposals. 2394 Operating Budget - 4/5/05 There's any number of other projects that we have put around this, and I'm not going to go into too much detail on those projects, but to say that all of it has to do with the technological changes that we need in order to make this full valuation project reach its goal. Finally, what does it mean to City Council? Which is really an important part, I think, of this short summary testimony. And not only you, but your partners in fiscal policy in the School District and the administration. It means that instead of passing a budget in June, without knowing what the taxable assessed values are until July or August, after you've already passed the budget, you'll have those numbers by February or March, so that you and your technical staff can analyze those values and plot various scenarios, using various millage rates, and you can develop various property tax yield outcomes, all of which you can do in conjunction with our staff. 2395 Operating Budget - 4/5/05 In the first year of full market value, target year 2007, you'll have the opportunity to lower millage rates. T. believe that the increase in market values accompanying the full market value project should be offset by lowering millage rates in order to produce a revenue neutral outcome. Some caveats, however about revenue neutrality, in that allowances should be made for delinquencies, appeal losses, new and rehabilitated construction and abated properties coming on line. T.
offer to meet with you, your staff, your constituent groups, whomever it is you wish us to meet with, to go over this full market value project in order to explain the processes, the concepts, and to answer any and all questions. We will share with you preliminary values as we get them, both City-wide and by Councilmanic district. And finally, on October 1, 2002, I 2396 Operating Budget - 4/5/05 testified before the Finance Committee of this Council, and stated that we must find a way of unbinding this confusing, overlapping relationship between property values on one hand, and property taxes on the other. I would assume Council agreed with me because that's why we had that hearing, was to talk about that very problem. Full market valuation is the way to begin doing this. T. values properties. The Council and the Mayor set revenue and spending policy. 's role in property taxation policies is to set the table, if you will, by presenting to you and your partners in policy-making good, fair, uniform, dependable taxable assessments that are understandable to the property owners of the City of Philadelphia. And with that, we're happy to answer any questions you might have about that testimony or anything else that we've submitted to you this morning.
Thank you. 2397 Operating Budget - 4/5/05 Mr. Glancey, when do you anticipate going to the 100 percent of market price?
2007 which really means what we're trying to do is to give you values that you can use to calculate in February, March of 2006. It's a pretty aggressive schedule, but we think we can make it.
I'm thinking that's when Council is up for re-election. (Laughter.)
Has the Act 46 problem been addressed? And if not, when will it be?
It has only been addressed within these confines, I believe. Yeah, I have talked to the Law Department. I guess I started talking to them in December of '04 concerning this. I have been informed that there will be a -- I guess in combination with the Finance Department -- there will be a draft technical amendment to Act 46. 2398 Operating Budget - 4/5/05 And I'm assuming that -- and I don't know this for sure -- but I'm assuming that that will also be in conjunction with the School District, knowing full well what we're doing. And in conversations I've had with Mr. Fader about this. When I've looked at Act 46, I think you can look at it and say, well, maybe you don't need one. But he and I both agree that it would be safer to have an amendment to Act 46 in order to have this take place. So, the answer to your question is, yes, we've begun to address it, but it has not yet gotten to Harrisburg.
And if that is not addressed, will you be able to go to the 100 percent?
Well, I think we should go to the values. And it will be up to Council and all of us to talk about what we should do at that point. I don't think there's anything wrong with getting the correct values on the properties. Clearly, we will work hand in 2399 Operating Budget - 4/5/05 hand with you and the administration. One of the things we don't want to have happen is what has happened in Allegheny County. If you recall, what happened in Allegheny County, and I think what Mr. Onorato is not doing in the right way or the county executive out there, although maybe politically he's doing it the right way. But for purposes, it seems to me the merits he's not doing it the right way. They increased the values, I guess initially in year 2002, but none of the local jurisdictions reduced the millage rate. So, there was this incredible windfall, the school districts and some of the municipalities. That is something that we shouldn't do here. We agree with you with that.
Okay. Are there any questions from any members of the committee? Councilwoman Blackwell, do you have any questions? No. 25 Thank you. 2400 Operating Budget - 4/5/05
Thank you. Thank you all for your patience. Oh, before you leave.
I would like to ask you, what was the total amount of productivity loans the B.R.T. has been awarded?
The total that we currently have or what we're anticipating? I'll give you both.
What we've already received and what we are anticipating, once we get all of the projects that we're talking about. We have currently received roughly about $3.1 million. And outstanding, as we go through the next year, we're looking at an estimated -- and this is purely estimated, to fill out the rest of the project -- somewhere between $3 million and $5 million. 2401 Operating Budget - 4/5/05
So, it's actually upwards of $8 million? Close to it?
Well, if you go to the maximum. It could very well be lower. As I said, I'm giving you roughly. It's about $3.1 million.
The reason I'm trying not to be so specific is because I don't know exactly when we will put the applications in and what the costs will be of items that will cost today that might change in the future.
I just asked that question because I wanted Ms. Reed, if she's in the room -- Is she still here -- to hear that because when we had hearings regarding Fleet Management it was 2402 Operating Budget - 4/5/05 indicated that there were only small loans that were given to departments. Here's one that worked out very well. And we'll talk about that privately. But I want to thank you again. Thank you very much.
This committee will stand in recess until tomorrow, Wednesday, April 6th, at 10:00 a.m. at which time the Free Library will testify. Thank you all very much. (Public Hearing concluded at 3:13 p.m.) 2403 CERTIFICATE I HEREBY CERTIFY that the proceedings and evidence are contained fully and accurately in the stenographic notes taken by me upon the public hearing of The Philadelphia City Council, taken on April 5, 2005, and that this is a true and correct transcript of same. _____________________________ DAVID A. DEIK, RPR and Commissioner of Deeds (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)