At this time, I recognizes Councilman Kenney. 70 02/16/05 - WHOLE - 05007, 05008, 040767
Thank you, Madam President. I share the same frustration with Councilmembers Clarke and Goode and their line of questioning. I mean, it seems based on the reasoning at the table that we're better off increasing taxes, maybe it will increase jobs. I mean, the scenario that's being painted is the worst case scenario with no job projections, no growth, to make it look as bad as possible so we're forced into voting for something that we don't even have the analysis of from the Administration. You want it all ways. You want to give us the worst case scenario on the tax reductions, on Councilman Nutter's bill; you want to add no growth in jobs or anything else, and then you want to look at service cuts and all those other kind of things to paint a scenario that is the most dire consequence. I mean, that's not the way we should be attacking this problems.
Councilman, if I may. The earlier questions -- there were earlier questions that addressed recent losses in jobs 71 02/16/05 - WHOLE - 05007, 05008, 040767 in Philadelphia. Philadelphia added jobs in three years, in, I think, the last 10-plus year. Our Five-Year Plan assumes flat employment, so we're assuming we don't lose jobs. That's better than what we've been doing.
Why do you assume that? This is the same question that these two Councilmembers are asking. You assume no job growth as a result of lower taxes, so in that regard, what's the sense of us lower taxes at all?
That's right. The City has been doing better in terms of job losses --
Conservatively, we assume we do at least that well. We do at least that well that we stop the flow of job losses. And then if we do better than that, then we restore our fund balance and get back 72 02/16/05 - WHOLE - 05007, 05008, 040767 to a healthy range.
Well, I find problems within your analysis and your approach, and I think other Members of the Council also do. Let me go back to an issue that came about in the Five-Year Plan. House Bill 2330 and Senate Bill 100 provided for state-wide tax reform. It's said in your plan that it's essential for the City's overall tax reform strategy. Could anyone at the table explain to me what our actual overall tax reform strategy is? I just really never heard it quantified.
The Administration supports the reduction in both the wage and business taxes. The Administration's approach, though, is to balance tax reductions with what we feel are the other ingredients in growing a healthy economy. And those are quality services. I think a lot of people writing about tax reform also note that you don't get the benefit of tax reform if you gut your City services. So the Administration has 73 02/16/05 - WHOLE - 05007, 05008, 040767 been adamant in its position that tax reduction has to be balanced with the need to commit to quality City services. The Administration also feels that it's essential that we be in a position to make strategic investments. And that we have done through our NTI program. We hope to make strategic investments in the New River City Program. The City has wonderful assets or wonderful assets that we don't take benefit from because --
Why does the City continue need to be the incentive for development? Wouldn't it make more sense to have a tax structure and a tax environment that allowed for private sector development without River City, without NTI, without putting tax money into programs that the private sector, if the environment existed here, a progressive tax environment, a good tax environment for business, wouldn't private sector companies be making this investment? Why would you take money out of the Water Fund for River City or out of our borrowing for NTI 74 02/16/05 - WHOLE - 05007, 05008, 040767 when if we had the right tax environment here in the first place, we would have private sector investment and not government sponsored investment.
Well, I think it happens sometimes. For example, Denver that has a more advantageous tax structure in Philadelphia, finds itself in the position of having to give incentives when they were trying to lore Comcast away from Philadelphia, Denver was throwing cash at Comcast.
I don't think that's exactly relevant. It's a battle over trying to steal a company as opposed to creating an environment where people would want to come in and develop the waterfront on their own without being incentivised to do it because they need the incentive because the tax structure is so terrible.
And I think that tax structure alone doesn't get it done, that businesses respond to a whole host of factors. I think that with respect to the waterfront, it is our feeling that you have to make some 75 02/16/05 - WHOLE - 05007, 05008, 040767 of these incentives, particularly formerly industrial areas where a lot of times developers encounter environmental costs, they encounter infrastructure costs like at the Navel Yard where you have flooding that happens. There are a lot of reasons why you end up having to level the playing field, reasons that don't necessarily have anything to do with the tax structure.
I would argue that the playing field is particularly out of kilter as a result of the tax structure, not as a close of flood lands at the -- What is the Administration's fall-back position on tax reform if the City does not receive the estimated $101 million from the State for wage tax relief beginning in 2007?
We would continue with the land reduction that are in the Five-Year Plan. That's a one-time decrease that has suggested as a source for the City.
I'll come back, Madam President. 76 02/16/05 - WHOLE - 05007, 05008, 040767
Thank you. The Chair recognizes Councilman Kelly.
Thank you, Madam President. I just want to know very briefly how many new businesses have been started in Philadelphia over the last five years?
I also want to know how many have left Philadelphia in the last five years.
Because I think Councilman Kenney has just touched on an important nerve in your testimony this morning, and that's your dim view on the supply side economics due to these tax cuts.
The presentation 77 02/16/05 - WHOLE - 05007, 05008, 040767 attached to our testimony, the Power Point, of that presentation shows that these wage tax growth assumption are the highest of any of the City's Five-Year Plans. So we don't feel that this is a worst case or pessimistic. We're projecting 4 percent growth in the wage tax in the out years. 4 percent in the BPT. And the federal government tells us that inflation is only expected to be 2.2 percent. So somewhere in there, you know, there's some real growth.
I agree on one point. I think you're going in the right direction when you're talking about reduction of the gross receipts tax. That has to be probably the worst tax in the world, in my opinion. The sooner we get rid of that tax, I think the better off we're going to be in this City than we can be.
I think the conversation ends up being skewed if we just limit it to a conversation about tax reduction. When I was here on Monday testifying, the question was about why do you 78 02/16/05 - WHOLE - 05007, 05008, 040767 have to cut this service; why do we have to get rid of white metals; why can't we collect those anymore; what about the library; why do we have to pare back the library hours? You know, you may have created a program that you say is okay but we know that in the end is less. What I'm not hearing is what services the City is willing to forfeit in order to fund these tax reductions. That gets to be the critical question for everybody. Nobody disagrees with the premise that tax-free Philadelphia would be a more competitive Philadelphia. What I'm not hearing from people is, what services are we willing to forfeit? People have said, generate revenue. We have tackled every proposal that was put forward and are bringing in over $200 million in new revenue under this Five-Year Plan. We were told manage more effectively. We came up with a proposal to manage better, and what we were faced with is fighting in court, fighting in arbitration, challenging our plans to manage more effectively. We've come forward 79 02/16/05 - WHOLE - 05007, 05008, 040767 with proposals to downsize our facilities, and what we're met with is in some cases we're able to agree and collaborate, in other cases there's resistance. If we're going to have tax reduction, then we have to be willing to do less than what we're doing now. The other part that isn't addressed is what was underpinning a lot of what the tax Reform Commission proposed. It did not propose simply reducing taxes. It proposed shifting the taxes in Philadelphia, reducing the business taxes and moving it on to the real estate tax. And what I have not heard is anybody call for an increase in the real estate taxes in order to fund all these very aggressive business taxes. That's the fundamental premise of the Tax Reform Commission. And if we're going to have a conversation about tax reform in Philadelphia, we ought to talk about the whole proposal for tax reform, not simply a program for tax reduction.
Point of information. 80 02/16/05 - WHOLE - 05007, 05008, 040767
The Chair recognizes Councilman for a point of information.
Madam Chief of Staff, based on your last statement, are you suggesting that the Administration is prepared to support an increase in real estate tax?
Nope. The Administration has come forward with a proposal to reduce the gross receipts tax and to offset it with an increase in the parking tax. The Administration, under the current real estate tax environment, is not prepared to support an increase in the real estate tax. That's why we've come forward --
Madam Chief of Staff, you just complained that no one has put forth such a proposal in accordance with the dictates or proposals of the Tax Reform Commission. So if you like that idea, why didn't the Administration put forward that proposal?
What I'm saying is that for those who are proposing massive tax 81 02/16/05 - WHOLE - 05007, 05008, 040767 reduction there ought to be a matching proposal to either increase revenue to the City through other taxes or begin to identity those services that ought to be eliminated. That's what's missing from this conversation. Everyone agrees that tax reduction is good for the City. The question maintains --
I think there are 28 recommendations in the report. I'd love to hear the Administration on the other one, where are cost-cutting proposes, not just what programs can be eliminated. Where would you find in the Five-Year Plan a layout of all the cost-cutting measures that have been put forward?
If you look at the introduction of the Five-Year Plan, we go through all the budget initiatives -- almost all the budget initiatives that the Administration has pursued. We've reduced the personnel costs or reduced the operating costs of every department by approximately 5 percent. We've eliminated -- we were talking about some of them on Monday. We've had 82 02/16/05 - WHOLE - 05007, 05008, 040767 changes in the Streets Department. We're standardizing trash collection. We are -- everything from limiting the hours, we have drawbridges manned to reducing the number of districts that we have.
We actually have a hundred million dollars of initiatives in Fiscal '06.
But as we look at all the initiatives that we have both on the revenue and expenditure side, they do total 103 million for Fiscal '06 and add up to 577 million over the life of the plan. And we did discuss some of them on Monday.
Are you talking about what starts on small number 6 83 02/16/05 - WHOLE - 05007, 05008, 040767 initiatives for FY '06 to '10 budget?
And you're saying within these introductory pages that you've got $100 million in savings?
Yes. That's a summary that's probably not every single one of them --
Some of them are revenue. Some of the initiatives are revenue initiatives.
And you have a figure that goes with each one of these?
Okay, I'll come back. It's just a point of information. 84 02/16/05 - WHOLE - 05007, 05008, 040767 Thank you.
Councilman Kelly, you will be recognized, but Councilman Goode has a point of information.
Just for clarity of the record, Madam President, I want the Chief of Staff to clarify what she said regarding the Tax Reform Commission report, whether it actually called for an increase in property tax revenue to offset business and wage tax cuts or an increase in property tax rate? I believe it called for an increase in property tax revenue, not rate.
But it is a huge difference, because essentially, the Tax Reform Commission assumed that property tax values are going to rise, the property tax revenue was going to increase and, therefore, that, along with the parking tax would pay for wage and business tax cuts.
We've got to be 85 02/16/05 - WHOLE - 05007, 05008, 040767 willing to take the revenue from the increase in the property tax. When property taxes went up a few years ago about percent, we on 5 average -- or less than 10 percent, we were 6 engaged in an active conversation about 7 capping the increase at 4 percent. 8
But I'm simply 9 trying to clarify the record in terms of what 10 you believe the Tax Reform Commission said, where they, in fact, called for an increase property tax rate or just assumed an increase in property tax revenue based upon increasing real estate values, which you take a whole lot of credit for in terms of NTI.
Volume 1 of the Tax Reform Commission report, says, "The Commission considered that if all the revenue-generating failed and there is no 20 other way to fund the Commission's package of tax reform, the City could increase property based tax rates."
That's the suggestion. 86 02/16/05 - WHOLE - 05007, 05008, 040767
No, it's not a suggestion. It's an analysis. The Commission had several recommendations where they actually even developed bills patterned to those relations, and none of those recommendations called for property tax rate increase. So if the Commission wanted to call for property tax rate increase, it would have done so formally in the form of a recommendation. Then it would have crafted a bill based upon that recommendation. They did not do that. They did not call for a property tax rate increase.
I just read to you from the report the Commission was not charged with identifying ways of funding its recommendations, so it did not present what I just read to you as a formal recommendation, but it's there.
There were several scenarios laid out: A scenario if you invest a hundred million dollars and cutting this tax and that tax. There were several different analyses done. But the question is, 87 02/16/05 - WHOLE - 05007, 05008, 040767 they never, ever said that what they were doing were predicated upon a property tax rate increase. And so are you here to suggest that they assume property tax rate increase or property tax revenue increase?
They didn't assume anyway to pay for it because they didn't have to. What they recommended were ways to reform the tax structure. They have a chapter called the Financing Tax Reform and I read to you a sentence from that chapter.
The parking tax rate increase is one of the things that was proposed by the Tax Reform Commission as an alternative. I think whether you get it through national growth in property values or increasing the tax rate, I think what's essential is that the Tax Reform Commission recognized that you may not be able to fund all the proposed reductions simply by cutting City expenses, that there would come a point in time at which there would have to be 88 02/16/05 - WHOLE - 05007, 05008, 040767 additional revenue. It's either going to come out natural growth in the real estate tax or it's going to come from increasing the rate to generate additional revenue off the real estate tax.
But there was no 8 specific recommendation for a real estate property tax rate increase.
I disagree with that reading of the Reform Commission's report.
They made specific recommendations and crafted specific bills based upon those recommendations. None of those recommendations and none of those bills they crafted called for property tax rate increase. Thank you, Madam President.
You're welcome. The Chair recognizes Councilman Kelly.
Thank you, Madam President. I would like to know if the 89 02/16/05 - WHOLE - 05007, 05008, 040767 Administration would still consider the Tax Reform recommendations that were put in, especially if the taxes on property were included.
If there were additional revenue, would we support shifting from business taxes on to property taxes in order to more aggressively --
I think the Administration has concerns about the senior citizens in Philadelphia and the people who are in neighborhoods that are experiencing particularly aggressive growth, and there would have to be something that would provide abatement so that we don't end up with people being pushed out of their homes. When the Mayor was in City Council, he, in fact, sponsored legislation that created the senior abatement that exists currently. That is something that -- that 90 02/16/05 - WHOLE - 05007, 05008, 040767 approach we think is essential, particularly when you have property values increasing. You've had good growth in neighborhoods. That growth is a good thing. We have to be willing to capture it. But at the same time, there's got to be a recognition that there are people on fixed incomes, people who live in neighborhoods that can't keep up with the growth in taxes, and it's our position those people shouldn't be forced to lose their properties.
We would if there is adequate protection for those who are vulnerable as a result of the increase in values in property. But, you know, a lot of what we're doing, a lot of what we're doing with our neighborhoods, a lot of benefits that's supposed to come from tax reduction is 91 02/16/05 - WHOLE - 05007, 05008, 040767 the result also of an increase in real estate values, and we have to put ourselves in a position to capture some of that increase in value.
Actually, specifically, sir, the estimates that were made last year were something like an $11 million property tax increase effect as a result of tax reform, and that translates into a sort of natural growth of about 11 --
This was the recommendation of the Tax Reform Commission?
This is some analysis by E Consult. It was part of the report that there would be a resulting 11.7 percent increase in the average property tax bill in 2010 going up to maybe 34 percent by 2017. So property tax, as the Chief of Staff said, is assumed.
You're welcome. I'd like to let the record reflect 92 02/16/05 - WHOLE - 05007, 05008, 040767 that I certainly instigated the freeze on senior citizen taxes if they were under the PACE guidelines. Ms. Wilkerson, on of your testimony, you indicate that "Research has shown that the gross receipts portion of the BPT is an impediment to economic growth in Philadelphia. Accelerating the proposed reduction in this tax is an investment and economic development if done in a way that does not cause deficits or service reductions that would undermine the value of the tax reductions." What do you determine what the optimum reduction is before you begin to undermine the value of the reductions?
I think it's when you begin seeing an erosion in City services, in City amenities. What we know is that as important as taxes are, there are a lot of 93 02/16/05 - WHOLE - 05007, 05008, 040767 other things that go into businesses deciding to locate here and grow here. Schools are important. Amenities are important. The cultural amenities in the City are important. The cleanliness of the streets, the safety of the streets are all important things in companies deciding to locate here and grow here. When you begin to find yourself in a position that you can't fund the amenities like you really think you ought to, when you get to the point that you've got to begin constricting the library hours, the art museum funding is cut, when you start limiting the trash pickup, those are the kinds of things that reflect a degradation in the quality of life in the City. And they can reach the point that they become a disincentive for people to come here. I don't know that there's a magical number. I think it is an evaluation of the quality of life. Fortunately, one of the things that the City does is a citizen satisfaction survey. Every July, I believe, we're out surveying residents about the quality of life and we measure 94 02/16/05 - WHOLE - 05007, 05008, 040767 things like trash pickup and library and recreation services. So I think we will begin to have a barometer that tells us when we're doing well and when the residents don't think we're doing as well. One of the questions we started asking in the citizen satisfaction survey a couple years ago was "Would you rather have services or tax reduction?" And one of the things that residents told us is that they wanted services. It wasn't a huge margin. They didn't like paying taxes either. But they made it very clear that services in the City were fundamental. It's the kind of things that allow people to stay in our neighborhoods.
Was that survey also taken for the business community?
It's just residents. I don't know that we surveyed businesses. That would be interesting thing to begin surveying businesses in addition to just residents. We certainly can do that.
I think it 95 02/16/05 - WHOLE - 05007, 05008, 040767 would be very interesting. Ms. Wilkerson, is it safe to assume that the Administration's position that overall parking rates in Center City do not impede businesses?
I think they're probably -- there may be a point at which parking rates impact. We have not done a study to determine that with specificity. But there are a lot of aspects to parking. There's the on-street parking that is not impacted by this. There's valet parking. There are a lot of things that go into --
But what infuriates me, you talk about valet parking. I consistently complain about this, and I don't know if anything is ever done about it. You valet park. You go to a restaurant. You're on Walnut Street. You walk out of the restaurant and low and behold you have paid $17 for valet parking and low and behold there your car sits on Walnut Street. That's really very, very unfair.
I will make sure to 96 02/16/05 - WHOLE - 05007, 05008, 040767 point that out to the Managing Director. I share your frustration.
It's all over the City that this happens. I think it's truly, truly unfair to people coming into Center City wanting to go to the theater or to a restaurant, wherever they're going, to pay that kind of money when they have could have very easily parked on the street themselves.
I think that valet parking -- I remember when valet parking was enacted. I think that it is something that probably needs to be revisited in the City.
L&I in involved in -- I think is responsible for the enforcement of it. But I think that the whole policy -- some blocks on Walnut Street in particular there's almost nothing but valet parking. And I know that some firms have lost their licenses to do valet parking because they've been violating law.
97 02/16/05 - WHOLE - 05007, 05008, 040767 Restaurants on Front Street or Market Street, it's the same issue. I think it truly infuriates people.
I will raise that with the Managing Director and get back to you so by the time L&I comes, we'll have something.
Madam President, this is what -- and I don't want to use the word upset, but this is what concerns me. You have brought that up, that same issue, time after time after time. If you played back the tape from a year ago, a year ago before, you said the same thing; I said the same thing. Today we hear, "Well, we're going to let the Managing Director know." Why do you have to let the Administration know that they've got a problem where valet parkers take your car around the block, put it at an expired meter. The parking authority gives it a ticket. The valet parker goes back, sees that it got a ticket, throws the ticket down the inlet. Two 98 02/16/05 - WHOLE - 05007, 05008, 040767 months later you get a summons in the mail. You paid bucks. We have to tell them to 4 manage valet parking? That's a disgrace. 5
I'd like to have the 6 Managing Director come and respond to that. 7 I'll try to get him, because I think that 8 there has been enforcement. I think the 9 problem may be with the underlying policy that 10 supports valet parker. 11
I had the point 12 of order, Madam President. Again, what 13 concerns me is it's like talking -- I used the 14 analogy yesterday -- to that pillar there in 15 some occasions trying to get messages across. 16 And you get patronized by saying, "We 17 appreciate your suggestions, they're good ones." Well, if they're good ones, they should be doing it. They should be policing the valet parking, which I believe is also -- they took a shot at the Parking Authority earlier in the process. It is the Parking Authority's responsibility to manage that. And if we have a problem with the way valet parking is run in this City and people are not 99 02/16/05 - WHOLE - 05007, 05008, 040767 coming back -- and you said this, not coming back because I know people that have gotten that ticket where instead of it going in a garage, it goes around the corner in a bus zone, gets the ticket, and obviously they don't want to let the person know that they got the ticket, they rip it up or throw it away and then you get the summons two weeks later. They're coming back? I don't think so. Thank you.
Yes, the Chair recognizes Councilwoman Blackwell for a point of information.
Thank you. I agree with what you said. And also perhaps -- I don't know if Ms. Wilkerson, but since you said the Managing Director is coming back on the very issue you mentioned, I don't know how, given all the problems with SEPTA, that it increases SEPTA ridership instead of decreasing it. If you've got to get a bus to 100 02/16/05 - WHOLE - 05007, 05008, 040767 come into Center City, as you mentioned, and pay more for parking, I absolutely don't know how that increases SEPTA ridership. And also, the other part of my point of information is that according to the Five-Year Plan, an increase from to 8 percent in this tax leads to a 32 percent 9 increase in collections. I don't know what 10 that means. What's the number on this small 11 reduction in tax base and how did they even 12 come up with this 32 percent increase? 13 None of these make sense. And those 14 are my issues and point of information. 15
The increase in the rate 16 of the parking tax is based on the experience 17 of the yield from the tax. You know, 15 18 percent yields a certain amount and therefore 19 the increase yields the higher amount. It's 20 possible there would be some decline in the usage of parking as a result of the increase, but it is not a very great increase and doesn't put Philadelphia parking out of line with a lot of other places.
I don't 101 02/16/05 - WHOLE - 05007, 05008, 040767 understand that. Tell me how it increases SEPTA ridership.
Because it may create some disincentive for people to drive into the City because they'll have to pay parking. They may in turn -- some of the people may in turn choose public transportation. I think to put it in perspective, if you have a $20 parking bill, this would increase your parking bill by a dollar. This is being proposed as a way of trying to do more in terms of tax reductions. And if we want to fund tax reductions, we've got to come up with ways of doing that. And there are only so many areas that are viable for taxation. The parking tax, we think, does not create a disincentive for business growth in Philadelphia. We believe that the gross receipts tax does, and so we propose shifting from a tax that we don't think creates a disincentive -- shift from one that creates a disincentive to one that doesn't.
Well, we 102 02/16/05 - WHOLE - 05007, 05008, 040767 still agree that it will not increase SEPTA ridership. That still just doesn't make sense to me, Madam President. Thank you. That's the end of my point of information.
You're welcome. We're still in the first go-around. The Chair recognizes Councilwoman Brown.
We've given considerable amount of discussion of the taxes on the small business community and we should. I want to shift it just for a moment to regular households. Do households default and utility bills increase when families face sharp increases in real estate taxes? What impact might increased real estate taxes have on both PGW and Water Department Revenue?
We've not done an analysis of that. Common sense would tell you at some point we are sucking a lot of income out of households. We know that -- I forget exactly what the time parameter is, but since gas costs began to increase dramatically, 103 02/16/05 - WHOLE - 05007, 05008, 040767 about $1.2 billion will have gone to pay the increase in the cost of gas. That takes enormous revenue out of the local economy. It takes a lot of money out of families' household, and there are concerns about that. So we keep going into the same well. We keep drawing from the same well, and I would expect that at some point people are not paying tax bills; they're paying their gas bills. Common sense tells you that that's happening in some instances.
And those instances are principally anecdotal; there's no hard data?
No. We might be able to figure out a way of trying to measure that. We could probably figure out a way to begin trying to measure that.
Back to the discussion around the impact of these potential tax measures on small businesses. What services to small and neighborhood businesses might be in jeopardy if the revenue losses from further cuts in the business taxes 104 02/16/05 - WHOLE - 05007, 05008, 040767 are not made up by the increases in the other taxes? I mean, the kinds of services that small neighborhood businesses require and deserve local police protection, street lighting, et cetera. Even garbage and trash pickup. So what is the Administration's view with regard to that?
You're asking the question -- I'm just trying to make sure I understand it -- what services will be lost --
Might be in jeopardy as a result of the revenue losses.
Probably Licenses and Inspections for food licenses, the turnaround on that is going to be slower for any kind of inspection. Turnaround on that would be slower. For those for whom the condition of the street and the curb are important, all of that slow down. It will not stop, but it will be slowed down.
I think the other area that is at risk that particularly would impact the business community -- we've done a lot to try to put e-billing, for example. You 105 02/16/05 - WHOLE - 05007, 05008, 040767 can pay a lot of bills on-line now that you previously had to come into the City to pay. We're trying to permitting on-line so that business people don't have to come into the City and wait in line in the concourse. That reorganization or change in how we provide services is enormously expensive. All these IT initiatives cost a lot of money upfront. They cost a lot of money in order to sustained them over time. Those are the kinds of things that make Philadelphia more business friendly, but they're also the kinds of things that cost money. Historically, we funded them out of the Operating Budget. It may make sense to fund some of them out of the Capital Budget, but when we go to turn there, we've got constraints in our Capital Budget as well. I think it would be those kinds of initiatives that would impact businesses more disproportionately than the rest of the community.
How far along are we with this E -- what did you call it?
E-Government, 106 02/16/05 - WHOLE - 05007, 05008, 040767 electronic government. We've got e-billing. For example, you can pay your water bill 4 on-line. You can pay taxes on-line. You can file taxes on-line. There are a lot of real estate related documents that are available on-line through the Records Department. When Diane Neff, the CIO, comes, she can talk about it in more detail. But there any number of initiatives that the Administration has pursued in order to make it easier and more convenient. I think to the extent particularly a small business person doesn't have to close down the business in order to come to the City to transact business is a big help.
My final question is, what is the ratio and gender makeup of the City workforce and what impact does it have on employment opportunities for minorities and women when the City is forced to reduce its workforce as it is doing now?
And the 107 02/16/05 - WHOLE - 05007, 05008, 040767 follow-up question could be what measures or protocols are you considering to retain or maintain a balance, if you will, of diversity in the workforce?
You're welcome. If I can have my colleagues attention for just a moment. We have a very, very lengthy list of witnesses that will be coming in starting at 1:15. Our schedule indicates that we would be breaking at 12:30 to 1:15. I see that there are a number of Councilmembers that still want to be recognized. We have a choice. We can either just take a 15-minute break or we could have the Administration come back at a later date. What is the feeling of the Members? So we will stand in recess then until 1:15, and the Administration will come back at a later date. Thank you very much. 108 02/16/05 - WHOLE - 05007, 05008, 040767 (Hearing recess.) - - - -
Good afternoon, everyone. This is a continued public hearing of the Committee of the Whole on Bill Nos. 040767, 050007, 050008, and 040789. We do have a very, very lengthy list of witnesses that want to testify, and we certainly want to give everyone the opportunity to do so. In order for that to happen, I am setting some ground rules, and that will be that individuals testifying will be given five minutes. If there are panels to testify, they will be given 15 minutes. So with that, I would ask Mr. McPherson to please call our first witness.
Thank you so much for the opportunity to visit and provide some thoughts. For the record, I am Mark 109 02/16/05 - WHOLE - 05007, 05008, 040767 Schweiker, President and CEO of the Greater Philadelphia Chamber of Commerce. It is indeed a pleasure to be able to testify on the proposals that you already mentioned affecting the business privilege tax as well as the proposed changes to the parking tax. First, I'd like to point out the progress we have made in just the past year on the issue of the business privilege tax. Both the Mayor and Members of City Council have come to recognize that this tax is one of the main culprits which restrain the growth of business in our City. In Philadelphia, our leaders are discussing tax cuts, a message that we need to shout to the rest of the country. After all, wage tax cuts were accelerated last year, and the cuts will continue as gaming is put into place. Our members have always felt that the business privilege tax was one of the biggest points of contention that they faced in doing business in Philadelphia. It is a tax that hampers small businesses from growing and often causes other businesses to set up shop 110 02/16/05 - WHOLE - 05007, 05008, 040767 in suburban locations. The Bureau of Labor Statistics within the federal government last month once again cited our City as second in the nation behind Detroit in job loss with a downturn of almost 10,000 jobs. And if I could just direct the Chamber's attention to some illustrations we have to my right, especially the chart to the left which illustrates -- and certainly it's an alarming trend line. It illustrates the loss of jobs which have been sustained by this City since 1969. I won't go into all of the details, but you can see with the blue line heading south, so to speak, is in 1969 this City enjoyed close to 938,000 jobs. According to the Bureau of Labor Statistics, ending in mid-2004 with that 10,000 job loss that I mentioned in the last year alone, we are now at 679,000 jobs. Make no mistake, the tax model and the prospects of job growth which were hampered as a result of unattractive tax models do lead to this drop in job growth. And I might add very quickly for the 111 02/16/05 - WHOLE - 05007, 05008, 040767 record, to the right the one chart illustrates the job growth that is being enjoyed in the outlying suburban counties in the red line. Certainly, a very positive direction in the red. And you'll see in contrast the blue line which represents that which is experienced in the City of Philadelphia, obviously, going in the wrong direction. And thus speak to the business privilege tax and what it means to investors, entrepreneurs, business people and job growth. I know you will agree that this phenomenon must be reversed if we are to attain the long-term growth that all of us desire. We have many things going for us: New market rate housing is being built throughout the City. Two new office towers are being built downtown. Our sports franchises are having banner years. Bio 2005 is coming in June. The Barnes relocation is now a reality, and the Fox Chase Cancer Center is proposing expansion plans -- and I want to say this slowly because it bears emphasis -- that include 4,000 new City jobs over the next 112 02/16/05 - WHOLE - 05007, 05008, 040767 years. And the promise of both gaming and Convention Center expansion are on the horizon. Still, we loss residents and jobs in both our household and per capita income remain behind the median income in the rest of the Commonwealth. One is left to conclude that despite all of our assets, the cost of doing business in Philadelphia remains an anchor from which we must be freed. If the business privilege tax only affected the largest of businesses, we could make a strong argument that it must be reduced and eliminated. The fact that small neighborhood businesses must bear the burden makes this call all the more critical.
18 Small neighborhood businesses are 19 the heart of neighborhood economic 20 development. If these businesses fail or move out of this City, it cost jobs in the neighborhoods and leads to the deterioration that many neighborhoods have experienced. It is truly important that neighborhood businesses in Philadelphia enjoy the same 113 02/16/05 - WHOLE - 05007, 05008, 040767 competitive landscape as those in suburban communities. Having said this, the Chamber was pleased to see both the Mayor and Council recognize the need for addressing the business privilege tax. We recognize that each of the approaches begins to make the competitive landscape more level. As we look at the components of the tax, we believe that Bill 040767 is the better approach. Our assessment is based on the fact that over the long term it addresses both the gross receipts and the net income portions of the tax while Bill 050008 only addresses gross receipts. Let me point out that there are gross receipt taxes leveled in neighboring suburban communities. And we've done some research on this count. In 2004, there were 19 communities in Delaware County, 16 in Montgomery County, 10 in Bucks and in 23 Chester with some form of business privilege 24 or mercantile tax. None of these 25 jurisdictions imposes a BPT on net income. 5 percent is higher than the wage tax. And each of you know well, the damaging effect that the wage tax alone has had on the City's economy. 5 percent, the business privilege tax puts the City at a major competitive disadvantage. Therefore, it is our belief that by reducing both portions of the business privilege tax and by seeing its eventual elimination, jobs will be created both downtown and in the neighborhoods. And if I could, Council President Verna, just for the moment depart from an abstract discussion of the mathematics in talking about the business privilege tax. I'd like to describe a firm which does business in Yeadon literally 51 feet from the city line. This company, Union Packaging, is a manufacturer and is in the business of providing packaging for the fast food industry, $19 million in payroll, 78 employees, many of them from the City, and 4 million in wages. Now, from a distance I'm going to 115 02/16/05 - WHOLE - 05007, 05008, 040767 point to the corner of the Chamber and ask Mike Pearson to take a place there and he'll begin to walk over here and travel what is 51 feet from that point to the chair behind me. This gentleman is significant for a lot of reasons. We represent him, so to speak. We represent small business. Mike is a born and bred Philadelphian out of West Philly, employs 78 people. He's got the guts to give it a go, build his business. And unfortunately, because of the intimidation -- I shouldn't say intimidation. His concern and the lack of appeal in the business tax model, ended up in Yeadon 51 feet -- literally, his business, his front doors are 51 feet from the city line. And so for all of those who believe this discussion is simply about mathematics and balancing City budgets, I want to go past the abstract and see the concrete. This is the kind of gentleman, given his heart and where he was raised, would love to do business in this City and employ more Philadelphians, and it's about to grow. Wouldn't it be nice that that business, Union Packaging, be here 116 02/16/05 - WHOLE - 05007, 05008, 040767 in the City of Philadelphia. Now, it isn't my privilege to ask Mike to comment because I know we're mindful of time. But I thought it was our obligation as a representative of small businesses throughout this region and City to at least give all in this Chamber the firsthand opportunity to see someone that has a business and they're doing business and literally only 51 feet from the city line.
And in the short time it took him to walk that 51 feet, wouldn't it be nice if we could boast a tax reform a more affordable business privilege tax so that the Mike Pearsons of the business world come into Philadelphia to do business here. So I just wanted to acknowledge Mike and his entrepreneurial nature and his background. I appreciate the privilege to do just that. Having said that, I recognize that as public officials you are faced with the challenge of producing a budget which is balanced and addresses the needs of the citizens of Philadelphia. That responsibility 117 02/16/05 - WHOLE - 05007, 05008, 040767 must force you to look at factors which have led to the loss of jobs and seek ways to reverse that trend. It is incumbent upon us to grow our population which will in turn provide more revenue to the City to pay for services for the residents. History has shown us that each time that we have reduced the rate of the wage tax, and you can go to the numbers, that the revenues have increased. That is good for our City and demonstrates that the trend should continue. Just a question, had we stopped those rate reductions or not begun them at all, we might have been facing an even faster exodus of citizen from our City. I would note notwithstanding gradual gross receipts reduction experienced during the past five years, the Fiscal '05 business privilege tax revenue forecast reflects a greater yield than Fiscal '01 revenue. Tax reform works. We also believe that it is shortsighted to look to the parking tax as a means of generating extra revenue. Most would agree that the hospitality industry has been a 118 02/16/05 - WHOLE - 05007, 05008, 040767 source of growth in our economy over the past decade. Many of the jobs created in the industry are held by neighborhood residents. By raising the tax, we risk jeopardizing the many restaurants and entertainment venues that are supported by non-City residents who have helped to fuel our hospitality boom. As you remember, the Chamber opposed plans to raise this tax last year and remain in opposition of the current plan to increase parking taxes this year. Last year I cited the impact not only on hospitality but also on sporting events and on the retail sector as a whole. Nothing has changed. Nothing has changed. Suburban malls still have plentiful and free parking. While this tax may seem like a short-term fix, it can only serve to lessen the attractiveness of our retail and hospitality sectors. The increase in the parking tax would cause the City to lose revenues as well from the amusement tax and the liquor by the drink tax as fans and 119 02/16/05 - WHOLE - 05007, 05008, 040767 restaurant patrons seek alternate venues outside the City limits. An increase in the parking tax will only further the perception of the high cost of doing business in the City. In closing, we for our part at the Greater Philadelphia Chamber of Commerce are continuing in our efforts to market this City and region to business leaders around the country. Through the efforts of select Greater Philadelphia, we have raised more than million in marketing and business 14 development funds and have continued with the placement of promotional ads and materials around the country. Recently these adds recognized the advancement represented by the Comcast tower construction commitment as well as our competitive real estate rates. We will continue such efforts and believe that they will lead to the attraction of more businesses to this City and our region overall. And might say thank you to the Council for supporting the City's commitment 120 02/16/05 - WHOLE - 05007, 05008, 040767 to that Select Philadelphia endeavor as well. In conclusion, your efforts to make Philadelphia more business friendly are critical if the City is to realize its share of new business coming from these efforts. With that, I thank you for the opportunity to address the business privilege tax proposal as well as the parking tax.
And again, I want to thank Mike for spending a few minutes with us as well.
Mr. Pearson, before I recognize any of the Councilmembers, is there a statement that you would like to add to what the Governor has already said?
I think he really represents all of the Philadelphia businesses in regards to the tax situation. But I love the City. And to make it a vibrant City and create career opportunities for its residents, I think it's necessary that we address the tax issue.
Thank you. At this time, the Chair recognizes 121 02/16/05 - WHOLE - 05007, 05008, 040767 Councilman Goode.
Thank you, Madam President. Good afternoon, Governor. The questions I will ask you, just a few, are similar to what I asked last year. The first is, do we actually need to eliminate the net income tax in order to be economically competitive?
I think ideally, if we could get rid of it, there is no greater accelerant, from my standpoint, than that prospect. To be able to say to a perspective business -- I might add, 70 percent of the new jobs come from existing firms who choose to grow here. They are certainly going to love it. And I do think there is a connection between its ultimate elimination and job growth, yes.
But do we need to eliminate it in order to be competitive?
Homeowners pay taxes, employees pay taxes; why shouldn't 122 02/16/05 - WHOLE - 05007, 05008, 040767 businesses pay some tax?
I don't know of a business person, be they in the City or around the region, that resents having to pay taxes of whatever form. It's the height of those taxes that begins to act as a retardant and stifles job growth and business expansion. I think they're willing to pay their fair share, but I think when you take a look at the fairness aspect, business people in the City of Philadelphia believe that it's gotten to the height where it's not fair. But keep in mind, we're talking only about one tax. Today we're talking about the nets profits tax as relates to the BPT. But their employees are paying the wage tax. So they're paying, whether it's coming out of the company treasury or from the paycheck from the employee.
At what point during the elimination of the BPT or in what year do you thing we would actually be competitive?
I don't have a 123 02/16/05 - WHOLE - 05007, 05008, 040767 specific year that I could circle, Councilman Goode. I'm here trying to give voice to many concerned and frustrated business people, many of them small business people that just believe that when you take a look at the rather large bite that comes from the net piece of the business privilege tax, it's just staggering and it does prevent job growth and just want you to know that. I think it's safe to say, and I've tried to quickly make that point during my remarks, that as the City's tax model becomes more affordable, literally lower, you're going to get job growth. We're seeing it when it comes to wage taxes. You lower the wage tax and collections do continue to come in.
We're in complete agreement philosophically on that. Where we differ is whether we need to eliminate it. My final question is, we also agree that small businesses create jobs. But what's the biggest obstacle for small businesses owned by minorities and women? Is it actually the tax burden or is it ratio and gender and 124 02/16/05 - WHOLE - 05007, 05008, 040767 geographic discrimination that exists in terms of small business lending?
That's certainly a question that should be asked all the time. It's probably excess access to capital. That's probably a colorblind kind of moment too. Small business people, whether they're people of color or women-led businesses, they're not short on ideas. They're not short on a place to locate a company. And as a parenthetical, we didn't prep Mike here. He was born and raised here and would like to do business here. Many of them would like to be in the City. I think it's access to capital. And I'm happy to tell you that through the supplier network at the Chamber, we're working to remedy that. I won't expand on that, but we hear that cry loud and clear. I'd kind of circle that one, Councilman.
So as the Mayor presents his economic develop blueprint to the Chamber, you will be lobbying both for reducing the tax burden and access to capital 125 02/16/05 - WHOLE - 05007, 05008, 040767 for minorities and women?
That will not be a new position or aspiration for us. The Greater Philadelphia Chamber of Commerce has been persistent on that count for a long, long time. We have 6,000 members, I might add, and half of them, close to 3,000 right here in this City. So that has been their preference for a long time.
Thank you. The Chair recognizes Councilwoman Blackwell.
Thank you. Good afternoon, Mr. Governor. What about the issue of or the possibility of some kind of phased-in reduction in increments, how do you feel about that, like maybe 5 percent and then maybe 10 percent? 126 02/16/05 - WHOLE - 05007, 05008, 040767
Phase it 5 out. If we're trying to reduce this tax, how 6 would you feel about doing it in some 7 phased-in way? 8
Well, depending on 9 the pace of reduction. We would be likely 10 encouraged. And I do believe that that is part and parcel of the outline; is it not?
Thank you. Are there any other questions or comments from Members of the Committee? The Chair recognizes Councilman DiCicco.
Thank you, Madam Chair. Good afternoon, Governor Schweiker. In your testimony on you speak of the parking tax and you say that 127 02/16/05 - WHOLE - 05007, 05008, 040767 "Most would agree that the hospitality industry has been a source of growth in our economy over the past decade." What other business entity when we think of Philadelphia could we say is a growth industry? I mean, we have the medical institutions which are here. What I'm getting at is -- I was at a breakfast meeting a couple days ago with some developers and there was an economist who was there speaking about the regional economy, national economy, and he made a point I found quite interesting. I'll try to paraphrase him. He said, when you look at the national trend and a declining growth nationally, sometimes Philadelphia doesn't factor into that because we really don't have any major industry that is affected on a national level, for the most part. I mean, there are small cottage industries that may have some connection to what happens with General Motors or Chrysler Corporation, but --
Where they take a big hit when there's a downturn. 128 02/16/05 - WHOLE - 05007, 05008, 040767
Right. We don't take that big of a hit, which is a good thing but --
We were. We're no longer there now. But on the flip side of it, the bad thing is that we don't have any industry or industries that are that global that we could sustain some decline in other areas but yet still stay above the water. So for me, in my opinion -- that's why I'm asking you -- aside from the hospitality industry, we really don't have a major industry, correct me if I'm wrong, that we can look to as far as growth.
Well, with all due respect, I'm going to quarrel with you on that.
I'm trying to be argumentative, I'm just trying to get to a point -- maybe I'm wrong and I'd like some clarification on that. 129 02/16/05 - WHOLE - 05007, 05008, 040767
Part of the Chamber's job is to create an economic literacy about where is the growth. Put it to you this way, after Boston and San Diego when it comes to biotech and life sciences, there is no region more splendid than ours. A case in point, there's only two regions in the country with four national cancer institute centers. The reason I mention that is, one, we have the distinction; and two, the medical and commercial good that comes from that research begotten by NCICs is immeasurable and creates companies and jobs. We don't know it all the time because we don't follow the chain of events. But there's a big economic payoff there. And so to answer your question, I happen to believe that biotech and life sciences and big pharma, it is an industry sector that will enjoy accelerated growth. In fact, we can prove that it is. 80 percent of the world's pharma companies are within a 25-minute ride of us right here. I mentioned -- 130 02/16/05 - WHOLE - 05007, 05008, 040767
Many Philadelphians work there, though. To some extent, we are restricted sometimes by our perspective and believe the City is in it alone, that the economic well-being the City and its residents is tied only to what goes on economically within the City limits. It's not true. It's not accurate. And the unit of competition in this day and age, Councilman, is the region, not a City along. And I'll venture to say that an awful lot of the employees in those businesses, whether big like GSK to smaller firms that are around and have been begotten by the University City Science Center are employing Philadelphians. So it is growing, and I think we can demonstrate that. I might tell you, the largest recipient NIH funding, National Institute of Health funding in the country is just a few miles west of here at the University of Pennsylvania. And, friends, it's not just a 131 02/16/05 - WHOLE - 05007, 05008, 040767 remark about university research. Not far removed from that research are start-ups, commercialization, companies, jobs and paychecks. So you may see white robes, but business people ultimately see big paychecks in those white robe pockets. They're there.
And I appreciate your explanation. Maybe you're misunderstanding where I'm going with this. And I appreciate the work that the Chamber does not only for Philadelphia but for the region. But we're dealing with issues on tax reduction that will apply to Philadelphia and what we can do to keep businesses here and encourage businesses to move in. No 17 disrespect to the outlying areas. I mean the gentleman sitting to your left is a perfect example. Fifty-one feet away from the City borders is where he set up his business. How do we make a gentleman like him and others come over to the other side 51 feet the other way? So in that context, what I was saying is that as far as I can see, the growth 132 02/16/05 - WHOLE - 05007, 05008, 040767 industry, if not the top growth industry, it's probably up there in the top three is the hospitality industry. And that's my lead in to the next part of my question about the parking tax. The growth industry for the most part one of the top three is hospitality. The negative effect is what I'm asking for. What do you perceive as a negative effect on the hospitality industry as a result of any increase in the parking tax? Because on the one hand we're saying we're going to reduce your taxes here but we're going to raise them somewhere else. And most of the people who work in the hospitality industry in Philadelphia, I think it's something like 85 percent are Philadelphians. So I just wanted a little bit more detail, if you can, elaborate a little bit more on what your opinion is about the parking tax.
I think it slows retail activity. And certainly for a few businesses, the idea of higher parking tax means that they may not buy the tickets to the 133 02/16/05 - WHOLE - 05007, 05008, 040767 games. And so you damage -- you lower the prospect of the City collecting amusement tax revenue or the liquor by the drink tax. I mean, someone goes in to have a bottle of beer or someone goes in to have a drink, it's that prospect, I think, is diminished if they've got to go and pay a higher parking tax. So probably the easiest thing to do is just take a look at some of the folks -- perhaps a woman buying a dress at the King of Prussia Mall on Saturday and gets it for 200 bucks. And in the City, I know it's not going to be 200, but that's a whole other matter. The parking tax/surcharge, even though it's not a surcharge per se, they're going to pay 17 bucks just to park their car. So the dress 18 has gone up by 10 percent. So the question 19 is, is there any question that the fate that 20 awaits a bigger parking tax is lessened retail activity. And the place is cranking. I mean, some neighborhood streets are just cranking. And I think if you talk to restauranteurs, I think depending on the restaurant, take a look 134 02/16/05 - WHOLE - 05007, 05008, 040767 at suburban billing, maybe 50, 60 percent in some of these places. You could cut that down if all of a sudden for someone to take your keys and put it in a parking spot, they're out 20, they're going to rethink the idea of going in to have dinner some night..
Fortunately, at least for me, I haven't heard anything from the bar owners, restauranteurs in the City about this tax. I've been hearing from, obviously, the managers and operators because that's their business. But I think it would be important for them to speak out a little bit more. Them, meaning the restauranteurs and tavern owners about what they perceive as the negative impact on their business if this parking tax were to pass.
If I can mention one other thing, Councilman. On June 19th, if I could just mention this to your question about what industries are burgeoning. This biotech and life sciences, June 19th to the 21st, 20,000 of the world's leaders, entrepreneurs researches, technologists, venture 135 02/16/05 - WHOLE - 05007, 05008, 040767 capitalists, the entire leadership corps of that worldwide industry is coming here. They were in San Francisco last year. They had 18,000; 20,000 coming here. This is an example Select Greater Philadelphia and the industry and we have to turn out like we did for the Republican Convention, maybe not to that scale, but to be welcoming to these folks because they need investment ultimately and attention for our region and city and jobs for your constituents. And as I said, this isn't like having 20,000 chiefs of police come in who are looking to eat dinner every night for three nights. These are people who move operations, capital, and ideas around the planet, and they're coming here. And so enlighten regions and cities have to have their act together, and that what Select, in part, is meant to do. But that is an example. I think it's a confirmation that we are a hidden jewel as far as that industry that they've chosen to come here and says it's going to grow and even more.
Just the other 136 02/16/05 - WHOLE - 05007, 05008, 040767 morning, I expressed my concern that even with the best intentions when we talk about under the Administration's plan to reduce the gross receipts tax, you're still looking at 2018. I just can't imagine like waiting years to 7 get the tax down to the level they're 8 proposing. I mean, that's a lifetime. 9
Maybe you're not going to do it this spring, hopefully in springs to come. You know, the Governor deserves some credit, Governor Rendell, for expanding and then operating a loss carry forward. I don't have to get into the economics of it, but it just makes these businesses that -- according to the pro forma this is what happens when you're trying to discover new therapies and new drugs. They're going to lose money. And if they can carry forward those operating losses and diminish their tax obligation, they can live with some 137 02/16/05 - WHOLE - 05007, 05008, 040767 of that. So it's a mixed bag. They may see the net piece of the BPT as unattractive, but they see a Governor going to bat for that. That helps. It's kind of a mixed bag.
You're welcome. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. Good after, Governor. One comment and one question. First, thank you for your testimony and your participation and strong leadership in representing the variety of business sectors, small, medium, and large businesses throughout Philadelphia and the region. And I appreciate your continued support and efforts to try to change the onerous tax system in Philadelphia, which at times is stifling to growth and opportunity and making sure that people have jobs here, well-paying jobs here in the City. 138 02/16/05 - WHOLE - 05007, 05008, 040767 I did want to ask you, with regard to the measures in front of us, the Administration tax bill, in essence, covers Fiscal Year 2006 with, I would acknowledge, a significant reduction in the gross receipts portion of the business privilege tax; but by the legislation, it is only for one year. The other measure, and I think Councilman DiCicco is certainly correct at least in that bill, I have not seen anything that takes the tax out to 2018, but for Bill 767 has a much longer schedule but it lays out what those reductions would be on a year-by-year basis. I'd like to get your perspective and certainly the perception by both the local, regional, if not national business community on the choice between a significant one-year, but one-year-only cut, versus longer term schedule.
Is that 139 02/16/05 - WHOLE - 05007, 05008, 040767 primarily based on you at least know where things are going in a scheduled fashion?
I probably could not adequately voice the varied reactions on why they prefer it, but I do think -- in a moment I may ask Stu to comment, if I may, because he is a tax expert and specialist. That I think the certainty that is part and parcel of that model is encouraging to business people and investors. They know their costs and, more importantly, they know it's going down. You're looking at someone, whether it's in another part of the country or in the region, my job is to sell the promise, so to speak, of the region and the City. When I can talk and say, "Well, the wage tax is going down, it is soon to experience a downward trend," it perks up interest. And likewise, if you can talk about the BPT ultimately disappearing and with the certainty that Council Bill 040767 exemplifies, then it's just attractive. Stu, do you want to add something there? 140 02/16/05 - WHOLE - 05007, 05008, 040767
For the record, my name is Stuart Weintraub, and I am one of the co-chairs for the Chamber's State and Local Tax Committee. I would have to concur with Governor Schweiker just said. When I receive calls almost weekly from clients or perspective clients who are making business decisions on where to locate or expand their businesses and we start talking about the tax model in Pennsylvania, and when I tell them for Pennsylvania purposes the capital stock tax is being phased out over a specific schedule, they're very encouraged by that. When I tell them that in Philadelphia we have a specific taxes on track and people are talking about reducing the tax, the question I get is, "Well, how certain is it that it's going to happen?" And when I say, "I can't answer that because it still subject to this process and no one knows what will happen, I get very bad reactions from them. So the idea of certainty is a key component of a business person's decision of expanding or relocating the business. 141 02/16/05 - WHOLE - 05007, 05008, 040767
This is also an important issue small and mid-size businesses. As we expand and as we alluded to earlier, capital is an issue, you're doing a five-year pro forma projecting what your business is going to be like. Banks like certainty. Any funding source likes certainty. So if I can put together a plan and I can justify my expansion, which in my case may be another 40 or 50 jobs, the certainty of looking at a five-year projection and knowing what my costs are going to be, adds value to that proposal that I've just given to whatever banking representative I'm speaking to.
Thank you. One last question. And if you don't have a complete response, certainly when you get back to the shop. One of the things that happened, I guess, about 12, 13 years ago, there was an effort by the Administration at that time to not only try to stabilize the City's finances -- we've come a long way and 142 02/16/05 - WHOLE - 05007, 05008, 040767 some of the these things do operate in a bit of a circular fashion. But in the early '90s, not only did we need to stabilize our finances -- obviously, we weren't talking about tax cuts. The City had just come off of a series of tax increases. But the opportunity to utilize additional expertise in looking at management efficiencies, productivity, opportunities, ways that have been shown not only to grow the revenues but cut the cost. Now, obviously, a significant part of the cost of government are in our personnel. And there's already been a significant amount of uncomfortable shake-up in that regard, but there are systems and processes and functions that we perform, and I wonder if the Chamber would at least entertain the prospect of working with us on identifying ways that we can either do things better or cheaper, not primarily on the personnel side, but in the cost of goods and services and how we spend the precious dollars that we have. Could you give us any thought or suggestions on how we might gain some of the expertise of 143 02/16/05 - WHOLE - 05007, 05008, 040767 people in the business community to help us on the business side of government?