Thank you, Madam President. I was wondering when we were going to begin talking seriously. It's one thing to talk about cutting business taxes. But when do the cut in business taxes get made up by other business taxes? You talk about it's great when property values escalate. It's certain not great for people who live on a single level of income, on single social security check. If they live on that and the taxes go up, where do they get the money to pay for it? 221 02/16/05 - WHOLE - 05007, 05008, 040767
There are numerous ways that we can make it easier for people on a fixed income to afford the increase in property values.
There are reverse mortgages, there are programs that the government could implement. I know a few years ago one was bandied about before Council, deferring increase in property tax of payments. As I said, these are good problems to have. The reverse problem, the fact that nobody to move in your neighborhood because crime is too high, because vermin around, because houses are dilapidated. Those are the bad problems that Philadelphia has faced for far too long.
But we're talking about people who live there now, not people who are going to make a choice to live there later. What happens to the row after row of houses occupied by senior citizens, and the number of them is increasing year by year, who 222 02/16/05 - WHOLE - 05007, 05008, 040767 live on a stable income and a small one? Because when they retire, the Social Security check was far smaller than it is today. What happens in the meantime?
As I mentioned, there are programs that this Council could consider, be they involving the City in reverse mortgage programs which are handled privately. That's a fairly common way to deal with increases in property value and taxes now based on the future value of sale of your house. This Council has considered in the past and certainly could consider in the future efforts to defer payment of taxes. These are all, as I mentioned, good problems that smart people can figure out answers to, and I'm confident that this Council --
Why do you say it's a good problem to worry an elderly homeowner with the fact that their income isn't enough to pay their taxes?
No, the good problem is that the value of your house is increasing.
If the value of 223 02/16/05 - WHOLE - 05007, 05008, 040767 the house is increasing because of business activity, shouldn't business bear of brunt of that cost?
And certainly they would. The value of all property in the City would go up. If this City is a more attractive place to live and do business. Right now, business taxes, I believe, comprise about 55 percent of real estate taxation. If the City is a place where businesses want to be, business tax from the real estate would go up. If this is a place where more people want to live, I live in a neighborhood where prices have done up dramatically in the past few years. It's because our neighborhoods are a wonderful place to live where people are moving into everyday.
But you keep talking in defense of higher taxes, people making a choice to live in the future. I'm talking about the people who live in Philadelphia now.
The people who live in 224 02/16/05 - WHOLE - 05007, 05008, 040767 Philadelphia now, as I understand it, want to live to live in safe, clean communities where there are opportunities for jobs and chances to raise their family and stay here.
And it's A widow or widower or maybe a couple together in their 70s or 80s who lived in Philadelphia. Maybe they retired 10 years and their income is a Social Security check, which does not increase very much each year if at all. Now why is it a good thing to confront those people with the question as to whether they're going to be able to live in the house, whether they're going to be able to continue leave what they thought they might leave to a couple children, maybe a couple thousand dollars each. But now they're going to have to get what you get a reverse mortgage, I think, or something o enable them to plug into that money in order to pay current costs. To senior citizens, a lot of them 225 02/16/05 - WHOLE - 05007, 05008, 040767 have really moderate income. They want to be remembered. They want to leave something to their kids as part of their life scope. Why should that be interfered with? Why don't you come up with a proposal that says we're helping to build business, therefore, businesses have got to find a way to make up for that money because business is benefiting directly, instead of putting the burden on the homeowner.
Well, would you have any suggestions along that line? Because you seem to be so concerned about business. And it's a fair thing to be concerned about. Every element in the community ought to be cause for concern when it comes to raising taxes or creating other problems. But why should that be the only concern? Why shouldn't business that's going to be the prime benefit of the proposal to eliminate the gross profits tax, including the net income portion of it, why shouldn't you 226 02/16/05 - WHOLE - 05007, 05008, 040767 develop methods for business to make up for the loss of income that --
A great deal of the increased tax revenue would come from business in terms of higher property taxes that businesses would pay, higher use and occupancy taxes that businesses would pay. To the extent that businesses pay their sales tax or don't pass it on to their consumers in higher tax payments and also in higher wage tax payments to the City because we would grow jobs in the City. I think it's a misnomer to suggest that the Tax Reform Commission has suggested eliminating taxes on business.
Well, I may have missed that particular page, but I don't remember seeing a chart or an outline of the amount of money that this would cost the City in terms of revenue, a reduced revenue for business and how business would compensate for that are.
I'm happy to walk you through the Appendix 3 of the Tax Reform Commission report which does just that. 227 02/16/05 - WHOLE - 05007, 05008, 040767
Like the promise that economic development is going to produce 300 jobs and 400 there and here, and yet we 13 never get a single instance of proof from PIDC 14 or any of the business groups. 15
Madam President, I'll 16 ask the discretion of the Chair. If you would 17 like me to walk through the econometrics of 18 the Tax Reform Commission's recommendations, 19 I'm pleased to. 20
I think that would take an awfully long time right now. And we have any number of witnesses that want to testify.
I'm happy to make myself available to the Councilman now in 228 02/16/05 - WHOLE - 05007, 05008, 040767 private or later in private to do just that.
No, I would like it to be in public. Why in private? If it's public information, let's have it public. (Applause.)
Too much is done in private, which means that proof is never given to the public.
Councilman Cohen, we did have very extensive hearings on the tax reform and the report from the Commission. I think it would be very unfair for all of the witnesses that have been sitting here since 1 o'clock today to have to sit through it at least another 45 minutes of just this panel.
Well, I think it's been unfair that all we've heard of witnesses that justify a what I regard as a tremendous tax giveaway. There hasn't been any confrontation.
Councilman, this is only the first panel that we're hearing. The panel that preceded them 229 02/16/05 - WHOLE - 05007, 05008, 040767 were the Chamber of Commerce, and they weren't even a panel. But as I said, this is just the first panel. We haven't gone through three pages of witnesses that want to testify.
Well, I would like to suggest that there be a mix. Let's hear from those who don't think it's a good idea.
We are taking people in the order in which they called. That is how this list has been compiled. So if you want this group to come back another day so that they could provide you with the information you're seeking -- we're having the Administration come back at a later date. They too can come back at a later date. But I think it would be grossly unfair of us to have all of these people waiting to testify and not hear them.
I think it's been terribly unfair so far because we've only heard one side of an issue. (Applause.)
Well, it's 230 02/16/05 - WHOLE - 05007, 05008, 040767 only because we have not been able to get any further than the first panel on this list. That is why you have the impression that you have. However, as I said, I think we ought to proceed. And I'm sure that Mr. Mandel would not mind coming back a second time when we have the Administration so that he could walk through whatever it is that you want him to do.
Well, I'm for that provided it's done publicly and people have a chance to question and understand it. And I certainly agree with the Chair that I think we ought to move ahead to give the opponents of what I regard as a tax give-away a chance to be heard so that discussion is joined between both sides.
Mr. Mandel, you agree to come back at a later date so that you can walk through whatever part of the report that is being asked to you?
Thank you. Thank you very much, Councilman. The Chair recognizes Councilman Kenney.
Just quickly, Madam President. This is my opinion, and I'm only expressing my opinion, tax reform and tax reduction did not cause the condition that we have now in our City budget. Tax reform and tax reduction was not an issue in the condition of our City Operating Budget as we stand today. So tax reform and tax reduction is not responsible for the calls or the need to cut services, to look at the Fire Department, to cut library hours, those kinds of things. There were basically two or three things that happened that caused us to be in the condition that we're in. First and foremost was a spending decision in the Administration that was made unilaterally to employ Operation Safe Streets that cost at least a hundred million dollars, and probably more, over and above the normal Police Department budget. 232 02/16/05 - WHOLE - 05007, 05008, 040767 Now, you can argue that that's a good thing or a bad thing, but we didn't vote on it, and it was spent. That's a hundred million dollars that could be used for services and tax reduction. There was a pension non-performance in 2000, 2001, that cost us about $35 million a year for probably forever until we figure out how to fully fund our pension system. That was not something that Council voted on. It's something that happened. Maybe we should have been more prepared for it, but a lot of people took a hit when that bubble burst. And thirdly is the $21 million a year we spend in NTI for the next 30 years. I didn't vote for it. I know a lot of people voted for it and a lot of people believe in it. But there are spending decisions that were made either by the Mayor or in combination of the Mayor and Council that has put us in a position today to have to talk about tax cuts versus service cuts. Tax cuts did not put us in the situation our government is in today. 233 02/16/05 - WHOLE - 05007, 05008, 040767
My point is, is that the sad part about this is that this philosophical, this economic discussion is being placed in opposition to social service cuts that the tax cuts have nothing to do with. They have nothing to do with them because they didn't create the problem. The problem was run-away spending that was refused to be bridled in because it was an election year and things that happened to Pension Fund and other programs that we decided to do or the Mayor decided to do that put us in this condition. So I think the blame ought to go where it belongs, and that is spending put us here. And I think tax reduction is going to pay the price or potentially pay the price for bad spending decisions over the last five years. Thanks. (Applause.)
Are there any other questions or comments from any other 234 02/16/05 - WHOLE - 05007, 05008, 040767 members of the Committee? (No response.)
Seeing none, I thank you all so very much for coming in to testify. Thank you for your patience. Our next witnesses.
Robert Zuretsky and two others from the Philadelphia Parking Association.
My name is Robert Zuretsky, President of the Philadelphia Parking Association. My organization represents nine private parking companies operating in the Philadelphia area and over 2500 employees in the parking industry. I am again here to express my concern about the Administration's intention to increase the parking tax by 33 percent. Philadelphia's driving public already pays the highest tax that Philadelphia charges for any good or service its citizens 235 02/16/05 - WHOLE - 05007, 05008, 040767 purchase with its current percent parking tax. No governmental chamber is more aware of how dangerous increasing taxes can be to a City's business environment than this City Council. This was proven last year when you not once but twice wisely defeated the same parking tax increase. The business environment in our great City is troubled. Realtors report that the office market will have a vacancy of over 7 million square feet of office space in Philadelphia and no obvious answer to this problem in the form of new tenants on the horizon. Increasing the parking tax, which touches, every aspect of our economy right now, could spell disaster. If this increase were to occur, our projections show the parking rates could climb 7 to 10 percent. The new parking tax revenues will be offset by less tax revenues from customers who decide not to use our restaurants, theaters, museums, hospitals, sporting venues and hotels. Ask yourself what kind of a signal does the City send when it lowers one 236 02/16/05 - WHOLE - 05007, 05008, 040767 regressive tax, but raises another? If Council wants to see an example of the rippling negative effects of a parking tax increase of this proportion, all you have to do is contact your colleagues in the City of Pittsburgh. A parking tax increase caused a decrease in the number of people parking their cars as well as doing business in the City. The result was less business in downtown Pittsburgh and the further loss of business tax revenues. Believe me when I tell you, you don't want Center City Philadelphia to look like downtown Pittsburgh where there are 30 percent occupancy in office buildings and brand-new department stores that have recently closed. Last March when I began speaking last year about the proposed parking tax, I sat next to a gentleman at the Center City's Proprietors Association who told me that just the fact that the Administration was proposing the parking tax increase was enough to chase his accounting firm to Bala Cynwyd. He told me that that was the last straw, just the 237 02/16/05 - WHOLE - 05007, 05008, 040767 proposition of raising the parking tax. Center City is where 55 percent of the tax revenues are generated for the City. Drivers who park in Philadelphia are already facing record high gasoline prices and insurance rates. If the parking tax is increased, it could result in $183 increase per parker per year. In addition, SEPTA is currently in crisis. It is not a stretch to say there will be probably some across-the-board rate increase for riders. The City needs companies to locate here, but it also needs workers, many of whom have options outside Philadelphia. The roads and rails are vital arteries that keep this City's heart beating. Raising parking rates could be the final act in choking off every mode of transportation that the City desperately needs. Please don't make that mistake. Last year, our industry filled this hall with hundreds of employees who represented the 2500 workers in the parking industry. Since then, support for our efforts 238 02/16/05 - WHOLE - 05007, 05008, 040767 has grown. As you heard from Mark Schweiker from the Chamber of Commerce, this tax increase is a bad idea for the City. There is also opposition from Rittenhouse Row Association, the office building owners, the hotels, the hospitals, cultural intuitions, shops at Liberty Place and Jonathan Saidel, City Controller. Also, all the residents.
I haven't had enough time to speak with all the different resident agencies and their associations. I plan to do that to get their support also. It's going to be a big tax increase for them. All these groups are saying the same things. Don't take a giant step backwards in our attempts to improve the business climate in the City. Thank you for the opportunity to speak with you today.
Thank you very much. Excuse me, sir, did you want to testify?
No. I'll identify 239 02/16/05 - WHOLE - 05007, 05008, 040767 myself. My name is Alan Blake with Central Parking. I just came here today to lend my support as part of the Parking Association. I spoke last year in the spring on this issue. Again, just to lend my support. I spoke about many of the employees that I have that work in my organization. And I'm just surprised again when I saw this come up as an issue. I thought, if anything, we should leave the tax as is. It shouldn't be tied to the business privilege tax. It should be left to be viewed in its own merit. That's what I just wanted to say today.
Thank you. Are there any questions from members of the Committee? (No response.)
There are none. Thank you very much for your patience.
I had one comment. There was one question that Councilman Clarke asked as to where you could find other areas 240 02/16/05 - WHOLE - 05007, 05008, 040767 for revenue. And I just wanted to throw out the billboard industry which has 2500 billboards.
Oh, you have just hit a nerve in somebody's body here. I don't know if he heard you. Councilman Cohen.
Well, there are 2500 up in the City. Half of them are not regulated. If you tax them just what you tax our industry, I think you'd find your revenue right there with no problem at all.
I'm just saying to tax them. They should pay their fair share.
Good afternoon. Thank you for your patience. 241 02/16/05 - WHOLE - 05007, 05008, 040767 Please identify yourself for the record and proceed with your testimony.
Thank you. I am Krista Bard and I am President of the Center City Proprietors Association. We look out for small businesses. Politicians love to talk to us, to pat us on head and tell us we're the backbone of the economy. But what tax breaks do we get? Hardly any. If it wasn't for Councilman DiCicco and his tax abatements, we wouldn't have a thing. Small businesses get nothing compared to what big businesses get. Eighty percent of the Americans work for small businesses. And what comparable tax breaks to small businesses get compared to the big companies in Philadelphia? None. What is ironic is that this City prides itself as being democratic. Democrats outnumber Republicans 3 to 1, but it is giving big breaks to big businesses. Sounds like another party. To add insult to injure, the Mayor now wants to put excessive taxes on parking to 242 02/16/05 - WHOLE - 05007, 05008, 040767 raise funds. We did a survey of 1,000 small business owners. And they said the two top obstacles to doing business and living in the City were taxes and parking. People already don't want to come to town because they have to pay for parking. Now you want them to have to pay more, so they'll want to come to town even less. Raising parking taxes is ludicrous logic, at best; and suicide for small business, at worse. Representative Dwight Evans has the right idea. He suggests that every auto registration be charged $2 more. We should think creatively as well. What can we $2 more to on an annual basis that wouldn't be such a burden? Why not levy taxes on things people don't want in City, like SUVs, boom boxes, some luxury goods, adult entertainment or guns? Small business owners don't want increased parking rates because it's another obstacle for people to do business with them. Let me ask you something. Do you 243 02/16/05 - WHOLE - 05007, 05008, 040767 want us here or not? If you want us, give us some breaks and give them to us now. I have a dream. We have a dream. I would like Philadelphia to be the best City in the country to start a new business and the best City in the country for small business owners. We are so far away from that it's appalling. It's disappointing, people are even leaving and talking as we give testimony. What do they care about small business? It's really a question. As president of CCPA as the voice of small business in this City, I beseech you to wake up and take action. Don't add a parking tax and get rid of the business privilege tax. It's about time you did something to let us know that you want us to be here. Otherwise, your big businesses that you love so much will have nowhere to go to shop, to eat, or to live; and even they're not going to want to be here. The small businesses will be gone and then you'll all have to register as Republicans. 244 02/16/05 - WHOLE - 05007, 05008, 040767
Thank you very much. Are there any questions or comments from members of the Committee? The Chair recognizes Councilman Kelly.
I couldn't resist this, Madam President. Ms. Bard, I just want to disagree with why you should -- the difference in registering Republican, the reason why you picked, but I certainly wouldn't mind people registering as Republicans. God knows we need more of us in the City, I think.
Thank you, Madam President. Just for the record, small businesses do receive a tax credit for creating new jobs.
Any other questions for members of the Committee? Any comments? (No response.)
Seeing none, I thank you very much for your patience. Our next witness.
Andrew Chirls, Chancellor of the Philadelphia Bar Association.
Thank you very much. I'm the first person to appear alone at this stand.
I appreciate it. I thank you and I thank all of Council on behalf of the 13,000 members of the 246 02/16/05 - WHOLE - 05007, 05008, 040767 Bar Association. I appreciate the opportunity to testify on tax reform generally and more specifically on the elimination of the business privilege tax over a period of time. We understand that this is a very big issue and that it relates to the entire funding of City government, but we support the recommendation overall of the Tax Reform Commission and have passed a resolution in favor of the balanced package that the Tax Reform Commission recommended. There is a special aspect of the business privilege tax which affects most professional service entities that are formed as partnerships rather than corporations and it affects sole proprietorships. Many of our members are sole proprietors as solo practitioners, and a third of our members are in small firms. The people in the small firms are often in the neighborhoods. They are the people who take the pro bono cases. They're the people who take the court appointments. They're the people who in many ways hold our neighborhoods together. I'm not just here on 247 02/16/05 - WHOLE - 05007, 05008, 040767 behalf of people like me who wear blue suits and go to work in the highrises, though this issue is important to them as well. Under the current tax rules, if a service firm is organized as a corporation, the employee owners and the officers of the business will pay the City wage tax at about 3.9 for non-residents and 4.25 percent for residents. But if the same firm were organized as a partnership, the partners would also be subject to the business privilege tax of 6.5 percent on their net income and the partnership would pay the net profits tax. While there is a credit for 60 percent of the net profits portion of the business privilege tax, the effective rate of tax on partnership net income could in some cases be more than 7 percent. And that affects not just lawyers but other partnerships and sole proprietorships. It's a major inequity. And so many of our lawyers and many other people pay taxes twice, and that's not fair, it doesn't make sense and nobody else pays it that way. This is a small business issue. 248 02/16/05 - WHOLE - 05007, 05008, 040767 Our surveys over the last years show that Philadelphia law firms have been opening satellite offices at an accelerating rate. The big firms are not growing in Center City; they're growing outside of Center City. And some of the Philadelphia law firms just in the west side of the Market Street West corridor employ about 10,000 people. So that's a very large part of the Philadelphia economy as well as the people in the neighborhoods. And we ask for an equity that would be accomplished by the business privilege tax. Philadelphia lawyers are exporters for this City. There was a time when if you went up Broad Street, you went past the factories where we exported the hats. You could go in the suburbs and see where we exported steel or even along the river. We don't do that anymore. What Philadelphia lawyers do is work here on cases and transactions well beyond our City limits. And when we do that, we hire people who work here and we exported knowledge and professionalism. 249 02/16/05 - WHOLE - 05007, 05008, 040767 We do it because we have loyal relations with our clients. We do it because we're smart and capable. And we do it because we are lower priced than places like New York or Chicago. Client loyalty, as people know, only lasts so long. Being smart, it's a good thing to be, but being cheap is important. And if we're paying taxes twice, it's hurting our ability to be one of the key exporters for something for this City for the benefit of this City. So I thank you. I have submitted written comments from which I've departed.
And we will make a copy of your testimony available to the stenographer and it will be transcribed in full. Are there any questions or comments from members of the Committee? (No response.)
Seeing none, I thank you so much for your patience. Thanks for coming in.
I'd like to call up 250 02/16/05 - WHOLE - 05007, 05008, 040767 the following people who are associated with the Board of Realtors, Al Perry, Judy Buchsbaum, Lawrence Rust, and Tony Brown.
Good afternoon. I would ask that you please identify yourself for the record and proceed with your testimony.
Thank you, Madam President and members of City Council. For the record, my name is Al Perry. I'm a Realtor and President of the Greater Philadelphia Association of Realtors, with over 1500 members and 319 local business offices. Our association has provided for you position papers on Bill No. 040767, so I'll spare you from reading it today and ask you all to take a look over it and if you have any questions or concerns, please feel free to contact us. I do, however, want to state today that the Greater Philadelphia Association of Realtors strongly supports this bill. It is smart legislation that is fiscally 251 02/16/05 - WHOLE - 05007, 05008, 040767 responsible. Philadelphia needs to encourage the creation of new jobs in our great City. All you need to do is drive down City Line Avenue to see the impact of the business privilege tax on our local job market. If the jobs exist in our neighboring counties, the likelihood of employees living in Philadelphia drastically decreases. New local jobs will have a tremendous impact on Philadelphia's economy which, of course, includes but it is not limited to the housing market demand. If I can borrow a line from one of my favorite movies, "Field of Dreams," if you build it, they will come. No truer words have ever been spoken in regards to this situation. If the City shows a commitment to steadily decreasing and ultimately abolishing this business privilege tax, businesses will come, jobs will come, people will come, and new revenue will come. This City has more to offer than our neighboring counties. If you level the playing field, they most definitely will come. I can give you one glowing example 252 02/16/05 - WHOLE - 05007, 05008, 040767 of this. I've been a proud Realtor since 1995, and a majority of my real estate experience is in Council President Verna's district and Councilman DiCicco's district. As I've grown as an agent in this business, I see a strong opportunity for me to open my own office and become an owner and employer myself. Yet one week ago, I was looking and strongly considering as a location for this business a commercial property on Chester Pike in Delaware County. I would be close enough to I95 and Philadelphia that I could still serve my loyal client base, however, my commitment and growth would most likely begin in Delaware County at that point. This is only one example of a lost opportunity for Philadelphia. The good news is that I haven't yet made a final decision. And given a strong commitment from Philadelphia such as support for this bill, I would be more than happy to set up shop in South Philadelphia where I've been practicing since 1995. In closing, I would like to express 253 02/16/05 - WHOLE - 05007, 05008, 040767 that while I have been privileged to conduct business within this City, Philadelphia also has been privileged with my being here. Thank you for your time and consideration. I look forward to the passage of Bill 040767.
Thank you, Mr. Perry. Good afternoon. Kindly identify yourself for the record.
Honorable members of City Council, I appreciate the opportunity to testify before you. My name is Tony Brown. I'm a small business owner, Realtor and resident of Philadelphia. I love the City of Philadelphia and want to continue to make positive growth and vitality to the City. Because of this commitment, I strongly support Bill No. 21 040767. Prior to managing my own busy, I served in the housing and community development community for almost 30 years and have helped to revitalize communities in North 254 02/16/05 - WHOLE - 05007, 05008, 040767 and West Philadelphia. So I know from personal experience that jobs are the foundation for stabilizing our neighborhoods and delivering basic services. Over the past decade, the population has dropped because people and jobs have just left the City. What do we have to show for it? Abandoned neighborhoods. Just drive through the neighborhoods and you will see that when jobs and neighbors leave Philadelphia, the neighborhoods decline. Nevertheless, I'm confident that we can reverse this trend and see Philadelphia grow and flourish. But in order for this to happen, there must be a dramatic reduction in the business privilege tax. I strongly believe that this additional tax burden has directly contributed to the loss of population and businesses we are experiencing in our City. I too believe that elimination of the business privilege tax will promote business growth and in turn keep people and industry in the City and attract people and industry to the City, bringing the revenue that we need. 255 02/16/05 - WHOLE - 05007, 05008, 040767 Philadelphia's residential property values actually rank below lack luster cities like Newark, New Haven and Hartford. Let's face it, for most middle class families, a home is our most significant investment and most significant asset. Tax reform will indeed increase property values for homeowners in the City of Philadelphia. Businesses that have to compete in neighborhoods are a prerequisite for neighborhood transformation. We need to create a business-friendly environment jobs in our neighborhoods so that residents will have jobs in our neighborhoods, buy homes in our neighborhoods, get a good education in our neighborhoods, and contribute to the growth and vitality of our neighborhoods. When I hear reports that tax reform will force the City to cut critical services, I just scream because I know that's a cop-out. We just don't want to deal with the tough decisions required to deliver services more proficiently. I have been a part of the process of getting more for less. I know that 256 02/16/05 - WHOLE - 05007, 05008, 040767 under your great leadership we've been able to slowly reduce our tax burden while dramatically expand City services to neighborhoods across this great City. The bill proposed by Councilman Nutter calls for a gradual elimination of the business privilege tax by the year 2017. By eliminating the business privilege tax, you are demonstrating to residents and businesses that the City of Philadelphia is serious about tax relief. You are sending a message to corporations that Philadelphia is becoming a more business-friendly environment. And undoubtedly, this will encourage them to relocate to Philadelphia. I am the President of Lab III & Associates and I do not see doing business in Philadelphia as a privilege but as a necessity to bolster our City's economy and standing in the business world. Without the passage of this bill, Philadelphia will continue to suffocate under unnecessary taxes. The business privilege tax is a significant burden not only for me, but also for all business owners, especially small 257 02/16/05 - WHOLE - 05007, 05008, 040767 businesses in our neighborhoods. As a Realtor, the consistent decrease in population is a viable concern in my industry, but more importantly, as a resident and employer in Philadelphia my deepest concern is for the greater good of the City.
Business growth will inevitably lead to a rise in population as new employers and their employees relocate to Philadelphia. These concerns need to be addressed, and I commend all of you for dealing with this issue. Any opposition to this bill will state that the City cannot presently afford an elimination of revenue-producing tax without negatively affecting City services. I know we're better than that. Philadelphia business tax burden is the highest among major cities. We tax things that other cities don't tax and we tax them highly. We can eliminate these he taxes without it being detrimental to City services. The City Controller's Office showed that after the City began to cut its taxes in 1996, Philadelphia finally experienced some 258 02/16/05 - WHOLE - 05007, 05008, 040767 job growth and actually increased its tax revenue substantially. By enacting the recommendations of the Tax Reform Commission to eliminate the business privilege tax, reduce the wage tax, and reform real estate tax, we can create jobs and generate investment in City neighborhoods and spread neighborhood transformation throughout the City. In closing, I urge you to vote yes and pass Bill No. 040767. I trust that your commitment to residential and business community alike in Philadelphia will outweigh any political affiliation and pray that you will commit yourself to serious tax reform for Philadelphia and pledge your support to Bill 18 No. 040767. Again, I thank you for the opportunity to testify.
Thank you very much. Are there any questions? Councilman Clarke.
Good afternoon. 259 02/16/05 - WHOLE - 05007, 05008, 040767 One quick question. You said reform real tax taxes. What do you mean by that?
Reform the taxes so that the burden is not on the real estate industry to pay its fair share into real estate taxes. That's all. I'm saying to reform it to give a balance share of real estate taxes. Philadelphia has a high tax, and we think -- let me speak for myself. I believe that should be made more fair comparable to other cities.
I don't understand. What are you suggesting we do? You're saying reform it meaning to reduce it, to change the way we assess it? -
Reduce it in support of what the Tax Commission has outlined in its recommendations.
You're saying collections? 260 02/16/05 - WHOLE - 05007, 05008, 040767
We're talking about the real estate tax, reforming it to reduce the burden of the real estate tax.
I'm trying to understand what you mean by reforming it. You want us to reduce the real estate tax in addition to all the other taxes?
If I could interrupt for one second. I don't think the Association is looking for City Council and this government to reduce the City property tax, if that's what you're asking.
I'm just asking him to clarify. The statement was made he wants to reduce all the other taxes and reform the real estate tax, and I'm just trying to understand how he wants us to reform the real estate tax.
I'm not an economist, so I'm not qualified to respond. I know I'm in support of what I believe the tax commission 261 02/16/05 - WHOLE - 05007, 05008, 040767 has submitted and included a reform of the real estate tax.
Well, they were kind of suggesting a hundred percent evaluation that would actually in most cases, my belief is, increase to a substantial level.
Well, as a business owner, I wouldn't be in support of increasing a tax burden because I believe that we should be increasing jobs in neighborhoods.
Thank you, Councilman. Any other questions? (No response.)
The panel Harriet Lessy, Michael Kaplan, BJ Hoffman, John Kroll. 262 02/16/05 - WHOLE - 05007, 05008, 040767
So are we to assume, Ms. Lessy, you're speaking for everyone.
You are to assume that. I have their written testimony, but unfortunately, they had to leave.
I'm sure you do. The only person I'm not going to give you a written testimony on is for myself Harriet Lessy, born and raised in Philadelphia, and I consider it to be a privilege to be in business in Philadelphia. Part of that privilege, unfortunately, is to pay many, many taxes. Most of the time, I think you know this, Madam Chair, that I am not objecting to it, but it is the business privilege tax which includes gross receipts and net income that I am personally objecting to today. It has been a privilege to pay the school income tax, the real estate tax, sales tax and the tax on drinks beverages in 263 02/16/05 - WHOLE - 05007, 05008, 040767 restaurants. I even don't mind paying parking taxes. I do object personally to the proposed increase. I don't even object to paying the extra 3 percent on a car lease. But I think it's time to reduce, even gradually, the business privilege tanks. I thank you for that. I. Have testimony here which I will save you the trouble. I'll just hand it to you from John Kroll who is the President of the Greater Philadelphia Hotel Association who is here to say unanimously our organization is asking you not to increase parking tax; from Schectman Marks DeVor and Etskovitz, testimony from Brian J Hoffman, a CPA who is asking also for reduction in business privilege tax; from Michael Kaplan, Zarwin, Baum, Devito, Kaplan Schaer & Toddy, a law firm that employs 50 people in Philadelphia, reduction in business privilege tax; and from Rick Olivieri, President of the Reading Terminal Merchants Association who also had to leave. His computer went down at the Reading Terminal. And I'm also offering his testimony. 264 02/16/05 - WHOLE - 05007, 05008, 040767 Thank you very much.
Thank you very much. Are there any questions for Ms. Lessy? Let me say for the record that all of the testimony will added as if it had been said verbally and we thank you for coming.
Then we have a panel, Stan Shapiro, Sharon Ward, Jonathan Stein, K.C. Ellis.
Good afternoon. Thank you for your patience. Please identify yourself for the record and proceed with your testimony.
I'm Stan Shapiro, and I'm co-founder of the One Philadelphia Coalition, all of whom are gathered here now and will be testifying. First our co-chairs will be testifying.
Excuse me. 265 02/16/05 - WHOLE - 05007, 05008, 040767 Are all of these people going to testify?
All of these people, yes, are with us. And we've all been waiting since about 1:15.
I understand. And we just did the list as people called. Now, apparently there are two panels here. Is Beth McConnell here.
Mr. Rodriquez is not here. He wanted to be here but was not able to be here. I think, frankly, we're it.
I'd like introduce two co-chairs of our coalition, Tom Cronin and Sharon Ward. Mr. Cronin is going to testify first.
Good afternoon. Identify yourself for the record and proceed with your testimony. 266 02/16/05 - WHOLE - 05007, 05008, 040767
My name is Thomas Paine Cronin. I'm president of AFSCME District Council 47.
Today, we have heard a virtual chorus of al supporters arguing for ending the business privilege tax or BPT. We agree that parts of the BPT are onerous and unfair; in particular, the gross receipts tax. This tax does put an unfair burden on small businesses. However, everyone here must understand that cutting taxes will inevitably lead to a reduction in City services. Over the past year, City employees have seen the slow but steady reduction in the number of people who provide City services. While some may argue that the City workforce must be scaled back, it is also clear that the changing demographics of our City have increased the demand for a greater variety of services. Now we are caught in a tax-cutting frenzy based on the popular yet unproven 267 02/16/05 - WHOLE - 05007, 05008, 040767 premise that by reducing taxes to the lowest possible level will create and sustain a growth in jobs, and thus the over all economy of our City. Even if one accepts this notion on faith alone, it still fails to explain how the level of services provided by the City can be sustained. Unfortunately, we have all seen the real effects of reducing tax revenues. Mothballing of various fire-fighting units around the City, conversions of neighborhood swimming pools to sprinkler lots, reduction in the size of the police force, diminished hours in of our library branch libraries. At the 16 same time, City employees are once again told 17 to, "Do" more with less." 18 I am here today to tell you that all 19 these tax cuts will end up forcing City 20 workers to "Do everything with nothing." That idea should be an anathema to everyone who claims title to the name and characterization of "public servant." To expect that services can be sustained while reducing the funding for those services is clearly the triumph of 268 02/16/05 - WHOLE - 05007, 05008, 040767 hope over reality. We need to make our City more attractive for businesses and people to come here, but we must not do so at the expense of the more than 1 million people who live here. Thank you. I also have the Presidents of two of the City's locals here, Cathy Scott of Local 2287; Mike Walsh of 2186, who can speak specifically if you need to about not only the layoffs that have occurred recently across the field, but also this slow attrition, this loss of jobs in almost every single city department, commission, agency, and board in the City. And they can tell you how this affects City services that we provide and how it's going to continue unless things get turned around of the reduction of service in the City of Philadelphia which should be the real alarm for everybody here. Thank you.
They are willing to make comments if any of the Councilpeople have questions about either their particular 269 02/16/05 - WHOLE - 05007, 05008, 040767 Councilmanic districts, how services have been cut back, or just generally how they've been cut back over the years what the effect has been on the community. They're here to do that.
Thank you. If any Councilmember so desires, please let it be known. Councilman Clarke.
Thank you, Madam President. Good afternoon. Mr. Cronin, a real quick question. I'm going to ask you a couple of question of which I know the answer to. I guess you would say they're leading questions.
Mr. Cronin, how many people are in your union, in your local?
There's about -- it depends on the local that you're talking Cathy has a certain number in hers, and Mike has a certain number in his. We're talking about approximately 2500 or so City employees and 270 02/16/05 - WHOLE - 05007, 05008, 040767 you're talking over 5,000 members of the union when you talk about all the locals.
Yes. Most of whom live in the City and pay taxes in the City.
I'm leading you so good that you're answering it before I give you the leading question.
I'm sure you don't mean "most of whom." I would hope you mean "all of whom."
No, we have people who we represent who are not City workers but who still -- other people, for example, that work at Temple, people that work at the University of University of Pennsylvania, people that work in the private non-profits, all other local. We represent people outside of City workers, but most of whom, let me be crystal clear, live in the City of Philadelphia whether they work for a public institution, a government or private concern. 271 02/16/05 - WHOLE - 05007, 05008, 040767
So all of the members of your union that work for the City live in the City?
Unless they have a special exemption granted by the City, yes, they do.
So it would be reasonable to say that you have a 100 percent residency, the workers that work for the City?
Would you say that there's probably no other industry that has a such a percentage of employees that live in the City of Philadelphia?
So when we had 272 02/16/05 - WHOLE - 05007, 05008, 040767 an earlier discussion about some of the hospitality industries and things of that nature and there was a reference that those people lived in the City of Philadelphia which is why we need to strengthen the hospitality industry because those people live in the City, the same thing could be said for your particular workforce?
I would say that it could be squared or whatever. I mean, there's plenty of people that I know in the hospitality industry that don't live in the City of Philadelphia. So I heard a lot of nonsense up here today that I had to bite my tongue while I'm listening to because -- we all have a different reality, I guess. But we're the rubber meet the road. We see the people that are brought who have just been laid off or who aren't being replaced. So we can look into their faces and we can actually see the pain that they have and we can also see that the services that they're not going to be providing.
And I agree with 273 02/16/05 - WHOLE - 05007, 05008, 040767 you that although probably a majority of the people that work in the hospitality industry probably live in the City, but it's not 100 percent. So to eliminate a City worker who does live in the City of Philadelphia, who pays real estate taxes in the City of Philadelphia or rent or whatever in the City of Philadelphia, who pays a higher wage tax because they live in the City of Philadelphia, who more often than not will spend their expendable capital in the City of Philadelphia because they shop in the local neighborhoods, to eliminate that type of employee to enhance another type of industry that may or may not have an employee that lives in the City of Philadelphia, you would say that's probably not a good trade-off, right?
Okay, I just wanted to go down that line of questioning because somehow this thought that when you downsize government that somehow these are mythical people like they're not real people, 274 02/16/05 - WHOLE - 05007, 05008, 040767 that they're not people who live in our City, not people who've committed to live in our City, not people whose raised families, who send their kids to public school in our City. I mean, it's just a number. And while those 200 people that just got laid off is just a number, they're real people. You talk about having to interact with those people and try to get them placement, and I would probably say the likelihood that they probably won't get as high-paying a job as they had when they left the City of Philadelphia in most cases. So they're not only downsizing the City workforce, we're downsizing that particular family's economy.
Councilman, you're absolutely right. Not only are we talking about those folks who are laid off, won't have work and probably, depending upon their age, may not get work again, we're also talking about people who utilized the bumping down process who are going to be losing thousands and thousands of dollars in terms of their family income. 275 02/16/05 - WHOLE - 05007, 05008, 040767
Thank you, Madam President. Thank you Mr. Cronin and company for waiting patiently this afternoon. The last shall be first, they say. Someone greater than all of us said that. I'm glad that you're here to voice another opinion outside of the other statements that we've heard this afternoon. My friend former Governor in his testimony today said that small neighborhood businesses are the heart of the neighborhood, economic development. And I thought a lot of the Governor especially at the end of his short term as he led the rescue of those miners. So if the Governor is watching or listening, take no offense, however --
That's right, it 276 02/16/05 - WHOLE - 05007, 05008, 040767 was the workers. I understand. In his statement, he says, "We have many things going for us, new market rate housing being built throughout the City, new office towers are being built downtown, sport franchises having a banner year, Bio 2005, Barnes relocation, all this big stuff that happen which is wonderful for the City. And new market housing, we all know, is a barometer for a way of measuring the economy of any City in any location in this country. But he says that it is all driven by small neighborhood businesses. But there's no 15 mention -- while he talks about this market rate housing and the skyscraper that's going up, he doesn't mention that affordable housing has gone on in this City. Compared to other cities, we have done fairly well. Community-based groups have driven this government of this Administration and past governments to do more. And I suspect, because I know a little it, not much, not as much as probably you do Tom, but know a little bit that the people that are living in those 277 02/16/05 - WHOLE - 05007, 05008, 040767 non-market-rate housing are the working people of the City, and that, in fact, when they buy affordable -- when they get a mortgage for an affordable home, they are buying into the economy, they are contributing to the economy of the City. These people are moving into neighborhoods that were abandoned in this town. And now, all this new housing is go on in Councilwoman Blackwell's area, Councilman Clarke's district in which I live, and area where Councilman Cohen lives and many members of City Council, that we have seen the Council President's district. All this affordable housing has gone on. All these small shops have gone on. This is not a place that's going to become a ghost town, as someone alluded in the testimony about an hour ago, that all of a sudden if we don't do this -- and I'm for and I was very encouraged by the Tax Reform Commission report that we do, like you stated, need to do a little bit more and do the right thing with lowering taxes. I don't anyone in this country anywhere that is in favor of more taxes. So that business that 278 02/16/05 - WHOLE - 05007, 05008, 040767 people just want to be taxers is not a real appreciation of where people are coming from. But we have all this small business growth in the City and, yes, we need to do more. But the working people of the City are being pushed aside on expressing their opinion. And I think that it is time again for us to go through a cycle of hearing from people that -- and who feels the burden the most? The working people of this City that do not necessarily all live in new market rate housing. I don't. It just happens that my neighborhood, like many neighborhoods, have appreciated. I'm getting people calling me. I don't know how they get my home number. I've had the same home number for over years. 19 They're writing to me. They want to know if I 20 want to sell my house. And I hear of a 21 community that's got hundreds of people in New 22 York City that would like to relocate in the 23 City of Philadelphia. Yet, you turn on our 24 City channel today and you hear as though 25 we're leaving Dodge, that people are packing 279 02/16/05 - WHOLE - 05007, 05008, 040767 up, calling U Haul, "Get me the biggest truck. I'm moving out of Philadelphia." I might just live in a different world, but I don't see that. We have been very prudent. This City Council -- and I've only been here a little bit over a year -- has been very prudent in the past years or more, 10 years, to do the right thing and to do this in 11 a way where taxes go down and services stay at 12 the level that people need them. 13 So I just want to compliment you for 14 waiting so long this day to make your views 15 known to us and to the public.
Thank you, Councilman. I just want to just say one thing at the end. As you said, we've struggled through and we've been listening patiently to a number of people that spoke, a number of business people and so forth and so on. I just want to say, there's a few of us around here that stood out in the rain the other day up in Harrisburg trying to talk about an effect on the City with respect to this transit crisis and what schedule to 280 02/16/05 - WHOLE - 05007, 05008, 040767 occur at the end of this month or the beginning of the next month with a 40, 50 percent fair increase and a to percent 5 cut in service and the devastating effect -- 6 talk about a devastating effect. That's where 7 some hearing should be about what's going to 8 happen there. 9 And it's interesting to me that a 10 lot of these same people that are crying the 11 blues, "Oh, if we don't cut this" -- 12 incidentally, nobody wants to pay a tax. I 13 don't know how we're going to do this. Nobody 14 wants to pay. This group doesn't want to pay, 15 that group doesn't want to pay. It's okay for 16 us to pay, but they don't want to pay. It 17 would have been great, let me just tell you, 18 if the number of business people, the business 19 leadership of this City or this region had 20 been with us up in the rain in Harrisburg 21 fighting to prevent what's going on, which is 22 going to be a catastrophe for everybody unless 23 it gets reversed, if they put on the line the 24 same thing as the working people, the poor 25 people and the labor unions, we wouldn't have 281 02/16/05 - WHOLE - 05007, 05008, 040767 a transit crisis today and this problem would be solved. (Applause.)
You're welcome. The Chair recognizes Councilman Kelly.
Thank you, Madam President. Mr. Cronin, again, I want to thank you for your patience and your committee's patience for being here as long as you have. I just have a question. How many members are in Local 47?
It's not Local 47, it's District Council 47. It's a common mistake. I'm not trying to be funny. We have nine locals in the Council, two of which are city locals that are represented by Cathy Scott and Mike Walsh here today. They can give you specific numbers
What would be the 282 02/16/05 - WHOLE - 05007, 05008, 040767 combined total of the unions, just a ballpark figure.
Could you tell me how many members -- I don't know if you remember this. Say about years ago, what 8 was the membership compared to today? 9
It's grown for a number of reason. We're probably one of the only unions in the City of Philadelphia that has added members, generally speaking, to our union by going out and organizing, by acquiring other people, et cetera, et cetera.
My name is Cathy Scott. 283 02/16/05 - WHOLE - 05007, 05008, 040767 I'm president of AFSCME Local 2187. We represent the non-supervisory professional workers in the City of Philadelphia. I would say probably my local is the local that has grown the most over the last 7 years, but, in fact, that growth has been 8 driven by mandated increases in staff. For 9 example, in the Department of Human Services 10 where children and youth investigations are required, there has been close to 400 additional staff people added there because of the mandated services for investigation of abuse and neglect. When I look at the other areas in my membership, there is a sharp decline. For example, if I look in the Health Department and going back, you know, there was a promise that was made when the Philadelphia General Hospital was closed that there would always be the clinics to provide treatment for medically needy people. If you look at those clinics today, those clinics are in trouble. They are losing doctors. They are using nurses. The period of had time in order to get 284 02/16/05 - WHOLE - 05007, 05008, 040767 appointments to address health problems that people have are becoming very long. For example, for someone with an infectious disease, instead of taking four weeks to be seen and get treated in a referral, it is now to weeks to be seen. So where we do see 8 increases in the mandated services that are 9 paid for a hundred percent by the State, in 10 the other services that the City is providing, there is a sharp decrease in the number of members in those areas.
Yes, in other areas that are not funned through state or federal monies.
Okay, that's where I was leading to. Now, most of the members in your local, would they be considered City workers as such?
Are they required 285 02/16/05 - WHOLE - 05007, 05008, 040767 to live in the City?
Absolutely. The one area where people do ge exemptions, and Tom was referring to that, is there is a difficult time getting clinicians and physicians who live in the City of Philadelphia, so some of them do have exemptions.
Now, getting back to Mr. Cronin and District Council 47, how many employees did you have in just District 47, say, 5 years ago or 10 years ago? Have you been losing employees; and if so, how?
No, I would not say that we've been losing employees because we have been -- other than the addition that Cathy has talked about, in most cases, we have gone out and organized new groups of people. We're attempting to --
Let's put it this way. How many City employees have really lost their positions through attrition or layoffs in the City in the last five years or so?
Well, I think the City'S figures were something like 1600 or 286 02/16/05 - WHOLE - 05007, 05008, 040767 1700. I'm not sure exactly on the exact amount.
And in your mind, is this going to continue? Is this a trend, in order words? Do we loss a hundred people a year and they're not filling the positions?
Let me just say this. It certainly appears that way. If you talk to the folks that run the public libraries, run the recreation centers, it certainly doesn't seem like we're adding people; it seems like we're losing people and we're continuing to lose people. And what we're worried about is that this trend is going to continue so that the services will decline even further.
Well, I think that's what we're all concerned about. And I think that we have to make decisions here on how to stop this trend. And in my opinion we're losing because we're probably not spending wisely or whatever. But we have to make some decisions here and you may have to bite of bullet a little bit.
Wait a second. We've 287 02/16/05 - WHOLE - 05007, 05008, 040767 been biting the bullet. We've been biting the bullet year after year after year, contract after contract. Now, let me say just say one other thing, Councilman, when you said that. This union, District Council 47, is the union that came up with RGI, we're talking about way back in the '80s, as a way to save the City money, as a way to improve efficiency, what the Governor was talking about earlier about that he could do it, he could show where efficiencies could be made if you cut overtime, if you cut this, if you cut that. I listened to that testimony. We put that position out in the '80s in terms of RGI. It was rejected by Administration after Administration. Where the second Rendell Administration when it came into effect and was used, we began to save money, get more efficient, et cetera, et cetera. So we've been biting the bullet. We live here. We're hurt when there's a cut in services. We're hurt when there's layoffs. We pay the taxes. We belong to the religious organizations. We 288 02/16/05 - WHOLE - 05007, 05008, 040767 belong to the civic organizations. We're the life blood, as far as I'm concerned, of the City. We're the stakeholders of this City.
I believe that, but I'm getting back to my point. My point is you're losing people over the last 5 years, probably years. It's a trend that we have 9 to do something about. We have to stop it, 10 but we have to stop it in many different ways. Evidently, we're not spending wisely, we're not using everything in our disposal. One of the things that we have to look at is to get additional businesses in here, get additional people to move into Philadelphia, we're going to have to do something about it. Now, we're going to have to --
You don't do it by cutting services. You don't do it by closing libraries, health centers, et cetera, et cetera. I don't think that's the way you do it.
Well, I'm not saying that, but we're going to have to either raise the revenue or we're going to have to 289 02/16/05 - WHOLE - 05007, 05008, 040767 live within our means. And that's the hard, cruel fact that we're going to have to face. That's I have, Madam President.