COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Monday, May 22, 2000 10:25 a.m. - - - BILL 000221 - Creating Net-Works TIF. Board of Directors Appointments Resolutions: 000192 - N. Tissian, So. St./Headhouse Spec. Svcs. 000193 - A. Greenberger, Old City Spec. Svcs. 000194 - Bush Bell, " " " " 000195 - F. Palmer, So. St./Headhouse Spec. Svcs. 000196 - H. Lander, " " " " " 000197 - M. Weinberg," " " " " 000198 - A. Sitnick, " " " " " 000199 - B. Pierson, " " " " " 000329 - M. McMahon, City Ave. Spec. Svcs. 000330 - H. Wurzak, " " " " RES. 000230 - Confirming the appointment of Kenneth I. Trujillo, Esquire, as City Solicitor. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA, Chair COUNCILWOMAN JANNIE BLACKWELL, Vice Chair COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DARRELL L. CLARKE COUNCILMAN DAVID COHEN COUNCILMAN FRANK J. DICICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILMAN W. THACHER LONGSTRETH COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 5/22/2000 - COMMITTEE OF THE WHOLE I N D E X Page Res. No.'s 000192 through 000199 Dick Ostrander, Executive Director . . . . . . 4 South Street/Headhouse Special Services District Cynthia Filo, Director . . . . . . . . . . . . 6 Old City Special Services District 7 Norman Tissian, Board of Directors Appointee 5 Al Sitnick, " " " " 5 Bush Bell, " " " " 8 Alan Greenberger " " " " 8 Attached bios of: Fluffy Palmer, Board of Directors Appointee Marlene Weinberg, " " " " Res. No.'s 000329 and 00330 David Cohen, Executive Director. . . . . . . . 10 City Avenue South Street/Headhouse District * Mike McMahon, City Avenue Special Services 11 * Howard Wurzak, City Avenue Special Services 11 Bill 000221 * Robert Fina, Senior Vice President of PIDC 12 On behalf of PAID Res. 000230 * Kenneth I. Trujillo, Acting City Solicitor 74 Stephen Presser, Legal Director . . . . . . . 98 ACLU of Pennsylvania (* - Also provided attached written testimony.) 3 5/22/00 WHOLE COMM. - RES. 000192 thru 199 P R O C E E D I N G S
Good morning, everyone. This is the Committee of the Whole of Council. I would ask Mr. McPherson to please read the titles of Resolutions 000192, 000193, 000194, 000195, 000196, 000197, 000198 and 000199.
Resolution No. 000192, appointing Norman Tissian to the Board of Directors of the South Street/Headhouse District of Philadelphia. Resolution 000193, appointing Alan Greenberger to the Board of Directors of the Old City Special Services District of Philadelphia. Resolution 000194, appointing Bush Bell to the Board of Directors of the Old City Special Services District of Philadelphia. Resolution 000195 appointing Fluffy Palmer to the Board of Directors of the South Street/Headhouse District of Philadelphia. Resolution 000196, appointing Howard Lander to the Board of Directors of the South Street/Headhouse District of Philadelphia. Resolution 000197, appointing Marlene Weinberg to the Board of Directors of the South 4 5/22/00 WHOLE COMM. - RES. 000192 thru 199 Street/Headhouse District of Philadelphia. Resolution 000198, appointing Al Sitnick to the Board of Directors of the South Street/Headhouse District of South Philadelphia. Resolution 000199, appointing Bob Pierson to the Board of Directors of the South Street/Headhouse District of Philadelphia.
Thank you. Do we have anyone here -- Councilman DiCicco, are any of the candidates here? And if so, would you please ask them to approach the witness table.
Thank you, Madam President. I believe the majority of the people are here, and I ask that you all come forward and pull some chairs up. (Board of Director nominees come forward.)
Good morning. Please identify yourself for the record.
Thank you. I am Dick Ostrander. I am the Executive Director of the South Street/Headhouse Special Services District. I have with me two of our new Board members. Two 5 5/22/00 WHOLE COMM. - RES. 000192 thru 199 of the named people, Fluffy Palmer and Marlene Weinberg are out of town. I've brought with me bios which explain their qualifications and their interest in the Board, if you would like to have those.
Howard Lander was previously a Board member, as announced, and is being up for a second term. And that is also the case with Bob Pierson. With me are two new Board members, Al Sitnick and Norman Tissian, and I'll get out of the way, if I may, and let them speak. Thank you.
Would you tell us something about yourselves, please. 6 5/22/00 WHOLE COMM. - RES. 000192 thru 199
I've been in the area all my life, and I have had A business on South Street for the last eight years and am very interested in seeing the neighborhood get much, much better, and I want to see a lot of younger people be involved in the district.
My name is Norman Tissian. I'm a lifelong Center City resident, in Society Hill about 32 years. I have just completed a two-year term as the president of the Society Hill Civic Association. I've been very actively involved in the community, including all South Street activities, for many, many years. And I'm delighted to play an active role on the Board of Directors.
Thank you. Are there any questions from members of the committee of the two gentlemen at the witness table? (No questions.)
Thank you, 7 5/22/00 WHOLE COMM. - RES. 000192 thru 199 gentlemen.
I'm Cynthia Filo (ph.). I'm the Director of the Old City Special Services District. I'm here today -- to my left is Allen Greenberger, a Board nominee. To my right is Bush Bell, also a Board nominee. And to my far left is John Taxin, who is the Chairman of our Board of Directors and the owner of Old Original Bookbinders, located in the Old City Special Services District. Madam President, I don't know if you would like me to go ahead and describe our two Board members or if you would prefer them to go ahead and give a little brief background on their own.
It doesn't 8 5/22/00 WHOLE COMM. - RES. 000192 thru 199 matter, whatever you feel more comfortable doing.
Okay. First I'm going to present -- I think it's -- 194 is Bush Bell. Bush is the general manager of the Sheraton Society Hill in the Old City District.
My name is Bush Bell. I'm the general manager of the Sheraton Society Hill at Second and Walnut Streets. I've been the general manager there for about months and am 13 new to the area, but I'm very excited to be a part 14 of the vibrant, growing Old City District. 15
And I see 16 that you're approved of the term, your term would 17 end December 31, 2001? 18
I'm a partner of MGA 9 5/22/00 WHOLE COMM. - RES. 000192 thru 199 Partners Architects in Philadelphia. Our business moved to Old City, on the 200 block Market Street, two years ago, from Fourth and Walnut. I've been a resident of the City of Philadelphia for 6 years and am past president of the American 7 Institute of Architects 1992. 8
Madam President, I have 10 prepared a statement that does include the resumes 11 of each of these gentlemen, and I have provided 12 copies for you. 13 If you have any other questions, I 14 would be more than happy to answer them. 15
Are there any 16 questions from members of the committee? 17 (No questions.) 18
Thank you. 21 I would ask Mr. McPherson to please 22 read the titles of Resolution No.'s 000329 and 23 000330. 24
Resolution 000329, 25 appointing Michael McMahon to the Board of 10 5/22/00 WHOLE COMM. - RES. 000329, 330 Directors of City Avenue Special Services District of Philadelphia and Lower Merion. Resolution 000330, appointing Howard J. Wurzak to the Board of Directors of the City Avenue Special Services District of Philadelphia and Lower Merion.
Councilman Nutter called me earlier this morning and he indicated that an emergency came up and that he would not be able to be present this morning. However, he does recommend the two gentlemen that are approaching the table very highly and asked the Councilmembers to certainly consider them with a favorable recommendation. (Witnesses come forward.)
Yes. I'm David Cohen, the Executive Director of the City Avenue South 11 5/22/00 WHOLE COMM. - RES. 000329, 330 Street/Headhouse District. And on my left we have Howard Wurzak and Michael McMahon, who are Board nominees for terms ending December 31, 2004. Briefly, the City Avenue Special Services District is the first district in North America to include parts of two jurisdictions, covering parts of Philadelphia and also Lower Merion Township.
Gentlemen, do you want to identify yourselves and tell us something about yourselves.
I'm Howard Wurzak, President and Chief Executive Officers of the Radisson 12 Caesars Hotel, and I've been involved at that project since 1982, and I've been on the City Avenue Special Services District since its inception.
My name is Michael McMahon. I'm the general manger of the Adams Mark Hotel. I've been there for two and a half years and have been on the Board that long, also.
Thank you. 12 5/22/00 WHOLE COMM. - BILL 000221 Are there any questions from members of the committee? (No questions.)
We want to thank you for helping and servicing the area. Thank you so much. No questions from members of the committee? Seeing none, I would ask that Bill No. 11 000221 be read.
Bill No. 000221, an ordinance creating the Networks Tax Increment Financing District and approving the project plan of the Philadelphia Authority for Industrial for Development the development of the Networks Tax Increment Financing District. (Witnesses come forward.)
Good morning, President Verna and members of the Council. My name is Robert Fina, and I'm Senior Vice President of Philadelphia Industrial Development Corporation, PIDC, and I'm appearing on behalf of the 13 5/22/00 WHOLE COMM. - BILL 000221 Philadelphia Authority for Industrial Development, PAID. I am here today to continue PIDC's testimony of Bill No. 221 that William Hankowsky, President of PIDC, initiated last week when this public hearing commenced. Briefly, Bill No. 221 will create the Networks TIF to assist in financing the one million square foot vacant former SmithKline building at 15th and Spring Garden Streets into a state-of-the-art telecommunications e-commerce office complex. The TIF will be structured to attract e-commerce companies to locate in the City. The City and the School District are being requested to approve $15 million TIF loan for the $85 million project. The TIF note would be repaid from new real estate, City sales, and business privilege taxes. No use and occupancy taxes will be dedicated to the TIF fund. 1 million to the City. Another benefit would be the unique relationship 14 5/22/00 WHOLE COMM. - BILL 000221 that the Networks will have with Philadelphia Community College. First, the sixth floor of the Networks will contain meeting space and a presentation area. This floor is intended to be used for recruiting and educational purposes, including the recruiting of Community College graduates by network businesses, through recruiting seminars, job fairs, and direct recruitment presentation. Second, it is anticipated that Community College will develop customized training programs for from network businesses. Third, the Networks has already developed a Web site job Board to post available jobs, with the ability to create a link to Community College. Fourth, Community College presently uses fiber optic for Internet access, known as ISDN. Due to the Networks bringing various and multiple fibers to this property, Community College could gain Internet access from faster, less expensive fiber lines that would be cost-effective as the result of the switches that will be available in the Networks. 15 5/22/00 WHOLE COMM. - BILL 000221 Finally, a net play center has been proposed for the first floor, wherein the developer would provide computers free of charge with high-speed Internet access for the public. This would be available to both Community College and nearby residents. Since introduction of the Networks project plan, there has been an amendment to clarify several issues, none of which will alter the amount of the note or the incremental taxes used to pay the TIF loan, as was described in Mr. Hankowsky's testimony last week. In addition to those amendments, the following change to the project plan is proposed. The project design has not been finalized and the figures present are based on estimates. The total amount in the line items may vary as the project design is refined and are not intended as limitations. The initial project cost and/or the size of the project are not intended -- also has limitations. The initial project and/or size of the project, excluding the addition of structured parking and/or electricity generation, if any, may 16 5/22/00 WHOLE COMM. - BILL 000221 change by up to 15 percent prior to settlement of the financing, without an amendment to the project plan. Additional increases shall not be funded from any public financing source, except for increases with respect to environmental remediation, site preparation, or utility infrastructure and generation, which shall not be limited by the percent cap or the source of any 10 public funding. 11 Structured parking may be added to the 12 project without amendment to the project plan, if 13 it is financed with private funds. Private debt 14 and equity may not be decreased below $60 million 15 without approval of City Council. After settlement of the financing, no further amendment shall be required.
This language was agreed to by the District Councilman, technical staff of City Council, the developer, PIDC, and the developer's legal counsel. Previous language concerning the limitation on size and cost of this project was considered too broad and did not reflect the distinct nature of the Networks project. The project has been amended and restated to reflect 17 5/22/00 WHOLE COMM. - BILL 000221 these changes and is on file with the Chief Clerk of City Council for review by the public. In closing, I would like to remind member of the City Council that today's hearing is required by the Pennsylvania Tax Increment Financing Act, and that Act requires Council to wait at least three weeks for final consideration, which would imply action at Council's meeting of June 15, 2000. I respectfully request favorable consideration of Bill No. O00221. Thank you.
Thank you. We did hear most of the testimony last week, and you indicated that with a change of language, that everyone is in agreement?
Thank you, Madam President. Mr. Fina, is there any new documentation on this project, or other projects submitted to this committee, demonstrating financial need on the part of any of these 18 5/22/00 WHOLE COMM. - BILL 000221 developers?
Is it still your contention that all projects requesting TIFs have demonstrated financial need?
It's kind of interesting that you say that. I have a copy of a Philadelphia Daily News article from Wednesday, November 18, 1998, and it says that one of the proposals submitted on the agenda that day was a parking garage near the Convention Center. It said it might have been profitable without a TIF, Fina said. The City didn't want to see a garage on that site without a TIF. The developer was willing to include retail on the first level and beams that are strong enough to support a rooftop hotel. So in that case, it seems that the TIF was added to that project to influence the development; is that correct?
The TIF was added to that project so that the developer would provide an 19 5/22/00 WHOLE COMM. - BILL 000221 over-build structure as well as provide retail at the ground level because we thought that was a very important urban area, and that we just did not want to have a parking garage, which he could have built, as a matter of right, but we wanted to include other features for that project. Those other features made the project in feasible as just a parking garage without the TIF support.
But you were willing to forego $6.6 million in tax revenue just to influence development of that project?
I think that was the public purpose at that time, and that's what this City Council previously approved.
Although the project would have been profitable without the TIF.
Not the way it's figured today, it would not be profitable. I think that article --
But you're quoted in here as saying that it might have been profitable without a TIF.
If it would have been a garage only, but I really can't debate the nature 20 5/22/00 WHOLE COMM. - BILL 000221 of -- that quote was some time ago, and I'm not sure what the question was or how I responded in that article that occurred, I guess. When was that date, sir?
November 18, 1998. The article was written by Erin Einhorn.
Good morning. Mr. Fina, I want to go again on record and restate what I shared with Mr. Hankowsky, that though I am currently persuaded by the net job growth and the limited benefit that the School District receives from TIFs, I am not yet fully persuaded that they are in the best interests of our city. And so as I look to complete my homework and research around what New York, San Francisco, and Maine are currently doing with regards to things like child care and after-school programs and those kind of things being folded 21 5/22/00 WHOLE COMM. - BILL 000221 into the entire TIF package at some juncture, I will be using that information and finding out how PIDC is going to respond favorably to those kinds of projections that we see happening in other cities.
Councilwoman, I'd be very happy to meet with you at anytime to discuss the TIF program and other aspects of it that you find appropriate.
So what does that mean when you say that, that you are willing to discuss in detail, in full how upcoming TIFs, or future TIFs that are going to be coming to City Council, will indeed factor in benefits over and beyond what the School District and the City currently receives? Is that what I hear you saying?
I'm very happy to meet with you to discuss the program in total and any aspect of it that you deem appropriate.
Thank you. 22 5/22/00 WHOLE COMM. - BILL 000221 The Chair recognizes Councilman Ortiz.
Yeah, Mr. Fina, did I hear you say that there was no letters establishing financial need --
Oh, we do. We do a substantial analysis, we meet with each District Councilperson to explain that analysis of how we determine the TIF, and we meet with technical staff of City Council to discuss how we determine the TIF and the amount for every --
Well, I think that's all good and fine. You know, we obviously need development. The key issue is, do we give the developer these tax breaks if they can do it by themselves?
Well, did you ask 23 5/22/00 WHOLE COMM. - BILL 000221 them for a request of need, financial need in this case?
I believe members of the technical staff may have some information. We have not made a formal presentation to City Councilmembers on that analysis.
Well, I think this is the issue here, and I think this is the forum to make a formal presentation of the financial need and state what is it that they say why they need this money.
I could briefly discuss why this particular project needs that, if you wish, or I could provide you with the analysis we did at a later time. 24 5/22/00 WHOLE COMM. - BILL 000221
Well, and I would like it from the developer to come in and establish his financial need, before this forum. 'Cause I think that's what this forum is for.
If that's the wish of Council, we could ask the developer to come forward and talk about his financial need, yes.
Because I agree with my colleagues Wilson Goode and Blondell Reynolds Brown, in which we seem to be just approving these TIFs without even a thorough analysis, a thorough discussion, and of the impact that they have on the school system and the funding of the school system over the long run, and I think -- I think it's about time that we began to have that discussion here.
Councilman, I'd be very happy to do that. We do provide a project plan, as required under the State act. Each member of Council, as you are aware, has that project plan, and it talks about the impact on the City and the School District as it exists today in the TIF District and after the TIF is approved for the 20-year term of the TIF. 25 5/22/00 WHOLE COMM. - BILL 000221
Have you been keeping up with the headlines about the school system in the last week?
Yes. And we proved that this particular TIF project that presently produces little taxes for the School District will provide over the next years $1.2 million 12 annually to the School District that presently 13 does not receive those funds, if this project 14 moves forward. That's 1.2 million annually. 15
I think that 16 discussion is still to be held, and I think that 17 opinion is still to be confirmed. 18 Thank you, Madam Chair. 19
Thank you. 20 The Chair recognizes Councilman Kenney.
Thank you, Madam President. Perhaps I want to approach this discussion from another direction. I recognize 5/22/00 WHOLE COMM. - BILL 000221 that over the last eight years now, going into the ninth year, we've approved a large number of TIFs. All of those projects, I believed, when I voted for them were things that were necessary for the City and necessary for us from a competitive standpoint as it relates to our surrounding neighbors and competitors. And I think in this particular project, that is more evident, that this kind of operation, this kind of high-tech development could be done in another county surrounding Philadelphia or in New Jersey at a much lower overall tax rate. And I think, therefore, offering TIFs and other types of incentives for this type of development levels the playing field in many ways for us vis-a-vis the suburbs. If you look at wage-tax issues and utility-cost issues and other things that developer and business people weigh in the decision whether to come and locate in one area or another, I think that this particular tool is a way in which to balance the playing field between us and places like the corridor out in Montgomery County that, you know, was eating our lunch for a long, long time. 27 5/22/00 WHOLE COMM. - BILL 000221 I think it's important also, and I've said this before in other public hearings on TIFs -- and I don't want the public to misunderstand. This is not a tax giveaway, this is not taking money from the General Fund or from some pot of money in the City and saying, Here it is, take it, in order to incentivize this project. We are basically forbearing taxes that would be accrued or would amass as a result of the development itself. And if I look at this particular and this particular site, not too long ago, the last administration was suggesting that we build ball field I recognize that building ball field here. I recognize that the building of a ball field there would create jobs and other types of things to improve the economy of the City, but it wouldn't, I don't think, improve the tax situation for the School District or necessarily the real estate tax issue for the City, if the City would wind up owning that particular facility. So I think -- while I recognize that it seems that every major project now lines up for a TIF, I still think we have to weigh that against 28 5/22/00 WHOLE COMM. - BILL 000221 the disadvantages that developers and business people have in establishing businesses in the City as opposed to other areas around the City of Philadelphia. So I don't view it as giveaway; I view it as a way in which to capture jobs and capture development that may be done in the suburbs as opposed to in Philadelphia. And then down the road, as they've established and created jobs and paid taxes, the School District and the City would be benefitting long-term from the long-term establishment of this business. I think what happens is, is when companies like Disney and others come into the fray and start requesting TIFs, people start wondering whether or not that's the kind of company that has economic stress or economic disadvantage, and I don't think anyone here would argue that. But, again -- the question, again, if you back to Disney is, they can go anywhere. If you want them here, then you have to create the incentives. If you're not going to fix the wage tax over an accelerated period of time, if you're not going to fix other kinds of issue -- the business 29 5/22/00 WHOLE COMM. - BILL 000221 privilege tax and other things -- over an accelerated period of time, I think you're going to have to continue to use this kind of a tool in order to level the playing field against the suburbs and the East Coast. And I don't really have a problem voting for it.
I recognize that some of our colleagues here who are new members but have been involved with government a while have some concerns about the speed and the number which we approve, but I do believe in every issue that I voted on, I think we would have had a danger of losing that developer or that company or those jobs to the suburbs or to another state or another jurisdiction. Thank you, Madam President.
Thank you. The Chair recognizes Councilwoman Tasco.
The developer at 15th and Spring Garden, where could that project 30 5/22/00 WHOLE COMM. - BILL 000221 possibly be constructed other than that in area? We are competing with the suburban counties, but they chose that site for a special, I guess, for a particular reason and that met its needs, but where would you see that project going if we did not provide a TIF?
Well, I think Councilman Kenney said it very well, that actually a project like this could go anywhere, to any suburban, any East Coast location; and with that would go the businesses that we expect will move in here, and the jobs, the 1500 jobs. So this particular enterprise could go anywhere there is fiber optics, anywhere there are these lines and access to them. There is this fiber optic in Broad Street, which makes this building somewhat more attractive to run that, but they could put this anywhere in the City or anywhere else outside the City. And this is a vacant building at this point, and it's a blighting influence because of its vacant nature.
If the wage tax is a deterrent for businesses to develop in Philadelphia and there's difficulty getting people 31 5/22/00 WHOLE COMM. - BILL 000221 to work in Philadelphia because of the wage tax, is the TIF an overriding factor to continue to build, to develop here, as opposed to going someplace else?
It helps them mitigate the wage tax. It is not the solution for the problem that the wage tax causes employees and employers, as they see that as a reason. What the TIF does is, it makes the e-commerce space more economical for start-up e-commerce businesses, that makes it an attraction, an incentive to come into the City by having this. Presently, to bring e-commerce-type businesses in this market, the range is about $15 per square foot, is what the rent would be charged. That's the most you could charge. The economics of the project do not allow you to bring this building on line and make it available with fiber optics that will attract e-commerce businesses. So the TIF helps to keep that dollar amount to improve the building at a marketable rate to result in a $15-per-square-foot rental.
If I remember 32 5/22/00 WHOLE COMM. - BILL 000221 correctly, last week, there was some discussion about the increase in square footage costs. If they are successful in attracting, would it be the commercial space on the first floor or some other space? If they got a per-square footage increase, they would accelerate the payment of the --
Councilwoman, that's exactly what we said last week. We said that if the rents go up by more than 5 percent a year above the $15, there is "a claw-back provision," as call it, meaning that the difference of that $15 net increase -- say it's $1 per square foot, 50 percent of that, 50 cents of that would be used per square foot to pay down the TIF note so that the note would be completely repaid that much sooner if the rents go above the 5 percent increase per year on $15 per square foot.
Could we take that instead of accelerating the TIF note, could we take that and put those dollars in a youth fund?
I don't, believe under the State Act, we can we can do that with TIF revenue. It only could be used to pay off a TIF note or pay for infrastructure within the TIF 33 5/22/00 WHOLE COMM. - BILL 000221 District.
Now, you stated that they could accelerate the payment of the TIF note. I noticed that the TIF exists for a 20-year period. Is there any reason why we couldn't lower the period and instead of having years, have 15 8 or 10 on the TIF note? 9
We have done that on other 10 projects when the economics warrant that. We've 11 tried that on a housing project, known as St. 12 James Court, that this Council's approved. We did 13 it for 12 years. However, the economics were too 14 tight on that project and that project has not 15 closed, the financing has not closed yet. 16 So when it is feasible, we do provide 17 the provision to pay off the note early. And if 18 the revenue is there, it will occur, the TIF 19 revenue. But we try and keep it at 20 years 20 because the economics always warrant that a 20-year term, and many times a longer term, but under the Act, we can't create that and a longer term than 20 years is needed.
Okay, thank you very much. 34 5/22/00 WHOLE COMM. - BILL 000221
Thank you. The Chair recognizes Councilman Clarke.
Mr. Fina, you recall last week's conversation about the types of jobs created by these various TIFs. Over the last seven or eight years, some are on the lower end of the pay scale and some are on the higher end?
Yeah. Most of them -- many of the TIFs were used to create hotel jobs, and although there's a vast diversity of jobs in the hotels, the majority of those jobs at hotels are low- to moderate-income-paying jobs.
And where would these fall, these types of jobs created?
The e-commerce telecommunications business are the higher end of the pay scale, from everything we understand.
And can you give me an approximate of the average wage? Maybe the 35 5/22/00 WHOLE COMM. - BILL 000221 developer can help us. A guesstimate.
Okay. These jobs that will be created, hopefully, by the Networks, are these jobs currently in the City of Philadelphia by and large? Or will these be jobs that will be created above baseline?
New jobs. And paying approximately $75,000 per job, we're talking about a substantial increase in the wage tax that we will create?
Yes. We've projected that based on our analysis that there will be -- no, all City wage tax -- all City taxes we project new to be $2.1 million per year, 2.1 million per 36 5/22/00 WHOLE COMM. - BILL 000221 year.
Wage tax alone could be -- over the years, we projected -- and, again, 6 this is an estimate -- $40.6 million over 20 7 years. 8
So realistically -- 11 and I understand that you're not a member of the 12 School Board or necessarily with the 13 Administration. Realistically, we could maybe 14 have 2 million of those dollars in the foreseeable 15 future go towards the School District, 'cause we 16 often -- particularly here of late -- have been 17 asked to contribute to the School District out of 18 the City's General Fund. 19
Well, certainly that is 20 within the province of this Council and the Administration to determine how much money out of the General Fund would go to the School District.
How much would the U-and-O generate? I'm sorry, Councilman. 37 5/22/00 WHOLE COMM. - BILL 000221
The U-and-O taxes -- presently, there are no U-and-O taxes being paid on the building. Over the years, there will be 7 $22.2 million of use-and-occupancy tax. That does 8 go to the School District directly, all 100 9 percent of that. 10
Thank you, Mr. 13 Fina. Thank you, Madam President. 14
Thank you. 15 The Chair recognizes Councilman Goode. 16
Thank you, Madam 17 President. 18 Mr. Fina, I'm in complete agreement 19 with Councilman Kenney about the fact that we have 20 a poor tax structure here, that we are not 21 competitive with regard to tax structure, but it 22 is my understanding also that this Council has only approved 19 projects with TIFs; is that correct?
So giving a tax break to business has done nothing to change 4 the environment for the other businesses 5 throughout Philadelphia; is that correct? 6
I couldn't agree with that, 7 Councilman. I think the environment has 8 improved. If you take a look at the Loews and 9 PSFS Hotel, that was a TIF. The Marriott 10 Courtyard was a TIF, the Marriott Headhouse was a 11 TIF. There are three hotels that have huge impact 12 on Center City and other businesses, as well as 13 job creation and taxes for the City. 14
Essentially, if 18 you've only given 19 TIFs, and we're assuming 19 there's been jobs created by those projects, there are many other projects, many other businesses that located in Philadelphia because of its location, because of its market, without the need to forego tax dollars to finance those projects. Beyond that, any business or any major developer coming into this town to do business is going to 39 5/22/00 WHOLE COMM. - BILL 000221 assume that Philadelphia's less competitive and is going to request a TIF. Because once a TIF has been give, people are going to keep asking for TIFs. My question really is now -- I have some information based on an article written about months ago, that this City has done $185 9 million in TIFs. I'm assuming at this point that 10 it could be upwards of a quarter of a billion 11 dollars. Do you know what figure we've done in 12 terms of foregoing taxes, just from doing TIFs? 13
I have that information. I 14 may not have it with me today at this point, but I 15 have it in my office.
And I asked that question last week. At what point are we, quote/unquote TIFed out? At what point do we realize that the U.S. economy is generally good, things have moved somewhat economically in Philadelphia, there are many projects that do not require TIFs and exist and thrive with the existing tax structure.
I agree with you, there are many projects that do. At any given time, PIDC's 40 5/22/00 WHOLE COMM. - BILL 000221 looking at maybe 100 different projects. People are coming for requests for financial assistance, and we evaluate those projects to determine whether that request is real or not.
Because, essentially, everyone is going to request a TIF, because no one is going to want to exist under this tax structure, but many businesses locate here, there's a market here where they could be profitable, they continue to make money, and don't necessarily require the TIFs.
And we do not provide TIFs to every business that requests those TIFs. We make an independent analysis to determine whether there is really a gap in financing that, without the TIF, the project would not proceed. And under that evaluation, we then determine whether a TIF is needed and the amount of TIF that's needed.
And how do you determine that? Do you require a refusal letter from a bank or other financial institution?
But do you require a 41 5/22/00 WHOLE COMM. - BILL 000221 refusal letter from a private financing institution?
Thank you. The Chair recognizes Councilman DiCicco.
Thank you, Madam President. First, I want to say that obviously I concur with all the statements made by my colleague Councilman Kenney. Councilmember Goode just mentioned something about all of the people who are going to come to Philadelphia or thinking about coming to Philadelphia who will obviously ask for TIFs. We have some cases, at least I think in four years I've been here, where there have been some companies that haven't required or requested a TIF, and I think -- is it Marriott; am I correct in that? One of the hotel chains, I think, if it was not Marriott --
The Sofftel was built and 42 5/22/00 WHOLE COMM. - BILL 000221 opened without a TIF or without any --
Sheraton did request a TIF on Rittenhouse Square; we did not provide that TIF to the Sheraton.
But there are companies -- and my question is, are there companies or businesses that have come here that have not even requested a TIF?
So it's not necessarily that that's the only reason they're coming here, because TIFs are available.
That's correct. If you consider the number of businesses in the City of Philadelphia, only 19 have received TIFs to date, and that's going back 5 years.
Thank you. I think the other thing that is missing when we get into the discussion of TIFs is, we always speak to the number of jobs that are directly created by the TIF, and when you look at 43 5/22/00 WHOLE COMM. - BILL 000221 the hotel industry, we look at the 4,000-plus jobs that have been created there, but we don't look at the other jobs that are the feeder industries into the hotel industry -- the linen companies, the food purveyors, the maintenance people, who, after the hotel is built, are brought in to maintain elevators and repair windows, that may not necessarily be employees of the hotel. I would probably suspect that it's very difficult to come up with a number of those jobs that are being created and maybe what the impact on existing businesses who are feeder industries into those businesses have to employ additional people. We don't look at those numbers, I guess, and maybe it's because we have no way of knowing. So in addition to those direct jobs, there may be hundreds of other jobs, if not thousands of jobs, that are being created.
Councilman, you are correct. I am not an economist, but economists would normally say that there are two indirect jobs for every one direct job created in any given industry, particularly some of the intensive employment that we have in TIF projects, that the 44 5/22/00 WHOLE COMM. - BILL 000221 nature of those hotels, retail, those types of projects create a lot of indirect jobs, as will the e-commerce building that we're proposing to.
And I think the other thing that we sometimes maybe are not paying attention or losing sight of is the fact that when look at Networks and the potential for 1500 new jobs, there's going to be, I would assume, a significant amount of those people who are coming in to be employed that will become new residents of the City of Philadelphia. They will begin to occupy apartments, maybe purchase homes, and they will become a part of the fabric of the Philadelphia, they will become a part of the community. Their wages will be reinvested in our community. We have no way of knowing what that number will be or determining that, but I think it's fair to say that that will occur, and it has occurred.
Yes, I agree with you completely that it will occur. In fact, the very nature of e-commerce business and the people that work in there, I'm told -- you could use the words 45 5/22/00 WHOLE COMM. - BILL 000221 a "little quirky," and I hope I don't offend anyone, but they like to live and very close in proximity of each other. They want to live near the place they're working, I'm told. They want to be able to have the 24-hour city available to them.
And I agree 'cause I've read some articles on that, and I know out in the King of Prussia area, I read about a year or two ago where the companies that have either left Philadelphia or other urban areas and relocated out to the suburbs because of the some of the advantages that were offered to them out there, they're having a problem with their employees, most of whom are young folks, who really enjoy the lifestyle of living and/or working in a city, and they actually started structuring social activities out in King of Prussia at some of the chain restaurants so that their employees wouldn't have to drive in to Philadelphia. Because when they're out, even though they're young and maybe could handle a little bit more of the night life than I can handle anymore, the productivity the next day was down. There was 46 5/22/00 WHOLE COMM. - BILL 000221 a very scientific way of doing this. And after the third or fourth time that these folks go to these structured social environments, they tend to come back to the city anyway because they like the diversity. So what we're finding is, and I've been dealing with some of the e-commerce kind of companies on a smaller scale, they want to locate here, or if they're already here, they want to stay here and expand for the very reason that you just pointed out, that their employees want to live in the city, they want to stay in the city, they don't want to live in Suburbia. And I think this is an opportunity for us not only to create, again, those permanent jobs for the business, but to begin to maybe re-populate some of our neighborhoods with people who are now wage-earners. And there's this whole ripple effect that goes on. And I could recall -- and I think Council President Verna, there's a friend of mine who has one of the largest wholesale fish businesses at the Food Distribution Center. And for the last two or three years, he's been really 47 5/22/00 WHOLE COMM. - BILL 000221 trying desperately to remain in the City of Philadelphia because he needed to expand. The State of New Jersey was offering to build him a new facility free of charge, put in roads coming off of the Jersey turnpike at the State's expense, just to get his business there, but he'd rather stay here. He used to live in Suburbia, he lives in Rittenhouse Square, he loves the City, his employees are here. He understands that if he leaves, he'll have a difficult time attracting employees to his business, but it was very tempting to him for a very long time, and still is very tempting for him to think about relocating because he doesn't have to pay for a building. He can get a free building and free roadways, and there were other tax advantages that they were going to give him in wages and everything else. So I think when we look at these things, we shouldn't just look at this box that we will call a hotel or a networks facility and what we are giving up, although I don't particularly agree with that term "giving up," because if we don't have anything, everything we get going 48 5/22/00 WHOLE COMM. - BILL 000221 forward is a plus for us. And I think the other thing the people look at is when they look at these corporations and they look at the portfolio and they see the value of the portfolio and they're $300 million companies or whatever, everyone thinks that it's cash in pocket, that some big business person could just dump his or her money on the table and say, I'm going to build a hotel for $150 million, or I'm going to build a company and put out all my cash. They're no different than the rest of us. I mean, I never had $100,000 at my disposal at any given time, but even if I did, I don't believe that I would buy a house and buy it for cash. You do finance because there are reasons for that, there are advantages for that.
And when look at the tax abatement that we did a couple years ago, we understand that the ten-year exemption that we afford the developers, most of the 31 vacant buildings that are now being converted for residential uses would still be vacant. And I know many of those developers and they're wealthy -- at least compared to who I am 49 5/22/00 WHOLE COMM. - BILL 000221 and what I have, they're very wealthy guys. But they couldn't make it work without that exemption. And I think we did a good thing. So some of what I just said is more in the line of a statement, I guess, than a question. But thank you, thank you, Madam President.
Thank you, Councilman. You know, as you were speaking, I couldn't help but think of the first TIF that we had, and that was for PNC.
And I think we had to do it three times before we got it right.