COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON FISCAL STABILITY and INTERGOVERNMENTAL COOPERATION - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, December 10, 2008, 1:25 p.m. - - - RES. 080603 - Authorizing Committee on Fiscal Stability and Intergovernmental Cooperation to hold hearings re City's operating budget for Fiscal Year 2009. RES. 080890 - Authorizing Committee on Fiscal Stability and Intergovernmental Cooperation to hold hearings re feasibility and benefits of implementing a coordinated municipal advertising program in Philadelphia. COMMITTEE MEMBERS PRESENT: Darrell L. Clarke, Chairman Frank DiCicco, Vice Chair Blondell Reynolds Brown Curtis Jones, Jr. James F. Kenney Joan L. Krajewski Brian J. O'Neill Marian B. Tasco Also Present: Jannie L. Blackwell Bill Green - - - V A R A L L O Incorporated Litigation Support Specialists 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2 12/10/08 FISCAL STABILITY, RES. 080603, 890 I N D E X WITNESS Edward Dempsey, Program Director, INVEST 7 Pennsylvania Treasury Department Bernie Strain, PA Treasury Department...... 22 Rob Dubow, City Director of Finance........ 37 Rebecca Rhynhart, City Treasurer........... 37 Vivian Miller, Clerk of Quarter Sessions... 57 Andrea Jefferson, CQS Accountant/Clerk..... 60 Robin Jones, CQS First Deputy.............. 67 Shelley Smith, City Solicitor.............. 89 M. Madden, Director of Business Development 97 SEMUSA Paul Levy, President, Center City District 118 Rhina Cutler, Deputy Mayor................. 135 Transportation and Utilities * * * 3 12/10/08 FISCAL STABILITY, RES. 080603, 890
We are now going to convene the Committee on Fiscal Stability and Intergovernmental Cooperation of the City Council of Philadelphia. Currently-present members of the committee are Councilwoman Blondell Reynolds-Brown, Councilman Curtis Jones, and Councilman James Kenney. In addition, we have Councilwoman Jannie Blackwell and Councilman Bill Green in attendance. Before we start, I just wanted to give a brief statement. This is what, we anticipate, will be a series of hearings either by this committee or another committee of the City Council of Philadelphia in its attempt to discuss initiatives that will increase the revenue stream to the City of Philadelphia. As you know, we are in a significant budget crunch. It is real; it is not manufactured. It's likely to get worse before it gets better. And at the 4 12/10/08 FISCAL STABILITY, RES. 080603, 890 end of the day, we find ourselves wrestling with these issues about existing priorities and existing programs in the departments within the City of Philadelphia and what changes should be made, but the problem is, is that we're arguing over a declining revenue stream as it relates to our General Fund. So as we move ahead it's important for all of us in a collective way -- Council and the administration and all of the row offices -- to come up with initiatives that will allow us grow our revenue base. This particular hearing is going to talk about some of the initiatives that have been put forth by members of Council earlier on in this process and one or two new ones. And we anticipate in the first part of next year, there will be some significant things put on the table to try to grow our revenue stream. So I just want to thank everyone for being present here today, and we will 5 12/10/08 FISCAL STABILITY, RES. 080603, 890 start in short order. I guess we have a witness list. Councilman Jones would like to make a brief statement. Councilman?
Thank you, Mr. Chairman, and I would like to thank you for chairing this committee and having these hearings. When, as a freshman, I came on board and you allowed me to be a part of this committee, I had no idea of the relevance, the significance, the importance of this committee in these economic times. And just to give you your kudos on having a committee which will allow us periodically and on a quarterly basis to review where we are as a municipality. And the other point that I would like to make both to the people testifying on behalf of the Administration and to my colleagues is that the one thing that I found throughout this whole process is that we're in this together. I think, in 6 12/10/08 FISCAL STABILITY, RES. 080603, 890 different ways, we've all said that. And it is our responsibility to figure our way out of this, both through a combination of revenue enhancements and cost-saving measures. But at the end of the day, I think it suffices to say that we will rise or sink together, and we should do this in the best spirit of team effort. So just on my behalf, as a member of this committee, I want the Administration members that will testify here today that we're going to call up to take a great big inhale and exhale because this will be done in a spirit of cooperation and not in a spirit of "I gotcha." Thank you, Mr. Chairman.
Thank you. First up, we're going to have a panel to discuss the electronic money- transferring process in a proposal that was brought forth by members of this Council in a -- I guess in a venue other 7 12/10/08 FISCAL STABILITY, RES. 080603, 890 than a public hearing. So we would like to have, for the record, it laid out in a very specific way, this particular proposal. I'd like to call up Edward F. Dempsey from the Pennsylvania Treasury Department; he is actually the director; and Mr. Bernie Strain, who is also from the Treasury Department of the State of Pennsylvania. (Witnesses come forward.)
Mr. Chairman, good afternoon. Councilmembers, good afternoon.
Good afternoon, members of Council. I'm Edward Dempsey. I'm the program director for a program in the Pennsylvania Treasury Department known as INVEST. We are a -- we operate a local government investment pool, and that is for the purpose of short-term funds to be invested by any governmental entity in the 8 12/10/08 FISCAL STABILITY, RES. 080603, 890 Commonwealth of Pennsylvania along with certain nonprofits. Before I go any further, let me introduce my colleagues with me here today who work in Philadelphia, in the Philadelphia area: Bernie Strain on my right and Gerald Nicholas on my left, who have had many meetings with the staffs of members of Council and with the Treasurer's Office, who have been very receptive to what we have brought forward to them on the table. But I suppose, to get right to it, what we found -- we started an initiative statewide on electronic transfers versus check-writing. And we found -- we did a ten-month period where we took a look at all 67 counties and determined that there were in that period $1.3 billion worth of paper checks being distributed. Now, that sounds like a pretty reasonable -- you know, getting checks from the Commonwealth of Pennsylvania by 9 12/10/08 FISCAL STABILITY, RES. 080603, 890 checks is not a bad idea except when it happens in that number and dollar-amount that when the minimum time from when a check is prepared in Harrisburg and mailed out and received by the municipality is in the neighborhood of four days, minimum. In many cases, they're well beyond that. But if everything goes well by a paper check, there's four days' worth of time, or float, if you will, that is not going to go to the municipality -- in this case the City of Philadelphia; but rather, it will stay with the Commonwealth until that check clears. And we found that in that general study, we didn't do the specific analysis on Philadelphia; we did do a run on the City for that same period. And the paper checks that were sent to the City in the period that we looked at of approximately ten months was approximately $208 million in paper checks. And there's a variety of reasons for that, but the fact is that it was still $208 million. 10 12/10/08 FISCAL STABILITY, RES. 080603, 890 So, as we had with many other municipalities -- county governments mostly. But the City of Philadelphia, we approached the City Treasurer's Office -- the City Director of Finance, Mr. Dubow, was kind enough to entertain us as well found -- to make them aware of what we had found and offer the services we could provide to them. Now, we're not the only ones who could provide short-term investment services to the City, and the City has an awful lot of relationships already established. But we were, rather, coming in to say that (indiscernible) was one that was sufficient for the City to get a better deal; and/or in the case of the paper checks, to make them aware that those paper checks were coming, and suggested that they might consider, where they can, if it's appropriate, to switch to the electronic funds deposit. So from that, we've had, as I said, many meetings, we've been treated 11 12/10/08 FISCAL STABILITY, RES. 080603, 890 very well. And we certainly appreciate the time that we've had with Councilman Jones and Councilman Green. And we're here to assist where we can. But, essentially, our role in this was to make it known to the City that this was an additional stream of revenue that was available and to suggest that if we could help, we certainly would.
Thank you. Let the record reflect that Councilwoman Marian Tasco has joined the committee hearing. Are all of you going to testify?
No. Councilman, Chairman, that's essentially where we are. I suppose the long and the short of it on our end was essentially to let you know that this was -- and just not with the City of Philadelphia. Quite honestly, the County of Allegheny was not aware that they, again, had a lot of direct deposits as well, but they had over $158 million still due in paper checks. 12 12/10/08 FISCAL STABILITY, RES. 080603, 890
We went to some counties. The County of Erie, for instance, had $184 million in the same period. Now, considering their size versus the size of Philadelphia, you know, the fiscal impact is rather dramatic. And the higher the interest rates are, the more of an impact it is. Now, the fact is that while the checks are in process, the Commonwealth is receiving interest on that. But, in fact, for all of those people who are getting electronic transfers, they're getting that immediate. The City of Philadelphia, minimum, is losing, along with all the other entities that we certainly approached to inform them of this, are losing that minimum of four days, which, when you're talking several million dollars on any given day, it can -- depending on what the interest rates, like today, offering somewhere between, let's 13 12/10/08 FISCAL STABILITY, RES. 080603, 890 say, 1.50 to 2 percent. You could be riding 50, $60 a day per million for an entity the size of Philadelphia. That happens quite regularly. That's, again, the millions; in some cases, ten or beyond on a given day. So it can get up to be a significant number pretty quickly.
Okay. Well, I just want to thank you so much for making us aware of that. I know Councilman Jones and Councilman Green have been very aggressive in identifying any potential cost-savings in this particular measure, and I obviously want to thank them for their support. And we look forward to taking advantage of this initiative. Councilman Jones, you had a --
Yeah, just a few questions. And I appreciate you guys coming down and bringing this to our attention. Almost, what, eight months ago now. Let me ask you a couple of 14 12/10/08 FISCAL STABILITY, RES. 080603, 890 questions. At the point -- how many departments on average does the City of Philadelphia deal with that gets a receivable from the Commonwealth of Pennsylvania?
Generally speaking, each and every department; some more than others.
So some 53 -- well, let's say not all of them. Let's say they are close to the majority of them. So some to 40 departments 14 actually get receivables, and these are, 15 like, DHS. 16
Oh, absolutely. 17 You're talking about -- the Department of 18 Welfare would be a large one. And, as you 19 noticed when we went over the report that 20 we handed in, there was an awful lot from 21 the state police. 22
Right. Can 23 you give us a couple of examples of 24 checks; do you have that? 25
Actually, I don't 15 12/10/08 FISCAL STABILITY, RES. 080603, 890 have the report with me.
You produced a report and you brought it to Council a couple of months ago.
And you had checks from the Department of Human Services.
There were several things that came -- one of things that happened is -- and it happens all too often and it happens, again, not just here but across the entire Commonwealth, is you will have people who apply for the same dollar-amount on the same agency, and you will get four or five payments on the same 16 12/10/08 FISCAL STABILITY, RES. 080603, 890 day, in the same amount, coming back to the City Treasurer's Office, mail; rather than one electronic transfer, or at least one transfer instead of all of these multiple checks, that will delay the -- I think what you were talking about was, I believe it was 123,000 is what comes to mind. There was at least four or five on the same day, and they all took the same time to clear. And I believe, if I'm not mistaken, that it was, like, ten days.
So from the process that a receivable is approved at the State level, it can be a 15-day period before a physical paper check is generated.
No, not on our end. We will have, from the time it gets -- from the time a voucher transmittal is sent from the Department of Welfare over to Treasury, and they give us a pay date, we generally pay within 15 days. The problem is that by the time 17 12/10/08 FISCAL STABILITY, RES. 080603, 890 we prepare the check and put it in an envelope and put in it a batch to be sent to the post office in Harrisburg to be mailed till the time it arrives here in Philadelphia -- and I'm not familiar with the mail system here and how it arrives -- we have determined that we're looking at -- and it's a best guess -- about four days minimum from the time it leaves Harrisburg till it actually clears the bank up here and we get it back in Harrisburg (indiscernible) so that the funds have been transferred by check.
Most efficient financial entities count on overnight sweeps of interest and money --
No, that's not 18 12/10/08 FISCAL STABILITY, RES. 080603, 890 true. For this portion. What we identified, Councilman, there are hundred dollars of millions that are transferred electronically to Philadelphia every year from the Commonwealth. What we identified were those checks that were not.
And that's what I wanted to bring to your attention. I wouldn't have anybody here thinking that the City, particularly the Treasurer and the Director of Finance behind me, I'd be terribly unfair to them if I didn't say that the City already did an enormous amount of -- most, by all means, of the money coming the transactions here are electronic. However, the 208 million that we identified is still significant enough to draw the attention, which is why we brought it up here to your attention.
So 208 million, we don't generate -- 19 12/10/08 FISCAL STABILITY, RES. 080603, 890
So the time of processing of four days is a loss of interest to the --
-- the City. But then, because of physical checks, sometimes human error comes to play.
So it winds up on an administrator's desk and they don't see it on top of the other mail, and it may take a while for it to be processed internal to the City of Philadelphia.
And so, even in some worse-case scenarios, they have been lost.
In someone's drawer. And then we have to start the process all over again because we've 20 12/10/08 FISCAL STABILITY, RES. 080603, 890 misplaced that check.
It happens, I'd say, at least from what we've seen, 'cause we operated the Treasury Department and the Lost Checks Bureau, as well, Office and routinely have to deal with that. That does happen. I think it's a -- it doesn't happen a lot, but it does happen, and sometimes they can be for significant amounts.
Okay. Other municipalities, you mentioned, have not done that. Have we any best-case scenarios or other best practices that that we can look at that have, in fact, improved their --
I think when you have a municipality certainly the size of Philadelphia, over a billion dollar budget, I mean, the amount of checks that are written, the amount of vouchers that are sent in, the requests for payments made are enormous. And that's an enormous 21 12/10/08 FISCAL STABILITY, RES. 080603, 890 task to corral, if you will. What we suggested in our conversation and, certainly, I would say, again, the Treasurer's Office and Mr. Dubow's office were certainly in agreement to look at the -- when a process begins here in the City, as it has, and we've run into the same problem elsewhere across the State, that the process for payment to be done, if you corral it there, if you start from that process, that it is no longer either allowable (indiscernible) or appropriate, or certainly, at the very least, it is desirable, unless it is can be otherwise be proven reasonable, to only get electronic payments, that you should be -- because it's distinctly to the advantage in terms of security, efficiency. And when it becomes a large number, when you get in excess of $100,000 or upwards to a million, which, in this city, happens a lot, obviously, by that report we had, sometimes people who are 22 12/10/08 FISCAL STABILITY, RES. 080603, 890 starting the request for payment aren't aware of it, they don't think about it. All they want to know is, they want to put the paperwork in and get the money back as fast as they can. Sometimes it is the fault of the Commonwealth, where we should be in the Department of Health, the Department of Welfare, the State Police, we should be encouraging people to utilize that.
Mr. Strain, in your best estimate, how much did the City of Philadelphia lose last year based on interest payments not being electronically deposited? Best guess.
Because as the interest rates started to drop from when 23 12/10/08 FISCAL STABILITY, RES. 080603, 890 they were percent. 3
I would say it wouldn't be hard to suggest probably in excess last year of a million dollars. I would say that would be conservative based on --
Councilman, for the record, there's -- we talked -- you had mentioned about uncashed and/or lost checks in the process. There's about $70,000 that the Commonwealth has in its possession to date that it is waiting for the City to collect in uncashed and/or lost checks.
So depending on whether -- 24 12/10/08 FISCAL STABILITY, RES. 080603, 890
Two years ago, there were, during the Street Administration, I believe, there were in excess of $500,000 that was not collected in the course of two years. I think the City needs to develop a program to review its uncashed and/or unclaimed property at least quarterly. That would help those funds --
One of the things we've suggested is that we routinely -- now, we represent one program, but we also represent the department, and certainly, there are other programs within it. And the unclaimed property is one, and certainly the uncashed checks is another. Because of the size of the City and the size of the number, it's going to happen because of these amounts of transactions over a period of time. And we actually talked to the Treasurer's Office about periodically -- at least, like, quarterly -- reviewing what might very well be there for the City and return 25 12/10/08 FISCAL STABILITY, RES. 080603, 890 it.
Let me just ask a -- and I'm not a conspiracy theorist. But then, again, who would not want this to happen? Who benefits by us continuing on this path?
I mean, again, and I don't -- again, there's no conspiracy theorist on this end, myself, certainly. But the fact remains that the only one who benefits, to my knowledge, would be the Commonwealth, where they're Commonwealth checks, because, while the check is out there, until it's cashed, it remains in the Commonwealth's account. Now, believe me, in the short budget year, the Governor and the members of the General Assembly are known for what we're going -- you know, being short (indiscernible) ourselves this year. But the fact remains, when we write that check, it's the municipality's check; in this case, it's the City of Philadelphia's check. It is no longer the 12/10/08 FISCAL STABILITY, RES. 080603, 890 money of the Commonwealth. And, in fact, on the very same VT -- and there may be some Philadelphia checks or payments there that are going out by wire, so they're getting the immediate benefit of that cash because of the wire. On the other hand, a check for the City is going to go out, and it's going to be four days until it gets to your account. So there's really -- to my knowledge, there is no benefit to get a paper check versus an electronic. I mean on our end, on the Commonwealth's end, it's more expensive for us to prepare a paper check than it is a send a wire.
Let me target my question a little more specifically. Who does the Commonwealth of Pennsylvania bank with?
Yes. (Indiscernible; parties talking over each other.) 27 12/10/08 FISCAL STABILITY, RES. 080603, 890
I will speak to our custodial holds our money. That money that comes through is -- currently right now is Wachovia, but we have -- the Treasury Department has a relationship with many banks across the Commonwealth.
Thank you, Mr. Chairman. Good afternoon, gentlemen. PANEL MEMBERS: Good afternoon, Councilwoman.
I have a follow-up to Councilman Jones' question where your answer was about $1 million.
Okay. So tells us, what is what I call "SOP," 28 12/10/08 FISCAL STABILITY, RES. 080603, 890 standard operating procedure, for following up with those individuals, citizens on the other end, in terms of notification that those dollars are about to be lost?
Well, to be honest with you, the -- it is the -- in this case, it would be the City of Philadelphia. When they are writing up a request for payment, they're the ones who tell us, the Treasury, how they want that payment to come. They say whether they want it electronic, they say whether or not they want a paper check.
Again, we're in this electronic age, and a lot of your smaller -- keep in mind now, the City already gets hundreds of millions of dollars electronically transferred every year.
This is only talking about that part that has escaped. 29 12/10/08 FISCAL STABILITY, RES. 080603, 890 We wouldn't have even -- actually, we wouldn't have even looked to Philadelphia had we not seen what happened in the other 57 counties. So, again, Philadelphia is a big player. From a personal standpoint from the INVEST program side, we were looking to get Philadelphia's participation, in all honesty, you know, to benefit us three and our program, and we decided, you know, if these others were having problems, we thought, well, Philadelphia is about as big as everything else, and their number's probably going to be sizeable, which it was. So we saw an opportunity to get additional business for our program.
Otherwise, I mean, if you -- if the people in any of the individual departments, they might not be aware it's to their advantage.
Okay. So then what recommendations or suggestions would you offer to our government to fix 30 12/10/08 FISCAL STABILITY, RES. 080603, 890 what appears to be -- if it's a million dollars, that's big. So given where you sit and what you see works well in other municipalities in terms of best practices, what recommendations would you offer to us?
To go back and take a look at the specific process you have, to any one of the departments who is going to put in a request for a payment from the Commonwealth and, for that matter, anywhere else, that where you're going to get a payment where you can get electronic payment, that should be the preferred way of being paid, 'cause that gets the funds back into the City's hands quicker than a paper check under any circumstances, unless you're going to stand down there and get it right off the press and walk across the street and put it in your depository.
I mean, it turns around that fast. 31 12/10/08 FISCAL STABILITY, RES. 080603, 890 But I will tell you, for purposes of full disclosure, there are some very sophisticated money-management operations within the county government, two of the most sophisticated that I've seen in the four years I've been in the program.
North Hampton County and Dauphin, and they had missed paper checks in excess of -- Dauphin County was in excess of 50 million, and I forget the number, but I think it was 19 or 30 million in North Hampton. 20
So are you 21 able to cite one or two features of those 22 best practices that give them the 23 characterization you've just described? 24
Well, when I say 25 "sophisticated," when I went in to the one 32 12/10/08 FISCAL STABILITY, RES. 080603, 890 county, North Hampton in particular, they run all the money through one central area, so they control it all.
So one central area, meaning one city department like Revenue?
Yes. They have -- I won't say it's exactly set up that way. I don't think they call it "Revenue," but their fiscal control is there so that all the cash that comes in is there. They manage it all, they make sure that the cash on hand is sufficient to pay the checks on any given day of the week. It's tightly controlled. And in many other counties, you have row offices who control their specific counts of money.
You have -- the Treasurer does -- has certain authorities. The Controller's Office has certain -- they're kind of spread out. It's difficult to corral. 33 12/10/08 FISCAL STABILITY, RES. 080603, 890
But even the ones who were, I'd say, the most sophisticated, have the best deal going, even they're unaware of it because they're not aware of all of the requests for payments made. So if it comes from the top down, suggesting that, you know, it's a new day and we need the money in here as quick as we can get it, we want to be sure that where it is at all possible that every payment coming into the City comes electronically, unless it can otherwise be proven necessary.
And for us, from what we've seen -- and I won't say we've seen it all, and that there may be some reasons -- no reasons that we're aware of that you should be getting any kind of a payment except electronic.
Particularly if 34 12/10/08 FISCAL STABILITY, RES. 080603, 890 you wanted to put, you know, like a dollar-amount, where it makes sense. And your finance professionals could tell you where that makes the most amount of sense. But to have a million-dollar check sitting out there for three, four, five or beyond days, it just -- we haven't seen any reason that there should be for that.
Okay. Now, you may have answered this question; I just don't remember what it was. Did you offer up one or two recommendations that we, as a government -- a practice we should adopt to eliminate the scenario you just described?
Actually, we had that very discussion with the former treasurer and the current treasurer and Mr. Dubow.
And they were very receptive to it. 35 12/10/08 FISCAL STABILITY, RES. 080603, 890
But when you have the amount of, again, the agencies that we're talking about that are applying for the money, it takes time, because a lot of these people are doing it on their own, you've got to get the -- you know, it has to be (indiscernible) here how best to be able to do that. But they were certainly receptive to what we were talking about.
Well, thank you for your testimony. It's very enlightening.
Thank you. Thank you, Councilwoman. All right. Thank you, gentlemen. What I would like to do now, at the request of Councilman Jones, is we'd like to ask the Administration, Mr. Dubow, if he can step forward and respond to a couple of the questions or statements that were raised. 36 12/10/08 FISCAL STABILITY, RES. 080603, 890 And, gentlemen, if you could just kind of hang up there on the side, because we might want to call you right back. So please don't go away. (Witnesses come forward.)
And for the record, I just want to note that Councilman Brian O'Neill and Councilwoman Joan Krajewski are at the hearing, and we have officially established a quorum. Thank you. Councilman Jones?
Thank you, Mr. Dubow. We had an opportunity to discuss this some months ago, and I guess the only question -- and I was asked to raise this with you from Councilwoman Blondell Reynolds-Brown as well -- is: In light of the fact that paper checks, you would agree, is an inefficient way to move money, and you're keenly aware that we're in a fiscal crisis, where are we on implementing a more efficient process by which -- that the City receives revenue 37 12/10/08 FISCAL STABILITY, RES. 080603, 890 from the Commonwealth of Pennsylvania?
Okay. Well, let me just start by saying that we agree with you that we should go paperless with State checks, you know, as quickly as we can. We have been working with both the incumbent treasurer and staff for the incoming treasurer to try to get it done as quickly as possible. There are some technical questions on their end that they're trying to work out, and as soon as they're worked out, we will move ahead with it.
Can you give us a sense of what some of those issues are?
Sure. Rebecca Rhynhart, City Treasurer. The information that the State includes on the electronic fund transfers 38 12/10/08 FISCAL STABILITY, RES. 080603, 890 is not sufficient to identify what the payment is for, for the accounting system. So it might just say "City of Philadelphia"; it doesn't say, you know, "Police" and what the payment is for. So they're looking to it to fix the problem so that they can put more information on it just so that our staff isn't overburdened with that.
If I understand it correctly, you just said that one of the problems is identifying the individual department.
Or is it a little more specific as to the individual program that your accounting system has to identify?
I think it's the department and also what the payment is for. So if there's a contract number or an invoice number, that type of information.
And is that a 39 12/10/08 FISCAL STABILITY, RES. 080603, 890 make, like, change to the system? It is?
Well, that's what they're looking at, if they can make some sort of adjustment to their system, to make it work.
So on estimate -- and not an exact number, because you're not prepared to do that maybe at this moment -- how many different departments, programs, contracts are we talking about annually?
I don't think I could give an exact number, but they're -- it's a wide variety of departments.
So if we were in the physical world of paper checks, when a check comes into the department, is that information included on the physical check?
On the physical 40 12/10/08 FISCAL STABILITY, RES. 080603, 890 check, it is; there's a piece of paper that they include. But on the electronic fund transfer, they don't include that information right now.
Now, I'm not a technological genius, but is that a hard thing to fix? (Addressing Mr. Dempsey.) Can you come back up? (Mr. Dempsey returns to witness table.)
It is not technologically impossible at all. However, what it is, it involves the agency, their bank, their banking instructions, IT requirements. And that is something that we have -- I have talked to Treasurer Weissman about it, and actually, I've talked to Treasurer-elect McCord as well. That is a longer-term problem that has to be resolved 'cause it doesn't only affect Philadelphia, but it certainly affects everybody else who receives large 41 12/10/08 FISCAL STABILITY, RES. 080603, 890 amounts of electronic transfers, as the City does, as do many across the State. But one of the things that we had offered that we could do from our program side is, if there was a particular problem area of identification, that we could set up the account within INVEST, of which the City is already a member, and title it so that the only money that would come into that account would be from that program.
In the -- as I said, in the interim. That would be a short-term solution.
So if I understood the stopgap measure, it would be to set up an account that was a catchall account --
Or set up as many as the City wanted to for those particular 42 12/10/08 FISCAL STABILITY, RES. 080603, 890 problem areas in the interim, but only in the short term. The long term has to be that -- they call it "the addendum" that identifies the electronic payment as it comes electronically. It needs to -- it should, for the purposes of everybody's receiving money from the Commonwealth, properly identify so it can be properly recorded. But I would say even that, it would be better for the -- if the City gets an electronic payment for which they're having trouble identifying, at least while it's in the bank account --
Versus while it sits as a check, again, the Commonwealth is still drawing the interest.
Do you have a 43 12/10/08 FISCAL STABILITY, RES. 080603, 890 response, Madam Treasurer?
I think we are looking at all of our options. Our first thought was to work with the State Treasurer to see how quickly they could implement some sort of change. But, of course, you know, we agree that it's a good idea to move to electronic fund transfer as quickly as possible, so we're working towards that goal.
When you say "as quickly as possible," that reminds me of a term called "all deliberate speed" when it came to integration of our schools, and it proved to take a lot longer than a lot of people thought. So my question is: Do we have a goal of a deadline? When we talk about a spigot that's leaking at a million dollars estimated a year, when can we kind of set a timeline? We know exactly when the libraries are going to close, but when are 44 12/10/08 FISCAL STABILITY, RES. 080603, 890 we going to close this loophole to figure out how we can save a million dollars a year, which is half of what I think the amount of costs to operate the libraries is estimated amount of savings. So the sense of urgency is something that, I guess, this body would like to see as well.
When we met with the representative of the incoming state treasurer, we told him this was our number-one priority and that we wanted this done as quickly as it could be done.
And I can assure you that I work with the treasurer. You know, our program is not separate from the Treasury Department. And, in fact, if the priority is that of the City, I'm sure that Treasurer-elect McCord will indeed make that a priority. And, again, coming in. He's going to be there for four years. I would 45 12/10/08 FISCAL STABILITY, RES. 080603, 890 say that this -- because it's not just a problem significant to Philadelphia; it is a little more significant to Philadelphia 'cause the numbers are larger. But, in fact, this is a problem in Allegheny County, it's a problem in a variety of other large municipalities and counties across the State. So it's one that I know that there has been some work done on. But to have the incoming treasurer make that commitment that would be a priority, I can assure you that -- I'd say you'd see some action probably within the first six months.
Well, thank you. Mr. Chairman, we meet on a quarterly basis, and maybe we might make a footnote to check on the status of this at our next quarterly meeting of this committee.
I -- unfortunately, we'll probably end up meeting more than quarterly, given our 46 12/10/08 FISCAL STABILITY, RES. 080603, 890 current financial situation. And as I said earlier, we plan on being very aggressive in this economic issue and in making sure that we provide whatever support for the Administration to get whatever revenue is necessary for us to hopefully restore some of our services. So absolutely.
Thank you very much, Mr. Dubow. So what have you been working on lately, anything in particular? Are there any capital or software costs or systems costs that are associated with creating this new stream of quicker revenue to the City? I'm more asking the State, I think. Well, if you know, fine; but if the State knows if there are any costs involved. Are there any changes to our 47 12/10/08 FISCAL STABILITY, RES. 080603, 890 computer systems or to --
I couldn't answer on the -- I don't believe -- I don't know what there is in the State's (indiscernible). I know the technical term for the addendum comes out as it currently does. We can only send from Treasury what we're given, you know, from the agency; for instance, what we get from the Department of Welfare, and then the bank that they're dealing with and/or the bank that the City would be sending their electronic payment to. That all has to be very specific.
So if we're going to change now, it might -- I can't say that on our end that there wouldn't be a cost.
I'm not 48 12/10/08 FISCAL STABILITY, RES. 080603, 890 worried about your end; I'm worried about ours.
I understand that, Councilman, and I don't blame you. The fact is, until we sit down with all of the people who are involved in making the changes, is there a software change? Could be; don't know that. And if that would be a cost that the bank would eat if it's on, you know, the City's bank, considering the --
Now, as I understand the process, does the City have to initiate to the various departments in the State the requests for the reimbursement?
Okay. So is there a delay that City folks are aware of relative to the request from DHS, for example, for reimbursement from public 49 12/10/08 FISCAL STABILITY, RES. 080603, 890 welfare? Is there a delay or is there a timeframe wherein the Department of Public Welfare processes the claim to send the check over to Treasury to disburse so the City?
I'm not -- that end I'm not as familiar with. Again, what we were focusing on, Councilman, was, in fact, from the time the payment request comes over from the AT till it comes to the City, that there was a gap that we could close. Now, to say that -- to sit here and say that we could close the gap on a given department and make that process -- that's the process of that department, and I certainly couldn't comment on that. But what we can say factually is that we know that if it's a paper check that's produced, till it arrives in the 50 12/10/08 FISCAL STABILITY, RES. 080603, 890 City till it clears, that we know that there's a certain minimum there that we sit on. I mean, the Director may disagree, but I generally would say it's about a four-day minimum.
Do you have any insight into the -- any of the hardware, software, or systems costs that may be associated with this not new form but, you know...
I think, from the City's perspective, we've received electronic fund transfers from others, so we're set up to receive it, to my understanding.
Okay. And it's just trying to sort it out once it gets there.
There's a mixup between the State that it sends out to, in this case, the City's bank. That's part of the problem.
Okay. Has this been discussed in the Administration 51 12/10/08 FISCAL STABILITY, RES. 080603, 890 from the time you got here, or do you remember discussions about this in prior administrations? Not -- it's probably more Rob, you, than --
I don't -- in prior administrations, I probably -- I don't remember. There may have been, but I don't remember.
Thank you. I'm not sure that I understood 52 12/10/08 FISCAL STABILITY, RES. 080603, 890 the -- if we ever got an answer to: What's the problem with just creating a separate account for each program or department that receives money from the State and allowing them to just put it in there; and that way, when it hits that account, you know that it's for that program. I guess I don't understand why that, as an interim measure, if it's going to take six or nine months for the State to provide it exactly the way you want, why we just can't open, you know, 53 accounts under our main INVEST account.
That -- and I don't know whether we've heard that before, but I didn't remember that, so that was new, and that's something that we'll look into.
Well, I don't -- we have to talk about the details which, you know, an open hearing is not the appropriate place to do that, but -- 53 12/10/08 FISCAL STABILITY, RES. 080603, 890
So the other thing is to have one INVEST account and then have an arrangement from them to send an e-mail to our treasurer as to all of the wires we receive in one day or all of the electronic fund transfer we receive in one day and where they go. So we'll have a pot of money and we'll know where to send it --
Right. And if they were able to do that, that would be great. (Addressing Mr. Dempsey.) But I think what you're saying is, you're not able to do --
Okay. Thank you. Also, at the hearing of the 54 12/10/08 FISCAL STABILITY, RES. 080603, 890 Committee of the Whole, at the end of that hearing you, and Mr. Agostino committed to getting me all of the information that I requested in the context of some library data I was seeking and other data in a request that I had sent over through Clay Armbuster, which you had a copy of, et cetera. And I still don't have most of that data. You had committed to get it to me by the end of two weeks ago Friday. Can you tell me why I don't have the information that you committed to give to me?
You -- but it wasn't all of the information that we requested.
I don't know what information you requested you don't have. We can talk about that, but I don't know what you're --
Okay. Well, 55 12/10/08 FISCAL STABILITY, RES. 080603, 890 I'll send you another copy of it, and I'd like your commitment that I can -- that I will -- that it is forthcoming quickly.
Yeah. I mean, I have to say what it is, but, you know, we'll look at it and get to you as quickly as we can.
Thank you, Mr. Chairman. Just for the record, we don't, as a council or a body or as freshmen, believe that we reinvented the wheel, nor cost efficiencies, but the only thing in identifying them again is to say that there's a newfound sense of urgency to close these gaps, to correct these problems. So if we've been working on 'em since God made little green apples, that's fine, but now we really need to close the loop, because now, these small 56 12/10/08 FISCAL STABILITY, RES. 080603, 890 efficiencies mean savings from tough budget cuts that we're going to face. So in a spirit of cooperation and encouragement, we'd like you to really look at, you know, solving these software problems and creating the savings that we need so we can apply those revenues to needed departments and agencies. That's all --
Well, we share your sense of urgency, and I think we've conveyed that.
Thank you, Councilman. Any other questions from witnesses -- from members of this body for these witnesses? (No further questions.)
There being none, gentlemen, I want to thank you very much for coming down and giving us this 57 12/10/08 FISCAL STABILITY, RES. 080603, 890 very, very important information. We look forward to working with you to iron this out 'cause we need every penny we can get. And to the Administration, if there's any support that you need from the Council to implement this program, please let us know.
You're welcome. Okay, thank you. Next on our list, we will have Ms. Vivian Miller, the Clerk of Quarter Sessions, to discuss of issue of bail collections. I must say, Miss Miller is a row office member. (Witnesses come forward.)
Good afternoon. My name is Vivian Miller. I'm the Clerk of Quarter Sessions. To my right is Andrea Jefferson, who is my accountant/clerk. And to my left is Robin Jones, my first deputy.
Thank you. 58 12/10/08 FISCAL STABILITY, RES. 080603, 890 Please proceed with your testimony. Or were we going to have questions? Councilman?
I'm sorry. Thank you, Mr. Chairman. I don't think you have prepared testimony.
What I'd like you to do is -- this is as a result of coming to this council's attention that there may be outstanding bail money out on the streets. And in tough times, I guess the question begs itself of: How do we get those dollars more efficiently into our coffers? And what I would like you to do for us is describe the bail process for us as it exists today. And then we'll go into some understanding on how we can make it a little more efficient. And also whether the Council can be helpful in increasing fees in certain areas as to allow us to receive a little more revenue 59 12/10/08 FISCAL STABILITY, RES. 080603, 890 than we today. So with that, can you describe for us how the bail process works.
Okay. First of all, bail is imposed a hundred percent. We assess a person percent of that 8 hundred percent. Thirty percent of that 9 is administrative costs. 10 Are you following me?
Okay. Now, what happens is, FJD handled all codes and forfeitures, which means the forfeitures up until '06 of last year, when CPCMS came in.
Okay. That's the State, when the State taken over. And what happened is, we then -- well, the forfeitures went down because FJD no longer did the coding; we had to take over and do the coding. 60 12/10/08 FISCAL STABILITY, RES. 080603, 890 So, but I'll tell you -- better still, I will let Andrea Jefferson, who's my accountant/clerk, explain that process to you.
Andrea Jefferson. I'm the account clerk for the Clerk of Quarter Sessions. The process of bail, the judge imposes a bail of a hundred percent. The surety comes to the bail window, and they pay 10 percent of the hundred percent. And that money is collateral, stating that the defendant is going to show up for court. If the person does not show up for court, then the judge will enter, like, a sue-out forfeited bail. The defendant has 20 days to respond to the letter. And if they do not respond to it, then the judgment is entered. 61 12/10/08 FISCAL STABILITY, RES. 080603, 890 So in that process, we have taken over the judgments. So now, once the judgment is entered, the bail money is assessed. That percent that's 6 collected is forfeited and it goes to the 7 City. So then the defendant/surety will 8 owe the 90 percent. 9 So basically the 90 percent is 10 basically a judgment, but you have to put the judgment for the whole thing, for the whole total amount, to cover the money that was assessed to the City.
So if I understand this correctly -- let's use a hypothetical figure of a thousand dollars.
Okay. So -- okay, you have a thousand dollars. The person doesn't show up for court.
So we have the hundred dollars immediately. 62 12/10/08 FISCAL STABILITY, RES. 080603, 890
Yeah, we have a hundred dollars right immediately. And then also we have a $10 bond fee, because for every bond that is printed out, it's $10.
So then there is $900 that was owed to the City of Philadelphia.
The judgment is for a thousand because you have to cover the hundred that was taken.
How do we secure the other 900 when the defendant comes in; is that unsecured? Meaning, is there a house? is there property? is there 63 12/10/08 FISCAL STABILITY, RES. 080603, 890 a bank account?
In some cases how that money is collected is, if there is, like, a payoff, if a person owns property and they find out that you owe the Clerk of Quarter Sessions, like, $900 in judgment, you need to pay it off before you can sell your house.
'Cause sometimes they could -- they can get money off -- say, like, if they sell they house, then whatever they owe, say like they owe $900, then that money will come to us. FJD collects that money. Then they would deposit that money in our account, and then we would 64 12/10/08 FISCAL STABILITY, RES. 080603, 890 forward it to the City.
So there is a scenario where a person can approve bail for a person and may not have it secured by real estate; it is on the person's name?
So what percentage of bail in the City of Philadelphia is secured by real estate today? Roughly, approximately.
Roughly? It's -- I know it's low. They do more 10 percent than real estate; that I do know, but -- 'cause they do do real estate bail, but it all depends on the value of the property.
And that -- they usually take the value of the property, and whatever adjustment is left, they'll take, like, 10 percent; they have to put 65 12/10/08 FISCAL STABILITY, RES. 080603, 890 up 10 percent of it.
I know today... Well, we'd have to give you the figure, but it's a large sum of money.
So there's 20 $20 million approximately owed on forfeited bail today? Or is that more?
That's just estimated because we only -- in the figures that I have, it only went to -- the accounting -- the accountant only did 66 12/10/08 FISCAL STABILITY, RES. 080603, 890 from 2005 to 2008, but you have to go prior to 2005.
Would it be out of the realm of possibility for that number to be higher?
It could be higher or lower. And then also, too, you have to take on account that you have vacated orders that can affect that 90 percent, because the person can say, Hey, you have a judgment against you. And if they want their bail money back, they can file a petition through the president judge. And it all depends on the reason why they didn't show up for court; the judge will either grant it or deny it.
It was brought to my attention that that figure could be as high as a billion dollars; is that beyond the realm of possibility? 67 12/10/08 FISCAL STABILITY, RES. 080603, 890 Yes?
So it's not a billion dollars, but it could be -- what could be the possible high end of this based on the fact that a lot of the prior years aren't assessed in your figures? What could be the mean amount of money owed the City of Philadelphia?
300 million, okay. Now, you mentioned in your prior testimony that we secure some of the bail by real estate, but we're not today prepared to say how much percentage of that 200 million is real estate secured?
Well, that part of the process is not done by our office. 68 12/10/08 FISCAL STABILITY, RES. 080603, 890
Well, that process is between FJD and the Controller's Office.
So then when a person wants bail, who determines whether -- is there a financial assessment done --
If somebody wants to put up property, they first have to find out the value of the property, and it all depends on the amount of bail that the judge will impose on the defendant. You know, sometimes they use half real estate and half 10 percent. They use half cash, half real estate.
So in order 69 12/10/08 FISCAL STABILITY, RES. 080603, 890 to get this accurately assessed, we need to contact the Controller's Office --
-- to find out what percentage of the potential 200 million is secured by real estate?
Because if we do an assessment of the person's ability to secure by real estate, what are some of the litmus tests when we say, All right, they don't have real estate; let's go in that person's name. What would be that threshold that we say, Okay, we're going to let them not use real estate; we're going to let them use their name as 70 12/10/08 FISCAL STABILITY, RES. 080603, 890 security. Could you describe what that threshold is? Or you don't do that, the controller -- it goes to the bail commissioner. So then they make a determination as to this person's economic is such that we could use the real estate.
Well, they have that option, whoever the surety is, to use real estate or use cash. It all depends on, you know, what they have at hand.
All right. You mentioned earlier that there's a percentage, 10 percent, that you get for processing fees?
The 10 -- no, there's a $10 processing fee. 71 12/10/08 FISCAL STABILITY, RES. 080603, 890
The 10 percent was 8 speaking in reference to what's paid from 9 the 100 percent. If a judge orders bail 10 on a thousand dollars --
-- that's for the 10 percent. The administrative fee, which I think you're asking, is 30 percent.
That's money that's generated for the City whenever the bail is imposed or paid.
So currently, 72 12/10/08 FISCAL STABILITY, RES. 080603, 890 do you know what we receive in revenues as a municipality of that 30 percent?
Let's see. For -- for, um... Okay. For 2008 up to date, it's 2 million, 800, 900 -- 600 dollars, 436 --
So we can round it off to a little less than 3 million. And --
So annually, your estimation is, we're going to be about at 3 million, do you think?
So if we were to -- and does this council have the ability to increase that fee?
Okay. So you're recommending that we go from 30 percent to what percent?
35 percent. So that would give us an additional what in revenue annually?
Well, those numbers we haven't come up with because we wanted to see what the process would be, I guess, in terms of even asking for the 35 percent.
All right. So your recommendation on the record is 74 12/10/08 FISCAL STABILITY, RES. 080603, 890 for us, for the administrative portion of the fees, to go from 30 percent to 35 percent; is that correct?
We're also asking that possibly -- in terms of looking at -- we understood to come here today was to ask for revenue-enhancement ideas, and one of them was to raise the cap; it's a cap of $750. Basically what happens is, if a person pays a bail of, say, $2500, the most that they could take would be the $750; they couldn't exhaust the person's fees. That's 30 percent, or 750. What we're asking is to propose it maybe to a thousand dollars so that it would generate money for the City. So we're asking to raise the cap.
So included 75 12/10/08 FISCAL STABILITY, RES. 080603, 890 in the 30 to 35 percent increase, which is a percent increase, you're recommending 4 to go remove the cap to -- from 750 to 5 $1,000?
I'm just trying to figure out, you don't -- you don't -- do you set bail?
The judge sets bail, right? Do commissioners set bail?
The bail commissioners set bail? At what point does the client pay the fee for bail? They say $25,000 and they said that's how much your bail is; they have to pay 10 percent of that? 76 12/10/08 FISCAL STABILITY, RES. 080603, 890
So they pay 10 10 percent of that -- that would be, what did I say, $2500?
The cap means that you only -- up to a certain amount, irregardless of how much the bail is, they only have to pay up to $750.
So if it's a million-dollar bail, they still pay only up to $750?
No, no. What happens is that the cap is, as it pertains to the 30 percent. The City can only take 77 12/10/08 FISCAL STABILITY, RES. 080603, 890 up to 30 percent. Anything over the 30 percent -- anything over -- anything over -- up to -- anything over $750 they 5 can't take it as it pertains to -- 6
So your fee 7 is, the City gets 30 percent of $700 -- 750, right, okay. So what happens to the rest of the money?
It goes to the surety 'cause the money is split between the City and the surety. You have 30 percent -- on each bail is 30 percent.
The 70 percent of the 10 percent goes to the surety, the 78 12/10/08 FISCAL STABILITY, RES. 080603, 890 person who actually paid the money.
Okay. So all of that money floating out there doesn't -- is not the City's money; it's the surety's -- the person who assures the bond.
It's theirs until they forfeit. If they don't show up to court, then at that point, the City enters a judgment and they keep the 10 percent.
So if I don't show up for my court date and I have a $25,000 judgment, so Mr. Jones assured that they would get the -- assured that 19 I would show up. 20
This is why -- 24 (Indiscernible; parties talking 25 over each other.) 79 12/10/08 FISCAL STABILITY, RES. 080603, 890
-- the $25,000, you get 750. And what happens to the rest of the money; it goes to Mr. Jones?
Whoever put the money up. See, this is why a lot of the sureties put the money in the inmate, the person who is up in front of the judge; they put it in their name because they don't want to be responsible just in case the person jumped bail. But then if the person jumped bail, then they're not responsible.
Of a forfeited (inaudible). There's a difference. What happens is, there's 10 percent, okay, that's paid off.
That's a different scenario; that's a thousand dollars, okay? You pay a $100 as your 10 percent. 80 12/10/08 FISCAL STABILITY, RES. 080603, 890
All right. The City takes 30 percent of that off of the administrative fee, off of the percent. 6
You're entitled to your 10 percent, minus the 30 percent if you don't jump bail. If you jump bail, then what happens is, the City takes -- you go up before a judge, and if the judge says he doesn't reinstate that, that money goes back to the City; that's money that goes to the City. If you're talking about that 90 percent, the difference between the 10, the $900 we were talking about in reference to the example we used earlier, 81 12/10/08 FISCAL STABILITY, RES. 080603, 890 that's the judgment that's entered to the defendant if it's not --
There are several things we're trying to figure out. Number one -- (Laughter.)
What's happening is, you -- (Indiscernible; parties talking over each other.)
Let him answer my question, Ms. Miller. I want to know, what are we talking about?
What's the issue? 82 12/10/08 FISCAL STABILITY, RES. 080603, 890
Here's the issue: Under their estimate, as much as $200 million is on the streets right now. In our current configuration, we only get 30 percent of the percent, which is 7 capped at $750. 8
We want to 10 consider increasing the cap so that the City of Philadelphia gets a larger portion of that share. And then we want to look at means by which I hope the City Solicitor is in negotiations on how we receive that thou -- the rest of that $900 that's owed on the streets, which could be as much as $200 million. Now, I have questions about -- what has been helpful to me is that the economic assessment of the individual receiving bail is not done by you.
It is done by the Controller's Office, so the question be -- 83 12/10/08 FISCAL STABILITY, RES. 080603, 890 (Indiscernible; parties talking over each other.)
The real estate part, correct. And my issue on real estate is, is there a question of economic viability that we're trying to be a little more liberal so that we have don't have over-crowding in jails, and that's a reality. But in cases where people have means to pay, we should be going after -- if somebody jumps bail, we should -- and the person has means to repay the City of Philadelphia, we should be going after those dollars.
Right. And we are working with the City Solicitor's Office 84 12/10/08 FISCAL STABILITY, RES. 080603, 890 to go ahead and make sure that that happens, that there's a collection (inaudible).
That's a possibility, but at the point where we're closing libraries, fire stations, and pools, we're going to reassess how we deliver bail, we're going to look a little harder at the economic viability of the individual. And if we can get real estate, we want it; and if they violate and jump bail, we want the property.
I think in terms of -- you mentioned it yourself. In terms of looking at the cost, is trying to collect a thousand dollars going to cost you more? By keeping 'em in jail, does it cost more than the thousand dollars to keep 'em in jail than to keep the cap on the 750? Because the ability to pay the 750, if it's not there, then you increase the population in the prison, and that 85 12/10/08 FISCAL STABILITY, RES. 080603, 890 cost goes up to the City.
And as we look at this, we're looking at this in total context of house arrest and other things we can do to try to balance this out. And I appreciate your comments there. We don't want to be penny-wise and pound-foolish. It does not make sense for us to hold somebody in jail at a hundred dollars a day cost to the City of Philadelphia. So your point is well taken. But as we look at all of these things as cost considerations, we need to take into account that $200 million is a lot of money that, you know, we can possibly go after.
I want them to explain that 200 million. What -- whose money is that; is that our money? If we're at a 750 cap, what -- I don't -- see, I don't understand the process, so that's why I'm not sounding 86 12/10/08 FISCAL STABILITY, RES. 080603, 890 real smart about this stuff. You can't know everything, right? So how do you come to -- is that $200 million that has not been paid of the 30 percent of the money that's floating out there for bail?
How do you get to $200 million? And what is that; whose money is that?
The commission and the forfeited bail is two separate categories. The commission is already automatically earned, it's automatically taken from the bail money.
No, but Councilman Jones is saying we have $200 million on the street that we need to capture.
It's the City's money. 87 12/10/08 FISCAL STABILITY, RES. 080603, 890
The 750 is commission. That money is separate from forfeiture; that's what I'm saying.
So you're saying there are people out there on bail who didn't pay the percent. 10
There's an administrative fee that they're already getting; they get that off the top.
But what is missing in that 200 million is people who jump bail, who don't come back; that is owed to the City of Philadelphia.
Yeah, that's the 70 percent. 88 12/10/08 FISCAL STABILITY, RES. 080603, 890
Joe Brown 10 goes to court, he has to pay a bond, and he has to pay 750 to the City. And he pays -- whatever he pays, 750 comes to the City.
Does he put the 10 percent up at the time he's put on bail?
He has to post that money at the time that he pays the bail; he has to put the money up, right? So you get 10 percent bail, and that's $2500, and then you take --
So how do you not collect it if you're not collecting it upfront? Shelly, can you explain it to us? Let Shelly explain it to me 'cause I'm a little slow at this. (Witness comes forward.)
And for the record, just for the record, we have three individuals who are in the next panel that have to be at a 3 o'clock appointment, so if we can't wrap it up relatively shortly, we're going to ask for you to submit to the chair for the committee members in writing the structure of how it works.
Yes, of how it works. SOLICITOR SMITH: Shelley Smith, City Solicitor. All right. Hypothetically, a person is -- a judge imposes bail of 90 12/10/08 FISCAL STABILITY, RES. 080603, 890 $10,000. The person is required, in order to be released, to post percent of that 4 bail, $1,000. 5 Of that 10 percent, the court 6 charges an administrative fee of 7 30 percent; that would be $300. 8 The amount of the administrative 9 fee, the 30 percent of that 10 percent, is 10 capped at $750. Therefore, no matter how high your bail goes, when you pay the -- if the 30 percent of your 10 percent would theoretically exceed $750, the court's administrative fee is still capped at $750. That's how it works.
So how do we get to the -- SOLICITOR SMITH: And the remaining amount of money then -- how do we get to the...
They said there's $200 million on the street. SOLICITOR SMITH: Okay. The $200 million, assuming that's the 91 12/10/08 FISCAL STABILITY, RES. 080603, 890 number -- and I'm not sure that that is the number. But assuming that's the number, whatever amount of money is outstanding in -- in -- that money is bail judgment. In other words, it's people who have forfeited their percent and also, 9 therefore, forfeited the total amount of 10 bail that was imposed against them. So when they forfeited -- when they jumped bail, they forfeited the deposit and they forfeited the total amount of the bail. So in my hypothetical, they forfeited the total $10,000. Whatever they have not paid is the remaining amount of the judgment against them, and they owe that. And those total amounts for all of those people who jumped bail and forfeited their 10 percent and then the total amount of bail amounts to the 200 million, or whatever the number is.
Thank you. SOLICITOR SMITH: You're welcome. 92 12/10/08 FISCAL STABILITY, RES. 080603, 890
Yes. Are we moving to look at that $200 million for collection? SOLICITOR SMITH: We are.
Thank you. And I won't ask question's; I'll just ask you to provide this information to the chair. Could you please get to us what your estimates would be if we increased it to a thousand dollars from 750, if we increased the fee from 30 to 35 percent. And then also give us a breakdown of the 90 percent that is not part of those fees, you know, the two or $300 million, whatever that number is, 93 12/10/08 FISCAL STABILITY, RES. 080603, 890 give us a breakdown of how much of that is collateralized by real estate or some other method or has a surety other than the actual bail jumper, what percent is that, so that we can get some kind of likelihood of collection analysis from that data. And then, finally, do we not have bail bondsmen in Philadelphia?
And, you know, if there are sureties, why we're not going after those people first, I guess, would be -- why it's hanging out there. Thank you.
All right. Thank you very much for your testimony. SOLICITOR SMITH: Thank you, 94 12/10/08 FISCAL STABILITY, RES. 080603, 890 Mr. Chairman.
Thank you, Miss Smith, for helping us. If you can -- when you compile that information, if you could forward it to the chair and we'll distribute it among the members both on the committee and Councilmembers. Thank you so much for your support.
All of us have been through Clerk of Quarter Sessions and their funding issues over the years, and it's always been an issue with 95 12/10/08 FISCAL STABILITY, RES. 080603, 890 them. Certainly, we support this department and we want it to survive and to continue. And we believe that any issues that are raised about departments, I would prefer that they come to Council and talk to us, because the functions of these departments still have to go on. So to say what departments should stay and which should lose, that's easy; anybody can say anything. But what happens to all that they do to raise these funds for the City, maintain records, and all that goes along with that. And, you know, the issue has always existed. They get a commitment that they'll get funded, their department does, and they never get it. So we wanted to speak for the Clerk of Quarter Session and praise them for the work that they do.
Thank you, Mr. Chairman. 96 12/10/08 FISCAL STABILITY, RES. 080603, 890
Councilwoman, I suspect if the recent newspaper reports go beyond simply statements, there will be significant discussions about what row offices will stay and leave, and there will be substantial discussions with respects to those proposals. Thank you so much. Next we'd like to call up Mr. Mark Madden, the Director of Business Development from SEMUSA; and Paul Levy from the Center City District. (Witnesses come forward.)
And, Mr. Madden, there will be some discussion about the ability to have a coordinated municipal advertisement program. And I understand that there was an attempt in the last administration to move this forward, but we did not conclude that. I understand Miss Cutler is here to provide any support as it relates to questions and the status of any new 97 12/10/08 FISCAL STABILITY, RES. 080603, 890 proposals. We're going to have a PowerPoint presentation.
Good afternoon, Councilmembers, committee teams, and citizens. My name is Mark Madden, and I'm the Director of Business Development for SEMUSA. If you could turn to the next slide, please. We're a global leader in the outdoor street furniture industry. We were established in 1984, headquartered in Madrid, Spain, and we're a century-old company -- rather, a subsidiary of a century-old company, FCC, which is Spain's largest municipal-services provider, with over $16 billion in annual revenue. Next slide, please. We're in 13 countries, over 160,000 structures in the ground in over 160 cities, such as Milan, Barcelona, Madrid, Rome, Rio de Janeiro; and, most importantly, the New York City contact. 98 12/10/08 FISCAL STABILITY, RES. 080603, 890 The 20-year New York City contract is for 3,300 bus shelters, 330 newsstands, 4 automatic public toilets, and a number of 5 other amenities. 6 Next slide, please. 7 SEMUSA's sole business is just 8 the design, fabrication, installation, and 9 maintenance of world-class street 10 furniture complemented by dedicated 11 advertising sales force. This is 12 important because street furniture 13 advertising is the only medium that we 14 sell. 15 This is a crucial factor in 16 revenue maximization as it eliminates 17 internal competition for advertising 18 dollars by selling other competitive 19 media, such as billboards, radio, 20 airports, or shopping malls. We use internationally renowned designers such as (indiscernible) Di Giotto for our street furniture, who designed the Maserati; Richard Rogers, who did the Centre Pompidou in Paris; and Sir 99 12/10/08 FISCAL STABILITY, RES. 080603, 890 Nicholas Grenshaw, who did the Waterloo Station in London. The next few slides are basically just some examples of our street furniture and different designs and different design shapes. This is some standard bus shelters as well as some large bus shelters. Next slide. Here you have some newsstands with different functionality, with the garage-shaped enclosure in the front and also open paneled doors on the lower left. Next slide. Here you have honor-box corrals, or newspaper corrals, which are designed to reduce street clutter. And, finally, automatic public toilets, several different designs. And then information kiosks or way-finding kiosks, which are used for maps and things like that. Trash receptacles, which can be combined with other furniture such as 100 12/10/08 FISCAL STABILITY, RES. 080603, 890 benches at bus shelters or stand-alone furniture. Also, with all of our structures, we have the ability to put in -- we have the flexibility and innovation to put in the time and temperature clocks, digital media, next bus, or next (indiscernible) bus lights. One of our core values is respect for the environment. We use high-quality, pollutant-free recycled materials, and maintain our future, using biodegradable cleaners. More than 95 percent of each (indiscernible) structure is recyclable. We implement solar-powered structures when possible. For example, we installed 1200 solar-powered shelters in Miami. The power they generate provides a minimum of six hours of illumination during the night and reduces carbon dioxide emissions by 2300 tons a year. Next slide. Bicycle-sharing systems. I know 101 12/10/08 FISCAL STABILITY, RES. 080603, 890 this was a -- on the docket several months back, in early 2009. SEMUSA has a long history of supporting green and sustainable policies. Through this, we've come up with the bicycle-sharing program, which we've launched in Pamplona, Spain, which is stations and 350 bikes; and 9 most recently, Rome, which was a pilot for 10 20 bicycle stations and 200 bicycles; as 11 well as San Sebastian. 12 Next slide, please. 13 When a city selects us to 14 install street furniture or bicycle- 15 sharing programs, we partner with local 16 design, engineering, and manufacturing 17 firms to maximize the local economic 18 development.
For example, in Miami, local 19 partners performed 90 percent of SEMUSA's 20 work. Next slide. We look forward to continue an open dialogue with the City of Philadelphia and Councilmembers. My contact information is in my testimony 102 12/10/08 FISCAL STABILITY, RES. 080603, 890 submittal, which I have here. Should you want to meet or discuss a street furniture program for Philadelphia, we'd be more than glad to meet and talk with you folks. Thank you very much for your time and attention.
Thank you. Mr. Levy, I know you have a time issue. Oh, you're okay? Real briefly -- again, thank you for coming down and being very patient. I know you had some --
This is obviously something that has been discussed in the City of Philadelphia for a period of time. I believe we came close to entering in some agreement to have advertisement on street furniture and other municipal opportunities in the past, and I don't believe we concluded that. And it has obviously been lucrative not only in New York, but in other cities. 103 12/10/08 FISCAL STABILITY, RES. 080603, 890 One of the things that we've experienced in the City of Philadelphia -- be it good, bad, or indifferent -- is that we have traditionally had significant advocates for -- I guess it would be opposed to -- I forget the term they use. But essentially, it -- what's the term they use. UNIDENTIFIED SPEAKER: Outdoor advertising?
No, it's a certain term they use basically. They call it "visual litter" or something like that, where people essentially don't want to be able to see anything else other than the sky. And we've had these advocates every time there was an attempt to enhance the billboard program or wall wrap programs in the City to increase revenue generation both for the public and the private sector, and more often than not, they've actually won, so to speak, from their perspective. In these cities that you've 104 12/10/08 FISCAL STABILITY, RES. 080603, 890 worked in, have you experienced the level of pushback from the types of advocates who would be opposed to outdoor and public advertisement and things of that nature?
Yes, Councilor, we have. For example, two years ago, Toronto issued an RFP, and they restricted the amount of advertising that could be essentially in a zone or in a geographic area but that adver -- bus shelters would be able to possess advertising. So I'd be glad to pass on that RFP to City Council, or whoever it might be, so you can look at kind of what the parameters were. Again, when you start -- you know, the way the business model works is that we provide the structures for free to the City, using a long-term contract. And 90 percent of our contracts are greater than 15 years, and we provide those free, at no cost to the City or the citizens, you know, with the proliferation of 105 12/10/08 FISCAL STABILITY, RES. 080603, 890 advertising. And that's how it's financed throughout. So when you start to move -- as you know, as you start to move the parameters back in terms of what is allowed, then, of course, the availability in terms of the revenue share that we would be able to provide to the City is -- subsequently, the scales are tipped and then restricted. Mostly the West Coast states and the Northwest, like Oregon, Washington, they have very strong first-right amendments, so they're very, very keen to scrutinize advertising programs, because they're, you know, very much into what you've described, you know, visual pollution. They're concerned about clutter and things like this. Again, you have a very outdoor-focused communities there. And so, you know, for example, I think it was Portland had a bicycle-sharing program that they issued an RFP for, but weren't 106 12/10/08 FISCAL STABILITY, RES. 080603, 890 allowing advertising on it. So, again, you know, there was -- you know, it was a bit of a disconnect in terms of how they went. And, you know, unfortunately, they canceled their program just to review it further. I don't know if that answers your question.
And maybe you haven't experienced the level of opposition that we have in this particular city.
During the course in any of the cities that you either participated in or know of, has there been, either from your, the company's, standpoint or the municipality, a sharing of ideas as it relates to design and content during the course of the RFP, formulating the RFP, or during the course of the implementation of the outdoor 107 12/10/08 FISCAL STABILITY, RES. 080603, 890 advertisement? Did your company -- I'll ask about your company.
Did your company -- and I don't know what degree you participated, if you essentially responded to what the city put out as an RFP or --
Did we provide guidance to cities on the forefront prior to an RFP is issued; is that --
Or were you involved in any way, shape, or form of dealing with the opposition? Were you asked to sit down with some of the opposition?
Oh, in terms of some of these people who are against, quote/unquote, advertising --
Sure. As a matter of fact, you know, we were participating in the last RFP that was issued by the 108 12/10/08 FISCAL STABILITY, RES. 080603, 890 City of Philadelphia, and we met with -- I believe the organization was SCRUB. And we had a very open conversation, it went very well. You know, we talked about how we -- you know, we -- as an organization, we self-man -- we self-police our advertising. So, for example, when we arrived in Miami, they had bench advertising, which had a lot of bail bonds, "1-800-divorce lawyer" advertisements. Immediately, as soon as we took over the contract, we got rid of all of those. We just said we'll take that one on the nose and we'll definitely -- you know, we want to clean up. And we basically got rid of bench advertising; that was something that we put forth to the city.
You know, we're always looking to work with the city. You know, our motto is, you know, we want to -- you know, we're your partner, you know. And that's kind of what we want to 109 12/10/08 FISCAL STABILITY, RES. 080603, 890 do. If we're going to be in a long-term contract with the City for 5 years and a municipality for 20 years, 6 then we need to get together on kind of 7 what the city is looking for in their 8 vision, and include all of the business 9 improvement districts, the NGOs, anyone 10 who -- you know, the business influencers, 11 kind of putting it together, because it is 12 a streetscape at the end of the day, and 13 we all have to live with it. 14
All right, 15 okay. I wasn't going to bring the name up 16 of one of the advocacy groups, but since 17 you brought it up, we do have SCRUB here 18 in the City of Philadelphia; it's been 19 very aggressive in, to some degree, 20 thwarting some of the initiatives that have been put forth as it relates to public advertising. So you've had some experience; I'm glad to hear that.
Certainly. We had 110 12/10/08 FISCAL STABILITY, RES. 080603, 890 a very open and a very positive discussion when we met with them.
Okay. One of the other questions: Given what's happening in the economy, unfortunately -- and I want to acknowledge this, that in terms of our ability to get significant revenue as a result of the public advertisement, there -- and correct me if I'm wrong. It appears to be a shrinking of the advertisement dollars from the --
-- from the advertisers. And I think they're making prudent decisions on how to spend money as it relates to their being able to get the maximum benefits of the advertisement. Have you seen any significant reductions in the willingness to provide that opportunity for the municipalities?
You know, there hasn't been a major RFP in quite some time from a municipal standpoint. I'm talking 111 12/10/08 FISCAL STABILITY, RES. 080603, 890 about a large, you know, multifaceted such as, like, New York, San Francisco, Atlanta, were all out at the time Philadelphia had issued theirs.
Phoenix was out last year, smaller in scope. But, again, it would be a large program. Haven't seen a large program in the last probably a good five months. Now, you know, you've -- you know, credit to you and your team. You've obviously been doing your homework, you know, with the economy, and that's going across the board. But yes, you're seeing definitely a diminishment in terms of the marketing dollars that an advertiser such as -- and I'm talking about the national advertisers, 'cause those are typically the ones that drive the revenue stream significantly; you know, the airline industries, the auto industries, all of those major industries that are obviously 112 12/10/08 FISCAL STABILITY, RES. 080603, 890 pulling back on anything, any sort of, you know, disposable income that would be allocated towards marketing or advertising. So, yes, you're definitely seeing a dip in the revenue streams. And it's just something -- you know, again, the advertising industry is definitely similar to real estate; it's very cyclical. When the economy buckles, you know, so do those industries.
Right. In terms of locations and opportunities for advertisement -- and, again, I'm an extreme novice in this issue, but my assumption is that when people make decision as to where to advertise, they want to have one of the most visible locations to either vehicular or pedestrian traffic. Assuming that in the City of Philadelphia there's probably substantial opportunities of municipally-owned, be it sidewalks or be it buildings, and the 113 12/10/08 FISCAL STABILITY, RES. 080603, 890 assumption is that they would probably be in the extremely visible location, particularly in Center City.
And I'm not asking you to speak for an advertiser, but if there's a decision to be made about spending this limited dollar, would the likelihood that they would spend in a building that's owned by the City, that everybody sees -- and if anybody's listening, I am not talking about putting a wall wrap around City Hall 'cause I know that somebody's going to say that I'm suggesting that. Would you say that those would be --
You're absolutely correct. I mean, when we study -- when any outdoor street furniture organization studies a city, you know, the first thing they want to look at is all of the locations of the existing inventory, and 114 12/10/08 FISCAL STABILITY, RES. 080603, 890 they want to find out where the densely populated -- where the most eyeballs, essentially vehicular and pedestrian traffic, are going to see those advertisements because, again, at the end of the day, it's going to be those national advertisers, those large organizations with the large advertising budgets that will look for those types of things.
Okay. Thank you. I had a few more questions, but I'm going to defer to Councilman Jones at this time.
Good. Is there any estimate on what we receive from outdoor advertisement annually?
You know, when we were looking at Philadelphia before you could expect -- I don't know what the annual could be, but it was over -- if you were looking at a 20-year contract, you were looking at over $20 million over 8 years at a minimum, all right? 9 And it was probably more than 10 that; I don't have the figure, but it was 11 probably more than that. 12 This was -- again, those numbers 13 were at the time that the RFP was issued, 14 right? Obviously, all of that would 15 change given today's economy and 16 everything. 17 And we would also need to 18 understand -- you know, stepping back with 19 all of that, there is a significant amount 20 of ambiguity within the RFP itself, so it lends a large range in terms of what types of revenue could be distributed, you know. So with a clearer picture, then we would be able to tell you, you know, more fine points or, you know, drill down 116 12/10/08 FISCAL STABILITY, RES. 080603, 890 into what number we could get to, you know, provide to the City over the course of time.
And, very quickly, how does that compare to cities like Washington, D.C. versus New York?
It's a whole social, political, economic study. Essentially, I mean, you know, you're looking at population density. You're looking at, you know, population, tourism. You know, a small city like Miami Beach, which only has several hundred thousand, you know, citizens, but then you have tourism, which is 8 million to almost 12 million a year. You know, it starts to pave the way for how many eyeballs or, you know, individuals are seeing those advertisements. You know, Philadelphia ranks high, no doubt; it's the number-four city in terms of population, and it's definitely going to be up there with, you know, the leading, you know, I guess, 117 12/10/08 FISCAL STABILITY, RES. 080603, 890 cities and outdoor furniture contracts.
Right. In the earlier question from Councilman Jones -- I'll just follow up to his questions with respects to the estimates on the municipal contract. And I think you gave an estimate in terms of the last RFP, but I believe that the earlier RFP was limited in scope; it didn't include all municipally-owned buildings or properties. I think it was --
Right. There were restrictions on where, for example, the bus shelters themselves -- you know, there was -- in Center City alone, there was some restrictions just due to -- I think there had been some recent upgrades to some of those shelters, and there had been some ordinances -- I don't really recall watt language was. But, yes, there were restrictions on where one could advertise on -- I think those are on Chestnut Street 118 12/10/08 FISCAL STABILITY, RES. 080603, 890 and some of other major thoroughfares, and I think that had to do with collaboration with the local BID.
All right, okay. All right. I'm going to actually go to Mr. Levy next. But, Councilman Green, you had a question for Mr. Madden?
I'll actually wait till Mr. Levy finishes. And then are you both going to -- are they both going to be there to answer questions?
We'll come back. Mr. Levy, please state your name for the record.
My name is Paul Levy, and I'm president of the Center City District. Good afternoon, Councilman Clarke, Councilman Green. Thanks for the 119 12/10/08 FISCAL STABILITY, RES. 080603, 890 opportunity. I'll be very brief. But just the perspective I bring as an organization over the last years 5 that has installed a great deal of street 6 furniture, signs, maps, honor-box corrals, 7 et cetera. But since 1994, we've actually 8 managed the transit shelters on Walnut 9 Street and on South Broad Street. 10 And we've worked very closely 11 with the City's selected outdoor- 12 advertising agency, CBS Outdoor. And we 13 provide their opportunities of advertising 14 for nonprofit and cultural groups. Those 15 are areas where there was a prohibition on 16 commercial advertising, so we fronted the 17 cost on those shelters in order to provide that opportunity. Since 1998, we also managed the transit shelters on Market East, which not only provide opportunity for nonprofit and cultural groups, but the commercial revenue there goes to maintain the transit shelters, bus stops, et cetera. But most recently -- and you 120 12/10/08 FISCAL STABILITY, RES. 080603, 890 alluded to this -- in the last year of the Street Administration, I served on the Review Committee the last time there was a public advertising offering by the City. And out of those experiences, I just want to offer a few suggestions and recommendations. I think, number one, the City needs to think carefully about what it wants a achieve. Is the primary goal revenue generation, or is the primary the provision of public amenities? You can do both, but you really need to decide what you want to emphasize. It's clear, as you've heard, that a substantial revenue stream can be generated from commercial advertising, but it may actually require more commercial advertising than the City or its communities are prepared to support. I'll just give you an example. In the last street-furniture public bidding, the City was requesting about ten public toilets, each of which cost about a 121 12/10/08 FISCAL STABILITY, RES. 080603, 890 half a million each. And to support that, the advertising agencies wanted a great deal more advertising on the street; whereas, if you had taken the public toilets out, you would have had a lot less advertising. So it's a question of: What is the City is trying to achieve? If I had one piece of advice, it's really to avoid what I think is a false either/or choice. As you've alluded to, there are people who are 100 percent and categorically against any form of commercial advertising, and I think there's a middle ground that the City should seek to find. I think outdoor advertising can be used very effectively to provide public amenities like transit shelters, benches, trashcans, recreational facilities, screens to cover construction during temporary periods of time. And you can clearly do so with high-quality design. The City, I think, needs to think first about the design standards it 122 12/10/08 FISCAL STABILITY, RES. 080603, 890 wants to set for ads. And I'll give you a very simple example is, we installed banners all over Center City for more than 60 cultural, civic, nonprofit groups, and those really announce events of nonprofit organizations. And by agreement with the Art Commission, no more than 5 to 10 percent of the area of the banner is devoted to sponsorship. And so you have a discreet logo of a corporation or their name taking 5 to 10 percent, and 90 to 95 percent is the message; and, therefore, it's not commercial advertising everywhere. So there's a design standard of how much advertising is appropriate, and I think that's clearly a standard. You could do the same on basketball backboards. That is, if it was plastered across there with the name of a soft drink, people might find that offensive, but if it was limited to a size so it's appropriate. 123 12/10/08 FISCAL STABILITY, RES.
080603, 890 I think the City also needs to carefully think about where things are allowed, and that's effectively what we do in zoning. I mean, if you remember a couple of years ago, there was an April Fool's issue that announced we were going to rename it "The Taco Liberty Bell," and everybody was incredibly offended by that, but we're very comfortable with Citizens Bank Park or Lincoln Financial Field. And so I think commercial signs and advertising should be allowed appropriately in commercial districts and not in others. I would make a distinction between we wouldn't want commercial advertising on the Benjamin Franklin Parkway, but it's probably appropriate on Market East. So I think there needs to be a planning and zoning process. I would echo your comment. In the current economy, the value of outdoor advertising has probably dropped dramatically, but if the City were to go through a bidding process, hopefully, by 124 12/10/08 FISCAL STABILITY, RES. 080603, 890 the time it's finished, the economy would recover. But I would not go out today with an RFP in this environment. But that said, I do think it's appropriate for the City to move forward with issuing an RFP for street furniture. The current transit shelters we have all over the City were installed in 1994, they're years old and they're really 11 showing that wear and tear. 12 The current provider has been on 13 a year-to-year extension of his contract 14 and, therefore, is making no substantial 15 capital investments and not removing or putting in expensive graffiti-removal film, so they simply don't look up to standard. Most importantly -- and you just heard this -- is that not simply SEMUSA, but there are two or three other competitive firms. The technology has moved way beyond what we've installed in 1994. Realtime information, a whole number of technologies really could enrich 125 12/10/08 FISCAL STABILITY, RES. 080603, 890 the street furniture we have out there. So my own recommendation, to simply conclude, is: Do not think about this as a gigantic cash-generator. Think about this -- and when the current recession is over and -- and let me just say, during the current recession, when we're dealing with cutbacks and the kind of psychology, I think street furniture is one of those things that could happen sooner rather than later that would show continuous signs of improvements in neighborhood commercial areas. It would be like a psychological shot in the arm that we're installing new street furniture, we're upgrading recreational facilities. And particularly streetscape and public-area improvements paid by others is part of a coordinated public advertising program. It could enliven streets, it could improve streets, it could provide new amenities, but in accord with pre-thought-out design standards and with a clear set of what do 126 12/10/08 FISCAL STABILITY, RES. 080603, 890 we think is appropriate. You cannot put out an RFP that says, Give me the nicest-looking design and maximize the revenue, with no further guidance, which is something that needs to occur before then. But I thank you for the opportunity to come in.
Mr. Levy, are you participating in any way, shape, or form with the Zoning Code Commission.
You're not? One of the issues -- and you actually referenced it -- with respect to some zoning initiatives involved in the process of implementing a program, one of the things that I found in representing a district that includes substantial opportunities. And there have been occasions when developers or owners of property, private property, were interested in having certain advertisement attached to -- as an accessory to their 127 12/10/08 FISCAL STABILITY, RES. 080603, 890 buildings and were shot down at the Zoning Board simply because some of the advocacy groups were able to muster a reasonable amount of opposition. And, frankly speaking, I didn't agree with it, but this is America, and people have the right. And in those cases, they won. And there was actually some instances where there was actually oppositions raised, and the owner of the building eventually was successful, but they had to go through the process of hiring a lawyer, and it was time- consuming. As a part of the Zoning Code Commission -- I know you're not a part of it but I know you're aware of it -- do you think that there should be some significant thought in terms of when we ultimately redo the code or maybe prior to it that we should look at areas or certain aspects of the code to change the ability to rezone certain areas? I'll give you an example. 128 12/10/08 FISCAL STABILITY, RES. 080603, 890 There's a nonprofit corporation up in the North Philadelphia part of my district who, they own a building, and they were able to get a contract with one of the local TV stations to place outdoor accessory signage that was electronic, and there was an agreement that the TV station would be able to show their news stations, basically promoting the station.
But as a part of that, they also agreed to do public service announcements and things like that. It was on a commercial corridor, but because it was within this -- I forget the exact amount of feet. There happened to be, like, two residents that lived in proximity within that feet, and they had to go through that process to get zoning. And frankly speaking, everybody thought it was ridiculous, but because of that antiquated code, you know, it was time-consuming and it was costly in terms 129 12/10/08 FISCAL STABILITY, RES. 080603, 890 of them being able to do that. Do you think we need to look at --
Yeah. You know, I'm by no means an expert on zoning, but I think it's clear, it's appropriate that we relook at the zoning code. The technology of signage, digital, LED screens allows for things that were not possible before. And I think it can be very appropriate in some areas and very inappropriate in others, but to do it by variance is not a constructive way. I think rethinking the zoning and the criteria would be very helpful.
Okay, thank you. Councilman Green, you had some questions?
Thank you. Actually, I would just like to briefly take issue slightly with the comments that there's not a lot of money here. And I understand the economy is 130 12/10/08 FISCAL STABILITY, RES. 080603, 890 going down. But, you know, for example, personally, I'd be willing to wrap One Parkway and wrap MSB if that provided enough money to save, you know, 6 libraries, for example. You know, for 7 things like that, you can get upwards of 8 $60,000 a month for the side of a building 9 like that, depending on its visibility and 10 other things. 11 And I understand that there was a building in Philadelphia at Fourth and somewhere that had a wrap that was required to take it down that actually was getting $60,000 a month. So I think the City of Philadelphia needs to look at its assets in this time and see how we can create revenue. And I just wonder if SEMUSA, if we were to get you the address of all City-owned facilities, if you could provide for us kind of your estimate of what -- if we were to wrap libraries, we were to wrap rec centers, we were to allow Coca Cola to put a Coke bottle at the 131 12/10/08 FISCAL STABILITY, RES. 080603, 890 bottom of a pool, and really get private support for these very important institutions in the City of Philadelphia. You know, if we have to put a billboard on the library on Broad Street to keep it open, there's a lot of eyeballs there. You know, what kind of revenue can we get looking at just City-owned facilities in terms of direct money to the City of Philadelphia for allowing outdoor advertising on these facilities in any category -- wraps, whatever, all the trashcans in front, you know, having something on them, et cetera. So I don't expect you to have that answer now, but if you could provide information like that to the chair for our information, understanding you're not making a bid, I would greatly appreciate that. I have another question and that is -- and maybe Deputy Mayor Rhina Cutler can help me with this. There's a section 25 of the subway lines that the City of 132 12/10/08 FISCAL STABILITY, RES. 080603, 890 Philadelphia, not SEPTA, owns. And I don't know what -- do you know what section that is? It's like the -- it's the -- is it the Broad Street line or --
It's the South Broad Street concourse. It's excluded from SEPTA's outdoor advertising. It is something that's being explored right now in partnership with the City.
Okay. Well, I'm not just talking about the South Broad Street concourse; I'm talking about, there's a whole line, subway line, that the City owns that we lease to SEPTA, and there is outdoor advertising that SEPTA currently gets a revenue from. And I'd like to suggest that in the renegotiation of whatever deal we have to give SEPTA that line, that we retain the outdoor advertising rights for the City of Philadelphia in the future and try 133 12/10/08 FISCAL STABILITY, RES. 080603, 890 to get that revenue generated for us. I don't really have any questions except I'd like to get that information. And if you have -- I'll get you the information about that line, and perhaps you can tell us what revenue could be generated for the City as a result of the selling the right to advertise at all those stations.
Councilman, my comment went to a 15-year or 20-year agreement, that now is not the time to enter into a 15-year or 20-year agreement now. You wouldn't want to cast it in stone. I wouldn't --
Yeah. That's true. On City-owned facilities, we'd obviously just be getting the revenue 134 12/10/08 FISCAL STABILITY, RES. 080603, 890 directly.
Thank you, Councilman Green. Mr. Levy, you have to go, and I understand that. Thank you.
We'll be in touch 'cause we want to have some follow-up to this particular issue. I want to thank you so much, first of all, for being very patient in coming down. We're going to actually have some follow-up questions that we can possibly e-mail to you 'cause we're probably going to be issuing some recommendations or a report on this issue. Do you have a minute to stick around?
I certainly do. It's no problem whatsoever. Thank you 135 12/10/08 FISCAL STABILITY, RES. 080603, 890 very much for inviting me. I appreciate it.
Well, it's our pleasure. Miss Cutler, did you want to talk at all about it? I know my understanding through the grapevine is that the City's working on some things related to this matter. And I don't know if you want to talk about it publicly. If not, I understand. (Witness comes forward.)
Councilman, Rhina Cutler, Deputy Mayor for Transportation and Utilities. Yes. In fact, my office is looking at the issue of street furniture. It is our expectation that at some point in '09, we will produce an RFP for street furniture. At the moment, there are a variety of issues that we are looking at, one of which is, in fact, what will zoning current allow? And some policy questions 136 12/10/08 FISCAL STABILITY, RES. 080603, 890 related to issues such as should the City go forward with public toilets? That's really a policy question at the moment rather than an advertising question. Many of the cities that have put in public toilets have actually started to take them out due to some undesirable behavior around them, so it is one of the issues we're looking at. I think there is a sort of split for me between what might constitute street furniture versus what our other potential revenue-producing piece is, whether that's building wraps or vending machines or naming rights or whatever, that probably will not easily fit into a street furniture contract. So I know there is a group of people in the Managing Director's Office also looking at the additional pieces to that, and at some point, will try to figure out which ones are appropriate to come into a street furniture contract and which should be bid separately. 137 12/10/08 FISCAL STABILITY, RES. 080603, 890 So I don't have a great deal of information. And we are certainly in touch with all of the other big cities who have gone out on the street, to get their sense not only of their vendors but of some of the pros and cons of what they have put forth. It is certainly my sense that we will see probably nothing close to the previous bids from a year-and-a-half or two years ago because the economy just cannot sustain that for public companies, but we do think there is an opportunity. I think the other piece -- and it somewhat goes to your earlier comments about advocates for no public advertisement on the streets. And I think part of what we're going to try to figure out as part of the next RFP process is really the public participation piece. I think one of the problems that I've heard a lot about from anti-billboard advocates and anti-advertising folks is that there was not enough of a public 138 12/10/08 FISCAL STABILITY, RES. 080603, 890 process to vet what kinds of things should go into a street furniture contract, what things are appropriate and where. And so I do think we will try to figure out and have it in advance of an RFP going out, a public process where people get to weigh in on the topic. And I'm hoping that will mitigate some of the anti-street furniture folks. I would agree with Councilman Green and with what Paul Levy just said. I think, given the current financial situation of the City, people are likely to be at least slightly more receptive to the notion that we will attempt to assist in raising some revenue to assist us in keeping things open that people care about. So I think it might be slightly easier to do now than it might have been two years ago, because I think the financial situation has so dramatically changed, that people's opinions on the subject are likely to have changed as well. 139 12/10/08 FISCAL STABILITY, RES. 080603, 890
All right. That might actually work on casinos, right?
All right. I hear you. It just seems like since the City's financial situation -- and I know you have nothing to do with this, but since the City's financial situation has declined, it seems that the anti-casino advocates seem to be dwindling. Sorry. I digress. A couple of things. In terms of an RFP contract -- and I know you've been in government for a while, various stages of government -- are there ways that you could put escalators in a contract, so if you let a contract at a particular time, the climate is not that great, but if there's a certain amount of revenue raised, be it gross or net, that the City can have escalators built into that contract? So as the economy improves, we 140 12/10/08 FISCAL STABILITY, RES. 080603, 890 get more revenue for the City as opposed to just simply saying, Well, it's a bad climate, we're not going to do it. And when there may be an opportunity to get something now and more down the line as the economy improves.
I think there is not only the opportunity to do that, although, it obviously will impact your upfront revenue estimates from the companies. I think there might also be a way to just open the renegotiations if revenue hits a certain point. So even if you don't build the escalators in, although you could certainly do that, you could hypothetically create a contract that said if revenues get above this amount, we will come back and renegotiate the next five-year term or the next ten-year term. So I think there are a variety of ways you could have the City participate on the upside as well as the 141 12/10/08 FISCAL STABILITY, RES. 080603, 890 base.
All right, okay. That's something you will give some thought to as you move forward?
One other thing, and we touched on it to a degree. I guess it was Councilman DiCicco at the time, I think he was pushing -- this was a few years back, about this advertisement issue. And I actually raised it at the time, and we were a lot more fiscally sound so it didn't get a lot of traction. But we talked about at one point the ability to have actual advertisement on facilities in neighborhoods, and it got a little pushback. Certain recreation facilities -- I don't think anybody referenced libraries, but recreation in particular was -- I know I brought up in terms of sponsorship. You know, we do have certain entities that offer some levels of sponsorship. 142 12/10/08 FISCAL STABILITY, RES. 080603, 890 Like in Strawberry Mansion, my home base, you know, the Phillies, you know, contributed through the RBI league in making sure that the newly formed baseball and athletic association to a degree, but the question is, if the Phillies were able to have some sort of advertisement on the Mander Playground Recreation Center, would that increase, tastefully done, their ability or willingness to contributes to a little more to some of those facilities? And just from a policy standpoint, would or should there be any thought given to possibly advertising in actually high-profile locations on municipally-owned buildings?
I think it's probably worth looking at. I would be very careful about the type of advertising I would allow, and I might even be specific. I mean, I think there's a difference here -- and this goes back to the issue I was speaking about earlier -- 143 12/10/08 FISCAL STABILITY, RES. 080603, 890 between what should go in a street furniture contract versus what should go in an additional sort of revenue-raising contract. And so, I don't -- I mean you could hypothetically do logos on a variety of things. We currently do not do them on everything from trashcans to bags that people will ultimately put their leaves in to be picked up for collection, to sneaker contests during a basketball league. So I think the opportunity to do that sort of thing is probably there. I don't know if it's a part of street furniture or if it goes to, you know, the rest of the revenue-raising pieces, but I certainly think I will bring it back and try to figure out if there's a role for it, which of those two sides of this might be more likely.
Yeah. I just think that, you know, understanding, to some degree, we're taking baby steps. I understand at this point, looking at 144 12/10/08 FISCAL STABILITY, RES. 080603, 890 street furniture, but I just think if we're going to go full bore -- or maybe some people don't. But if we're going to look at advertising, we should look at every opportunity and kind of -- from my perspective, what I would do, I would look at the most lucrative advertising opportunities and then back my way into the RFP as opposed to putting the RFP out there and saying, This is what we want you to respond to, 'cause at the end of the day, the advertisers going to advertise in locations that are advantageous to them, not necessarily to us. So if they can't do it on a municipally-owned building, then they're going to go across the street and rent some space from somebody that owns a gas station and put a billboard across the street on that building, and we get minimal revenue; as opposed to if there was some opportunities to do it on our building. 145 12/10/08 FISCAL STABILITY, RES. 080603, 890 That's just my limited perspective.
I just -- you know, we need to go where the money and not make the money come to us sometimes.
There are -- obviously, there are some billboard rules as well.
So it wouldn't be as easy for them to go across the street and create a billboard.
Having said that, I agree with your piece. I think the first question in the public process piece of the question has to really be: How much public advertising are people willing to accept? And I think once you have that -- 146 12/10/08 FISCAL STABILITY, RES. 080603, 890 those parameters, then you need to figure out where the real dollars are. So, for example, you may get pushback on recreation centers in neighborhoods; you may get no pushback on commercial business districts in the neighborhoods. So I just don't know where the public will come down on how much advertising is appropriate. That question really will be the determining factor, I think, in now which of the advertising pieces will give the City the most money for its efforts. And so I think those are the two questions.
Okay. Not to belabor the point, and I know I'm getting a little beyond the subject matter, but from a policy perspective, do you think once you enter into determining this first phase of public street furniture and then possibly a broader concept of advertisement that 147 12/10/08 FISCAL STABILITY, RES. 080603, 890 neighborhood-specific -- and I know it's a touchy situation, issue -- strategy should be dealt with? Because we've had in the past a situation where a particular neighborhood was supportive of an advertisement initiative, and then some advocacy group who might live halfway across the City shows up at the Zoning Board and opposes that particular initiative, and it gets shot down because they had the most sophisticated lawyers or approach to opposing zoning. And from my perspective, I don't think it's fair that people in a community don't have a little more input in the ability to influence the decision than somebody else who lives in other parts of the City. This is from my perspective. I always had a problem with that.
Well, from a policy perspective, I think there are two very different responses. The first is, I think you can, in fact, create a zoning code which allows 148 12/10/08 FISCAL STABILITY, RES. 080603, 890 that, which allows certain community groups in the neighborhood to determine what is acceptable. I think it's a very different reality for what we would consider to be the core, which, for us, would be Center City, South Street to Spring Garden, river to river, and University City. So I think there's probably a lot more people who wish to weigh in on what happens in the core. And so I think you have some ability to influence the zoning code changes to respect some neighborhood responses to this type of issue. So, therefore, you take the zoning and the variance question away. And I think part of what the -- one of the problems I had with the prior RFP, having had the opportunity to go back and look at it, is it assumed there were no zoning problems to be had. So when the bidders responded, they appear to have responded as if there were no variances required and/or the City would provide 149 12/10/08 FISCAL STABILITY, RES. 080603, 890 them with whatever it was they needed to meet the numbers in those responses. So one of the first questions I asked the Law Department was, in fact: Is all of this doable? Can this be done as a matter of right? And if it can't, then we should not have an expectation in the request for proposals that doesn't meet that test. So we will carefully see what currently is allowed by code, and certainly we'll raise the issue with the Zoning Code Committee in terms of whether or not we will need legislation as part of that contract to establish what those variances will be as part of the RFP. We'd like to not issue one and then have half it have to come back out because we can't put the advertisements up where people bid on them.
All right. I don't recall that being the reason why it didn't proceed. (Councilman DiCicco enters 150 12/10/08 FISCAL STABILITY, RES. 080603, 890 chambers.)
Councilman DiCicco, how you doing, sir? Let the record reflect that Councilman DiCicco is here. Yeah, I don't recall that being the reason why it didn't proceed because there were opportunities --
No, no, no. What I'm saying is, it is one of the results that would have occurred.
All right. So you anticipate that it would have been, 'cause we did get a respondent, and it was -- but anyway...
Okay. It did not appear so to me, but that was just my response. So it will need to be vetted in advance of anything going on.
Okay, that's fine. I just wanted for the record to say that that wasn't the reason why it didn't 151 12/10/08 FISCAL STABILITY, RES. 080603, 890 move ahead.
Okay. I'm pretty much there. Councilman DiCicco, Councilman Green had -- he's been -- Councilman Green?
I was watching this on TV in my office, and I just had to come up when I hear about advertising.
Thank you, Mr. Chairman. I just had a quick question, which is: What is the area of the subway line that we don't own?
What area of the subway line do we own that we lease to 152 12/10/08 FISCAL STABILITY, RES. 080603, 890 SEPTA?
We own the South Broad Street line and we own a portion of the Market-Frankford line.
Okay. So that's the area that I was talking about for your benefit and for others in terms of the ad revenue. Maybe we can reserve that for ourselves, or do we already?
And there is a current vendor in place that manages the advertisement for both the City and SEPTA in the concourse.
Okay, great. So I just wonder if we can look to extend our rights to have the advertising revenue as part of our agreement to continue to lease the lines to SEPTA as a revenue- generating measure since we do own the property and have been able to get there with them. 153 12/10/08 FISCAL STABILITY, RES. 080603, 890 And just -- Councilman Goode's having hearings soon on the whole concept of those lines, and if you could have that as maybe an answer to one of questions at that hearing, it would be helpful. I don't expect you to answer it today 'cause I just am raising it.
I will be testifying at Councilman Goode's hearing. But one piece that I would just like to say, which is part of the confusion that exists is that the -- when I went back to start to look at lease agreements for the concourse and some of those spaces, part of the problem is that they truly reference agreements with the Pennsylvania Railroad from 1913, and SEPTA didn't even exist, and so it's a very convoluted set of documents. The problem with exchanging it for the rights for SEPTA to operate is, I can't quite figure out what would happen if they said no. I mean, obviously, we can't have the system shut down. 154 12/10/08 FISCAL STABILITY, RES. 080603, 890
But this goes to the whole issue of we should -- and I hear it on a regular basis and I'd prefer to not. It will take on a life of its own, I assume, for Councilman Goode's hearing, so I'll save most of it. But yes, I will bring the information.
Thank you. And I just want to thank the chairman for holding these hearings. I found them very informative. I commend you for it, and know you're going to keep it up. Thank you.
Thank you. I was listening to most of the testimony in my office while I was having other meetings. And advertising has always been an issue that I've been very interested in in the way of generating 155 12/10/08 FISCAL STABILITY, RES. 080603, 890 revenues. And no disrespect to you, Councilman Green, but back in, I think it was, '97 or '98 -- no, actually, it was a little bit later than that, closer to 2000. I had introduced a bill that would have provided for some of the concerns that Councilman Clarke spoke of a few minutes ago, about the ability to -- I hesitate to use the word "limit" but to create boundaries in which -- where people from one neighborhood or from across the City or even from across the region would not have legal standing in issues as it related to zoning matters, in particular when it comes -- when it would come to outdoor advertising. It's all-inclusive of other matters. The bill number was 629. I pretty much had my head handed to me on a platter. Every newspaper in the City wanted to remove me from office. It was unbelievable. 156 12/10/08 FISCAL STABILITY, RES. 080603, 890 But, needless to say, I would certainly be more than glad to reintroduce that bill or some form of that bill, but there is that challenge that currently any taxpayer has the right to appeal a decision by the Zoning Board of Adjustments, whether or not you're a resident of the City of Philadelphia or not. And that goes to the whole heart of this issue. And there are advocates out there, as we all know, and I respect their position, although I disagree with it, that feel there is already too much advertising in the City. So I'm just kind of giving you a three-minute synopsis of where this argument was. And I know Rhina and I talked about this the other day, and I started out by suggesting that we do wall wraps on scaffolding, which is temporary. And I got the idea from Europe, where they were putting these wraps on scaffolding, which I thought was much more esthetically 157 12/10/08 FISCAL STABILITY, RES. 080603, 890 pleasing than the scaffolding. And it just -- we were shot down -- I was shot down every which way. And at the time, I even used City Hall as the example. A ten-year project of scaffolding surrounding this building would have generated conservatively two-and-a-half, $3 million in direct revenues to the City that would help offset. So I'm not dismissing this conversation. I'm just saying I've been down that road and I'd be more than happy to work with you, all of you, to find some reasonable accommodation where we can benefit by doing some advertising either on public buildings or even not public buildings. There's a whole way of -- a whole host of things. And, again, I did a lot of work on this stuff. And, unfortunately, I never could get the bill passed.
Well, Councilman, I'm always looking for common 158 12/10/08 FISCAL STABILITY, RES. 080603, 890 ground with my colleagues, and I look forward to following the lead on this issue.
Well, have your staff go pull up Bill 629. And if you want to get some of the testimony that we've been through, but it was a rough one. And it was at the beginning of the Street Administration; I think it was, like, '99 or 2000, if I'm not mistaken.
Timing is everything. So maybe there's a different -- because of the timing and the circumstances that we're confronted with, there may be -- some people might -- may have second opinions or second thoughts about how we can go about raising revenues. Thank you.
Thank you, Councilman. Actually, I think that was my 159 12/10/08 FISCAL STABILITY, RES. 080603, 890 first year here, and I must say it was --
Yeah, at some point, I was wondering why I decided to run for political office, and I said, "Is this the way it's going to be?" And it was pretty brutal. Thank you. Thank you both for your testimony.
All right. Are there any other questions from members of the committee? (No further questions.)
There being none, Mr. Madden, I just want to thank you so much. You had some more?
No. I'm free to stay afterwards if that's what you need. That's no problem whatsoever.
No, no, we're actually going to ask to be able to have further conversation 'cause, as I 160 12/10/08 FISCAL STABILITY, RES. 080603, 890 say, we're going to -- there's going to be some follow-up with this -- the information that was discussed today in a more formal way, and I think there's actually going to be some sort of a document produced, so we may need to lean on you for --
And it has my contact information and everything I discussed.
And so you guys can have it and distribute it to Council. Thank you.
Thank you very much. You're a credit to your team. You guys are definitely (indiscernible). And also, Miss Cutler is fantastic. It 161 12/10/08 FISCAL STABILITY, RES. 080603, 890 really shows a level of effort, and it's refreshing, so to speak.
Thank you, Miss Cutler. This concludes the hearing on the Committee on Fiscal Stability and Intergovernmental Cooperation. We now stand in recess to the call of the chair. Thank you. (Proceedings end at 3:35 p.m.) * * * 162 C E R T I F I C A T E I HEREBY CERTIFY that the proceedings of the City of Philadelphia Council Committee on Fiscal Stability and Intergovernmental Cooperation are contained fully and accurately in the stenographic notes taken by me on Wednesday, December 10, 2008, and that this is a true and correct statement of same. __________________________________ JOSEPHINE CARDILLO Registered Professional Reporter (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)