Committee Hearing, January 27, 2005

COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT - - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, January 27, 2005 10:10 a.m. - - - - BILL 041072 - an Ordinance amending Chapter 19-2600 of the Philadelphia Code... RESOLUTION 040827 RESOLUTION 040977 RESOLUTION 041014 PRESENT: COUNCILMAN W. WILSON GOODE, Chair COUNCILMAN MICHAEL A. NUTTER, Vice Chair COUNCILMAN FRANK DICICCO COUNCILWOMAN MARIAN TASCO COUNCILMAN FRANK RIZZO COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN JUAN RAMOS COUNCILMAN DARRELL CLARKE - - - - V A R A L L O Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 I N D E X BILL 041072 NANCY KAMMERDEINER, Revenue........... MORRIS DEAN, ESQ...................... 9 RICK SAUER, PACDC..................... 15 PUBLIC MEETING FOR BILL 041072........ 19 RESOLUTION 040977 MICHAEL SKINNER....................... 23 NICHOLAS BROWN........................ 26 MICHAEL WILLIAMS, MBEC................ 42 RICHARD FEDER, Law Department......... 61 CANDACE HITCHCOCK, MBEC............... 85 3 01/27/05 - COMMERCE - BILL 041072

Good morning. If everyone could please take their seats. Good morning. This hearing is called to order. This is a public hearing of Commerce and Economic Development Committee on Bill No. 7 041072 and Resolutions No. 040827, No. 040977, and No. 041014. My name is W. Wilson Goode, Jr., Chair of this Committee. I note that a quorum is present. To my far left is Councilman Frank Rizzo. Next to him is Councilwoman Blondell Reynolds Brown. Next to her is Majority Whip Marian B. Tasco. Also present is Councilman Frank DiCicco. The title of Bill No. 041072, an ordinance amending Chapter 19-2600 of the Philadelphia Code, entitled "Business Privilege Taxes," by providing for the calculation of the credit against net profits tax based upon net income tax liability, where a credit is received against net income tax for contributions to community development corporations undertaking economic development activities within the City of Philadelphia, 4 01/27/05 - COMMERCE - BILL 041072 all under certain terms and conditions. I'll ask the Revenue Commissioner to please come forward and approach the witness table. Commissioner, I have a copy of your testimony. Do you have additional copies? COMMISSIONER KAMMERDEINER: Yes, I do.

Thank you. Please state your name for the record and proceed with your testimony. COMMISSIONER KAMMERDEINER: Good morning, Councilman Goode and Members of the Committee on Commerce and Economic development. I'm Nancy Kammerdeiner, Revenue Commissioner. I'm pleased to be with you today to present testimony regarding Bill 19 041072. " This new provision is intended to permit a business partner that has been approved to participate 5 01/27/05 - COMMERCE - BILL 041072 in the Community Development Corporation Contribution Tax Credit Program, which I'll refer as the CDC Credit Program later, to continue to receive the 60 percent BPT credit against its net profits tax liability without regard to any reduction in the BPT actually paid to the City. This is a little bit complicated, so let me try to explain in simple terms what this provision would do and what its impact would be. The CDC Credit Program is limited to businesses. Each business approved for 14 the program enters into an agreement with the 15 City to contribute $100,000 per for 10 16 consecutive years to a qualifying CDC in 17 exchange for a $100,000 credit on its BPT 18 liability. If a business is unincorporated 19 entity, for example, a partnership, a sole 20 proprietorship, or a limited liability 21 company, it will be liable for net profits tax 22 in addition to the BPT. The net profits tax 23 provides for a credit in the amount of 60 24 percent of the tax liability based upon net 25 income and paid as required for the BPT. 6 01/27/05 - COMMERCE - BILL 041072 I emphasize the phrase "and paid" because a literal interpretation of this provision would require that the net profits tax credit be provided only if the BPT is actually paid to the City of Philadelphia. Under this interpretation, a business that participates in the CDC Credit Program would not be entitled to receive a $60,000 credit against the NPT since its BPT liability would have been reduced by $100,000. Thus, an unincorporated business that participated in the CDC Credit Program would receive the $100,000 BPT credit, but would pay $60,000 more in net profits tax. In other words, the net benefit for participation in the program for an unincorporated business would be $60,000 less than the benefit for a corporation. A more liberal reading of this provision would recognize that the agreement between the City and the business that in that agreement that City agrees to provide the credit as a quid pro quo for the contribution to the CDC and that the City is in essence is 7 01/27/05 - COMMERCE - BILL 041072 directing that a portion of the tax payment due to the City be made to the CDC instead. The bill before you would ensure that this second, mor liberal interpretation be applied so that an unincorporated business that is approved for the CDC Credit Program and makes the annual contribution to a CDC partner will be able to continue to take credit against the NPT for its full BPT liability, including the amount of the credit that equates to the CDC contribution. Most of the businesses that have applied for participation in the CDC Credit Program are corporations that are not required to pay the NPT. However, several are partnerships that would benefit from a clarification of this provision. This clarification would not result in any new cost to the City. These businesses were benefiting from the 60 percent BPT credit against the NPT before becoming participants in the CDC Credit Program. The cost to the City of their participation in that program was considered at the time this Council approved the 8 01/27/05 - COMMERCE - BILL 041072 legislation that created the credits and set the numbers of business that could participate. " It's this section of the Philadelphia Code that includes the phrase "and paid" that I discussed earlier. Amending THE BPT and not the NPT could lead to more ambiguities instead of the clarification that's sought. I have some suggested language.

It's really this language and identification of where it should be inserted in the Code. And at your request, Councilman Goode, I quickly checked with someone from the Law Department about whether or not this could be added as an amendment to today's bill. And because it doesn't change the intention, it is exactly for the same purpose as the bill and the title of the bill, the informal opinion is that you could move forward with doing that. And so I have here some copies. There is one 9 01/27/05 - COMMERCE - BILL 041072 typo in it in terms of referencing the section 3 of the Code, and I am quickly trying to write over that on these copies which I will share with you in one moment. That concludes my testimony.

Thank you, Commissioner. Are there questions from Members of the Committee? (No response.)

Thank you. I ask Morris Dean from Blank Rome to please approach the witness table. Good morning, Mr. Dean. Please state your name for the record and proceed with your testimony.

Thank you very much. My name is Morris Dean. And I want to make sure that you have before you, not only the proposed amendment, but also the memo of Nelson Diaz, a partner of mine at Blank Rome. It is addressed to Councilman Goode, which provides us a summary explanation and justification for the adoption of this 10 01/27/05 - COMMERCE - BILL 041072 proposal, as well as two pages of illustrative calculations that will be used in the course of my testimony. Permit me to make a few preliminary observations. First, I appreciate the opportunity and privilege of appearing before you in support of the proposed amendment. Second, I have a special interest in providing the supportive testimony, which, as I hope will become evident in my presentation, will strengthen the CDC Tax Credit Program. I'm a board member of the Pennsylvania Housing Finance Agency. And in that role, I'm focused on promoting and implementing community development and revitalization initiatives of which the CDC Credit Program is a prominent program. In short, this is not a matter for lawyer-like advocacy. It is, for me, a matter of commitment and conviction. This proposed amendment may properly be characterized as tax neutral. It's subjective is to clarify the CDC credit legislation in a manner that fulfills its 11 01/27/05 - COMMERCE - BILL 041072 original intention. This connection, it is noteworthy, that the City law representatives have supported this proposed amendment as a needed clarification. The Revenue Commissioner has really spelled out a great deal of what I would have said in my testimony, but I think it's important for you to take a look at the illustrative examples that have been circulated to you, because that really provides a careful explanation and summary, as well as a graphic display of the lack of equivalence in the treatment of the unincorporated business as opposed to other types of businesses. Remember that the credit's basic design in incentavising motivation is to place the funding or contributing taxpayer in no 20 different position than it would be if it paid the same amount on account of the BPT. If you look at the -- first of all, I recognize it's a little presumptuous of me really to go into a lot of detail in connection with the business privilege tax 12 01/27/05 - COMMERCE - BILL 041072 because most of you are very familiar with the issues involved and with the details of this tax. But if you look at the first set of calculations, that first item that was distributed to you, you'll see how the BPT works for the unincorporated business. And what you see here is summarized in the italicized comment at the bottom of this page. That is, that the effect of the NPT credit is the virtual wipeout of the NPT for the unincorporated business. At most, it's one half of one percent that will still be owing. " Note the assumption, the business is subject to a $1 million BPT liability based on that income. And then exam the potential contrast and non-equivalence in the tax impacts. The non-CDC contributing taxpayer impact -- look at this example. You'll see that the business 13 01/27/05 - COMMERCE - BILL 041072 pays a BPT based net income of 1 million and receives an NPT credit using the 60 percent credit rate of $600,000. If you look at a CDC contribution taxpayer, it's different. The first part tells you that return for the CDC contribution of 1 million, business receives a BPT credit in that amount and only pays a BPT of $900,000, representing an equivalent aggregate initial outlay of $1 million. Then -- and this is a critical part of this discussion. Unless the CDC contribution is treated as the equivalent of the payment of BPT, an assurance that the City's taxing and legal authorities have been unwilling or uncomfortable in providing. The NPT credit of 60 percent could reasonably be interpreted as applying to 900,000 rather than to 1 million.

As a result, the contributing taxpayer could be placed in a position of only receiving a credit against its NPT of $540,000. In short, the contributing taxpayer, unincorporated business taxpayer, pays $60,000 more in NPT than it would otherwise pay 14 01/27/05 - COMMERCE - BILL 041072 without making such contribution. That's the graphic display. And the corrective remedy which I indicate at the bottom of the page in italics to eliminate this unintended disadvantage, it must be made clear that for the purpose of applying the 60 percent NPT credit and determining the NPT amount, the business privilege tax deemed paid shall not be reduced by the $100,000 contribution resulting in this example in leaving the BPT at 1 million rather than at the lesser $900,000 figure. In short, and coming to my conclusion, the proposed ordinance does provide this corrective remedy. If you read it, you can see the credit against net profits tax liability shall be calculated without regard to any reduction in tax provided under the section which relates to the credit for the contribution against the BPT. If there are any questions, I'll be glad to answer them.

Thank you for your testimony, Mr. Dean. 15 01/27/05 - COMMERCE - BILL 041072 Any questions from Members of the Committee? (No response.)

Thank you again. Rick Sauer, PACDC. Mr. Sauer, state your name for the record and proceed with your testimony.

Good morning, Councilman Goode and Members of the Committee. My name is Rick Sauer, and I'm Executive Director of the Philadelphia Association of Community Development Corporations. I'm pleased to have the opportunity to testify on the bill before you today. PACDC was engaged in the initial creation and expansion of the CDC Tax Credit Program, so we have a lot of experience working with our members around this program and glad to see that legislation is being advanced to address a specific issue that's come up with the implementation. I'm going to keep my comments very brief. I've submitted by written testimony. This program which is entering its third year 16 01/27/05 - COMMERCE - BILL 041072 now has proved to be a very effective tool for increasing investment for neighborhood economic development neighborhoods where CDCs are operating. A lot of good has come from it so far. The key is it's a 10-year commitment that CDCs can count on and plan and mind as they're implementing the neighborhood economic development activities. There's partnerships that have 11 been approved to participate in the program 12 between the CDCs and local businesses, which 13 means there's still five slots open for 14 additional partnerships to participate. And 15 one of the issues that's come up is that some 16 CDCs have had difficulty lining up a business 17 partner to apply to the program. One, there 18 is side for this the issue before us today, 19 that some partnerships and other sole 20 proprietorships would have to forego the other tax credit based on the current readings or the lack of clarification of the regulations around this program. So we strongly support the legislation before you today. We think that 17 01/27/05 - COMMERCE - BILL 041072 it will provide additional incentive for further corporations to participate in this program. There are a number of CDCs that are engaged in neighborhood economic development around the City that would be logical partners to participate in this program that currently aren't able to do so. Just a few of those groups to mention briefly, Allegheny West Foundation, which is working on the 22nd Street Commercial corridor in North Philadelphia; the Asociacion de Puertorriquenos en Marcha, which is working to do both commercial and residential development in eastern North Philadelphia; the Ogontz Avenue Revitalization Corporation, which has done some terrific work up in West Oak Lane and has some ambitious plans for broader economic development work there; and the Hispanic Association of contractors and Enterprises, working on the Fifth Street commercial corridor, the heart of the Latino corridor in eastern North Philadelphia. So we strongly support this bill and we encourage the Committee to report it 18 01/27/05 - COMMERCE - BILL 041072 favorably today.

Thank you for your testimony, Mr. Sauer. Are there questions from Members of the Committee? (No response.)

Thank you. Is there anyone else to testify on this particular bill? (No response.)

Seeing none, we will move from our public hearing into a public meeting to consider Bill No. 041072, but before we move, let me acknowledge for the record that Councilman Michael Nutter, Vice Chair of the Committee, is here, as well as Councilman Juan Ramos, a member of the Committee as well. - - - - 19 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT - - - - Thursday, January 27, 2005 - - - - Public meeting conducted by the Committee on Commerce and Economic development, held in Room 400, City Hall, Philadelphia, Pennsylvania, on the above date, to consider action on the following: BILL 041072. PRESENT: COUNCILMAN W. WILSON GOODE, Chair COUNCILMAN MICHAEL A. NUTTER, Vice Chair COUNCILMAN FRANK DICICCO COUNCILWOMAN MARIAN TASCO COUNCILMAN FRANK RIZZO COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN JUAN RAMOS 20 01/27/05 - COMMERCE - PUBLIC MEETING

And as we move into our public meeting, the Chair recognizes Councilman Nutter for a motion on Bill 041072.

Thank you, Mr. Chairman. Mr. Chairman, move that Bill 041072 be reported out of this Committee with a favorable recommendation. (Duly seconded.)

All in favor? (Aye.)

Those opposed? (No response.)

Bill No. 041072 will be reported out of Committee with favorable recommendation. This concludes our public meeting. - - - - 21 01/27/05 - COMMERCE - RES. 041014

We will move back into a public hearing on the resolutions. The first resolution, No. 040827 is not being considered today. The second resolution, No. 040977, a resolution authorizing the Committee on Commerce and Economic development to hold hearings to examine Minority Business Enterprise Council, with regards to Chapter 11 17-500 of the Philadelphia Code and Executive Order 1-03, and to assess the efforts to improve participation levels and utilization goals for Minority, Women, and Disadvantaged Business Enterprises in City contracting and procurement and the effectiveness of attempts to eliminate related discriminatory and unfair practices. The title of the other resolution, No. 041014, a resolution authorizing the Committee on Commerce and Economic Development to hold hearings to examine and investigate the City's provision of assistance and services to businesses through the Commerce Department and the Mayor's Business Action 22 01/27/05 - COMMERCE - RES. 041014 Team. I will ask Councilwoman Marian Tasco to call her first witness on Resolution 5 040014.

Good morning. This a continuation of the hearing that we had some time ago, and we will have additional testimony from the community, plus we'd like to talk to the L&I Department. So this portion will not take a long time for MBEC. Just for the record, we have met with the Commerce Director and staff from MBAT to discuss the issue of 706 and 707 and through and 717 West Chew Avenue. And 16 there were some people in my district who did 17 not make the last hearing who wanted to go on 18 record to discuss their concerns as neighbors 19 with this company. 20 So we ask all the neighbors and the 21 spokesperson to come forward and make your presentation on this issue. Mr. Skinner, you want to come forward? If any of the other neighbors would 23 01/27/05 - COMMERCE - RES. 041014 like to sit with him, that's fine. For the record, we'd like to state that MBAT, which is the Mayor'S Business Action Team, the Commerce Department provided business assistance to Mutual Industries which resides at this address. And we were not aware of that until we received complaints from the community about the operation of that business. And we have had ongoing dialog about how to encourage that company to be a better neighbor. We haven't been successful. We wanted to have a public airing because the neighbors were very frustrated about the lack of City enforcement or any action on the part of the City to help them resolve this issue. Mr. Skinner, you want to begin your testimony? Identify yourself for the record.

My name is Michael Skinner. I leave at 5730 North Seventh Street. Like we been saying, we have numerous problems with Mutual Industries, the truck and et cetera. I have recent photos of how L&I ignores -- we call it L&I. To come 24 01/27/05 - COMMERCE - RES. 041014 and investigate the activity that's going on in our neighborhood. We don't seem to get any response. L&I said that they coming. We don't know for sure if they coming or not. But they're saying that they're zoned to have a loading dock on Grange Street and that they are zoned to run tractor-trailers up and down Grange Street. Now, on Chew Street is a different situation. I have photos of them building a loading dock on Chew Street, which is still a part of our neighborhood. We sit in the middle of Grange and Chew Street, our homes do. What mutual industries would like to do. And what Mutual Industries would like to do is run tractor-trailers from Chew Street and Grange Street. They going to use Chew Street as a back way to come in to run straight on up to Grange street to load up, then run out and go straight on up Grange Avenue to hit the highway. The problem we have with that is they've been told on several occasions to do 25 01/27/05 - COMMERCE - RES. 041014 certain things in our neighborhood, such as they were supporting planting shrubs which would help us, a buffer where we won't be exposed to their activity. They changed our way of life so dramatically, it's like the first thing in the morning you hear is Mutual Industries, the last thing at night you hear is Mutual Industries. The trucks drop. It sounds like somebody dropping a bomb. Our homes shake. We have structural damage. Our children are no longer safe. My thing is, if the City has our est interest at heart and you put these laws into place to work for us as taxpayers, then how can you contradict yourself and do just the opposite? So we would like to know who do we turn to and what do we do when we can't get nobody to come and assist us in this matter? We don't feel as though that we should have to live like this. As taxpayers, whether it's one, two, three people or not, we should not feel as though when we come home 01/27/05 - COMMERCE - RES. 041014 from work worrying if you walk up the street you're going to see a fire truck at your house, is you house burned up. When you go to sleep at night, if your house is going to be burned up. We brought photos in to prove that these people just do whatever they want. L&I told them one thing; they do exactly what they want to do. So I'm finished with.

Thank you. Would you identify yourself for the record.

Nicholas Brown, 5722 North Seventh Street. Thank you, Council. I don't want to take all your time. I'll try to be brief. This business started since 1999-2000 when we woke up one day to what sounded like was an invasion. There was large half-ton trucks and front-end loaders just bulldozing the trees and shrubs that were located behind our residence. Since then, almost every neighbor on the block has been forced to buy a cat because 27 01/27/05 - COMMERCE - RES. 041014 of the mice and rodent problem has become unbearable. Before I retained a cat, I was recycling mouse traps because I was tired of going to the store and buying them by the dozen. This was a problem that was caused by constant digging and construction that Mutual Industries was doing behind our residence. Also, Mutual Industries do not seem to operate during normal business hours as normal business would do in a residential neighborhood. Sometimes they start 5:30, 6:00 in the morning, and at 9:00, 10:00 at night you can still hear propane fork loaders running up and down behind our residence. The wheelers never seem to stop 17 pulling up into the neighborhood. Three 18 o'clock in the morning I'm constantly being awoken to the sound of air brakes of trucks pulling up and the engines run idle all night long. In the summertime, we're forced to put the windows down and run air conditions all night because of the diesel fumes from these trucks that run idle because the drivers are inside sleeping with air conditioners on come 28 01/27/05 - COMMERCE - RES. 041014 inside the house. Since Mutual Industries has expanded their operations to include the rear of 5700 block of North Seventh Street, our quality of life has greatly diminished. Practically no 7 one uses their back anymore other than to park their cars. There's no barbecues. People are forced not to hang clothes in the back no more because of the constant dust and the dirt that's kicked up in the air because of Mutual Industries. Also, there are no trucks through signs parked on Seventh Street. These operators of these 18-wheelers continue to ride trucks down the 5700 block of Seven Street. This causes the entire block to rattle and shake. Other problems we've had is with employees, the language in the morning, the trash. A lot of them use the rear driveways to go to work in the morning, and every day I have to pick up bottles and trash that the employees are just throwing down onto the ground. It's just that the quality of life 29 01/27/05 - COMMERCE - RES. 041014 has diminished. I mean, being a resident of this City and working in the City, when I go home, that is my home; that's where I would like to go and relax and enjoy and raise my family. That's where I chose to live. To put up with those type of conditions where my family can't have cookouts or barbecues behind the rear of our homes is unbearable. And as a taxpayer, I think that's unfair. Basically, we all agree that we believe that Mutual Industries have just outgrown our neighborhood. We're not trying to be unreasonable. We understand that cities need businesses and the importance of businesses to our municipality, but we have had several residents on our blocks who are now no longer live in the City; they're residents of the state of Florida. As a citizen and person who grew up in this City and who loves this City, it troubles me to open up a newspaper and read that Houston has just passed Philadelphia in population because of things like this that are driving people out of this City. We are 30 01/27/05 - COMMERCE - RES. 041014 losing people in this City by the droves. And all the businesses in the world won't mean nothing if there's nobody here to live because of the conditions that businesses put neighbors through.

I mean, I believe that this organization that help Mutual Industries, with all the vacant industrial sites in the City, they couldn't have helped them relocated to another part of the City where they would not have caused this type of inconvenience and problems in the City. And like I say, if I wasn't an employee of the City, I would seriously be considering moving somewhere else outside the City. It's unbearable; it really is. I don't think anyone wants to look out their window and see what I see from Mutual Industries. The risk of fire. There was a fire there several years ago, and their concern is, well, someone set it. Well, to me, the concern is whether it was caused by natural conditions or manmade, the thing is is that threat exists. That 31 01/27/05 - COMMERCE - RES. 041014 threat that having that fire, to have those things, that material that's stacked up that high -- I mean, when the firemen came last time, that stuff was spontaneous combustible. It kept going up and up and up. Every time they put it out, it flares back up. We believe that stuff is a danger to all of us. I'm forced to increase the level of insurance on my house because I'm afraid if something happens I might not have enough insurance to cover everything.

Thank you very much. I think we've got the flavor of your testimony. We have photographs at the table that show what the neighborhood looked like prior to the expansion of Mutual Industries, and there was grass and children were playing in the back. They destroyed all of that and put up a fence, and now they're using that as a driveway. They really have impinged on the quality of life. What I'd like to do is have Mr. Solvibile come forward. He is from the Department of L&I. We have asked Phil 32 01/27/05 - COMMERCE - RES. 041014 Goldsmith who is the Managing Director for the City -- we asked him to testify; he has not. We've called him. Mr. Grace, if you can get him here, it would be very helpful. If not, we will use the subpoena powers to bring him here. We have Mr. Ramos here and his deputy. We want something done for this neighborhood. I want the Administration to figure out how they improve the quality of life for these residents. I want a thorough investigation of the expansion. I want a thorough investigation of what they're doing. Are they going beyond the expansion. I want a thorough investigation about the traffic, what is allowed on a residential street and what is not allowed on a residential street. And we're asking you to ask PIDC to find them another spot because this is ongoing, and for the last five years these residents have been in my ear about this company and we have not gotten any satisfaction from the Administration about how they're going to relieve the frustration and problems that the neighbors are experiencing. 33 01/27/05 - COMMERCE - RES. 041014 Mr. Solvibile, could you come forth, please, and give us what is happening with Mutual Industries and what your role can be in helping to relieve this?

As Mr. Solvibile approaches the witness table, let me note for the record that Councilman Darrell Clarke, a member of the Committee, is also in attendance.

Good morning.

Good morning, Chairman and Councilpeople. I brought with me today John Wright from our zoning unit. You'll probably have some technical questions and he'll assist an old demolition man in helping read and interpret zoning issues. Basically, from what I'm able to glean is that we've written violations. They came in for a permit to create in an R-9A Zone to make it commercial. We turned them down. We gave them a letter saying that they were denied this. And they then filed an appeal with the Zoning Board, and they granted them a variance to be able to operate the way they 34 01/27/05 - COMMERCE - RES. 041014 are. We have written violations, and they have complied. That's basically our powers are only that we can write violations; and if they comply, then there's not a lot we can do to punish them beyond having them comply. They've been compliant. If there's any specific questions about what they're allowed to do there, we're here today to provide the answers to you what's allowable. And if they are going by that, I commit to you that we will work with the community, if they're beyond what they're allowed to do, in getting this rectified.

What about the traffic, the tractor-trailers?

That part I believe is not something that L&I enforces.

Whose jurisdiction is that?

It would be the Streets Department. Councilwoman, I think from what I've heard -- 35 01/27/05 - COMMERCE - RES. 041014

Mr. Solvibile, I have to leave the Chambers; I have an emergency. I'm asking the Vice Chair Michael Nutter to assume the Chair of the Committee.

Councilwoman, from what I heard from the testimony of the two gentlemen, I believe it would Streets Department that handles traffic. And also about the tractor-trailers running and the fumes and the air conditioning, that would be air management at the Health Department. So the two issues that I heard, L&I wouldn't handle. From what I understand, the variance -- and the gentleman mentioned the shrubbery that they didn't put in. I will order a violation written that that part of the variance has not been met. Immediately, today it will be written. I want to add that when an L&I inspector does go and makes an inspection, it's sort of invisible. They go. They most times will take SEPTA or their own personal cars; they're not in an official City car. 36 01/27/05 - COMMERCE - RES. 041014 And they write the violation, they note it, and send a letter to the owner. It's not like a public thing that people would notice if we're there or not. But I know that from reading this record in the past, we have in fact written violations. They complied. When they applied for a permit to create a commercial area in an R-9 area, we refused it and sent them to the Zoning Board, and there was, in fact, a public hearing. So really beyond that, there's not a lot we can do as a department other than -- I agree with you, as you know, that if there's violations that are there now, we're to enforce and make sure they stay within the guidelines of what the variance grants them to do.

You have some comments you want to make?

My name is John Wright. I'm the zoning examiner for the City of Philadelphia. The application was filed with us back on 10/02/02. We refused the application on 11/15/02. They had a public hearing 37 01/27/05 - COMMERCE - RES. 041014 hearing in front of Zoning Board on January 8, 2003. And the Zoning Board did grant them a variance.

We opposed it and we ended up in court, which we opposed also. But they were still granted the variance with all the testimony. It's not your area, but -- I had a question I wanted to ask. The substance that they have over there, the chemicals, does that come under the Fire Department?

Depending on the chemicals, I believe it's called the right to know. In other words, if there's chemicals there, they need a license for what they store. And our commercial and industrial unit --

Do you know whether or not they have a license?

I would have to check that. I will get back a report to the chairman and copy the Committee Members.

I think this is 38 01/27/05 - COMMERCE - RES. 041014 what we're doing. Mr. Ramos, you're here and you're a lawyer. What I want, I want a meeting of everybody. I want L&I, I want Streets, I want Air Quality, I want the Fire Department, I want the unit that controls whatever they're doing, I'd like somebody to tell us what that company does, what are they manufacturing. I want to know what are the requirements for traffic. And we need PIDC in the meeting. And we will do that so we can come to some, hopefully, resolution on this because it just can't drag on. These people have -- it's a land use issue, and we believe they're abusing the land and the variance that they were given which we did not agree with. We opposed it. We opposed it in court. But since the Administration seemed to prevail, because it was the Administration that gave the encouragement to this company to expand and should not have done that in a residential area. We will show you the photographs, Mr. Ramos, so that you can see what was before and what they have now. And it really is not a pretty site. 39 01/27/05 - COMMERCE - RES. 041014

Councilwoman, we have, if you care to have it, a copy of the zoning file that states everything that they can and can't have if you would like it.

Give it to my staff. We'll take it. Thank you. What we will do, Mr. Skinner and company, we will gather a meeting of all these people and have a sit-down because we're not going to resolve it here today. The City is going to have to come up with an answer on how they're going to address that company.

Councilwoman, I make this commitment to you. If there's any L&I issue that should be --

Well, the problem is not just L&I. The problem is the company was allowed to expand. They shouldn't have been allowed to expand. And you'll just constantly go out there with violations, but they will continue to operate business as usual on a daily basis. And these people are not given any comfort. And we respect that and we thank you for that. We know you will 40 01/27/05 - COMMERCE - RES. 041014 do that, but it doesn't address the problem. It doesn't address the problem or the quality of life that these people have to endure, or lack thereof. And I think that's what we have to do to address this. Someone has to take responsibility for what is happening over there on that site. So we'll follow-up with the meeting and we'll have the Managing Director there, too, and all the departments that are responsible. Thank you very much.

Thank you, Councilwoman.

We're going to move to the next resolution.

Madam Chair, can I have a moment just to acknowledge some visitors from abroad that are here.

Sure.

I want to acknowledge Mr. Dikee Furuee (ph). He's a staff reporter in the news section in Akita City, Japan. Will he please stand up so we can welcome you, as well as John Wonderly from 41 01/27/05 - COMMERCE - RES. 041014 the State Department, and our friend Ms. Gillboy from IBC that's here today with them. Welcome and enjoy your stay in Philadelphia.

Thank you very much. Welcome. (Applause.)

We were waiting for the Vice Chair to com, but he has gone into a meeting, but he'll be right back, so we'll move forward. We'll ask Mr. Williams to come forward and company. Mr. Ramos, I think we're going to have some questions of you, too. Would you like to come forward?

Good morning.

Good morning. SOLICITOR RAMOS: Good morning.

This is a continuation of our hearing that we had in December. We did not complete it. We want to continue because we are concerned about the future of the MBEC program and just what's happening over there now. And as you know 42 01/27/05 - COMMERCE - RES. 041014 when we left, one of our major questions was about the Executive Order. And so could you please state your name for the record and give us an update of what's happening with that?

My name is Michael Williams. I'm the Director of the Minority Business Enterprise Council and a Deputy Finance Director. I will defer that question to the City Solicitor, as the Executive Order is currently in the Law Department. SOLICITOR RAMOS: Good morning.

Good morning. SOLICITOR RAMOS: My name Pedro Ramos. I am City Solicitor. And there is an Executive Order whose execution release, I belive, is eminent and which I've been authorized to discuss generally this morning. I'm prepared to use my own notes, kind of go through what I think are the top 12 items of interest in there to this Committee and then be prepared to answer any questions along with my colleague Mr. Williams. 43 01/27/05 - COMMERCE - RES. 041014 I'm going to start by saying that this Executive Order -- the direction to MBEC, to the Law Department and Finance and other cabinet that have been involved in this process, the direction we received was, in drafting this Executive Order, to be in the context of the City's history with an ordinance that had previously been struck down by the courts but in the context of everything that's happened since, everything we know since the evolution of the law since, to get us as close, get us to a point we're being as aggressive as we can be in a defensible way. For example, to the extent that there were aggressive measures or measures contemplated by the so-called Ortiz ordinance 18 that we try to do as much of that as we can, and where there's opportunities not addressed by that ordinance, to do better in terms of inclusion of minorities and women in participating in City contracts to do more. We have since have the benefit or at least the information provided by two disparity studies. There was a disparity 44 01/27/05 - COMMERCE - RES. 041014 study done in 1988 that studied City contracting from 1983 to 1997, and you've heard testimony on that. And there was a disparity study conducted in 2004 that looked at contracting from 1998 to 2002. Those studies, testimony for this body and other documentation indicate disparities, needing changes in policies and procedures in how the City contracts. The Executive Order that is being prepared has a number of features that I'd like to note. First, it retains the MBEC Advisory Board in, I believe, a similar way. There is a new role in there for something that I'll call the economic opportunity task force which has a separate role than the MBEC Advisory Board, which is advisory to the Executive Director of MBEC this would be a task force advisory to the Mayor in dealing with inclusion in the private sector, not necessarily in contracts of the City, but in looking at issues of inclusion in executive management roles and boards in the private 45 01/27/05 - COMMERCE - RES. 041014 sector in the City. There's a process by which bids and contract proposals are rejected or would be rejected if a bidder fails to meet the required participation ranges or fails to make a good faith effort to meet those ranges and where unwillingness to seek out any subcontractors would generally not be considered to be good faith. There's an important new element. Every City department will be required to submit for approval to MBEC an annual compliance plan containing benchmarks for overall minority participation, but those departments would also be required for each contract that's either a City contract or City-funded contract to submit a participation level consistent with MBEC's goal-setting. Every City department will be required to invite MBEC to participate in every pre-bid meeting and at every contract selection meeting. MBEC would be put into every step of the contracting process. Benchmarks and participation 46 01/27/05 - COMMERCE - RES. 041014 requirements would apply not just in the aggregate but to individual bid contract and non-bid contract where there's underutilization. As I alluded to earlier, benchmarks and participation requirements apply to any projects that requires City approval, personnel, financial assistance, or services. Quasi public agencies, the sort of not City but public entities, will be encouraged to adopt the policies of the Executive Order even for non-City-funded contracts.

And Mayoral appointees to the boards of these agencies are being directed by the Mayor to work towards having these policies adopted in the quasi public agencies. MBEC is asked to or directed to collect data on minority participation in all City contracts and to submit semi-annual reports, reports twice a year to both the Mayor and to City Council. We also addressed the issue of non-profits. One of the things we learned of the disparity study and one of the things that 47 01/27/05 - COMMERCE - RES. 041014 affect numbers was that the magnitude of contracts that are let to non-profit organizations which are not for profit, don't have shareholders, don't have owners, don't have anybody making a profit. And one of the things that we began to address in this Executive Order is how to hold non-profits in the aggregate are getting a substantial amount of the tax's tax dollars to reflect the policies of this Executive Order and the policies that I think the Administration and Council share. So non-profits for all City contracts of non-profits must require in the contract that the non-profits submit annually a diversity program to collect data on minority, women, disabled business enterprise participation in their subcontracts and to make appropriate efforts to maintain the diverse workforce and board directors. So we're asking MBEC -- we're also authorizing MBEC to issue regulations to further address this. But saying non-profit although not a business enterprise, we want to bring transparency, accountability, and 48 01/27/05 - COMMERCE - RES. 041014 attention to your staffing, your board, your service areas. Again, at this point, it's requesting that type of information from the non-profits and then empowering MBEC to go down the road through regulations, figuring out how to further implement the ideals and policies in this in the area of non-profits, which is a little unusual in the area of minority participation.

Mr. solicitor, can I just -- how would that come into play? If a non-profit received what, a grant from the City? SOLICITOR RAMOS: Well, it starts with the proposition that a large volume of contracts from the City, as you know, that are the let to non-profits --

I've heard about it. SOLICITOR RAMOS: And the idea is as we're trying to effect inclusion through our purchasing power, generally, find a way of not leaving such a major player in the City's 49 01/27/05 - COMMERCE - RES. 041014 economic activity out of it. And so what we-- the first thing we're doing is sort of calling attention to the non-profits by, in essence, at least in terms of the specific requirement in the Executive Order is in the contract with the non-profit require them to tell you more about themselves and what they're doing in terms of any diversity programs, the diversity of their staff, the diversity of their subcontractors, the geographic areas that they serve. It's not issuing goals through the non-profits at this stage, but what it's saying is, forcing the process within the non-profits of telling the City, the taxpayers, MBEC, how their business activities look.

I understand. Let me try to better understand this. So if a non-profit organization -- what's the circumstance under which these provisions would come into play that they would be required to disclose all this information? What's the scenario? SOLICITOR RAMOS: All City contracts 50 01/27/05 - COMMERCE - RES. 041014 with non-profit organizations shall have these contract provisions. So it's the circumstance -- to answer your question, if you have a contract with the City, in your contract with the City it will say you're provide this information. So it's any contract with non-profits.

Whose idea was this? SOLICITOR RAMOS: The idea evolved from the discussions among MBEC and cabinet members. It evolved from the discussions about the disparity studies. We're trying to figure out how you get to some -- how some of these percentages get to where they are. One of the things we learned in the last disparity study is one of the things that was driving the participation levels down -- not driving, but one of the reasons that participation levels were where they were is because when you look at participation over total business, the numerator over the denominator, if you will, in the denominator are all the non-profits. 51 01/27/05 - COMMERCE - RES. 041014

So you're saying if we have a contract with Penn or United Way or one of these organizations, they're going to have to tell us about all of their -- who they contract with and how they spend their money and what the diversity of their work force is and all of those issues; is that what you're saying? SOLICITOR RAMOS: That's what's contemplated currently in the draft of the Executive Order. In my own experience in those two examples that you cite, those two non-profits probable wouldn't have a problem doing that.

Point of information, Mr. Chairman.

Sure. Councilman Reynolds Brown.

I'd like to add for the record that it was during budget hearings, specifically with Department of Public Welfare and Department of Health that I raised questions, and a number of other Councilpersons, regarding the non-profits that 52 01/27/05 - COMMERCE - RES. 041014 those two departments specifically were doing with non-profits and were the ideals of this Executive Order being carried through with the non-profits that those two departments were dealing with. SOLICITOR RAMOS: Yes, that's very fair, Councilwoman. In the drafting process, what we get is what people bring back to the table. Mr. Williams is telling me that this has been an issue certainly beyond the table that we talked about where we're trying to devise policy, but this is a reaction to, not only data, but the testimony and other experience.

Thank you, Mr. Chairman.

Sure. No 20 problem. I have a couple background questions, but first, Councilwoman Tasco. SOLICITOR RAMOS: Can I finish the other three things, the highlights?

I just want to 53 01/27/05 - COMMERCE - RES. 041014 ask you one question. At what point would they provide this information, prior to receiving the contract or after the contract execution? Would that information be part of evaluating the contract? SOLICITOR RAMOS: I believe the way it's currently written is that it's a requirement -- it's sort of disclosure requirement in the contract. I don't know whether it's anticipated that it's in advance of the contract or disclosure obligation that comes with having gotten a contract.

If there's a RFP, part of the RFP process could require that this information be provided when they submit their response. SOLICITOR RAMOS: At this point, what the Executive Order does is sort of lay out this new idea in terms of how we approach this in terms of policy in the past and empowers MBEC and the Finance Director -- I'm not sure which. I think the Finance Director is the one with regulatory authority, to 54 01/27/05 - COMMERCE - RES. 041014 further develop this through regulation, develop the procedures to implement this. Just a couple other --

Go ahead, because we have some questions. SOLICITOR RAMOS: I promise it will create more questions. The net worth exclusion that's been discussed here and other places, we're proposing to eliminate. There's another thing here which there would be -- there's a direction in the Executive Order from the Mayor to MBEC that MBEC monitor diversity exclusion efforts of the building trade unions. They're being asked by the Mayor to go to the trade unions collectively and individually and get their demographic data, not just in the aggregate but every year, talk about the annual increases by trade unions. And it's contemplated that --

Point of order, Mr. Chair.

Councilman 55 01/27/05 - COMMERCE - RES. 041014 Clarke.

Just one simple question. How do they do that? How does MBEC going to do that? SOLICITOR RAMOS: The same way that when one of us makes a call to somebody that we don't authority over, by virtue of our position, they pick up the phone. I think this is what we're doing here is, well, two things. One is the spirit of cooperation that I believe -- the Administration believes that the trade unions would and should be receptive to such an effort because at this stage it's about providing --

Mr. solicitor, has something changed? With all due respect, I've been around for a little bit. I've actually sat in meetings with the Mayor and head of building trades and a couple of other members, and they basically said, "We're not giving you that information. We're not giving you a list of our members. We're not giving the grades, the gender, the whole nine yard." Has something changed? 56 01/27/05 - COMMERCE - RES. 041014 SOLICITOR RAMOS: Well, what we're saying is we're directing MBEC and empowering MBEC with the Mayor's authority through an Executive Order to pursue that.

I understand that, you can empower anybody to do whatever, but you can't require it. SOLICITOR RAMOS: You can't get inside the books, but we think that we're prepared to engage further in those discussions through MBEC with the building trade unions.

Why don't you finish up. I think there might be a couple questions. SOLICITOR RAMOS: The other thing that's a little different is with respect to employment as opposed to just -- we've traditionally tracked participation by dollars spent with a prime or sub, is tracking demographics in the employment in public works projects. Again, that's more of a reporting function like what describe as sort of an aspirational thing with respect to the trade 57 01/27/05 - COMMERCE - RES. 041014 unions. That was sort of my top or top 4 items that I think are of interest. 5

Let me ask you a 6 couple background questions. 7 First, there's reference made in the 8 resolution, of course, to Execute Order No. 9 1-03. I believe that was the last Executive 10 Order that was signed by the Mayor with regard 11 to minority participation; is that correct? 12 SOLICITOR RAMOS: The last Executive 13 Order signed by the Mayor with respect to minority participation was 1-03, yes.

And did that Executive Order have an expiration date? SOLICITOR RAMOS: Yes.

What was it? SOLICITOR RAMOS: I don't have the exact date. I think it was October of last year.

October of 2004? SOLICITOR RAMOS: 2003.

And when did you decide that bill that was passed by the 58 01/27/05 - COMMERCE - RES. 041014 Council and, I believe, signed by the Mayor sometime in 2003 -- SOLICITOR RAMOS: Councilman, can you hold on a second?

Sure. SOLICITOR RAMOS: I'm sorry, Councilman.

When did the Administration decide that the bill that had been passed by this Council and, I believe, signed by the Mayor in the spring of 2003 -- when did the Administration decide that they were not going to enforce that bill? SOLICITOR RAMOS: You're referring to the Bill 030125, and I don't think I have enough information to answer factually or to say that I know enough to agree with the premise of your question that there was a decision not to enforce the bill.

I think there's been an opinion issued to that effect. SOLICITOR RAMOS: Well, there's been an opinion as to the legality, the Law Department's view of the legality of the bill. 59 01/27/05 - COMMERCE - RES. 041014

The legality of non-enforceability because you believed it exceeded our authority, isn't that essentially the language from the opinion? SOLICITOR RAMOS: The bill exceeded Council's authority, yes.

I think that's what I asked you. Now I'm asking when did the Law Department decide that the bill exceeded Council's authority and would not be enforced? SOLICITOR RAMOS: It's the practice of the Law Department for every bill if the Law Department believes that a bill will be invalid, it is our practice historically to notify the sponsor of the bill; and if adopted, the Mayor.

And what? SOLICITOR RAMOS: The sponsor and the Mayor.

And you did that? Was that done in this matter? SOLICITOR RAMOS: As for each of you and for every previous Mayor, we offered those 60 01/27/05 - COMMERCE - RES. 041014 opinions on a confidential basis to the parties. I will note that having read the testimony of December of this Committee -- and if I'm wrong on this, I'll sue Richie Feder for malpractice. He advises me that one witness, former Councilman Ortiz testified as to the advice he received from the Law Department and, therefore, had waived his privilege as sponsor of the bill with respect to advice he received on its legality.

I understand that. So is the answer that the Law Department essentially reached its decision at the time the bill was moving through the process? SOLICITOR RAMOS: My understanding from what I've been able to review is we have not deviating from our standard process with respect to that bill.

And did the Law Department testify at the hearing or any of the hearings on Bill 030125? SOLICITOR RAMOS: It certainly pre-dates me, so I don't know. If you'll 61 01/27/05 - COMMERCE - RES. 041014 indulge me, I'll ask --

There's two historical figures behind you. You want to check their recollections? SOLICITOR RAMOS: I got two "I don't recalls."

Well, it wasn't that long ago. I mean, it's not a parking regulation; it was a new Minority Business Enterprise Council bill that hadn't been pretty much touched in years. 13

What I said to the 14 Solicitor -- 15

You might want to identify yourself for the record.

Richie Feder, Chief Deputy for Appeals and Legislation. I do not recall testifying on that bill.

Is it something that if you had, you would probably recall that you had, right?

Yes, but your question was, did the Law Department testify. I can 62 01/27/05 - COMMERCE - RES. 041014 tell you that I'm pretty sure I did not testify. I don't if other people from the Law Department --

And we'd be pretty sure that virtually no one else would testify but you on such a matter? SOLICITOR RAMOS: Richie would be my prime suspect.

He'd be your lead-off hitter on that. So you may have advised the sponsor. The sponsor may have testified at a hearing the last December having received the advice, but it is fairly certain, even with the uncertainty, it's fairly certain that the Law Department did not testify with regard to the legality, the exceeding of the authority by Council with regard to this bill; is that fairly accurate?

Councilman, to respect the record of this body, the most I can say is that I don't know. If you wish, we can have our legislative group go back and determine whether there was testimony. 63 01/27/05 - COMMERCE - RES. 041014

I'd like to know specifically -- if you'd just check the notes of testimony, I'd like to know through the Law Department did the Law Department testify at any of the hearings on Bill 030125; if they did, what their testimony was and what their position was at that time.

Respond in writing to Chairman Goode?

Yes. Now, since the Executive Order expired in October of '03 and you deemed sometime in the spring of '03, at least to the sponsor, that the law that we passed, signed by the Mayor, exceeded Council's authority, what premise have you been operating under since that time with regard to the letting of contracts and minority, female, and disadvantaged business participation? You have no Executive Order, and you have a bill that you believe violates the law. Under what premise have you been operating? SOLICITOR RAMOS: There's a very technical answer and there's a practical and 64 01/27/05 - COMMERCE - RES. 041014 equally valid answer. The very technically answer is that when the Executive Order expired, it reverts to the previous Executive Order under Wilson Goode. I think the more practical answer is an Executive Order --

Didn't Executive Order 1-03 repeal or override the previous Executive Order, making it null and void? SOLICITOR RAMOS: It is a technical argument about whether the repeal also was extinguished. But I have a much more basic --

Tell me what you've been operating under for the last over a year when you have no Executive Order and no 17 bill that you believe is valid. SOLICITOR RAMOS: The much more basic answer is this: An Executive Order is a directive by the Mayor, the Chief Executive Officer, to people under his jurisdiction of what he directs and expects them to do. It's a manifestation of the Mayor as Mayor. I believe that by maintaining the office, undertaking reorganization and new leadership 65 01/27/05 - COMMERCE - RES. 041014 for that office and meeting regularly and providing direction to the Finance Director and MBEC, the Mayor is clearly directing within his authority MBEC and his desire for MBEC to continue to administer and recently to revamp and gear up further. So while we through Executive Order try to formalize procedures further to provide maximum notice, at the end of the day it's a statement of the Mayor's will, of his directive as the Chief Executive Officer which can be done through Executive Order and done much more precisely through Executive Order, but need not be done exclusively through Executive Order.

But don't you, quite honestly, leave either the department, the director, if not the Mayor or entire government subject to some extraordinary level of exposure, given that you have an expired Executive Order and you've already articulated in writing the exceeding of the authority by the legislative body, putting aside the fact that the Chief Executive the bill apparently against the advise of his own Law Department. 66 01/27/05 - COMMERCE - RES. 041014 If there were a challenge to anything that's happened either between October of '03 or the spring of '03, depending on whether you want to attack the Executive Order or the legislation or both, there must be in this wonderfully creative legal environment here in Philadelphia, there must be some argument that says the City is tremendously exposed at the present point in time, having no legal document in place but for the directive and the will of the Chief Executive Officer to direct his people to do certain things with virtually no written guidelines. SOLICITOR RAMOS: Well, one of the main issue you raise is one of notice. MBEC did not pull back its procedures, pull back its notices, pull back its operations, pull back the language in bids and RFPs. It has told the public and potential contractors, these are the rules under which we're operating. Do I prefer written things that are where we've thought more about where the commas go? Yeah. But I think there was a 67 01/27/05 - COMMERCE - RES. 041014 structure set up by the previous Executive Order that was perpetuated in operation by MBEC and MBEC continued to tell the world at least what its rules were that it was operating under. It didn't pull those back.

Councilwoman Tasco.

I just want to say so the will -- the Council passed the MBEC bill and it became an ordinance, the Mayor sign it, and you're saying that the will of the Mayor supersedes the ordinance that was passed by City Council? SOLICITOR RAMOS: No, Councilwoman.

But we passed an ordinance which the Mayor signed which gave the authority of MBEC to operate under certain guidelines and rules and regulations, and the Law Department said, "Well, this is not a legal bill." So they can't operate under that, but the Mayor can tell them. SOLICITOR RAMOS: That's exactly what the Charter says, Councilwoman. The Mayor is invested with exclusive authority 68 01/27/05 - COMMERCE - RES. 041014 over the executive and administrative functions of the City.

Well, he can say under executive authority of the Charter that I give the power to MBEC to operate. SOLICITOR RAMOS: Yes. And that's how it has been operating.

And so under the ordinance that was passed by City Council. If his word and his will is such that he can just say and it happens, then we don't need an Executive Order; he just says to MBEC "You operate under the ordinance that was signed by me and passed by City Council."

I hesitate to get into history when I wasn't there to witness it, but I observed that the Executive Order was issued around the time of the ordinance 20 and it seems was meant to address some of the concerns at the time with other legal risks of the ordinance at that time.

When the Mayor signed the ordinance, there was no Executive Order. He just signed the ordinance in a 69 01/27/05 - COMMERCE - RES. 041014 grand ceremony. SOLICITOR RAMOS: Councilwoman, what I've advised is that the Mayor simultaneously issued the Executive Order with the ordinance.

What Executive Order? SOLICITOR RAMOS: 1-03.

1-03.

All right.

Of course, the total irony, I guess, of all of this naturally is that there's a previous City Solicitor's opinion that would suggest that the whole creation of MBEC is illegal in and of itself since it was created under the bill that the Solicitor's Office deemed was illegal back at that time, vetoed by then Mayor Green and overridden by the Philadelphia City Council on the basis that the Council doesn't have the authority to create boards and agencies in the first place. I mean, it ends up coming completely full circle in the first place. SOLICITOR RAMOS: MBEC was created by Executive Order, not by ordinance. 70 01/27/05 - COMMERCE - RES. 041014

There is a provision in 17-500 in the original bill 4 creating the MBEC back in the early '80s -- SOLICITOR RAMOS: And you said that that was ruled illegal by a previous Solicitor. I'm saying --

Absolutely, and vetoed by the Mayor and overridden by City Council, based on the fact that we don't the authority to create new departments and agencies. SOLICITOR RAMOS: But the Mayor does and he did. But the Mayor does have the authority, and he did; he created MBEC by Executive Order.

Absolutely. But that's the history that we're talking about in terms of who has the authority to do what. We had an agency that was created over the will of the Mayor, deemed to be illegal but the City Solicitor's Office, and has been functioning for the last 20-plus years. SOLICITOR RAMOS: Probably deemed -- and I don't know which opinion. That may be 71 01/27/05 - COMMERCE - RES. 041014 under Wilson Goode, Mayor Wilson Goode. But what I was suspected is if it was deemed illegal, it was for the same reason as the Council exceeding its Charter authority. Not that the function would be illegal, but-

It's one of the wonderful series of opinions over there, formal opinion No. 7. Let me just ask a few last questions. One, you seem to be spending a significant amount of time, I don't know how much time, creating a new Executive Order as opposed to writing a new piece of legislation. Why the continued insistence in this particular area of legislating by Executive Order versus the garden variety send a bill, we can take it through a legislative process and make it the law? Why do you continue to insist on that, which also would appear to be at the exclusion of the legislative body? SOLICITOR RAMOS: I believe that that's the same issue we've been discussing. When it comes to performing the functions of 72 01/27/05 - COMMERCE - RES. 041014 MBEC, you're talking about an administrative function of the government. And it's just one way -- an action by ordinance by the legislative branch, and the City Charter is just not a permissible way of doing that, so that's why it's done by Executive Order.

The Administration can send a bill over. SOLICITOR RAMOS: And you've referred to previous solicitor opinions --

The Administration can send a bill over, Solicitor; you know that. SOLICITOR RAMOS: Sure, but it doesn't mean that I'll sign it or that it will be valid or defensible. And that's why -- you mentioned previous Solicitor opinions. This is one area where there hasn't been a whole lot of development in terms of what the law is in solicitor opinions for generations probably. The division of authority between Council and Mayor over executive and administrative functions and whether you can create boards and commissions, that goes way 73 01/27/05 - COMMERCE - RES. 041014 back before my time and any of my immediate predecessor's time.

So you're saying that the Administration is reluctant on its own to draft a bill formalizing -- SOLICITOR RAMOS: If this were a deposition, I'd say, "Read back the transcript," because I don't think that's what I said.

-- formalizing the creation under law versus Executive Order of such an important function in the government. SOLICITOR RAMOS: It's not a matter of will, it's a matter of ability. You can will to do it, you can want to do it; it doesn't mean you can do it.

I didn't understand that. SOLICITOR RAMOS: My kids want to do some things that they can't do. The Mayor may want to do some things he can't do. There may be things that Council wants to do that it can't do under the current Charter. 74 01/27/05 - COMMERCE - RES. 041014

You're saying the Administration does not want to create such an entity by ordinance? SOLICITOR RAMOS: No, that's not what I said. The Mayor, concurrent with the ordinance, adopted an Executive Order that, seems to me -- although not there at the time; I won't speak for what the thinking was at the time -- tried to address some of the legal concerns, not the division of power concern but some of the Constitutional concerns at that time with the ordinance. An ordinance 14 having waived the privilege, the sponsor of the bill apparently was aware was invalid.

What's the Council's role in the creation of the Executive Order? SOLICITOR RAMOS: It's an Executive Order. It's the executive branch of government. I don't understand your question.

So therefore we should have nothing to do with what it says and how it functions and operates within this larger context of the government? 75 01/27/05 - COMMERCE - RES. 041014 SOLICITOR RAMOS: You're asking a question of--

We're all still in the same government, right? SOLICITOR RAMOS: You're asking a question of policy and inner-governmental relations and, to some extent, politics, not law.

Not politics. We're the legislative branch. Whatever is done in the Executive Order, we will all have to either live with or understand. SOLICITOR RAMOS: Right and I'm the Solicitor so I'm just giving you the legal answer.

It's not a legal answer; it's a policy question. I'm asking you what if any role is there for City Council for input -- SOLICITOR RAMOS: The legal --

Let me finish the question. What is the role, if any, for City Council to at least provide input or advice or perspective on the creation of a 76 01/27/05 - COMMERCE - RES. 041014 sweeping Executive Order that affects this particular area? If the answer is none, then the answer is none. SOLICITOR RAMOS: An Executive Order is an expression of the executive branch of government. The answer does not end there, though, because now you're making me talk policy. There is the Council individually and collectively through hearings, through --

We don't have hearings on Executive Orders. SOLICITOR RAMOS: You have hearings on issues on which there are Executive Orders. You interact with the other branch of government and have venues for influencing it but not for determining it.

Last question: In the course of this conversation about the Executive Order and its components, we've had yourself and the Executive Director of the MBEC at the table. And I don't know what the record will reflect, but in the visual observation, in the interplay between 77 01/27/05 - COMMERCE - RES. 041014 the parties, I would be left with the impression that the Director, Mr. Williams, is not necessarily up to speed on what the Executive Order says or does or how it functions. I say that for two reasons: One, because he has not said anything about it. Deferred to you, I understand the Executive Order is over in the Law Department for review. But how is the Director to implement what's going on if all the information appears to be over in the Law Department?

Councilman, that's incorrect. I've looked at every version of the Executive Order, but I assumed --

Well, who wrote it?

It initially was written by the Law Department, I believe, the first draft. SOLICITOR RAMOS: We are also the distributors and writers of the Executive Orders.

I appreciate your multitasking there. 78 01/27/05 - COMMERCE - RES. 041014 SOLICITOR RAMOS: Councilman, I'm here because I was called by resolution to be here following extensive voluminous testimony written and verbal by the Executive Director of MBEC in December. And in fact, a few days ago, Michael said, "I thought they were just calling you. I wasn't planning on going." I said, "No, you'd better not leave me up there alone."

Smart move. So you've been involved in the crafting of the Executive Order?

Reviewing it and adding comments and suggestions.

Councilman Clarke.

Thank you, Mr. Chair. Good morning.

Good morning.

I'd like to ask the hypothetical question about a hypothetical Councilperson representing a hypothetical district, District 12. And I guess more so 79 01/27/05 - COMMERCE - RES. 041014 from a legal perspective. This Councilperson interacts with people in and out of their office, they come in, they want to do development, they want to do this, they want to do other things relating to the City and its business. And this developer says that they're interested in acquiring a parcel of land and they need to legislation to be passed to enable them to develop whatever. And this hypothetical Councilperson says that "I would be supportive of your efforts, but I need you to get 50 percent minority construction and 50 percent professional services," and just lay out a series of things that that Councilperson is willing to do, would like to see done prior to them introducing a legislation or taking whatever action it is for that person to proceed or to continue doing whatever it is they needed to do. Is that illegal? SOLICITOR RAMOS: Councilman, I'm going to do us both a huge favor. That's a substantive enough question, even as a hypothetical, that I'm not going to wing it up here and give you legal advice on the City 80 01/27/05 - COMMERCE - RES. 041014 Council record about whether that's legal. But it raises -- the hypothetical Councilperson would be right to ask questions about it. I don't know that it's necessarily -- I wouldn't venture that it's necessarily legal or illegal. It depends on how much of it, what the degree of exercise of power is in that discussion problem. I think -- let me go to one end of it. I think a Councilperson saying "I can be supportive of an effort, but I won't be supportive in I find out that you have a history of discriminating or you have a history of under-utilization of women and minority business enterprises, and to the extent you don't have the ultimate authority, there may be some room there. But it would something that -- it would take a couple people in my department a few hours to think through.

You said that who wouldn't have the ultimate authority, the Councilperson? SOLICITOR RAMOS: Well, it depends. 81 01/27/05 - COMMERCE - RES. 041014 If it's contingent upon whether you introduce legislation, now we're talking about the exercise of more authority. We would want to look at that, to not wing it and give it thoughtful consideration and advise you before you have that conversation. Not you, the hypothetical Councilperson.

Well, would the need to have a confidential conversation with legal counsel for that hypothetical Councilperson be the same as that Councilperson said they wouldn't be willing to proceed with assisting this person through legislation or whatever if they didn't build the building in a certain way or have a certain facade or a certain color or height limits? SOLICITOR RAMOS: I don't know what the practice has been in the past of solicitors up here, but the way law I practice law and the time that I've had my license, I don't wing it like that. I think it's a good question, but I think I should give it the attention and research that it merits rather 82 01/27/05 - COMMERCE - RES. 041014 than say something in a public way on the record that doesn't have the benefit of having, if not me, having somebody else spend some time in the library. I think it's a good question, individually or collectively. I mean, if we could have folks come over and have a general discussion with Councilmembers individually or at caucus or something to talk about some of this, I'd be happy to provide that service.

Let me direct my question back to MBEC. When MBEC meets with businesses that are attempting to get contracts, do they suggest that they get aggressive on hiring practices or contracting practices? Or do they require or do they demand? What exactly do they do? Do they just look at their document that's been submitted and say, "You meet goals," and just proceed to sign off on it?

We look at all the available data that we have. I think just as a practice, particularly when I've been there, 83 01/27/05 - COMMERCE - RES. 041014 we've also always tried to push contracts to get as much participation as we can.

How do you push it?

By looking at them, by helping trying to find different folks. For example, someone comes to us and says "well, we can only get a certain amount of folks," we'll help them try to find more folks and ask them to push it up. And if we have a set number and someone can't reach that, well then, from most of the bids that come through, we deem them non-responsive and non-responsible because we know that they're people out there that they can solicit for these bids.

So if they're non-responsive, that does what? That triggers?

That triggers us saying that we do not sign off on the bid.

What's the threshold?

It depends on the 84 01/27/05 - COMMERCE - RES. 041014 percentages on each bid. Each bid is individual.

And each bid number is sit by availability of contractors or people? I mean, how do you set those thresholds? SOLICITOR RAMOS: Availability.

Yes.

How do you determine availability?

By the number of vendors that we have in our database.

That are registered under MBEC?

Exactly, that could do that type of work underneath a certain commodity codes that come from those bids under.

Would you say that you have a substantial number of minorities and females and DBs that are listed in your database enough to suffice to make available to these particular contractors?

To answer that, one 85 01/27/05 - COMMERCE - RES. 041014 is yes, we have about 853. Could we use more? Always.

953 for all trades for all types of professional services.

For all trades for all types of professional services, supplies and equipment, public works, all total, about 853.

Do you have a sense of how many -- that's 853 MBEs, DBEs and WBEs total?

That's correct.

That doesn't sound like a lot.

Excuse me, Councilman.

Good morning. I'm Candace Hitchcock, the Deputy Director of the Minority Business Enterprise Council. In answer to your question, there are approximately 800 people in our MBEC directory, and they have distributed the variance of vendors per commodity code, not a set number. 86 01/27/05 - COMMERCE - RES. 041014

So the likelihood that there are probably a whole lot more MBE/WBE businesses in the City of Philadelphia than 800 -- you think that's a small percentage of the total?

My personal opinion is, yes, I do, which is why when I came into this position we started to have an aggressive outreach program to try to bring folks in to become certified.

So if you had substantial more people or businesses in your database, the likelihood that you could increase your numbers would be improved, enhanced?

I think that it will, absolutely. I think that our aggressive outreach activities have been so far very good. We can tell it by the amount of people coming in to get certified. A number of certifications have increased since I've been there and we're experiencing a tremendous backlog. And so --

Backlog in? 87 01/27/05 - COMMERCE - RES. 041014

Backlog in processing certifications. More people have come in, certifications have come in and more re-certifications have come in than we have the staff to do it. SOLICITOR RAMOS: Mr. Chairman.

Yes, Mr. Solicitor. SOLICITOR RAMOS: I'd like request permission to be granted leave. I have a pressing matter with the Mayor. I'd be happy to come back at your pleasure later today or at a future time. I'd like to take Mr. Diaz with me who is also necessary for this event. Mr. Feder is giving me this look.

You're going to leave us Richie Feder? SOLICITOR RAMOS: And he's prepared to discuss at length intricacies of Constitutional law as well as the division of authority under the Home Rule Charter.

Let me wipe out the rest of the day for my schedule. I've been looking forward to this for 14 years. 88 01/27/05 - COMMERCE - RES. 041014 (Laughter.)

Councilman Ramos.

Good morning, Mr. Ramos. Your testimony here and the message that you presented the Members of this Committee of Council and the public -- and correct me if I'm wrong -- is that, one, that the Mayor will be presenting in an official matter at some time a new Executive Order that should be reflective of the City's interest in more minority participation, and that you have taken under the circumstance the ordinance 15 that was presented that was introduced here and passed, I believe, last year or the year before; is that the message you've conveyed here today? SOLICITOR RAMOS: I am so sorry, Councilman. I was being distracted by what was going on the other side of your Council table. But if say so, Councilman Ramos, I'm sure it's true. My understanding is that the release of the Executive Order is imminent. 89 01/27/05 - COMMERCE - RES. 041014

That was last month too. Imminent was last month. When we had the hearing the other day in early December it was imminent. How do you define imminent?

Councilwoman Tasco, I believe that's a legal matter that we need extensive conversation. SOLICITOR RAMOS: Mr. Feder is prepared to discuss this.

To discuss "imminent." That's at less two hours of conversation. (Laughter.)

The answer to that yes, right? SOLICITOR RAMOS: Yes.

Thanks.

Councilwoman Tasco.

I was out of the room, but I understand that Councilman Nutter raised the issue of where does Council fit in all of this as you were reading some of 90 01/27/05 - COMMERCE - RES. 041014 the excerpts from the imminent Executive Order. SOLICITOR RAMOS: I just want to clarify, it was rough take, my top or 6 list and not as precise as the document 7 itself. 8

We spent a lot 9 of time on that, at least Councilman Angel 10 Ortiz spent a lot of time, along with other 11 Councilmembers, drafting the ordinance as a 12 result of a lot of discussion with the 13 contractors through the public hearing process, plus from the experiences that we have in working with contractors who contact us because they're experiencing problems. As you were discussing what might be in the imminent Executive Order, I thought about what input can we have or will we have because at the end of the day when you issue your Executive Order without input from those of us who deal with this on a day-to-day basis -- contractors don't go to the 2nd Floor or the Administration; they call us. And if we have the opportunity to review what you 91 01/27/05 - COMMERCE - RES. 041014 plan to issue, we might be able to address some issues that may be in there, may be confusing, may not be clear, should be in there, which helps us with our constituents when they contact us about a problem, which they always do because they come us to us for the solution. So I would think as a measure of good faith and in the spirit of cooperation that we're given some time to discuss with you what might go into the Executive Order and/or seriously for you to look at the ordinance and that the issues addressed in the ordinance be part of that Executive Order. The other thing is, in the old Executive Order, there is an economic Development Task Force or something like that, Economic Opportunity Task Force that was never appointed. What assurances do we have that the Committee will be appointed and who will those members be? SOLICITOR RAMOS: Let me try to answer both of those briefly. I know that's a challenge for me sometimes. With respect to feedback on the 92 01/27/05 - COMMERCE - RES. 041014 Executive Order, the Executive Order certainly informed by what the record has been on this, but I will communicate to the Mayor and the Mayor's Office that request with respect to his Executive Order. With respect to the second, in addition to the MBEC Advisory Council under the Executive Order that's being contemplated, there would be something created called the Greater Philadelphia Economic Opportunity Task Force, and that may or may not end up having the same name. But that's a body that would be advisory to the Mayor in addition to Michael's board that would have representatives from all the major sectors of the regional economy and are about increasing minority activity and participation in the private sector, not necessarily limited to contracting relationships with the City. For example, encouraging more minority women executives and board members in the private sector. This has been -- the Mayor has communicated that this task force is something within the Executive Order that he's very 93 01/27/05 - COMMERCE - RES. 041014 committed to implementing.

Councilwoman, I just want to add that the way that these boards are structured are a lot better than they were in the previous Executive Order because both of those boards -- the previous Executive Order just really dealt with MBEC. Now we'd have one board dealing with MBEC and one board looking at larger opportunities outside MBEC's purview. It's a better scenario than it was for the previous Executive Order.

If there are no 14 further questions for the Solicitor, you are excused. Thank you very much for your testimony. Thank you for leaving Mr. Feder. And I wish you well at your next meeting. SOLICITOR RAMOS: Thank you.

That sentiment is echoed by a number of us.

And we certainly look forward to your assistance on the Mutual Industries. SOLICITOR RAMOS: I was taking notes. 94 01/27/05 - COMMERCE - RES. 041014

Thank you.

I do have one other question which has kind of been a mystery for some period of time. Why is the MBEC, other than because of how the legislation was written, why is the MBEC in the Finance Department?

I have no idea.

Have you ever inquired?

No, I haven't?

Councilman, if I could. The Procurement Department is in the Finance Office and that was a logical place to put it. I think that's probably the best answer historically.

Does MBEC report to the Finance Director or to the Procurement Commissioner?

The Finance Director.

Why is that?

Councilman, I don't know why that is except that's the way that it is. I got the job. I report to the Finance 95 01/27/05 - COMMERCE - RES. 041014 Director.

Well, why don't we do this: Between now and the time we have budget hearings, would you try to have a slightly different or a better answer than that?

I will look that up for you, Councilman, and I will get that to you.

And send it to the Chair of the Committee.

Absolutely.

Councilman, I don't I don't know long it has been that way, but certain since the 1993 Executive Order, that's where MBEC has been located.

I understand. There's probably nothing that drives me a little crazier than, "Well, that's the way we've always done it so that's the way we're going to continue to do it." I constitutionally can't deal with that kind of response.

I'm not suggesting that 96 01/27/05 - COMMERCE - RES. 041014 was an answer to your question. I just wanted to make sure historically --

Well, it wasn't an answer; it was a response.

I'm sorry about your frustration, Councilman, but that is my answer and I will get back to you.

Okay. But it won't be your final answer.

This will not be my final answer.

Do a little research, let's try to figure out what the best practice should be as opposed to just repeating what we've historically done which will pretty much get us the same result, okay?

Okay.

Councilwoman Tasco.

I think what we might do is just recess this. We'll recess to the call of the Chair on this issue. There may be other recesses for other issues, but we will let you know if we want you to come back. 97 01/27/05 - COMMERCE - RES. 041014 I think what we might do is recess until we get the Executive Order.

Okay.

Thank you.

Thank you so much.

There being no 8 other testimony, I've talked with the Chair of the Committee, Councilman Goode. He has made arrangements. This hearing will be recessed specifically regarding Resolution No. 12 040827 -- the other two resolutions, as Councilwoman Tasco is the sponsor, 040997 and 041014, those two resolutions will reconvene at the request of the sponsor of those resolutions. Resolution 040827, the hearing for the Council Committee on Commerce and Economic Development will be recessed until February 24th at 1 o'clock p.m. There being no further business before the Committee, this hearing is adjourned. (Council adjourned at 12:03 p.m.) - - - - 98 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Thursday, January 27, 2005, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT _________________________ Lisa C. Bradley, RPR