That's really not the question I'm asking. The question I'm asking is whether the City ordinance is enforceable with regard to state and federal law or is it preempted?
Okay. Not hard and fast quotas. You can set aspirational goals.
So let's skip through all of it and let's not play the low- and moderate-income game. There were disparities with regard to lending 57 5/26/10 - FINANCE - BILL 100129, etc. under the City ordinance --
Those are two -- the connection or the correlation has to be there. You must first determine the disparity.
Then in order to remedy that disparity, you can set aspirational goals.
If the disparity has been determined by the disparity study and is done so on an annual basis.
And the OCC regulations with regard to preemption in terms of local and state law clearly says that what we cannot do is set terms. We cannot tell you who to lend to. But with regard to -- specifically with regard to 58 5/26/10 - FINANCE - BILL 100129, etc. areas that may deal with lending discrimination, local and state laws are not preempted.
Correct. I don't differ with you over that. But aren't we getting to the same point?
What's the aspirational goal? Is the aspirational goal percent? 14
Based upon the 15 testimony that you refer to, that was an 16 estimate -- that was the bar, the 24 17 percent. 18
The question 19 is -- those were her words. Is the 20 aspirational goal 24 percent or not? 21
24 Ms. Metz-Galloway, in of the transcript, you said what you said. I 59 5/26/10 - FINANCE - BILL 100129, etc. gave it to you in writing. Were you inferring that the aspirational goal was percent? 5
So what were 8 you saying, which was my original 9 question? 10
I was 11 trying to say that I would expect the 12 industry, the mortgage lending in the 13 African American community in the City of 14 Philadelphia to continue at the rate of 15 lending in the African American community 16 that it had previously demonstrated. 17
We know the 18 other banks are going to do it. We're 19 asking whether you're going to do it. 20 Mr. Archie, maybe we can save a 21 lot of time and save the presentation if 22 you can just advise your counsel that it 23 is legal to set aspirational goals. 24
And let's 60 5/26/10 - FINANCE - BILL 100129, etc. just skip all of this and continue this on June 9th.
Well, if you are asking me whether I can advise my client to set aspirational goals --
No. I'm asking you to advise them that it is legal to set aspirational goals.
Right, but can I finish my testimony and then perhaps you can?
If it relates to low- and moderate-income communities and does not address disparities within other demographics, then it is insulting to me and the work that I've done over several years.
It's not an intent to insult you in any way, Councilman Goode.
It's not an 61 5/26/10 - FINANCE - BILL 100129, etc. intent by you. We are friends.
I consider you a mentor. But you were hired by them, and I know the games they play.
Let me say this: It's not a game. I think it's perhaps a misunderstanding.
Let me finish my thought and statement for a moment. What we have in front of us are basically three documents which are basically utilized to set goals, or at least they're stating goals. One is the community reinvestment goals, which are required by all the City depositories, which I've handed up, which sets goals on an annual basis June of that calendar year. You also have in front of you a strategic plan which was put together by Wachovia setting another set of goals for 2006 to 2009. What we had at the last 62 5/26/10 - FINANCE - BILL 100129, etc. hearing was questions from you in particular, and they weren't sure what goals you were referring to, the goals in the strategic plan or the goals in the community reinvestment goals which were set. I understand looking at the testimony now --
No, no. 10 They only wanted to do a strategic plan that was based on low- and moderate-income neighborhoods. They only wanted to set goals which were based on low- and moderate-income neighborhoods, and what happens in that case, they tend to lend to white borrowers in moderate-income neighborhoods, and if you track the data, you will see that people of color, their lending has not increased. If you track the data, you will see that low-income areas have not been increased in terms of lending, but that it has been increased in terms of white borrowers in moderate-income areas. That's why it's a game. 63 5/26/10 - FINANCE - BILL 100129, etc.
Right, but, Councilman Goode, what you cite at the ordinance that you read from, which is required to be submitted, the goals, the reinvestment goals, specifically it says set goals for low- and moderate-income areas. I mean, that's a part of the ordinance.
And that's why we added the annual disparity study that goes across several demographics and asked for a long-term strategic plan to address all of those disparities disclosed in that annual disparity study.
Have all of the depositories -- let me ask a question. Have all of the City depositories submitted a strategic plan for year 2009 and 2010?
All of those that had disparities that were disclosed in the annual disparity study, one, and if they did not, I removed them from the list. 64 5/26/10 - FINANCE - BILL 100129, etc.
Okay. But all the other City depositories submitted a strategic plan?
And those who do not by June 30th, they cannot receive City money. They have to give back the City money. But I take the extra step of actually wiping them off the list. Now, the question is whether the strategic plan that's been submitted actually was devised to do what it was supposed to do under the law, which is address all disparities. And when I pulled the transcript of this hearing, it will say the strategic plan did not address anything but low- and moderate-income communities. It does not address all disparities found in the disparity study, and that's wrong.
Right. Our understanding, the low- and moderate-income communities are comprised of those three racial and ethnic groups 65 5/26/10 - FINANCE - BILL 100129, etc. that are set forth in the disparity study, African Americans, Latino, as well as Asians. And based upon the information that we have, loans were -- between 80 and 100 percent of loans made in that area went to that group --
Mr. Archie, if low- and moderate-income lending remains steady or increases and lending to African Americans and Latinos decreases, what does that mean?
No. What it means that there is -- let me take that back. And lending to not only African American and Latino borrowers has decreased but lending to low-income borrowers has decreased, what it means is that they're actually lending more to 66 5/26/10 - FINANCE - BILL 100129, etc. white borrowers in moderate-income areas. It means that they are still skimming from the top in terms of borrowers and are not digging down deep enough to address disparities that actually exist. That's what it means.
Well, but there are other factors that sure go into lending other than race, and you know that.
They don't lend to lower-income communities either. The low- and moderate-income communities' numbers are higher. The lower-income numbers are not.
When you 67 5/26/10 - FINANCE - BILL 100129, etc. combine low income with moderate income, those numbers may increase because of lending may have increased in moderate-income areas.
But the City is asking for them to give goals based on low- and moderate-income areas.
That's the goal. We're not talking about the goals. We're talking about the long-term strategic plan, which is separate. That's separate.
As my client has advised me, and I'm in agreement based upon what we handed in, is that you are not permitted to develop a long-term strategic plan based on race and ethnicity. What you -- unless you determine that there is a disparity. And you have concluded based upon the disparity study that there is a 68 5/26/10 - FINANCE - BILL 100129, etc. disparity.
But, Mr. Archie, furthermore, not only do we believe we've determined there was disparity, when we walked through the formulation of the strategic plan with Wachovia, what they claimed was they were doing things specifically within that strategic plan that was going to target certain demographics within low- and moderate-income communities to make sure they addressed all the disparities. Is that not true, Mr. Scott?
The question as posed -- but you have the strategic plan there, so you know --
I'm talking 69 5/26/10 - FINANCE - BILL 100129, etc. about the formulation of the strategic plan as was discussed as it was being developed. Mr. Scott, is it true that Wachovia at the time said that it was developing a strategic plan that while on the surface may look like it just addressed low- and moderate-income communities, that the strategic plan was meant to address all the disparities among several different demographic groups. Is that true or not?
Identify yourself for the record and speak into the mike, sir.
Donn Scott, head of Government Banking Group for Wachovia/Wells Fargo. The only strategic plan, Councilman Goode, that I am aware of is the one that Robert Archie referred to, which is the one from '06 to '09, which 70 5/26/10 - FINANCE - BILL 100129, etc. is contained in the report that we gave you, which goes back many years ago, and we pulled the plan together to address certain issues, but I also believe that that plan dealt with low- and moderate-income communities.
Was the plan supposed to deal with the fact that only percent of home mortgages went to 11 African Americans at the time? That's a 12 question, Mr. Scott. 13
Was the 16 strategic plan that was submitted to the 17 City, was it supposed to -- 18
Based upon your recollection, did that plan provide for that, the discussion leading up to the development of that plan? Is that your question?
No. The question is whether the plan was supposed to address other disparities beyond those 71 5/26/10 - FINANCE - BILL 100129, etc. within low- and moderate-income neighborhoods, and specifically was this plan supposed to address the fact that at the time only percent of home purchase 6 loans were going to African Americans? 7
Councilman Goode, 8 my recollection is that when we look 9 back, we were certainly aware of the fact 10 that we had not done an excellent job in 11 terms of meeting the needs of the African 12 American community. 13
Mr. Scott, 14 let me be more specific. A significant 15 portion of the City a few years ago was 16 well aware of the fact that Wachovia only 17 gave 18 percent of its home purchase 18 loans to African Americans. I made sure of that. Was the strategic plan supposed to address that, yes or no?
Yes or no? Was the strategic plan supposed to address that, yes or no? 72 5/26/10 - FINANCE - BILL 100129, etc.
Councilman, let me state, I have the plan in front of me. Let me give the other members of the Committee an opportunity to understand what the plan stated.
Mr. Archie, I think what you might want to do is be prepared to respond and make that presentation on the 9th.
We're going to recess this hearing until the 9th and you'll have an opportunity to answer and make that presentation at that time. I think it would be better for you to do that. 73 5/26/10 - FINANCE - BILL 100129, etc.
Thank you. Okay. Thank you for your testimony and your time.
We are now going to call on Ms. Deborah McColloch to testify on Bill 100357 and anyone else accompanying her to make this presentation to come forth. (Witnesses approached witness table.)
Would you please identify yourself and present your testimony. MS. McCOLLOCH: Good afternoon, Councilwoman Tasco and members of the 74 5/26/10 - FINANCE - BILL 100129, etc. Finance Committee and other members of City Council. I am Deborah McColloch, Director of Housing. I will present testimony on behalf of the Administration on Bill 100357, which permits the City to apply for federal Community Development Block Grant, HOME Investment Partnership funds, Emergency Shelter Grant and Housing Opportunities for Persons with AIDS, known as HOPWA, funds and for state funds from the Department of Community and Economic Development. The bill 14 refers to Exhibit A, which is the Year 36 Consolidated Plan, the required HUD funding application. In order for the City to receive funding from HUD, the City is required to submit an approved Consolidated Plan to HUD no later than August 16th, 2010. The Consolidated Plan includes a budget for the Housing Trust Fund and related funding sources. With me today are Alan Greenberger, Acting Deputy Mayor for Planning and Economic Development and 75 5/26/10 - FINANCE - BILL 100129, etc. Director of Commerce, and representatives from the Department of Commerce, which administers funds allocated for community economic development, and related agencies, including the Redevelopment Authority and the Philadelphia Housing Development Corporation. The Year 36 Consolidated Plan for the fiscal year which begins July 1st, 2010 details our plan for spending monies from five primary federal sources. The proposed budget generally carries forward existing programs and commitments. The first source of federal funds is the Community Development Block Grant, which is still the largest source of funding for affordable housing, aside from subsidies which the Philadelphia Housing Authority receives directly from HUD. 326 million in new entitlement funding, an increase of nearly $3 million from Year 35. Other CDBG-related resources include program income such as 76 5/26/10 - FINANCE - BILL 100129, etc. the sale of land and prior years' reprogrammed funds, which are funds which can be liquidated from prior years' budgeted activities. In Year 36, based on resources available, we are anticipating an increase in prior years' reprogrammed funds and in program income. 652 million in Year 36. This $4 million increase in CDBG resources, however, is more than offset by the loss of the one-time federal funds from the American Recovery and Reinvestment Act, known as the CDBG-R funds, which were awarded and budgeted in Year 35. 9 million in Neighborhood Stabilization Program 2 funds in Year 35. These funds are budgeted over three years. 829 million less than in Year 35. So 77 5/26/10 - FINANCE - BILL 100129, etc. we have essentially $12 million less going forward. I am happy to tell you that despite the reduction in available resources, the Proposed Year 36 Consolidated Plan maintains core housing and community economic development initiatives and programs. The City remains committed to affordable housing production, housing preservation programs, mortgage foreclosure prevention and other key housing services. Within the Consolidated Plan budget, continued funding is proposed for for-sale housing, including both new construction and rehabilitation. Continued funding is proposed for rental ventures financed in conjunction with the Low Income Housing Tax Credit and special needs housing to assist the homeless and those with other special needs. The Basic Systems Repair Program, BSRP, is proposed to receive level funding in total funding in Fiscal Year 2011. The City proposes to replace 78 5/26/10 - FINANCE - BILL 100129, etc. CDBG-R funding used in Year 35 for BSRP and for mortgage foreclosure prevention with CDBG funds in Year 36. Program funding is maintained for the Adaptive Modifications Program. 655 million in Fiscal Year 2011. The increase supports the Mayor's job creation initiatives.
The objective is to create economic opportunities by assisting new and existing businesses, investing in neighborhood commercial areas and supporting community-based organizations which are engaged in economic development. The Consolidated Plan budget exceeds the requirement of Council Bill 000716 that at least five percent of CDBG funds be allocated to economic development activities carried out by community development 79 5/26/10 - FINANCE - BILL 100129, etc. corporations. The second primary source of funding for Year 36 is the federal HOME program. 445 million in new HOME entitlement funding in Year 36, a decrease of $100,000. HOME funds are used primarily to support housing production programs. The third source of federal housing funding which is included in the Year 36 Consolidated Plan is the Housing Opportunities for Persons With AIDS, HOPWA, program which the City of Philadelphia administers for a five-county metropolitan region, including Philadelphia, Bucks, Chester, Delaware and Montgomery Counties. The federal formula for HOPWA funds is based on the historical and contemporary AIDS caseload in the region. 786 million in HOPWA funds for the five-county region, an increase of $70,000 from Fiscal Year 80 5/26/10 - FINANCE - BILL 100129, etc. 2010. Rental assistance to allow persons with AIDS to rent their own apartment or home is the largest single expenditure of HOPWA funds and is proposed to receive an increase in Year 36. The fourth source of federal funding for housing in Year 36 is the Emergency Shelter Grant, or ESG, program. 296 million in ESG funds in 2011, an increase of $7,000. These funds which support emergency shelter activities will continue to be administered by the Office of Supportive Housing. In the past, another major source of funding for housing has been the Section 108 loan program. Under the Section 108 loan program, the City is allowed to borrow funds against future CDBG entitlement grants. In the past, the City used the Section 108 loan program to provide debt financing for economic development ventures and to support specific housing development 81 5/26/10 - FINANCE - BILL 100129, etc. ventures. While economic development Section 108 loans are self-sustaining through the repayment of debt, subsidies for housing funded with Section 108 loans must be repaid from CDBG entitlement funding. The City has nearly reached its Section 108 loan program borrowing capacity and, therefore, in Year 36 no 10 new Section 108 loan authority will be sought for housing activities, and budget authority for a relatively modest loan of up to $20 million is requested for economic development activities administered by PIDC. The plan identifies $4 million in proposed funding from the state Department of Community and Economic Development's Housing and Redevelopment Assistance, HRA, program. These funds will be used to support home repair grants through the Heater Hotline and Tier parts of the Basic Systems Repair Program and to support affordable housing development. This budget allocation is 82 5/26/10 - FINANCE - BILL 100129, etc. based on the actual amount of HRA funds received by the City in Year 35. The City looks forward to continuing to work with the Commonwealth and DCED to bring critical resources for housing to the City. The plan also contains a recommended budget for funds for the Philadelphia Housing Trust Fund. The recession limited Housing Trust Fund earnings in Year 35, which are based on recording fees from deeds and mortgages. 5 million in new earnings, up from 6 million in Year 35, but approximately half the amount earned in Year 33. Line items in the Consolidated Plan reflect the priorities recommended by the Housing Trust Fund Oversight Board, as agreed when Council passed the Trust Fund legislation three years ago. Thank you for the opportunity 83 5/26/10 - FINANCE - BILL 100129, etc. to present this testimony.
In order for the City to receive funding from HUD, the City is required to submit an approved Consolidated Plan to HUD no later than August 16th, 2010. In order to permit expeditious submission of the Consolidated Plan to HUD, suspension of the rules to permit first reading at the next Council session is requested. My colleagues and I will be happy to answer any questions that you may have for us today.
Thank you very much. The Chair recognizes Councilwoman Blackwell.
Thank you, Madam Chair. Unfortunately, I will have to leave this hearing. I have to deal with the Lucien E. Blackwell Community Center and so my heart and my commitment are split, but we are asking that in addition to the other two bills that this one be 84 5/26/10 - FINANCE - BILL 100129, etc. held until the 9th, because many of us have issues with the overall housing strategy, some issues that don't narrowly affect OHCD, but they do affect the RDA and other issues. There are other issues my colleagues have with the NTI plan. And so I regret missing testimony from all these interested and committed and involved people, but there are issues to which we need answers, and, again, we're asking, Madam Chair, that this bill, in addition to the other two, be held until the 9th. Thank you very much.
Thank you very much. Thank you for your testimony, Ms. McColloch. We've come to calmer days than I think when I first came here and this room was filled to the rafters with advocates for one issue or another. It seems either we solved the problems or we don't have enough money to solve them and people are out there trying to find other 85 5/26/10 - FINANCE - BILL 100129, etc. ways to deal with it. Just let me ask you a couple of questions. According to Bebashi, the HIV infection rate in Philadelphia is higher than New York City and rivals the infection rate of some African nations. In addition, and during the public testimony on this year's budget, we heard from constituents with AIDS that it was safer from a health perspective to be homeless than in City shelters. Considering this information, is the $70,000 increase in HOPWA funding for the five-county metropolitan region in FY11 sufficient to address this issue? Because all of that money does not come to Philadelphia. It's only $70,000. MS. McCOLLOCH: That's the amount of the increase. The HOPWA funding is based on a formula from HUD, and so we're simply told by HUD what the amount of money that we're receiving based on the formula that HUD has is. Of course it's not enough money to address 86 5/26/10 - FINANCE - BILL 100129, etc. all the needs in Philadelphia or in the counties, but the formula amount is simply given to us by HUD.
And what is the -- how does HUD determine -- you have a five-county region. How is the division -- the money allocated based on those five counties? What's the criteria for the distribution of those funds? MS. McCOLLOCH: I'll let my colleague answer the question.
Good morning, Councilwoman. My name is Scott Wilds, Deputy Director of Housing. The formula that determines what we get from HUD does not speak to the way we spend it here in the region as a whole. We try to match the approximate caseload within the counties with the way we spend funds. So about 80 percent of the folks with AIDS living at this time live in the City, and we spend about that same amount on folks in the City through contracts. There are also rules that HUD 87 5/26/10 - FINANCE - BILL 100129, etc. mandates that everyone who lives in the region must be able to access funds that we spend in the whole region. So that if you live in the City and there's a Bucks County rental assistance slot, you are able to use that as well as the ones in the City.
So it's not just allocated to those residents of those counties?
Okay. Interesting. Is there ever going to be an effort to increase the funding for HOPWA?
Let me, if I could, speak to that. Nationally, there's several advocacy groups that work on that. HUD did increase the amount last year. The Obama Administration has 88 5/26/10 - FINANCE - BILL 100129, etc. proposed increase for next year. The formula that drives what we get is complex and messy. It's volatile. It's based on a combination of current caseload and historic caseload. The current incidence rate, sometimes called the bonus amount, which is hardly a bonus since it depends on higher infection rates, gets us additional funds, but that portion, a quarter of the national award, bounces around a lot, because it depends in part on reporting and when people happen to walk in to a doctor's office and things like that. Two years ago, we got a substantial increase based on the bonus amount, and we have sustained that amount. At the time, we weren't sure we would be able to keep the amount of the grant that high and we were cautious in putting new rental assistance slots out. Because we've gotten this increase sustained, we're going to be able to add about 60 additional rental assistance 89 5/26/10 - FINANCE - BILL 100129, etc. grants to persons with AIDS in the new fiscal year. At the present time, that will cut into our waiting list substantially.
What is the amount that you receive for this program?
So how many sites can you fund with that, are you able to fund with that? How many patients can you accommodate?
Well, we fund a variety of different things. Last year we, between HOPWA, rental assistance and shelter plus care, which is administered by the Office of Supportive Housing, and some HOME funds, which we also use for rental assistance, we served about 800 households with direct housing assistance. They either received a rental assistance voucher, they received an emergency grant to allow them to stay 90 5/26/10 - FINANCE - BILL 100129, etc. in their apartment or they lived in a housing group living arrangement of some kind.
Okay. You know, State Representative Jewell Williams had a press conference and we got some information, I guess, from the state about the increase in HIV/AIDS epidemic. What is our role here in developing the advocacy? Like I said before, we used to have a lot of people in this room advocating for everything, particularly funding for HIV/AIDS and housing for those patients. Are we doing anything to strengthen and increase that advocacy in Washington?
We're obviously not allowed to advocate in certain ways as the grantee, but I think we do make -- the Administration makes its needs known 91 5/26/10 - FINANCE - BILL 100129, etc. to its Washington representatives and congressional office about the needs here.
Okay. Thank you. Ms. McColloch, according to of the budget detail of the Con Plan, $60,000 has been allocated for anti-predatory loan products. Can you explain how these funds will be used and how does this funding level compare to previous years? MS. McCOLLOCH: The $60,000 that you refer to is funding that is provided to Greater Philadelphia Urban Affairs Coalition, GPUAC, that supports the activities, that supports staff and operations at GPUAC to carry out the program that's providing Mini-PHIL loans, and that is the same funding that it received last year and I believe the year before -- and also the year before. So it's continuing to support GPUAC's efforts to assist us in providing 92 5/26/10 - FINANCE - BILL 100129, etc. anti-predatory loan products.
One of the concerns we've raised over and over and over again about this issue about the PHIL-loan program is the lack of advertising and information given out to the public, because I carry the little pamphlet in my car, because when you talk to people about it, they look very puzzled. So given the need for support and you can see the discussion around the banks need to put more money into the community to help these families who may want to buy housing or probably need home improvement loans, which we really find a lot of these predatory loans in Philadelphia are associated with home improvement or second mortgages to do home improvement, is there any way that we can get the level of increase for this program so that we can let our citizens know? Because they still are in a vacuum, a quandary to know what exists out there to help them. And the banks do 93 5/26/10 - FINANCE - BILL 100129, etc. participate in -- I think some of them -- in the program, but certainly we need some money to provide information to the community. MS. McCOLLOCH: Yes. We have -- through our housing counseling agencies, they provide the information and filter clients from the housing counseling agencies to GPUAC, and we've also done water bill stuffers that come in everyone's water bill once a month. There's almost always a stuffer every month advertising something. And we've done water bill stuffers for the Mini-PHIL program as well, and that's been an effective way to get the word out.
But you need to do more, and I'm going to keep talking to you about that, because it's not enough. We have 1.5 million people in this City, and if I see it in one-tenth of the City in my district and very narrow portions of my district where 94 5/26/10 - FINANCE - BILL 100129, etc. a lot of the predatory lending has taken place, the information is not getting out to the community. MS. McCOLLOCH: Okay. I'd be interested to talk to you about some ideas you may have.
Considering the need for anti-predatory lending products and the wait list for BSRP and similar services, has there been any consideration towards using the banks that partner in the anti-predatory lending program to expand the flow of bank capital into low-income communities for needed home repairs and improvements? MS. McCOLLOCH: I'm sorry. I didn't understand. I just didn't understand the question. Have we been working with the banks?
Do you work with the banks at all to expand their involvement or lending to communities for Basic Systems Repair? MS. McCOLLOCH: Well, the Basic 95 5/26/10 - FINANCE - BILL 100129, etc. Systems Repair Program is a grant program, so the --
No, but I'm saying because we don't have enough money -- MS. McCOLLOCH: Because our demand is so great for BSRP, are we trying to expand the banks' participation? Well, the banks participate in both the Mini-PHIL and the PHIL-loan program, and there's a standing committee that we meet with that GPUAC chairs -- GPUAC is the administrator -- chairs that has bank participation on it, and so we continue to try to work with the banks to expand the number of banks that participate.
Do you give them a sense of urgency? MS. McCOLLOCH: I'm sorry?
Do you provide a sense of urgency to the banks? It seems that Wachovia could use some help. 96 5/26/10 - FINANCE - BILL 100129, etc. MS. McCOLLOCH: We'll try to reach out to Wachovia.
Thank you, Madam Chair. Good morning. Madam Chair, my first comment is off topic. I need to do a rewind back to the first panel with Mr. Rob Dubow and correct the record that it was not the Treasurer's Department. They had in fact exceeded their goal. My misstatement was that it was the -- or it is the Pension and Retirement Board that does abysmal performance when it comes to MBE, WBE participation, and I've shared that with Mr. Rob Dubow and corrected the record. I needed to do that.
Yes, yes, yes. Back to the topic we're in. 97 5/26/10 - FINANCE - BILL 100129, etc. First, Deborah McColloch, let me say thank you for your leadership and willingness around the Child Care Facilities Fund since its launch in 2003, and I know -- (Applause.)
Yes, there are many who pay attention to what the City is doing in this area.
See, we do have some advocates in the room, right? Thank you.
I know also that you had the tough job of considering competing fragile interests in communities, as has been already stipulated by Councilwoman Tasco with the community badly affected by AIDS and predatory lending. So I'm just asking that you keep in mind going forward during this as we come to closure around the budget, that you remember when you make your decisions about the budgeting of this particular community, that -- and 98 5/26/10 - FINANCE - BILL 100129, etc. let me just read it so that I don't misstate it. Typically when your professionals step in to look to see how much money has been spent, there's a difference -- there's now a difference in organizational models and accounting procedures, because the City's contracting process and review takes up to two years. So do you understand that the Facilities Fund advances the money to grantees to make capital improvements. When the City looks at the balance sheet for the project, it appears, it appears that you don't often consider that that money has been obligated and, therefore, the Facilities Fund isn't using all the money they have asked for, hence the smaller amount. So it's important to me that you understand that peculiarity, if you will, and as you look to make the decisions around this pocket of dollars, you'll keep the Facilities Fund whole for 99 5/26/10 - FINANCE - BILL 100129, etc. what that can mean in the crisis that we're in. Do I make myself clear? MS. McCOLLOCH: Yes. And I do understand the problem to which you're referring, and I've had many meetings with my colleagues at the Child Care Facilities Fund, the folks from NFF and others, to try to help them and support them in carrying out this program. The City supports the Child Care Facilities Fund. They're in the budget for $650,000 this year, no small amount, and there is always this, I'll use the word, discrepancy between the funds that have been drawn down and the funds that NFF, Non-Profit Finance, who carries out the program, has obligated, and that is a problem that is systemic because they need to obligate the funds, they need to make the commitment. They make the commitment of funds, do the work and then they draw them down. So there's always a difference between what our records show as the amount spent and the amount in 100 5/26/10 - FINANCE - BILL 100129, etc. their minds that they have obligated, and that is -- that's ongoing because that's the way the program --
Is set up. MS. McCOLLOCH: Is set up. But I just want to reiterate that OHCD is cognizant of the good work that they do, as evidenced by the fact that they're in the budget for $650,000.
Yes. Well, we thank you again for that, and the only other factor, benefit that comes with this particular community is that where you have those type of activities, it supports neighborhood revitalization and jobs. So in no way -- in never no 18 way to diminish the competing fragile communities, but always looking for that one added benefit or edge that a particular community brings, and in that case, the Child Care Facilities Fund. I need to put that on the record, and I thank you again for your leadership. Thank you, Madam Chair. 101 5/26/10 - FINANCE - BILL 100129, etc.
Thank you all for coming. We appreciate it very much. Councilman Clarke.
Thank you, Madam Chair. Good morning, good afternoon, whatever it is. MS. McCOLLOCH: Good afternoon, Councilman.
Couple of quick questions. One, a follow-up on Councilwoman Brown's question with respect to the concerns -- and I understand that you have very difficult decisions that you have to make, although in this particular case, not declining funds but in moving dollars around in very difficult times and the possible reduction in the aforementioned program. You reference in your testimony 102 5/26/10 - FINANCE - BILL 100129, etc. the fact that you did not receive an infusion of cash from the stimulus in this particular year, although there is an increase in funding from the prior year on the general CDBG allocation; am I correct? MS. McCOLLOCH: Yes. There's an increase in the general CDBG allocation of approximately 3 million, but that's offset, because last year we got an additional million in Recovery 13 Act -- in CDBG money from the Recovery 14 Act that we call CDBG-R, so that the total effect is a reduction in funding.
From that year, but it's not a reduction in funding from the prior year. I mean, that's a one-time funding source. MS. McCOLLOCH: That was a one-time funding source, yes.
So my concern is that -- and, Deborah, I know you a long time. I know this is not where you're going -- is that it implies 103 5/26/10 - FINANCE - BILL 100129, etc. that for a layperson says, Well, there's a reduction, a significant reduction, in almost $10, $11 million, because we got whatever we got last year, 22, I don't know the exact figure, but -- so, therefore, we have to make difficult decisions in reducing programs, when in reality that million or 14 million, 10 whatever it was, was actually a one-time 11 number that should not be reflected in 12 the general allocation of funding from 13 the general CDBG budget. So that should 14 not be the basis for impacting the Child 15 Care program, because that has nothing to 16 do with it. 17 MS. McCOLLOCH: I understand 18 what you're saying, Councilman. Although 19 I would point out that two years ago the 20 Child Care Facilities Fund didn't receive 21 any additional funding. The funding that 22 the Child Care Facilities Fund has been spending up until now was $5 million of CDBG funds that were awarded in 2003. So they've been spending down that 5 million 104 5/26/10 - FINANCE - BILL 100129, etc. since 2003. So for this particular program, this infusion of 650,000 is something that hasn't appeared in our budget for many years.
All right. Thank you. Thank you for correcting me. I should have known that you were on top of it. Couple of quick questions. Are you familiar with the Growing Greener program, a state program that's allowed -- it's apparently a significant amount of money that's made available by the state that can be used by municipalities for purposes of site preparation, curbs and sidewalks, infrastructure in the event that it's a watershed community, which I understand Philadelphia is significantly a watershed community. It's my understanding that there's a significant amount of money returned to the state each year because it's not utilized by eligible areas.
We'll find 105 5/26/10 - FINANCE - BILL 100129, etc. out about that.
Could you, please? And I actually found this out on following a couple of candidates on the state election -- legislative election campaigns. I just happened to hear it, and actually there is a legitimate program. Could you please check that out, because we need all the money we can get. Okay. Getting to the meat of my question. My understanding is that you have a number of contracts that you let with external agencies such as the RDA, PHS, PHDC, those various agencies. In terms of your ability as it relates to those contracts, what level of authority do you have in terms of directing their activities that come as a result of funding from your agency? MS. McCOLLOCH: Well, we negotiate a contract with, as you say, a variety of entities. It's a negotiation. So we -- 106 5/26/10 - FINANCE - BILL 100129, etc.
Could you speak into the microphone. MS. McCOLLOCH: I'm sorry. I'm trying to look at him.
Well, turn the mike. MS. McCOLLOCH: I'm in an awkward position. Obviously because the City or OHCD is the funder, we have some ability to -- we work with the agency, whichever it is, to outline the activities that will be included, activities that we're going to fund. They have to be fundable, eligible activities following federal guidelines and so forth. And then we negotiate a contract about what activities we want to support and how those programs will be carried out. It's detailed in the contract. So, yes, we have a lot of latitude about what goes into the contract.
In terms of your process of determining what outside 107 5/26/10 - FINANCE - BILL 100129, etc. entities you contract with, what is that process? Is there a request for proposals or is it a solicitation of potential entities that can comply with that contract? How do you decide who gets the contract? MS. McCOLLOCH: In some cases, for some activities we issue a request for proposals; for example, housing counseling agencies. We issued a request for proposals this spring. We will enter into a series of contracts with agencies to carry out that activity starting next fiscal year. For some entities, such as the Redevelopment Authority or PHDC, we don't issue a request for proposals. We simply engage in a contract with each of those public -- well, quasi-public agencies to carry out the activities that we want to have carried out.
Are there no other agencies that can carry out those functions? MS. McCOLLOCH: There is no 108 5/26/10 - FINANCE - BILL 100129, etc. other agency besides -- well, the Redevelopment Authority has the power to acquire property through eminent domain, and so that's one of the -- that is an activity that we fund, that we carry out through the Redevelopment Authority, because that's the entity that is state chartered to be able to do that.
My question was, are there any other entities that can carry out those functions? MS. McCOLLOCH: For that particular function, I believe that the Philadelphia Housing Authority could carry out that activity and I believe the School District can, but those are the only three.
So there are other agencies that can do that? MS. McCOLLOCH: They're all that same sort of level of public agency.
All right. What are the other ones? MS. McCOLLOCH: Philadelphia 109 5/26/10 - FINANCE - BILL 100129, etc. Housing Development Corporation, Pennsylvania Horticultural Society. Those are agencies that we contract with that we don't issue a request for proposals. We simply put it in our Consolidated Plan that that's the agency that we intend to contract with. Through the Commerce Department, the Philadelphia Industrial Development Corporation, PIDC, is another such example.
Why don't we put out request for proposals for those, all those agencies? MS. McCOLLOCH: Well, again, in the case of certain activities, there are only certain agencies that can carry out those activities. Putting out a request for proposals would not serve any purpose.
Like the Horticultural Society? MS. McCOLLOCH: Well, I was thinking more of the eminent domain. For the Horticultural Society, that is the 110 5/26/10 - FINANCE - BILL 100129, etc. main agency in the City that carries out the kinds of greening programs that we want to have done, the vacant land management and the other urban greening programs.
My question is centering around -- you made a decision that those are the only agencies that can carry out that function, without giving any other agency an opportunity to show that they can or respond to a request for proposals to carry out that function. MS. McCOLLOCH: Yes, we made that decision and that's why it's in the Consolidated Plan.
But it's -- MS. McCOLLOCH: It's based on the experience that we have with the Philadelphia Housing Development Corporation carrying out the largest Basic Systems Repair Program in the City. It's based on the experience we've had of working with the Pennsylvania 111 5/26/10 - FINANCE - BILL 100129, etc. Horticultural Society to carry out a greening program, both community greening and the vacant land management program, that we know that it can carry out that program. In the case of --
But other than that, you don't know that there's anybody else that can carry out that function, other than the fact that that's who you've always dealt with. MS. McCOLLOCH: I don't know that --
Because actually we've heard that -- not to get off track, but when we talk to entities as it relates to construction and when we do major projects and I interact with contractors and I say, Well, why can't you reach out to X or Y contractor to give them an opportunity, and they tell you, Well, this is who we've always worked with and we feel comfortable with them. MS. McCOLLOCH: Well, in the 112 5/26/10 - FINANCE - BILL 100129, etc. case of both PHDC and Pennsylvania Horticultural Society, each of those agencies in turn issues RFPs or RFQs, whichever, to get the contractors that do the work. So PHDC issues a series of RFPs to get the contractors that actually pound the nails and repair the roofs and install the plumbing and so forth. So that PHDC doesn't have that --
I understand what they do. MS. McCOLLOCH: And the same with PHS. PHS, Pennsylvania Horticultural Society, issues an RFP to get the contractors that do the community land care and do the vacant land stabilization. So the openness, the competition to participate in those programs is issued at the next level down.
I understand that, but there's no 24 competition and there's no openness on the first part; is that correct? 113 5/26/10 - FINANCE - BILL 100129, etc. MS. McCOLLOCH: Right; that we contract with PHDC or we contract with PHS.
All right. Part two of the question. In terms of -- and let's pick RDA out of the hat. The Redevelopment Authority, you contract with them for acquisition and, more often than not, using Block Grant dollars, right? So a property is acquired, it's in the inventory of the Redevelopment Authority, and then the Redevelopment Authority contracts with somebody through a redevelopment agreement or whatever. That entity that they've contracted out doesn't comply with the timeline or whatever the Redevelopment Authority called for. There's a default notice issued. Under my understanding, the Redevelopment Authority believes that it has the authority to reassign, change or do certain things related to that parcel 114 5/26/10 - FINANCE - BILL 100129, etc. or that property. Before they do that, is it your understanding, given the fact that they use money from OHCD that was contracted with to acquire that property, that there has to be an authorization as it relates to the reassignment or the change in the development plan before they do that? MS. McCOLLOCH: The Redevelopment Authority has changed the redeveloper of a particular parcel?
Correct. MR. McCOLLOCH: I believe the Redevelopment Authority has the authority to do that, but I think my colleague is here that could answer. (Witness approached witness table.)
Good afternoon. Would you state your name for the record, please. 115 5/26/10 - FINANCE - BILL 100129, etc.
Sure. I'm Terry Gillen. I'm the Executive Director of the Redevelopment Authority.
Hi, Councilman. So my understanding is your question is the same issue that your amendment -- your ordinance earlier this spring went to, right?
Which is this, I think, request by Council that if there's a default or change in the redeveloper, that it come through City Council, and I think that's --
The question is properties that -- this relationship was between OHCD and the Redevelopment Authority, which in earlier testimony it's witnessed that there is a 116 5/26/10 - FINANCE - BILL 100129, etc. contractual relationship. So the question is, if the OHCD contracts with the Redevelopment Authority to acquire a property utilizing Block Grant dollars or whatever dollars are available for that purpose and then the Redevelopment Authority issues a default notice on the redeveloper because they don't comply, either time or whatever reason, and before the Redevelopment Authority decides to dispose of or change the redeveloper or change the plan, is there a requirement or an obligation to go back to the original funder who has a contract with you to determine the disposition of that property?
So let me make sure I understand. So the question is should we go back to OHCD either, A, because they funded -- they provided the funding for the land acquisition or, B, because they're funding the Redevelopment Authority?
Both? Okay. Yeah. I don't know. I think -- I don't know. I'd have to think about that. We should get back to you and get you an answer to that question. I don't know.
Yeah. I mean, I just haven't thought -- as you know, this is a relatively new thing for the Redevelopment Authority to do, to be doing these defaults, and we're kind of at the early stage of it. And I, frankly, haven't thought about categorizing it in either of those terms, but we can do that and we will do that.
The Chair recognizes Councilwoman Brown. 118 5/26/10 - FINANCE - BILL 100129, etc.
Thank you very much. Good morning. Who handled defaults in the past? What's the formal practice or the history?
When you say RDA has not handled defaults historically.
Well, until this Administration came in in '08, it had never been done.
I see. Councilman Clarke. Thank you for your testimony.
I was not going to follow up, but since Councilwoman Brown is requiring that I follow up. And I guess I kind of get into this whole default, because I, frankly speaking, I think it's illegal. 119 5/26/10 - FINANCE - BILL 100129, etc. I'm not a lawyer, but the whole premise that, correct me if I'm wrong, Ms. Gillen, please, is that the Redevelopment Authority sells a property for market value to a redeveloper. That redeveloper does not comply with the redevelopment agreement, so there's a default notice issued to the redeveloper. You have not complied, we're defaulting on your redevelopment and we're taking the property back. But there is no 13 requirement to give the entity, the developer, the value that was paid by the developer at that time, and even at the time when that requirement comes about, there's no requirement to sell -- to reimburse that person for that amount. It's only a requirement, according to the Redevelopment Authority law, to reimburse that entity or that person for the amount that the property can be sold for in a subsequent contract or a subsequent transaction. I know that was a long -- 120 5/26/10 - FINANCE - BILL 100129, etc.
I'll try to break it down. Let's use real people. You sell me a parcel of land, $50,000. I'm supposed to build something. I don't build it in the timeframe associated with the redevelopment agreement.