COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING BEFORE THE COMMITTEE OF THE WHOLE - - - Tuesday, 4/9/02 9:45 a.m. Room 400, City Hall Philadelphia, PA - - - (CONTINUED HEARING) BILLS 020030, 020035, 020096, 020116, 020144, 020145, 020182 (All ordinances are tax-related.) PRESENT: COUNCIL PRESIDENT ANNA C. VERNA, Chair COUNCILWOMAN JANNIE L. BLACKWELL COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DARRELL L. CLARKE COUNCILMAN FRANK J. DICICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 4/9/02 COMMITTEE OF THE WHOLE INDEX WITNESS Joseph C. Vignola, Executive Director, PICA Collin McNeil, President, PENJERDEL Council.... Mr. Biddle, 13th-generation Philadelphian...... 25 Jerry Mondesire, Philadelphia NAACP............ 30 Andrew Hans, Private Citizen................... 34 J. Stein, Esq. Community Legal Services........ 39 Mrs. Chen, garment factory worker.............. 71 M. Rowley Greater Philadelphia Hotel Assoc..... 74 Ron Antonucci, Crowne Plaza Hotel.............. 81 Bill Fitzgerald, Doubletree Hotel.............. 84 John Keenan, Omni Hotel, Independence Park..... 89 Debbie A. Bell, People's Weekly World.......... 101 Amy Dougherty, Executive Director............. 106 Friends of the Free Library Dr. Cynthia Eiseman, President................. 111 Friends of the Independence Branch Library Greg Paulmier, Democratic leader............... 118 12th Ward, Germantown Robert Sworbrick, Manayunk Development Corp. 122 Jerome Bayard, Unite........................... 124 John Hogan,Democratic Socialists of America.... 126 Rick Morawski (for T. Cronin, AFSCME Local 47) 130 Robert Latimore, concerned citizen............. 137 T. Kearney, Legislative Aide, Councilman Cohen 143 - - - 3 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing
Good morning, everyone. This is the continued public hearing concerning Bill No.'s 020030, 020035, 020096, 020116, 020144, 020145, and 020182. Our first witness this morning?
Good morning, Madam President and members of Council. My name is Joseph C. Vignola, and I'm the Executive Director of the Pennsylvania Intergovernmental Cooperation Authority, and I am pleased to testify today. Madam Chair, if I may, on February 12th, I testified before the Committee of the Whole in regard to the tax structure analysis of the City Controller, and I've brought copies of that testimony, and I would like them to be included in the record as part of my testimony. And by doing that, I think I can be very brief so that you could get on to see other witnesses.
I would like to, you know, 4 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing address two issues that the PICA Board believes are critical to this discussion. We have said first in every staff report and white paper, we have called for a simplified tax structure and a reduction of taxes is such a way as not to jeopardize the fiscal health of the City or to jeopardize City services. We have also felt, as point two, that -- and I'd like to point out that during the past period, City tax revenues have continued to increase. 66 percent growth rate, from July, the beginning of this fiscal year through to the end of February of 2002, total tax revenues have grown better than 2 percent. More importantly, from our perspective, PICA staff's projections of that growth rate, if it simply holds steady for the balance of the fiscal year 2002 taxes, local tax revenues will end up nearly $47 million over the original Five-Year Plan projections -- that's the Five-Year Plan that was passed last year and improved by PICA last May -- or approximately $25 million over current projections in the Five-Year Plan that is currently before City Council. 5 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing I would like to, you know, point out a couple other matters because over the past several days, there have been quotes attributable to PICA, which we did say, but I think taking them out of context, you know, does no one any service, and I would like to try to put them into context again. And I want to emphasize that PICA continues to believe that meaningful tax cuts and service-level improvements can, and should, go hand in hand, and should be weighed equally when the priorities of the Administration are being set. However, as will be noted in our upcoming staff report on the Five-Year Plan, service-level projections contained in the proposed Five-Year Plan show little or no improvement over the next few years. This result means that meaningful tax cuts -- you know, that the meaningful tax cut that we need with no service-level improvements may be a double negative, so that we are urging that you consider a meaningful tax cut. In turning to some of the other matters that we were quoted out of context with, for Fiscal Year Plan '96 and Fiscal Five-Year Plan '97, the quote that was attributable to the Mayor's 6 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing presentation leaves out that PICA's concern was over the proposed revenues associated with -- remember this word? -- river-boat gaming, because in those plans, the plan was balanced because of river-boat gaming. With those revenues no longer assumed, you know, the General Fund risk has since been reduced. The identified risks, you know, are real for the current plan, but they are reduced. The main risks last year were schools, PGW, labor contracts, and the possibility of a recession. We have quantified what our school risk is, we have weathered, according to the economists, the recession. We still have to be confronted with PGW and interest arbitration for our police and firemen, but we believe that the contingency funds that have increased over the past year will be available to cover any of those contingencies. Also, I have to point out that PICA never advocated more aggressive projections over the life of the plan. What PICA staff did was merely look at this year's revenues to date and conservatively project them out for the rest of this year, with the result of slightly larger than the Administration's projections. 7 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing So if I may summarize, Madam President and members of City Council, we feel that this Council can consider a tax package that will, in the out-years of the plan, change the tax rate by lowering the tax rate.
It is up to this Council, whether they want to do the gross-receipts tax, a gross-up, as advocated in my testimony of February 6th, or continue the gross-receipts tax at the current levels and shift it, you know, to the wage tax. But in any event, we feel that given the revenues of the City that we project, it can be afforded. I would like to say one thing that I heard yesterday time and again and talk about what both Mr. Dubow and Janice Davis said, and that is in regard to when you do cuts, you have to phase them out over the five years of the plan; that is correct. When we didn't have a Five-Year Plan, we could do things this year and, as Scarlett O'Hara said, worry about it tomorrow, what tomorrow would bring. The good part about the PICA legislation, the Five-Year Plan, is that you have to not only implement it this year, but plan for it in the four years out of the plan. But I believe that this 8 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Council and this administration, before it submits its plan to PICA for approval, can work out those differences, and that it's not insurmountable. But they do have to be worked out. A plan that simply cuts the taxes without balancing the Five-Year Plan is not something that the PICA Board would consider favorably. A plan that has a balanced tax cut with a balanced plan, I believe, my board can favorably consider, as it's favorably considered the nine prior plans that have been submitted by this Council and all of the administrations. Thank you very much, and I will be pleased to answer whatever questions you may have.
Thank you very much. The Chair recognizes Councilman Nutter.
I just need to ask you a couple of background questions. You have been at PICA how long?
Seven years, sir. 9 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing
A member of City Council. No, I never sat in that chair; I mean, you guys had to have the flood to get that chair. I was in City Council for almost a full term before I was hired by the PICA Board to be its executive director. Prior to that, I was twice elected Controller of the City of Philadelphia, and prior to that, I was Chair of the City Commissioners in the City of Philadelphia.
So it's fair to say that you've had some experience over what must be -- and I'm certainly no trying to date you, but based on some of the numbers, about twenty years or so of government service?
At least half of which have been directly involved with the City's finances? Two terms as controller?
Okay, so you've had a 10 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing fairly unique opportunity kind of around the board, if you will, of different ways of looking at the City budget in the government: In the Council, PICA, City Controller, and a department head.
I'd like to get your response to -- there are some quotes that have been made in previous PICA plans that have been raised as concerns with regard to the tax-cut proposals. One quote says, "While tax reduction is an important factor in halting the deterioration of the City's tax base, a large number of residents and businesses who leave Philadelphia do so as a result of perceived shortfalls in City services, including public education. Improved service levels need to be addressed in conjunction with tax cuts." This is from a PICA report, a Five-Year Plan, FY '97 through FY '01. Now, that means that that was -- that plan was probably produced sometime in 1996?
Based on your experience and your professional opinion, have the 11 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing City's finances improved, deteriorated, or stayed the same since FY '97
There's another report -- or a quote from the same report PICA: "PICA staff would prefer that the tax cuts be explicitly based on definitive expectations of increased revenues or reduced expenditures resulting from service improvements. By not doing so, implementation of the tax cuts could place the entire General Fund at risk." Could you give us some context for that statement from a report from five fiscal years ago?
Councilman, when we wrote that, one of the -- this was -- I guess it would be the second fiscal year of the tax cuts. What was still in the out-years to balance the Five-Year Plan was riverboat-gaming. So what we were urging the mayor, then-Mayor Rendell and this City Council to do, was to make sure that when you're cutting taxes, you're also looking at the expense side so that your expenses do not exceed the revenues that the reduced taxes may bring in. 12 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Now, because we didn't have a wealth of experience, although the first year we cut taxes, wage-tax revenues were above the prior collection, we didn't know that for the second year, and it happened the second year, it happened the third year, so that in that context, we're saying that you should always be mindful of expenditures. And I think it's consistent with my testimony today, is that in putting together a wage-tax reduction plan, if that's what this Council wants to do, it has to make sure that it only considers the revenues for what will be Fiscal Year '05, but it also has to consider what the expenses are so that when you submit the Five-Year Plan to PICA, you know, it is balanced. And you can't do one with the other. But you also have the experience that it can now be reasonable to conclude that if you reduce the rate, the supply-side effect, as testified to yesterday, that may only be applicable to local governments more than national governments, would increase the dollar amount of the wage tax revenues.
Let me ask you one other question with regard to some comments from PICA 13 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing reports. This one is from FY '02 to FY '06. I'm assuming that's the present fiscal year's report. "The identified potential risk to the General Fund and the FY '02 to FY '06 plan constitute a real threat to the fiscal health of the City." Again, could you give us some context for those comments?
Yes. As I said in opening remarks, the identified risks to the plan are the school situation, a recession, PGW, and the labor contracts.
We have been able to quantify what contribution would be to the school and, you know, the Mayor did an excellent job in negotiating that to a lesser number than was originally proposed by the people in Harrisburg. At 14 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing one time, I heard numbers were 100 million and 100 million, and 75 million and 75 million, and we've gotten that down to, you know, $45 million. We've also weathered the recession. PICA was always concerned that if we had a national recession, Philadelphia would be severely impacted. Well, I'm glad to say that my fears and the fears of a lot of people were proven wrong. While we went through this recession that started March a year ago, and we had the tragic events of September 11th, as I testified previously, our revenues, our total revenues, have grown by 2 percent -- not what was projected in the plan, but they still have grown. Now, we still have two big concerns, and that is the interest arbitration of the police and fire and also PGW. The risk to PGW is quantifiable in that the plan accounts for $18 million a year for five years and a $45 million loan. That's a $135 million hit. But those two other knowns, and the one dramatically being the recession, is something that is now off the table. And the schools are quantified and are mentioned in the Five-Year Plan, so that has been spread out over the five years. 15 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing
Let me ask -- I have two last questions. One, I'd like again your professional reaction and your response in your current capacity to the idea that somehow to move forward on tax cuts, that there will be dramatic, if not draconian, cuts in service in the City. Your reaction to that as executive director of PICA.
Well, for next fiscal year, I don't see that happening because there is a wage- tax cut in place, there is a further reduction in the gross-receipts tax, and the plan is based with the same performance measures. You know, we feel, as I testified on February 12th, that there is monies that have been generated, revenues that have been generated above what was budgeted, and that those monies can be used for tax reduction. And if it's postponed out additional year, I don't think that eventuality, you know, will become a reality. However, I do have to say that what the Finance Director and the Budget Director said is that when you factor whatever cuts you vote on in, the 16 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Five-Year Plan has to consider what will be the revenue levels and spend against that.
And if it means using this excess revenue that's available, that's fine; if it means looking at some other adjustments to the expenditure side, you know, that's also fine. But, again, this administration has shown that it can hold the line on spending. You know, up until -- you know, when you're a new administration, they don't have the benefit of the doubt. Well, this administration has shown that it has won the benefit of the doubt, and if they say they're going to make the cuts and they're going to have expenditures under control, they're going to have expenditures under control.
Does PICA have any particular jurisdiction, or does it take in opportunity to look at issues of how do you reduce the cost of government? And has that ever been the topic of -- and when I say that, I'm talking about reasonable reductions in the cost of government, not trying to eliminate people, but talking about systems and productivity and efficiency. 17 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Is that something that PICA looks at?
We do look at it. Again, the jurisdiction and having been the controller of the City, we view that more as the Controller's issue of responsibility in recommending those types of efficiencies in government, but we do look at it, and, you know, we do make suggestions from time to time, and we do participate in committees that look at that, you know, for the City to give, you know, our two cents worth, whatever that two cents, you know, may be worth.
And without going into tremendous detail, have there been recommendations or suggestions made by PICA with regard to, again, reducing the cost of operating the government?
We have participated in some of those discussions and have, you know, agreed with some of the suggestion that have been put forward, yes, sir.
Lastly, in your professional opinion as the former controller of the City of Philadelphia and now as executive director of PICA, do you believe that the tax proposals in front of us, the wage-tax reductions in a scheduled 18 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing fashion, as well as reductions in the gross-receipts tax, that the City of Philadelphia and the City Administration can respond favorably to those proposals and maintain service levels?
Without addressing specific rates as in all of the bills and in all of the proposals --
-- we feel that there can be tax reduction either for the gross-receipts tax or for the wage tax, without adversely impacting the level of services that the citizens expect and what has been submitted in past plans, past five-year plans by, you know, by the administration. But we have not -- you know, again, until the legislation becomes a reality and what the final numbers are and how that is plugged in, I don't want to say what rate is better.
This is my last question. Do you have a view with regard to a proposal that on the one hand says reduce one, stop 19 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing the reductions in the other, versus a proposal that says seek to have reductions in both? Do you have any professional or personal view of that?
Well, the answer to that is yes because in my testimony of February 12th, what I said what can, you know, be done is that if you hold the wage tax, as submitted in the Five-Year Plan, and grossed up the gross-receipts tax -- in other words, took the '04 to '07 savings in the first year, you have enough revenue to pay for that in the first year. And if everyone believes, as I believe, that these reductions are meaningful -- otherwise, why do them? -- then although it's a gross number of approximately $47 million, the supply-side effect will net that to maybe even zero; or, as in the case of the wage tax, wage-tax revenues grew, maybe the business taxes, you know, would grow. That was my testimony back then. So, yeah, there is money to do wage taxes. I also said, Councilman, that if you do not want to gross up the gross-receipts tax --
Now, when you make that statement, are you saying immediately drop the 20 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing rate to the '07 rate now?
And what I said in February was freeze everything, and then next December, when you're going through the budget process, if what I believe will happen will happen is that the supply-side will take effect, then we can revisit the whole tax-cut situation anew. But if don't want to do that, if the Administration doesn't want to do that and this City Council doesn't want to do that, we think that same revenues that I'm saying you could gross up the gross-receipts tax with can be used to "reimplement," for want of a better word, the wage-tax reductions that were in last year's Five-Year Plan.
Right, okay. Thank you very much. Thank you, Madam Chair.
Thank you. Are there any other questions from the committee? (No further questions.)
Mr. Vignola, 21 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing thank you very much.
Good morning, gentlemen. MR. McNEILL: Good morning. Would you like us in order?
Identify yourself for the record and proceed with your testimony. MR. McNEILL: I'm Collin McNeil, the President of the PENJERDEL Council, the Tristate Regional Business Association. It's a great pleasure for me to appear before you today, and it's an honor to speak on such an important issue. As the president of the Tristate Business Association, I represent more than 120 of the Philadelphia area's largest employers. Many of our members have headquarters or large operations right here in the City of Philadelphia. In fact, PENJERDEL itself has a stunning view of City Hall; we're 22 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing headquartered right over on 15th Street. On March 13th, the PENJERDEL Board of Directors voted unanimously to support Bill No. 92. The Board fully understands the obligation of fiscal responsibility that rests on the shoulders of City government, but PENJERDEL feels that these are not times for the old tried-and-true method of enhancing municipal revenue. We feel we should not be looking at ways to halt wage-tax reductions; rather, we should be finding ways to speed them up. Many of PENJERDEL's members have made a long-standing commitment to the City, but it is increasingly difficult to justify the high cost of doing business in Philadelphia. Anecdotally, one of our largest members, a major employer in the region, was seriously considering locating a major facility in the City. It could have meant more than 5,000 jobs. The company's rationale was that the City has much to offer: A central, easily-accessed location, cultural amenities, and many more attributes that we're all familiar with. Ultimately, the employer chose a suburban location for his facility. One of the determining factors was the tax burden within the 23 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing City limits. It's often said that things like that don't happen in Boston. Well, Boston and Philadelphia are not of equal size; Philadelphia's nearly three times larger. It can be constructive to compare Boston and Philadelphia as perhaps the two cities in the United States that are the most alike and yet quite different. In 1979, the prominent Philadelphia and University of Pennsylvania sociologist Digby Baltzell wrote his book, entitled Puritan Boston in Quaker Philadelphia. In it, Baltzell offers the premise that Philadelphia is the way it is, thanks to the Quaker heritage here, and he says Boston is the way it is due to its Puritan heritage. The Puritans encouraged individualism and the pursuit the individual excellence, and the Quakers sought group consensus and frowned on individualism, preferring plain conformity. great leaders came from Boston: John Adams, Oliver Wendell Holmes, and John F. Kennedy. Here, Ben Franklin was from Boston. The last Philadelphian who achieved truly national acclaim as a great leader was George Meade, after the battle of 24 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Ghettysburg. Boston is a city on the rise. It has a population that has remained relatively constant. It enjoys a much larger per-capita workforce, with advanced degrees, people who have elected to be educated and to stay in the Boston area. " And Boston has done a better job of retaining corporate headquarters than Philadelphia has. As you are aware, census figures show that Philadelphia has lost more than 150,000 jobs since 1990. Philadelphia residents and workers live and work in a city that places upon its citizens arguably the second highest tax burden in America. Thus, I say to you that we are at a critical junction in the City's history. With many positives to boast of -- the Kimmel Center, the new stadiums, a competitive Convention Center and a burgeoning travel and tourism industry -- the City must get serious about saving and creating jobs. The heart of the region must not be allowed to stop beating, because as Philadelphia goes, so goes the entire Delaware Valley. 25 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd.
hearing Several simple actions can help resuscitate Philadelphia. I asked Councilwoman Blackwell to withdraw Bill No. 144. I ask that you all please vote for Bill 92, and if there is a mayoral veto, I ask that you override that veto. Prove Bonsall wrong. Philadelphians can, and will, take leadership. Philadelphia can, and will, compete with Boston. And that competition begins right here in City Council chambers. Thank you very much.
Yes, ma'am. Good morning, Madam President, Councilmembers. I want to thank you very much for giving me this audience. Unlike all of the distinguished folks who have gone before me, I am not here in any official capacity other than to say that I am a proud citizen of this city. And if I can elaborate on that a little bit, my family, my forebears have been proud citizens of this city for 320 years, having had in the ranks folks such as the president of the Pennsylvania Assembly, who hosted the Continental Congress; 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing President of the second bank of the United States, etc., etc., generations basically of 4 Philadelphians. 5 Now, not that I've had the opportunity to 6 consult with all of those people. 7 (Laughter.) 8
But I am here in effect 9 speaking for us as proud Philadelphians. 10 We -- my wife and I have lived here for a 11 good number of years. We've brought up our children 12 here; they've all been public school kids. 13 But besides Philadelphia, we have lived in a number of other places, including: Washington; New York; New Port; Ithaca, New York; Norfolk, Virginia; Paris; Madrid; San Sebastian, London; Winfield, Kansas; and the bustling metropolis of (indiscernible), Maryland. My point here and the thought I want to leave with you is that all of these places are viable; I've lived in 'em, been active in 'em. None of these cities or towns rely upon what amounts to a tithe of nearly 5 percent on people's wages right off the top. Somehow, they manage to get through. It has been proven time and again, time 27 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing and again, that a reduction in taxes, whatever it happens to be, usually income taxes, surprisingly results in an increase in gross receipts. John F. Kennedy proved it on a macro level, Ed Rendell proved it right here, as we heard yesterday. So, you know, I take umbrage with the remarks that I heard yesterday about studying the entrails of animals to try to figure out where the economy's going. I mean, we have plenty of evidence about what's -- call it the "supply-side effect." I just call it what Samuelson called it, which is "a tax reduction is a stimulative move." And on the other side of the coin, the more negative side of the coin, if we don't believe that that is true, then how come all of those big office buildings exist on the north side of City Avenue? Let's get 'em into -- on this side of City Line Avenue, let's give people a reason to come back in and not a reason to stay out. Finally, I just want to say that the 14th generation of my family, namely my ten-year-old son, came up to me the other day after having played a round of Sim City -- this is a computer, and that's S-I- M, as in Mike, not "Sin City." He said, "Dad, 28 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing guess what?" And this is a thing where you simulate the growth of a city, and that's what the "Sim" stands for. He said, "Dad, guess what? I had this thing going, my city was really going, and then I increased taxes, and then guess what? my population went down." I said, "Ooh, then what did you do?" He said, "Well, I kind of reduced them a little bit, and then they sort of stayed about even." I said, "Well, why don't you go down and try to just knock off another point or two." "Oh, okay." He came back: "Hey, Dad, my population's growing again." I said, "Are you out of money?" "No, I got more money." Okay. I recommend that rather than read the entrails of animals try, "Sim City." God bless. (Applause.)
Thank you both very much. I know you've been patient, you were here yesterday, and I appreciate you're returning today. And thank you so much for your testimony. Do we have any questions from members of the committee? 29 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing The Chair recognizes Councilwoman Brown.
Good morning. Could either of you speak to the composition and/or makeup of the Board of PENJERDEL. What percentage of them are Philadelphia-area business owners and the like?
The Board of PENJERDEL is made up of a cross-section of regional employers. We essentially are -- on a per capita basis, we have a larger number of companies based in Pennsylvania, then a smaller number in New Jersey, and a smaller still number in Delaware. There are a number of business owners on our board, including Fred Hobb, who owns the F.C. Hobb Oil Company on Market Street; Dennis Colgan, who owns Barthco International Freight Forwarding Company based at the Airport; Frank Locheim, who is the founding chairman of Wright Associates, a large international company based in Philadelphia. And there are a number of corporate executives, top leaders in the community who are either executives with companies headquartered here or who have large operations, such as Bill Friel, who is with PNC Bank, managing partners in law firms such as Schnaeder, 30 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Harrison, Segal & Lewis, a managing from Peat Marwick, etc.
So there's a good cross section. But I would say that a larger percentage of our members have operations in the City than not.
Thank you very much. Thank you, Madam President.
You're welcome. Any other questions from members of the committee? (No further questions.)
Gentlemen, again, thank you. MESSRS. O'NEILL and BIDDLE: Thank you.
The next witness is Mr. Mondesire. (Witness comes forward.)
Good morning, Madam President. I apologize -- they were grabbing me in the hallway with another emergency. 31 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing I'm Jerry Mondesire local president of the Philadelphia branch of the NAACP, and it's my pleasure to have a chance to have a conversation with you. I asked Councilman Nutter to give you a written statement, which we presented yesterday -- I hope that there are enough copies for you. Basically, I just wanted to sketch out our overall position in a conversational way with you today, not reaching those ecclesiastical heights that Reverend Edwards and Sister Bay reached late yesterday, but just to have a conversation and to let you know that we in the civil-rights community believe that the final stage of making sure that we live up to the American dream for all people, irregardless of color, gender, or national origin or sexual preference, is around economic opportunity. And the future of the City is clearly at stake. We can't talk about fighting for workers' rights and people's rights in a city that has no 21 people, that has no jobs, that has no economic development. The wage tax, as we see it, is a regressive tax that unfairly and has a debilitating impact on people of color, most of whom are low-wage 32 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing earners, as you heard time and time again from far better experts than yours truly. It is a regressive tax. There are no deductions, as we have, with our federal tax system; there are no graduated tax rates, as we have with the federal system. It is a regressive tax that falls most heavily on those who earn the less. You heard also that the Cohen bill, which talks about reducing or removing the wage tax from the lowest-income earners, would have a negative impact on the City revenue, about 50 to $55 million, so that clearly shows you in very graphic terms just how much money is earned by low-income workers. We in the civil-rights community believe that continuing to reduce this wage tax in the City of Philadelphia will attract more businesses, attract more jobs. As we go around the City in neighborhoods from Germantown to South Philly to North Philly, we find that stores and medium-sized businesses are closing repeatedly. There is abandonment all around us -- in our North Philly office, and there's abandonment all through West Philadelphia. I'm talking now about the commercial strips, and we see this as having a destructive impact to the point 33 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing where we may not be able to reverse it if we don't stop now. We think that continuing the incremental drops in the wage tax will continue to send the right signal; that stopping it sends the wrong signal, that stopping the wage-tax reductions sends a signal to the business community, and to the workers alike, that the City of Philadelphia cannot figure out how to grow without continuing to tax our citizens. So for all of those reasons and the fact that we live in a city where all of us are sharing these burdens, we at the Philadelphia branch believe that the wage-tax cuts should continue and that we should seriously consider Councilman Cohen's bill, which would reduce or remove the wage tax from low-income earners. We think it should be further studied, however, because there doesn't seem to be unanimity of opinion as to how we will supply the badly lost revenue if we take it out completely. Thank you very much.
Thank you very much. Are there any questions from members of the committee? 34 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing (No questions.)
Thank you very much, Mr. Mondesire. Our next witness?
Madam President Council President, thank you for this wonderful opportunity, I appreciate it. And Councilman DiCicco and Nutter in his absence, thank you for bringing together this all of this tremendous public showing of support for reducing the wage taxes here in the City. I personally am speaking in my capacity as a private citizen. I am also for the reductions in the business taxes that the Administration has proposed; I think they'll do a tremendous job in bringing more jobs here into the City. But I'm certainly not as well-versed in the numbers as many of the experts who have come before you in the last couple of days, so I'm going to leave those aside. I was talking to a friend of mine, whose nickname is 42, on Friday night, at 29th and Tasker, 35 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. " And I think that that really is a great example of what's going on here because here, you know, Kvaerner, the only thing reason that it came here to Philadelphia is because it was given substantial economic benefits to do so; it wouldn't have come in a free market. And here's this fellow that can't come to show his support for reduction in the wage tax because he's caught working for a company that was induced to come here, having been given substantial economic benefits. And so I think that there is a groundswell of support to reduce the wage tax, and I can assure you that what was referred to many times as "a briefcase brigade" yesterday is, in fact, a brigade of all of the citizens of Philadelphia. I'm going to close my remarks with a brief story from history to show that other people have faced these same kind of challenges in the past, and 36 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing through impassioned and dedicated leadership, have been able to surmount them. In the late seventh century, before the birth of Christ, the Athenian people were plagued with tremendously high taxes. It was an agricultural society, and in fact, the region of Athens, which is called "Attica," is plagued by very shallow soil, and so you really can't grow, with any kind of regular schedule, the olives that are the cash crop there. And what would happen is that there were all of these small landowners, who every year, they didn't know if they were going to grow enough olives to be able to feed their families. So the larger and wealthier landowners said to them year after year, All you have to do is just give me your entire produce, and I'll guarantee to you this baseline amount every year. And they were able to do that because they cobbled together enough farms to do so. Well, every year, as you can imagine, the baseline amount got smaller and smaller, and the amount of olives that the wealthy landowners were able to receive got larger and larger. And the working people, the farmers of Athens, were in a terribly difficult position. 37 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing So along came a man named Solon, and he realized that this was an awful situation, and in a moment of clarity, he engaged in what the Greeks call the (Greek word), the shaking off of burdens. And there, foregoing all of the taxes that the Athenian people had had, he removed all of the debt stones from the farms in ancient Athens, and began anew in the quest to develop the economic power of that city. It was only a few decades later that that city completed the construction of the Parthenon. It was only a few years later that that city gave to the world the philosopher of Plato and Aristotle and the playwrights of Aeschylus and Sophocles and all of the rest. And I think we have before us today, here in the City of Philadelphia, a name which is Greek in origin, I think we have before us today an opportunity to shake off those same burdens.
And so I, speaking as a native of this city, and having spoken to a lot of the people all over the City, not just experts, but mostly just working people here in the City who want so desperately to stay here, who are so deeply committed to the City of Philadelphia, but feel that they are 38 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing being pushed away year after year, I say to you that there is the support to shake off these burdens, and I know that you possess the dedication and resolve to do so. I thank you very much for allowing me to come before you and would be more than happy to answer any questions that you may have.
We are very grateful that you have taken the time to come in and express your views. Thank you very much. Are there any comments or questions from the members of the committee for this witness? (No questions.)
The next witness is Jonathan Stein. (Witness comes forward.) 39 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing
Good morning, Madam President and Council. I'm Jonathan Stein, and I'm general counsel at Community Legal Services. Thank you for this opportunity to offer testimony on the wage-tax- cutting legislation, particularly Councilman Cohen's bill that would inject progressivity into the wage tax by exempting low-income workers, similar to tax exemptions in state law. Community Legal Services, for 35 years now, has stood as an informed voice for the poor and low-income residents of the City, a large number of whom are working and paying wage taxes, and all of whom need quality services from the City. My first point is to raise a major concern about any wage-tax-cutting, especially one premised on the perhaps media-popular, but unproven and unpersuasive, theory that it's necessary to stem population and job loss. What is persuasive from reliable research is that maintaining quality public services funded by the wage tax is key to a robust economy in the lives of lower-income people. Leaving unmet service needs like those to improve our schools and create an educated workforce, when coupled with tax-cutting, may do great harm to the economic life 40 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing and quality of life of the City, especially low-income people. My second point will be that only when this high threshold of concern is convincingly met, and the Pennsylvania Economy League report is a totally unreliable report to base a tax-cut policy upon. When that threshold is met, then if any cut is put into place, it would be a progressive one targeted toward working-poor or low-income people. " I think we all want to separate out the sense and the nonsense of the wage tax. Perhaps the most important testimony yesterday, weighing in with some sense, came late in the day, with few in this room, when Michael Mazerov, the Senior Policy Analyst from the highly-regarded Center on Budget and Policy Priorities, came up from the Washington, perhaps yesterday's only true independent voice above the fray, and that center is probably the highest- regarded think tank in the country based in Washington, and they made a special effort to really look at the wage-tax issues here, the legislation, and come in with independent 41 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing research, without, you know, an axe to grind in the process. And I have copies of his testimony if those didn't see it yesterday. The heart of Mr. Mazerov's research across the country was that a city's decision to cut individual or business taxes was unlikely -- I emphasize unlikely -- to significantly improve the chances of attracting jobs or residents. Contrary to most of the witnesses yesterday, Mr. Mazerov looked at cities across the country and found that the declines in residents or jobs had nothing to do with varying tax rates or differences between the City's tax rate and suburban rates. For example, he showed that most Philadelphia suburban jurisdictions lost population at twice the rate of Philadelphia, yet had lower wage taxes. Mr. Mazerov also documented that many other cities with lower-wage tax burdens and lower tax burdens in relationship to the suburbs did far worse than Philadelphia in job retention. And interestingly, in one city, New York, which had a similar-to-Philadelphia suburban/city wage tax differential, New York increased its population and employment gains in the '90s, even 42 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing though it paralleled the Philadelphia and suburban wage-tax differentials. C. suburbs and the District of Columbia in a city, a study that made the Pennsylvania Economy League report look like a high school exercise, included not just one variable, the wage tax, as the PEL people did here, but they looked at multiple control variables like crime and local government spending to really give a true picture, not a biased picture, of the effect of a wage tax.
The resulting finding was that differences in personal income taxes had little or no impact on population and employment growth rates. " So the PEL thus promises us 110,000 new jobs by 2007 and a "City tax revenue gap" -- yes, that's their words -- of a cool $491 million in their report. 43 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Now, how are they going to have you, City Council, fill this, quote, City tax revenue gap? Well, as former City Councilman Ed Schwartz lectured us in the waning hours of yesterday's hearing, half of this, quote, gap, according to the PEL, will come from increased property values and increased tax assessments. This shift from wage tax to real property tax led our Professor Schwartz to actually call this wage-tax-cutting the, quote, Campaign to Increase Real Estate Assessments. If it's one thing our present problems don't need, it's a local dose of Reaganomics. My second part is to talk just a few words about public spending and public services. The last important message from Mr. Mazerov's research was that the higher level of public spending, except for welfare, the higher level of employment growth. C. studies, between quality public services and decisions on where to locate a business. The primacy of services -- schools, public safety, streets, the justice system, everything that do you in your daily lives as City Councilpeople -- has been the message of the major consultants on 44 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing business location. Yet very few yesterday were drawing the connection in these chambers between the City wage-tax revenue supporting quality public services and public services being indisputably the most important factor in employment and population growth. The City has defended itself here by detailing the threat to existing City services. Poor and low-income people in the City need existing services, but what's more, they need increases in services that wage-tax-cutting certainly threatens even the best of the supply-side theory scenarios. Consider a few of these items: The City's $45 million injection of funds to the public schools is but a small down payment. It's estimated that our schools will need an additional $300 million a year in additional spending. Are our wage-tax-cutters supporting this cutting? The City will have to shoulder its fair share of restoring PGW's liquidity in rebuilding after the billings and collections system mismanagement of '99. The Public Advocate of my office, Community Legal Services, and the State's 45 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Office of the Public Advocate believe that PGW will need $56 million or more over the next three years. Reliable and low gas rates and, yes, City water rates are essential to business and residential customers. Are our wage-tax-cutters supporting these supports? Public transportation needs added City support, and Philadelphia school children must still pay outrageously high fares simply to get to school. Are our wage-tax-cutters proposing more support for SEPTA or solving the school-transportation problem? Improved after-school services and the Health and Safety Fund for the City's child-care programs are not only a humane demand on the City, but it makes economic sense by allowing parents, especially low-income, single mothers, to be productive people and taxpayers. Many of these people are coming off welfare into work. Are our wage-tax-cutters supporting these after-school and child-care increases? Just a few weeks ago, this Council heard undisputed testimony that hundreds of lead-poisoned children are still living in hazardous lead-painted homes because of the City's Health Department's inability to abate these homes and leaving these poor 46 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing children the canaries in the mines of leaded homes. Are our wage-tax-cutters supporting $5 million to abate these leaded homes?
Finally, Fairmount Park, the City's jewel, but often its disgrace, is vital to the quality of the life of low-income and working people. The $30 million lost in City revenue by those supporting a small, marginal wage-tax cut is twice the budget of Fairmount Park. Are our wage-tax-cutters supporting the funds to make the park fitting as a tourist destination and quality-of-life factor for a business relocation? We could go on. But the point is that reducing services or, as I have emphasized, not addressing the critical unmet services like quality schools, safe neighborhoods, and clean parks and streets, is critical to life and work here. Even marginal tax cuts, shown to have little or no impact on people or jobs moving, if they endanger services, can be a poison pill no one here should accept. And finally, what we have to say about a progressive wage tax, which we, obviously, have never had here in the City. It's clear that the wage tax 47 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing hits the poor and low-income families the worst; in fact, the more well-to-do in the City, perhaps the most vocal here today and even this morning, are now paying 28 to 35 percent less wage tax than lower- income people do because lower-income people don't itemize on their federal income taxes, and they can't deduct the wage-tax payments to reduce the federal taxes. Those pressing a wage tax cut here may be forgetting that the 28 to 35 percent federal tax break means that if and when the local wage tax is cut and no longer the subject of a federal-tax deduction, 28 to 35 percent of the local tax break is revenue lost to the City and goes to the federal treasury, as more income is subject to federal income taxes, a perverse effect that enriches the feds at our local government's According to the Keystone Research Center, in Harrisburg, only 44 percent of jobs in Philadelphia pay enough to cover the basic costs of a basic-needs budget for a family of one adult and two children. Wages in our city are lower relative to living costs in the entire rest of the state. Particularly for a group of those making a transition 48 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing from welfare to work, where typical wages are to $7 an hour, these wages are well below the poverty level, and a wage tax on such families is unconscionable. Councilman Cohen's bill, which many of you have cosponsored, would provide an exemption, or tax forgiveness, for lower-income wage-earners along the lines of state income tax exemptions -- up to $30,000 for a family of 4, or about 175 percent of the poverty level. As the Keystone Center and its directors explained, a City wage-tax forgiveness program would shift the overall burden of Philly taxes away from people who live in the City and have lower incomes to people in the suburbs, more of whom can afford to pay them. This would be true even if you made commuters eligible for this tax forgiveness, as more City residents would qualify for this tax forgiveness. A wage-tax forgiveness program will stimulate the Philadelphia economy more than any other tax cuts, as more of that money will be spent by beneficiaries who live in the City, and low-income people will spend more of their money and spend more of it locally than do higher-income people, who tend 49 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing to save it away in IRAs or spend it on some vacation in Cancun that is spent outside of the City. Councilman Cohen estimates the forgiveness would cost the City 38 million; the Controller estimates a bit higher. Both sides might be high, as takeup for the forgiveness will likely not be optimal. Various new friends of the poor, like the Chamber of Commerce, who cite the impact of the wage tax on the working poor, then forget about the poor when they propose cutting the tax across the board, retaining all of the regressive aspects of the tax, especially for the poor. I believe that Mr.
Cohen's bill would make for a fair wage tax. To minimize City revenue loss, the forgiveness could be set initially at lower- income levels, but I return to my first point when I say that the City needs to address its current and future needed provisions of services to its people. Only when this and the revenue needed to provide them is assured should wage-tax-cutting be employed, and then only on the progressive basis proposed by Mr. Cohen and those cosponsors of his bill. Thank you. 50 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing
Thank you very much. Are there any questions from members of the committee? (No response.)
Mr. Stein, before you go, I would just like to ask you a question in terms of the first part on , because while I listened to Professor Schwartz last night talk about the wage tax and the effort to encourage people to move back to the City, that encouraging people to move back to the City would mean an increase in real-estate tax. Now, what do you propose we do? You know, what is the answer to that? Do we not want people to move back into Philadelphia?
Well -- well, I -- the important thing I think here is to focus on what the research shows, and as much as the rhetoric and, you know, even some of our gut feelings that drive a lot of what we're saying and doing here, the research in the rest of the country -- and that's why we brought Mr. Mazerov down yesterday -- shows that those wage- tax differences do not significantly have any impact on whether people make those decisions. That is, there are many other factors -- crime, schools, City 51 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing services, auto-insurance rates.
Does that mean that you don't try on work on one that you can, in addition to working on all of the taxes? Because we're concentrating now on wage tax doesn't mean that we don't have to look at those other issues at the same time.
Well, it would only -- if someone could show that concentrating on one thing, that this isolated thing would make a difference, I would be there with you; Mr. Mazerov and others would be there with you.
But that's the one issue that's before us at this time.
I mean, certainly crime is an issue that's before us, and we are trying to address that.
Well, if you're looking at one issue, the evidence across the country, the research shows that that one issue is not going to make a difference that all of this heated up rhetoric is supposed to dictate, and that, you know, if you want to throw $30 million a year away of City revenues and 52 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing think that that might do it, you know, fine, there is going to be some cost, because I'd like to see those $30 million get rid of lead paint in or 600 homes 5 to save the life and health of children with lead poisoning. I'd like to see the school transportation charge, which we still charge for kids to get to school every day, put a few million dollars there so that kids can get to school. And if we're talking -- so let's target some of that 30 million, because there very important needs in the City that are unmet right now. And to just say we're going to forego 30 million, or up to 491 million, according to the PEL over these years under a hypothesis, a theory, an intuition, you know, a speculation that somehow, this is going to solve our city's problems, we shouldn't be making that kind of decision on that kind of gut feeling of speculation, when too much is at stake in terms of where those dollars could be better spent to really, you know, improve services that do have an impact on our economy.
Let me give you some rhetoric from March 29, 1990, when we were wrestling with this issue of an increase of the City wage tax. 53 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing This is a report from The Daily News, March 29, 1990, where it talks about the Council's objection to Mayor Goode's request for a 5.4 increase to the wage tax -- to raise it to 5.4 percent. And at that time, the Chair of the Appropriations Committee expressed concern that wage-earners will be looking for another place to work if the wage tax goes up, but he was equally negative about the City's major alternatives -- increasing real-estate and business taxes. And another piece of rhetoric was "Philadelphia wage tax is already viewed by many authorities as a major drag on the City's economy. A recent study by economists of the University of Pennsylvania's Wharton School estimated that the wage tax had cost the city 100,000 jobs over the past 18 years." 19 Again, some rhetoric from March 30, 1990, 20 a quote: "I can emphatically say that I will look very negatively at raising the wage tax to 5.5 percent," Councilman Street, Chair of the Appropriations Committee and Goode's fellow Democrat told his party's caucus. "I think the big trouble at this point," Street said, "the question is whether or 54 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing not pushing the wage tax over percent is going to be the straw that breaks the camel's back in this whole area of relocation of businesses and residents." And we have a whole series of articles around the discussion at that time, when the City needed $65 million in revenue to cover some of the things as subsidy transit for SEPTA, funding for abused and neglected children, and other items that the Mayor had raised that he needed the money for and had proposed a tax increase. And so some of those discussions took place are the same discussions that we are having here at this. So I think that there are various views, and I don't think we can term it "rhetoric" that people have different thoughts and ideas about research, and we interpret research in a different way.
But on top of that, in fact, in 1911, when we were broke, we did begin to increase the number of libraries that were open, and we did include improved services at health centers, 55 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing and we did open the health centers on Saturdays, and then we did have a benefit from the savings that we made and the productivity savings that we had in the City. So there are all kinds of ways that we can save money that has been discussed during this whole term, and not just the down side of this.
Yeah. Well, you know, no one loves this wage tax. I mean, in terms of those savings you mentioned, I just cite former Councilman Schwartz's testimony yesterday, which I repeat for those that were not here late yesterday, which was that he looked at all of these savings estimates that we can save here, there and elsewhere, and he found none of them credible in terms of --
Well, that's just his opinion, and we do know that there were savings that were made during the course of the Rendell Administration and some of the savings that this Council voted on so that we could improve the quality of services and the quality of life in Philadelphia.
Right, right. Well, my only point is that the reliable research which looked at cities which have no wage tax or very little wage 56 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing tax, those cities lost jobs, lost population, and the wage tax, or an absence of a wage tax, had nothing to do with that. There are bigger economic issues. The biggest in our city was the deindustrialization, the loss of 300,000 manufacturing jobs historically way back, you know, is probably the root cause of where we are today, and --
I don't believe that anyone has said that it is the single reason for people moving; it is a contributing factor. And there are other issues that are involved, and we all recognize that, but at this point, this is the issue that is before us today.
Okay, but if you're going on a route of wage tax, then consider the progressive element of David Cohen or other bills, which is that if you're cutting that tax, do you also want to cut it for suburban people? do you also want to cut it for the people maybe at this table before me who are earning $100,000 or 200 or $300,000? I mean, are those the working people who will, you know, put that extra few bucks into the local economy or into some more stock investments? You know, people here have been doing a 57 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing lot of crocodile crying here at this table here as witnesses about poor being hurt or working poor people being hurt by the wage tax, but when they come to push legislation before you, they're not saying generally, you know, cut the wage tax for low-income people; they're saying cut it for everyone, the people who earn $500,000 in the suburbs who work here as well as the others. And people may be missing that point about wage-tax-cutting? Who do you want to benefit? where will the wage-tax-cutting benefit the City economically? where will that saving be spent? And I think that those are relevant issues, too.
Thank you, Madam Chair. I don't know where to begin. You've made some interesting statements, most of which I disagree with. You talk about some of the people who were testifying who make a $100,000 or more a year, and will they put their money into the economy or will 58 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing they buy additional stocks? Well, I think it's been proven by some of the things we've been doing in this city and other places that tax cuts -- disposable income, if you will, knows no boundaries, rich and poor. If you have more money to spend, people will spend it. Wealthy people who come to this city and have been moving back into Center City, as an example, stimulate and grow the economy. Those are the people, the wealthy people, who go to the restaurants, go to the restaurants, and spend their money in the service-industry environment, if you will, that supports jobs for people in the neighborhoods. So I don't have a problem giving tax breaks across the board.
Where will they spend it, Councilman? The extra 100 or $200 that will be given to the person earning $100,000, the question is -- economic research has shown that lower-income people, when they're already living below the poverty level, will spend that marginal extra on food, clothing, shelter in the neighborhoods and grocery stores and the like; that's proven. The person at the $500,000 or $200,000 59 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing level, when they get that extra hundred bucks, what are they going to do with it? Yes, maybe they'll --
As far as I know, they go to restaurants, they go to grocery stores, they do everything that the poor people --
You say they go to Atlantic City? Maybe they do. But if they live here, they do spend it. And statistics have shown that for every $35,000 in income a person earns, $20,000 of it gets reinvested in the community, whether you're rich or poor. So I think the problem we always have when we have these kinds of debates is, we separate -- we try to distinguish two different classes of people -- the haves and the have-nots. I think this is about all Philadelphians, whether you're rich or poor. Regardless of where you live, this is important to all Philadelphians. You made some statements that people don't necessarily make a decision where they're going to live based on the wage tax, and you're probably right, but what about the business community who employ people to work? They make decisions based on 60 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing the bottom line, what it costs to do business in the City of Philadelphia. You talked about deindustrialization of 30, 40 years ago. One of the things -- I wasn't in government them but if I recall correctly, 'cause I was probably in my teens 40 years ago -- I was in my teens -- is that one of the reasons industries -- you could do the math -- I'm 56. One of the reasons that industry left the northeastern corridor was because it was less expensive to do business in the South: Wage taxes, union contracts, a whole, you know, group of things caused that to happen. So what we're saying today is, we want to start taking some of those things off the table that have caused industry or the business community not to look favorably upon Philadelphia. Is the wage tax a cure-all? Absolutely not. Are we single-focused in this, do we things in a vacuum? No, we're dealing with all of those --
So I take a little 61 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing bit of exception to the fact when you say Mr. Schwartz yesterday said in his closing remarks, in addition to saying if we do the wage tax cut, that will cause real-estate taxes to increase to the tune of $400 million or so, I don't believe that, I don't subscribe to it. But if that were the case, I think we solved the School District problem because 50 percent of that money goes to the School District. Councilman Nutter and I and the rest of us who support Bill 92 have all of a sudden created a surplus at the School District level. But that's not going to happen, that won't happen. Has it happened over the last seven years that we have had incremental wage-tax reductions? Could you point to any real significant increase in real-estate taxes over those seven years? I run a district; I'm a District Councilperson. We've had a few assessments. We've gone to the Board of Revision of Taxes and we've gotten relief. I haven't seen any massive increase in the real-estate taxes during the seven years that we have been reducing the wage tax. Why, all of a sudden, another -- he added yesterday another comment to the doom and gloom. I 62 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing mean, you know, he raised the level again of doom and gloom, that if they do a wage-tax cut, your property values are going to go up 40 percent. You know and I know that that's not going to happen, because we won't allow it to happen. Should it begin to happen. This Council will redress, revisit the issue of the wage tax, and we could stop it anytime we want. So all I'm saying is, why do we want to do something -- and in Mr. Schwartz's statements yesterday -- I'll paraphrase him. In 1995, Mayor Rendell began the first wage-tax reduction in the City's history. He said that sent a powerful message to everyone that the City of Philadelphia was finally getting its financial house in order. This is -- I'm paraphrasing him. You have no idea what impact that meant to the City of Philadelphia. So on one hand, he's talking about not reducing it; and on the other hand -- talk about rhetoric -- he's saying what Rendell did and how important it was to the growth of the City. This is talking about growing the economy. This is not talking about rhetoric, that I wanted to look good because I have a reelection coming up next year and the rest of us do. I'm not about that, I'm 63 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing not about that.
So I think we have an opportunity now, let's restore the cut. Next year, when the cuts would take place, if we see any adverse effect, if we see real-estate taxes are going up as a result of the cut, we'll revisit it. Whoever's here, we'll revisit it.
Okay, just a couple of brief (indiscernible). The real-estate tax increase that Mr. Schwartz yesterday spoke to comes out of the PEL report, the seminal document that's fueling all of this. They themselves say there would be this tax gap which would be filled by real-estate tax assessment increases, so that's the PEL speaking; that wasn't Mr. Schwartz. But on your first point, Councilman, I think you make some good points. In terms of business locations -- this was in Mr. Mazerov's testimony yesterday, so we really can be a little more candid and honest about what is the factors that cause businesses to relocate. He quoted national consultants to businesses on business relocation, on 64 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing of Mazerov's testimony: "For our clients, education has been found to be the single most important service greatly exceeding the value of all of the services combined. A distant second is highway adequacy followed by public safety, then infrastructure." Education is the single most important factor on whether businesses come here or stay here. So the question is --
I agree, I agree, but if we don't have people working in this city, employed, paying taxes, who will pay for the School District's problems? The more residents that we lose, if we continue to have depopulation, the more the burden -- the greater the burden is on the people who are left behind, and that, as I said, has a spiral effect and then more people leave. So we got to try to figure out how to balance this --
And school financing is a question of a greater City commitment of dollars as well as a more State -- equitable funding from the State, which we know has done the City of Philadelphia a raw deal in State funding. 65 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing But let's not fool ourselves to say that we're going to solve or even make a dent -- and were not talking about cure-all --
And making an impact on business location here is not going to be done, according to the research, by wage-tax-cutting.
I had a partial solution to the issue on raising money for the public-school students to travel for free. You know what that solution was?
It was Bill 629 with outdoor advertising. They almost ran me out of this town, but people weren't listing to what I was saying at the time. We could have raised a few million dollars a year, which would have paid for free public school transportation needs for public-school students, but Bill 629 became this ugly billboard bill, whatever people wanted to call it. So I don't want to revisit that anymore; it's done as far as I'm concerned. But there was some solution to that, but people weren't paying attention. 66 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing
Well, the problem still remains that school children have to pay very high fares to get to school.
Well, we appreciated your help there, but I'm citing that to say if people want a marginal tax rate cut, having $30 million go away, we could, with a small piece of that 30 million, allow our school kids, poor school kids, to get to school without paying outrageous sums they have to now.
I thank you for your testimony. I actually agree with a lot of your analysis and the analysis presented by Mr. Mazerov. I do not agree with your conclusions, though.
And I am a supporter of 67 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing incremental tax reductions, but I do agree that incremental tax reform is not a strategy for business and residential attraction, and that all of that is a bunch of hype. But I want to have a real economic discussion with you to move beyond some of the spinning, political spinning, that's been done about the Rendell years and what incremental tax reform does and doesn't do. Let's say we're moving forward on Bill 92, which I believe we are, with a veto-proof Majority, and let's say we actually move forward on Councilman Cohen's bill, which I support as well. That is $30 million going back to citizens of Philadelphia under Bill 92, and up to $55 million going back to low-income Philadelphians under Councilman Cohen's bill. That is money disappearing from the City's budget, but that's not money that actually disappears. Some people would have you imagine that it just goes away. That money goes back into the Philadelphia economy, particularly the money under Councilman Cohen's bill. Can you tell me what you think happens with that $30 million and with that up to 68 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing $55 million.
What would happen to the $30 million as opposed to the $55 million?
Both, both scenarios. What happens to $30 million returned to the citizens of Philadelphia under Bill 92, and what happens to the $55 million returned to the low-income Philadelphians under Councilman Cohen's bill?
Well, I think that the money returned to low-income Philadelphians will have a greater impact on the local economy and on businesses in Philadelphia because more of it will be spent here, and, you know, we have to recognize a certain -- you know, taxes is not only about jobs, people and all of this; it's about equity, fairness. And when we pay our income taxes next week or whatever, we know that, you know, those Enron executives, whether they're paying taxes or not, are supposed to be paying, you know, at a rate different from people coming who are coming off welfare who are earning 10, $12,000 a year and even working-class people earning 20 or $30,000.
So you believe that the $55 million definitely gets reinvested in the 69 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Philadelphia economy?
I think there's a greater likelihood that the $55 million that would go to low-income families will be reinvested in Philadelphia, then the $30 million is going, a fair chunk of that, to suburban people.
Well, what about the 30 million; what happens with the 30 million?
I think it's less likely that that will be invested in Philadelphia.
Well, people who are more well to do will put it away in IRAs or maybe buy a little bit more stock. They may buy some more luxury products with it. They're certainly not going to buy another carton of milk from the grocery store; their refrigerator's filled with milk. They're not going to, you know, necessarily by some more local clothing at a store in their neighborhood because, you know, they may have decent clothing. That's the theory about why, when you put more dollars in the hands of low-income people who have to spend it for their survival, it will benefit the local economy. 70 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing
And the dollars that you put into the hands of more well-to-do people, although some of that will be spent locally, the research shows that more of that will be spent outside the City.
Okay, thank you. Thank you for your testimony. Thank you, Madam President.
Thank you very much. Are there any more questions of this witness? (No further questions.)
Thank you, Mr. Stein. Our next witness is Mrs. Chen. (Witnesses come forward.)
Good morning. Welcome. Please identify yourself for the record. (Mrs. Chen is speaking through a Chinese/English interpreter.)
Good morning, everybody. My name is (indiscernible) Chen. 71 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing INTERPRETER: My name is (indiscernible). I'm a staff person who works for Asian-Americans United. I'm here to translate for Miss Chen, and we're both here to testify in support of Councilman David Cohen's bill to reduce the wage tax for low-income workers.
I've been a garment shop factory worker since I came to the U.S. At the garment shop that I used to work, I was a supervisor and I made $8.50 an hour. At 40 hours a week, I made every week $340. After taking out taxes and after paying for health insurance, every week, I would take home $261. Last August, I was laid off. After September 11th, I spent a few months looking for any kind of work. I finally found steady work at the Marshall's warehouse. At Marshall's, I make $6.50 an hour, and I work 40 hours a week, and my wages are $260 a week. And after taxes are taken out, I take home $221 a week. And that's without any kind of deductions for health insurance. If I were to purchase health insurance, I would be left with $180 for one week's work. 72 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing My yearly salary at this $6.50 an hour wage is $13,520. At the current City wage tax, in one year, I will lose $608.40. Because my salary is so low, I have to find part-time temporary work in the garment shop sewing by piece. Because September 11th affected the economy so much, the price for piece work has gone down by about half, and if I were to try and make up that $608.40 taken by the City wage tax, I would have to sew 2,434 collars on shirts. If I were to sew the hems on skirts for children, I would have to sew 10,140 skirts. The 4.5 percent wage tax has a big impact on me, and I ask that the City Council consider reducing the tax to the proposed 1.5 percent. Right now, I feel like I'm representing low-wage workers in Philadelphia, especially immigrants. In Philadelphia now, there are a lot of unemployed people. Where I work now, at the Marshall's warehouse, there's over 200,000 workers who have applied and can't get a job there. Out of the dozens of friends that went with me to apply for this work, they only took two of us. Among the people I know, my friends or the 73 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing parents of my daughter [sic], I know a lot of people who originally moved to Philadelphia to find work, and because they can't find it now, are moving away. They can't find work, and the wage tax is high, so they don't want to stay in Philadelphia. Right now, I find part-time work on my days off, and if I were to work every single day, seven days a week, the take-home amount of my wages would be $355. There's a lot more that I can say, but I can't talk anymore because I have to go to work.
Thank you very much. Are there any questions or comments from the members of the committee? (No questions.)
Thank you again. Thank you very much. (Applause.)
Our next witness is...? MR. McPHERSON: Mr. Rowley. (Witness comes forward.)
Good morning. 74 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Thank you so much for coming back to testify; we appreciate your patience.
Please identify yourself for the record and proceed with your testimony.
Thank you, Madam President. I'm Mickey Rowley, Executive Director of the Greater Philadelphia Hotel Association, joined here today by general managers of three Center City Hotels: Mr. Bill Fitzgerald of the Doubletree; John Keenan of the Omni; and Ron Antonucci of the Crowne Plaza. When I finish my remarks, these gentlemen will make brief remarks. What I'd like to let you know about is who we are as an organization, give you some insight into the complexity of interests we represent, and share with you how these various interests come together with a common perspective on the need for tax reform in Philadelphia, a city, by the way, that we all love, and a city that we, in the hotel business, anyway, spend most of our day promoting and selling to tourists, traveling businesspeople, and 75 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing conventioneers. The Greater Philadelphia Hotel Association serves as a voice for the interests of the hotels in the Philadelphia region, which encompasses the five Pennsylvania counties and three South Jersey counties. The region consists of some 277 hotels, 38,000 rooms, 23,000 employees, and probably a half a billion-dollar annual payroll. We estimate that as much as $6 billion in real-estate value is represented. The lion's share of this huge industry is located right here in the City -- some in University City. Some in City Line Avenue, but most of it, probably 30 percent of the entire regional hotel industry, is within a walk of where we sit today. These city-located enterprises represent, we estimate, nearly three quarters of a billion dollars in sales. Most of the revenue, of course, was in room rental sales. Hotel-room revenues for Philadelphia County were $456 million last year. Philadelphia-based hotels employ directly, or via contract services, some 11,000 people earning an average of $24,000 per year. 5 million in wage tax. 76 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing These buildings are owned by a variety of types of investors -- some local investors who own and operate their hotels, like Valley Forge Investors and the Omni Hotel; some are relatively small operators like Mel Heifetz at the Alexander Inn, who operates his hotel directly. Some hotels are owned by large, publicly-traded REITS that pay a national organization a franchise fee and a management fee to manage the hotels, like FelCor Lodging Trust and Ron Antonucci here from the Crowne Plaza. And some are locally-owned and locally-operated and pay a franchise fee to a national chain. So our industry locally is made up a of a variety of interests and perspectives. On one matter, however, there has been clear and consistent agreement across all levels of our organization, and that has been for tax reform in the City of Philadelphia. We think we know a bit about taxes. 7 million in business privilege, or the gross-receipts tax; we pay $32 million in the hotel tax; 77 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. 5 million for our employees via the wage tax. In January, I sat before you and testified on behalf of the 60 hotels of the county in support of the tax-structure analysis report then just issued by the City Controller. I was testifying at the direction of my board, which had just reviewed the recommendations and found the Controller's report worthy of enthusiastic support. 78 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing At that time, we praised Mayor Street for what we regarded as his bold move in proposing a reduction in the gross-receipts taxes. The Mayor, you may know, has been a great supporter of our industry, and he knows that when you're losing money, taxing on the top line is onerous. The Mayor was also there for us, as you all were in City Council, in authorizing a transfer ordinance at the end of last year that allowed the City to launch the hotel industry recovery initiative that just ended last week.
The "Philly Overnight" promotion was enormously successful, and we thank you and we thank Mayor Street for your support. The Board of the Greater Philadelphia Hotel Association, since January, has met on two occasions and discussed the wage-tax proposal and specifically Bill 92 that you're now considering. In both of these discussions, we have agreed enthusiastically and unanimously that the wage-tax reductions we've enjoyed over the past several years must continue. We do this for a few reasons, and I'll let my colleagues here elaborate on that, but we support tax reform because of the psychological lift it gives 79 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing us, knowing that the City is headed in the right direction in managing its affairs in a fiscally- responsible way, while eliminating the variety of burdens Philadelphians have to endure for the privilege of living, working, and doing business here. We support tax reform and Bill 92 because our employees -- and I'm not going to speak for all 11,000 of them, but certainly most of our employees tell us that they support it. " I was marching with several hotel people, and some of them had briefcases, but at least two of whom that I was marching with are housekeepers. And I wish Councilman Clarke was here, because he said yesterday he's taking a poll of people in his district; they're from his district, they were marching for wage-tax reduction yesterday. By the way, a bunch of the hotels are from his district as well. So we support tax reform and Bill 92 because we know, when forced to do so, cities, even cities, like hotels have had to do recently, can 80 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing eliminate waste, inefficiency, and unnecessary spending, and we believe this discipline sometimes can only be experienced when forced, as it was on us last fall. Before closing, I should point out that for us, this is not merely a businessperson's knee-jerk reaction to any tax proposal. In fact, our association has sat before you in the past and endorsed an increase in the taxes, specifically the hotel tax. The hotel tax funds the Philadelphia Convention and Visitors Bureau, and we believe that this agency is among the best in the country; we think we're getting a great return on these tax dollars. The hotel tax also funds vital tourism marketing programs through the Greater Philadelphia Tourism Marketing Corporation, and we see great returns on this investment of our tax dollars. Finally, the hotel tax pays the bond obligation of the Pennsylvania Convention Center. This too is a vital economic driver for the City, and we're soon likely to be before you to testify on behalf of an expansion to this great facility. I thank you for your attention and now, 81 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing before taking questions, I defer to my colleagues to who have come here today to elaborate on the reasons we support tax reform and Bill 92. First, I introduce Mr. Ron Antonucci of the Crowne Plaza Hotel.
Thank you, Madam President, for the time today. I know you have a lot of people to hear from, and we appreciate that you've given us and the Hotel Association an opportunity to speak. We believe our industry is one of the critical replacement industries here in the City as we emerge from a manufacturing economy to a service economy. As mentioned in the Association's overview testimony, our ownership structures vary greatly. I happen to work for an organization, Six Continents, that is one of largest hotel operators in the country. We own brands like Holiday Inn Express, Crowne Plaza, Staybridge Suites, and Intercontinental Hotels. We manage 250 hotels across the country and another 150 hotels across the globe. With this organization, I have managed hotels in South Carolina, Pennsylvania, and many other cities and states. In my career, I have 82 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing managed hotel in 20-plus states across America. Here in Philadelphia, I manage the Crowne Plaza Hotel. We employ approximately 200 employees, most of whom are Philadelphia residents and represent annual sales of over $60 million a year. We manage this for FelCor Lodging Trust, one of the nation's largest REITs. FelCor, down at their headquarters in Dallas, processes a lot of checks to pay property taxes and all sorts of other state and municipal taxes for their portfolio of over 100 hotels. In fact, the CEO of FelCor was here in Philadelphia just a week ago, and I had the opportunity to chat with him about Philadelphia and where the City is headed, especially insofar as the hotel industry is concerned. I want to just expand a bit on something Mickey Rowley said in his testimony, and that is that we support tax reform. We support Mayor Street gross-receipts tax reduction and we support the tax reduction as outlined in Bill 92. But we don't pretend to know anything about City finances. While we hotel operators had to do some belt-tightening ourselves recently, I am not going to pretend to know how the City can save $290 million, or whatever the 83 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing magic number is. What I do know is that when my company and my owners breeze through the City to check on their assets, I want to be able to tell them that this city is headed in the right direction. I want to be able to tell them that the fiscal crisis that they all heard about ten years ago is over and that the City is proceeding down a path of reform and management efficiency. And lastly and, I think, possibly most importantly, I want to be able to tell my colleagues across the country that the implied promise of reform embodied in the last several years of wage-tax reduction is not being pulled out from under the residents and the businesses in this city. In closing, I want to especially appeal to three Councilmembers who represent most of the hotels in the City. Council President Verna, I know you represent the Airport hotels. Councilman DiCicco, I know you represent the Society Hill hotels. And Councilman Clarke, you represent me and my hotel and several other hotels on the west side of Broad. I believe I've met you a few times at the various Center City events. 84 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Please do the right thing for folks who live in your district, many of whom work in hotels, and do the right thing for the businesses you represent in Center City. Keep this city going in the right direction. Please support Bill No. 92 because your constituents do and because it is the right thing to do for your district. I thank you for your time.
Thank you, President Verna. I too also appreciate the opportunity to share some of my thoughts today and thoughts that my friendly competitors and colleagues in the City have been discussing recently and, of course, the wisdom of Council Bill No. 92. I'm Bill Fitzgerald, and I'm the general manager of the Doubletree Hotel here on Broad Street. As Mickey and Ron have both described, our ownership and management structures do vary. In the case of the Doubletree, that hotel was built in 198e and is still owned by a local investor, who happens to own other businesses here in Philadelphia. They 85 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing engaged Hilton Hotel Corporation, who I work for, to manage the business and provide branch standards and marketing through the Doubletree name. So we bring both: We bring the big national company and the local-developer perspective to this debate. Our hotel, the Doubletree, employs 250 team members. Just like the Crowne Plaza and other Center City hotels, most of our associates -- we estimate closer to 90 percent, actually -- live in the City. 4 million in various taxes to the City. This is much higher than he's experienced or I've experienced in any of the cities that I've managed hotels in, which is several. This is something that we've been discussing lately, and it is really incredible for us to see the amount of tax that's paid through this city as compared to other cities. But I also want to talk about what I believe the Hotel Association testified to in January at the hearing of the City Controller's proposal to overhaul the entire tax structure in the City. I'd 86 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing like to talk about the impact of tax policy on commercial demand in the hotel business. " First, and most visible here in Center City, of course, is the convention, conventioneers. In the past eight years, since the opening of the Convention Center, we've seen a tremendous increase in demand from the convention setting. In 1999, room demand increased up over 9 percent; in 2000, largely due to the Republican Convention, it was up over 24 percent, and last year, one of its slowest years -- the slowest year actually -- demand was up 2 percent. The second and most important segment is tourists. We believe the city has been very successful in recent years in promoting the City as a fun place to vacation and spend weekends; of course, the "Philly Overnight" was fabulous, and you know the results of what that produced for the hotels -- some 33,000 room nights. The numbers support the success. In 1999, tourist demand was up over percent; in 2000, 24 tourist demand was up 8 percent; and in 2001, largely 25 due to the "Philly Overnight" program, it was up over 87 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing percent. But the third, and probably the most important, source of demand for hotels is the commercial segment. These are the lawyers, the accountants and support staff, etc. that -- basically, the plain business travelers who come to this city on assignment from companies that they're here to do business with. This segment represents nearly one-third of our total demand, yet has been expanding at a very, very slow pace. 9 percent decrease in commercial demand. Last year, it was flat. The two years in between there, '99 and 2000, we did see an increase of about 13 percent. But other cities talk about a to 25 percent increase in this commercial 18 demand segment. 19 You've heard testimony about the exodus 20 from Center City of major office tenants here today. You have been told that there's a direct link between office tenants and the City's tax structure. While we do not pretend to fully understand why companies move out to the suburbs, we tend to agree with this theory. 88 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing I have heard in other testimony about an insurance company that wants to move into the Wanamaker building.
I've heard that they are on the verge of accepting a proposal from New Jersey, and that the issue surrounding that is purely surrounding the wage-tax factor. This doesn't surprise us; we hear this all the time. The Wanamaker building is just a few blocks from the Doubletree and would make a great client of ours if they came here. Please do the right thing for this city and encourage an in-migration of office tenants. One significant demand segment of our business depends on your support of Council Bill No. 92. Thank you.
Thank you. Do we have anyone else to testify? (Witness comes forward.)
Good afternoon. Thank you, Council President. Seeing what you've gone through over the last couple of days, I'll keep it brief. My name's John Keenan, and I'm the General Manager of the Omni Hotel at Independence 89 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Park. We are locally-owned and, unlike my two colleague hotels, we're also locally-managed. I am an employee of the Valley Forge Investment Company out in Valley Forge. We simply pay Omni for the use of their brand standards and other sales and reservation support we get from a national brand. I have 140 employees at the Omni and about $10 million in annual revenues. I want to address the opinions of the folks who work for me in regard to their paycheck and the wage tax. By the way, as a local company, we employ people at our hotels in Valley Forge, who do the reverse commute: Live in Philadelphia and go out to Valley Forge every day to work. They work side by side with Valley Forge residents, who pay zero in wage taxes. We've transferred people from Valley Forge to the Center City location, and they've had to suffer the shock of realizing that we have to start taking nearly 4 percent from their paychecks right from the beginning. When they complain to us, I direct them to the City government and their City Council representatives. And here at the Omni, we employ lots of folks who both live and work in the City -- almost 90 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing all of my employees. And may I dare suggest, they also vote here. While I can't say that I know exactly what each of them thinks, I can tell you that these people are paying a lot of attention to this debate as it is now being played out. I had a housekeeping meeting this morning with my housekeeping staff, and they were very interested in my attending this meeting today. I want to just touch on one element of the debate and then tell a little story. It's been suggested that the argument today is over "just a few dollars" in the paychecks of Philadelphians making $50,000 a year. As has been reported here today, most hotel employees make about half of that, about $25,000 a year. To these wage-earners, the wage tax is about $1135 per year, or $44 in their biweekly paycheck. The difference, as I understand it, between Council Bill 92 and the proposal to freeze the wage tax is about $29 a year over time for this wage earner. That comes out to just over $1 per paycheck for the $25,000-a-year wage-earner, $1 a paycheck. Now, for the story. It's actually a 91 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing combination of stories from a group of my housekeepers in the years that they've had in the business. Envision a housekeeper. Oftentimes, it's a single mother whose paycheck actually isn't a steady sum every day because her income and hours are a function of business demands at the hotel. Imagine her thoughts -- and I've had to face these thoughts pay day many times -- when her income for a given week dips down just a few dollars because times are slow. Then imagine her thoughts when she finds out our copay arrangement on prescription medication went up $1. Or imagine her thoughts when she finds out her contribution to comprehensive medical coverage went up just a few dollars. Or, best yet, imagine her thoughts when her raise, which she had hoped to be about 40 cents per hour, turns out to be only 30 cents per dollar. True, these are a mere few dollars, but the hotel housekeepers I know watch every one of those dollars. They watch dimes, they watch pennies. It's a matter of their comfort and of their children's security. I appeal particularly to City 92 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Councilmembers Clarke, DiCicco, and Verna. Most of our hotels are in your district and many of these housekeepers I speak of live in your districts. Do the right thing for our employers, our owners, and our national reputation.
Reduce the gross-receipts tax and continue the wage-tax reductions envisioned in Bill 92. I'm pleased to join my colleagues in answering any questions you might have.
Thank you very much. The Chair recognizes Councilman Rizzo.
Thank you, Madam Chair. Gentlemen, thank you for coming here today. I'm going to take advantage of you being here, and I'd like either or all of you to comment on the Administration's decision. You referred to the Republican National Convention, which I thought was exciting for Philadelphia and, I thought, lucrative, but for us to allow the Democratic National Convention to pass, or not even take a shot at that, I'd like to get your feeling on that decision.
Thank you so much for giving us the opportunity to say something great about Mayor 93 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Street, and that is that he made the absolute right decision on that. We met with him, I think it was, the Friday before the Friday before the decision, and he was brilliant in how he looked at it. He said to this group of people -- and I think there were four GMs, and a bunch of other folks, most of whom were not enthusiastic about spending the 60-some million that the City would have to spend. Everyone, by the way, was enthusiastic about a lot of business in August of '04; no one necessarily thought that a $60 million investment on the City's part would pay off the kinds of premiums that we experienced in 2000 because we've already experienced them. We've already said to the world, We can do this. Doing it again and running the risk of possibly not doing it correctly again is not something that we thought was worth the $60 million risk. So the Mayor said, Okay, if it was free, would we do it? And we all said, Well, yeah, we would do it if it was free. And he said, If it was 100 million, would we do it? And Council President Verna was there as well. And we all said, of course, we wouldn't do it. And he said, My only question is, 94 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing where on that line do we fall? And, you know, we kicked around, maybe if it only cost $25 million, it would be worth the investment, but then said, you know, we'd rather take that $25 million and spend it on another "Philly Overnight" campaign or a Convention Center expansion or some other priorities that the City's facing. Now, I actually thought that he would want to bid on the convention; he seemed the most enthusiastic. He, obviously, has made the decision not to commit the City resources to it, and I think he made the right decision.
You're welcome. The Chair recognizes Councilman DiCicco.
My question is to all of you. And, Mr. Rowley, you may want to respond. From time to time, when we get reports on the state of Center City, in that report that 95 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Mr. Levy puts out, he generally speaks to a whole variety of issues. One issue in particular, we talk about the number of jobs that the hotel industry created, and we're somewhere in excess of 4,000 jobs.
Some of you -- or all of you have spoke to the issue that many of the people who work for you live in my district and Councilman Clarke's district or Councilwoman Verna's district -- or at least your hotels are there. Is it accurate to say that about 80 to 85 percent of the people who you employ cumulatively, in the hotel industry are Philadelphia residents?
It's actually probably higher than that. Our surveys suggest 80 percent; these gentlemen are each reporting higher than that. And by the way, there's a bunch of folks who live in the City and work at our suburban hotels as well.
Okay. And is it accurate to say that a majority, or a significant number of those folks, were formerly unemployed, and some of those folks who came to work in your various hotels were actually a part of the welfare-to-work program? 96 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing
Yeah. I don't know if the answer is the majority, but it's a significant number of folks were brought off the welfare rolls in recent years.
So you heard the testimony of Mr. Stein a little earlier
When he spoke about wealth people not spending their money here?
Most of the people you get may not all be wealthy, but they are people who have disposable income from outside the area who come here and spend their money, that go to your hotels, do the overnight stays.
Right. So the benefit is to people at the lower end of the income.
Because it keeps them employed and so forth and so on.
I just couldn't 97 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing figure out his logic that people who have money just invest it in IRAs and don't spend it, but whatever. I just wanted to get those statistics correct that the majority of people who work in the hotel industry are Philadelphians, and most of them, or a lot of them, a significant number of them, were formerly unemployed. Thank you.
That's right. And a fair number of our managers live in the City as well -- I do, I know Ron does, and a bunch of GMs live in the City.
Well, God rest his soul, Mike Boyle lived in Society Hill.
He was a wealthy man, and he spent money in the neighborhood, he went to the grocery stores Thank you. Thank you, Madam President.
Thank you. I also want to thank you again for coming in, and I will tell you that your employees have been absolutely marvelous. I think every one of them that 98 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing live in my district apparently have written a letter in encouraging that we vote on this bill. I have acknowledged each and every letter, and would you please convey to them our thanks for their interest in letting us know exactly how they feel.
Thank you, Madam President. Unfortunately, I may not have as many hotels as some of my colleagues, but I have had the opportunity to work with you, Mr. Rowley, and a number of the general managers of our great hotel industry. And I just want to, one, thank you for coming in. You have been a standup person during all the time that we've known each other and worked together on a couple different issues. I respect your commitment to the industry. You are correct, and we had some discussion about even the raising of the hotel tax, which, I think, actually may have taken place during 99 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing the course of an election year.
Yes, we did mention that at the time, but if the industry really wanted to have it happen and Council responded, but I think in many, many instances, the hotel industry has been tremendously responsive and provides a wonderful opportunity for the City to promote itself and better market itself, working with the other agencies around the City and the government that helped to promote this industry, but the buildings are landmarks, many of them in the City, some old, some relatively new, some were one thing at one point in time, and now they're now they're a hotel. The great service and even the greeting that you get -- not because you're anybody in particular, but just because you're literally walking into the place, I think, sends a very, very powerful message, especially to people who are not from here and may not know the wonders and the excitement of Philadelphia. You are ambassadors for this city in a 100 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing your own special way. And I want to commend you for that, appreciate you coming in to talk about this very, very important issue, the effect that it has on many of your employees. And if you mentioned it in your testimony, I apologize, but do you have a general sense of the percentage throughout the industry of the workers who actually live in Philadelphia?
Yeah, it's upwards of 85 percent. We estimate about 11,000 employees. And, by the way, if I can make a quick point. Councilman DiCicco referenced the Center City thing, which shows 6,000 hotel employees. we think there's 11,000 because there's a lot of restaurants that are farmed out but wouldn't be in that hotel were the hotel not there, obviously, so we're estimating about 11,000 employees, easily 85 percent of which live in the City.
Great. Thank you again very much for your testimony, and I appreciate your commitment.
Thank you. Any other questions or comments from 101 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing members of the committee? (No further questions.)
Gentlemen, thank you very much. Our next witness is...?
Good afternoon. Please identify yourself for the record and proceed with your testimony.
Yes. My name is Debbie A. Bell. I'm here on behalf of the People's Weekly World, and I thank you for giving me the opportunity to address you on this important matter. I, like many of the other speakers who came before me, am a lifelong Philadelphia resident and, therefore, I have paid wage taxes all of my adult career to the City of Philadelphia. Like most people, I am moved to action when it affects my self-interests. I don't directly qualify for the proposed wage-tax reductions in Councilman Cohen's bill, but there is some benefit 102 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing that I and other Philadelphians who might be considered, quote, middle-class will derive from the implementation of this bill. Much attention is paid to improving the conditions in Philadelphia to make it possible for this mythical middle class to feel comfortable and happy in our city. The health and welfare of our city is directed related to the quality of life that is guaranteed to every single citizen, regardless of their economic status. This concern covers a wide range of areas, including everything from the quality of the schools, the culture, the cleanliness, even our hotels, as we just heard, and the cleanliness of the streets, etc. Philadelphia wage tax is a regressive tax, which we've also already heard. It taxes the poor and the low-wage families at the same percentage as millionaires. If Council were to be serious about increasing money tax for our coffers, we would have a graduated tax. The wealthy would pay more than working poor. Under the Philadelphia tax plan, those who earn the least pay a larger percentage of their wages to finance the City than those who are wealthy. This 103 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing needs to change immediately. In order to ensure that our city has adequate funding, we need a tax code that proportionately taxes people according to their wealth. We cannot continue to use the working poor as pawns against other City workers. All workers, including City workers, deserve a reduction in their wage tax. Reduction for low-income workers should not be used as a reason to cut the wages and benefits of City workers. In the Cohen bill, the minuscule additional income to low-paid workers should be seen as a benefit to all residents of our city. It is pathetic that workers who are the heart of our city are being placed in opposing positions. The working poor are not the enemies of the public employees. It is unconscionable to threaten to cut City services and threaten City employees with layoffs if a minuscule tax cut is implemented. While low-wage workers are being threatened, the business community is being courted and offered further tax cuts. For decades, the business community have received favors from our city. With all of the favored status, many businesses still pick up and leave the City. This is 104 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing not a winning policy. Businesses cannot thrive if there are no 4 consumers to support them. There can't be any winners if we don't provide for every working citizen, the lowest paid to the wealthiest. Councilman Cohen's bill is a beginning towards providing an avenue to give the working-poor Philadelphians minor tax relief. 5 wage-tax reduction, but it may make it possible for a family to have a modest improvement in their living standards. Most of these workers toil at minimum-wage jobs, as we just heard from the hotel folk, jobs that rarely provide medical benefits or any benefits at all. The Cohen bill might give them the opportunity to get health care or some insurance to upgrade their housing, their diet, and possibly enjoy some entertainment. This modest step, obviously, wouldn't satisfy all of these needs; however, this small relief will begin to pay for itself in the taxes the City will reap from the increased ability of the workers to spend and support the businesses in their communities.
Council debate does not address the 105 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing question of whether to employ or even to provide well-paying jobs for a comfortable living standard for all of Philadelphia's families; that would be my preference if we were going to have a long discussion about how to make things more palatable for all Philadelphians. City Council is quibbling over giving this modest tax relief to low-income workers or giving -- I'm sorry, that's a repeat. It is time to stop using the people of Philadelphia as political tennis balls to be batted back and forth. It is time to give the working poor a break. Philadelphia's a wonderful city. Our city has many attributes: A spectacular park, a historic district, delightful neighborhoods, tremendous cultural institutions, friendly neighbors, and we even have a $200 million budget surplus. In all good conscience, how can our city insist that a family of four living on less than $30,000 a year annually must share this measly sum in the form of taxes. This is outrageous. Where is our humanity, where is compassion. Council needs to demonstrate to the people of Philadelphia that they care for the citizens' 106 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing welfare by immediately passing the Cohen bill, which reduces the wage taxes for the working poor. It is my self-interest and yours to make it easier for more of our neighbors to be in a better position to share the richness and bounty that our city has to offer. Let's stop the politicking and get about the business of improving our city. We should also talk about our schools when we're talking about this equation. Thank you.
Thank you very much. Are there any questions? (No questions.)
Thank you. The next group is the Friends of the Free Library. (Witnesses come forward.)
Good morning, members of City Council. My name is Amy Dougherty, Executive Director of the Friends of the Free Library, and I am joined by Dr. Cynthia Eiseman, President of Independence Branch Friends. 107 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing I am pleased to have this opportunity to come before you to discuss a topic that is of vital importance to me and to the citizens of Philadelphia. Libraries are not simply places to find shelves of books. In the libraries of the 7 century, particularly in Philadelphia, that has one 8 of the best systems in country, libraries are places 9 all kinds of learning for everyone. All 53 branches 10 of our system are equipped with 12 computers, videos, 11 cassettes, books, magazines, etc. It is a truly 12 democratic institution where all are welcome and 13 enjoy equal opportunity regardless of ethnicity, 14 economic or educational differences. 15 The 53 branches are the largest and most 16 comprehensive providers of after-school care for the 17 City's children. The branches have gone far beyond 18 serving as mere parking places for the children. 19 Currently, they provide programs to develop reading 20 skills, computer literacy, and homework assistance. 21 In addition, they offer training for the teen leaders from the community who are the providers of after-school help. This LEAP program alone reaches 85,000 children a, year and this is the tip of the iceberg. Let me briefly list some of the other 108 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing ongoing library initiatives to increase literacy that are available at your branch library. From October through June, Books Aloud is an educational enrichment program for parents of preschool children and day-care providers that teaches adults the skills and background to read aloud successfully to their children. A child develops library skills long before being able to read. 1,800 adults took part in this program in 2001. The Science in the Summer Program introduces students to science. Brief experiment-oriented courses are taught by teachers at all open library branches. There are four 45-minute sessions for one week. In 2001, 1800 students participated in the program focused on electricity. The 2001 program subject was chemistry. Teen Summer Reading Programs for grades from 7 to 12. In the summer of 2001, 5,121 children took part in this challenge to read more. Sundays on Stage comprises free performances for children, families, and adults at the Central Library throughout the year. Philadelphia Lectures at Central Library 109 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing brings eminent authors and reaches an audience of 11,000 in 2001. Not included in this list are programs sponsored by individual branch libraries or by branch Friends groups. This is perhaps some of the many reasons why the Mayor's report on city services reports that the number of registered library borrowers reached a record high in FY 2001 to 514,000 borrowers, an increase of percent. The number of 11 visitors increased significantly as well to 12 5,934,000, a 19 percent increase. Customer 13 satisfaction is also on the rise to an all-time high 14 of 87 percent of those served who were satisfied with library personnel in spite of the increased demand. The renovation of 53 branches will be complete by 2004, leaving only the Central Library renovation and expansion project remaining. One might be inclined to ask, do we need all of these branches throughout the City? What difference could it possibly make to close one or two or three or four? Can we make do with less? In a city that is in the midst of a public-school crisis in which less than half of public schools offer greatly-reduced library 110 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing services, if at all, my response is that we cannot afford to close any library doors. And how do we choose which ones to shutter?
The libraries with the highest circulation like the recently-opened Independence Branch at Seventh and Market? Or the lowest circulating library where Friends and librarians are working hard daily to reach out to their community to attract more borrowers. Can, and should, children from one neighborhood have to walk further to another neighborhood to reach a library? And will they? Is it safe or on a winter's afternoon? Is this acceptable? Whose library should we close? One in an affluent neighborhood that has ample family and individual resources, or the branch in a poor neighborhood that has less access to educational resources and is, therefore, more at risk? Who is prepared to make this choice? As we as a city and nation struggle with issues over equal access to resources, can we justify closing the very institution that provides equal access in a truly democratic form? I think we cannot, and should not. I implore members of City Council and the 111 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Mayor to consider the message that closing libraries will give: That there are those among us who are less deserving of City services than others. I suggest that it is your responsibility to ensure that this does not happen, to ensure that every child, parent, and senior in this city can take advantage of learning more every day, bettering themselves every day, and every day, having a safe place to do this. A thriving economy is only possible with a literate and educated citizenry. The 53 branches in the Free Library of Philadelphia system offers the most sustained and comprehensive means to an educated public ready to work and participate in a democracy. Thank you for this opportunity to speak to you. Dr. Cynthia Eiseman, President of the Independence Branch, will now testify.
Madam President, members of Council, and fellow Philadelphians, my name is Cynthia J. Eiseman, and I am President of the Friends of the Independence Branch Library. The Friends of Independence Library is a 112 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing subsidiary of the Friends of the Free Library of Philadelphia, a private, nonprofit corporation whose purpose is to support the Free Library system. The Independence Branch is the newest branch in the Free Library system. It opened just over one year ago, on February 28, 2001. The Friends of the Independence Branch was founded on the same day, with the purpose of promoting awareness and advocating for the branch's operations resources, services, and needs. The branch is located at South Seventh 13 Street, just off Market, and serves the communities 14 of Chinatown, Old City, Washington Square West, 15 Society Hill, and Queen Village. The people who live 16 in these neighborhoods have been without a branch 17 library within walking distance of their homes for 18 decades. Some of my neighbors struggled for 40 years to get a library branch in our community. Several years ago, a group of community leaders agreed to raise $230,000 to purchase collection materials if the City would establish a new branch to serve our neighborhoods. We raised that money, and the City built the branch. To shut down that branch, now that we have it, would be a 113 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing grave disservice to everyone who worked so hard to make it happen. The success and popularity of the Independence Branch in the months since its 6 opening is nothing short of astonishing. Within six 7 months, the Independence Branch achieved the highest 8 level of circulation of any of the 53 branches in the 9 system, and has sustained that circulation record for 10 the past eight months. Since February 2001, the 11 Independence Branch has issued over 3,550 new library 12 cards. To shut down a branch that enjoys such 13 popularity would be a grave disservice to its many patrons. Go to the Independence Branch Library, and you will find a branch filled to capacity. In the morning, you will see that many day-care centers in the neighborhood take advantage of the branch's children's collections, story times, and other special programs that our librarians developed for children. Parents and their preschool-aged children come in to enjoy story times and to read and borrow books. Also in the mornings, many adults, especially citizens, can be found reading newspapers 114 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing and magazines, working at the computers and using the extensive reference collections. Businesspeople who don't have another place in Center City to meet can, and do, use the branch for business meetings. Cutting back the morning hours would be a grave disservice to these patrons. At lunchtime, because Independence Branch also serves a significant number of people who work, but do not live, in Center City east of Broad Street, you will find such workers from nearby businesses dropping by to borrow materials or simply to spend their lunch hour reading quietly. Three afternoons a week, the branch hosts English-as-a-second-language classes for speakers of Chinese. After school is out, the branch fills up with school children who use the library to do homework, use the computers, or take part in the LEAP Program or other special programs developed by our librarians especially for school kids. Many children and adults do not have computers at home or at work and depend heavily on the library's computers to gain access to Internet resources. Cutting afternoon hours would be a grave 115 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing disservice to these patrons. The Independence Branch has a number of special collections that were created especially to serve our neighborhoods and are unique to the free library system.
The Chinese language collection, the largest in any branch in the free library system, attracts Chinese readers from all across the City, not just from the immediate neighborhood. It is so popular that some patrons have already read everything in the collection. The Independence Branch also has the largest collection of gay and lesbian materials -- not just in the free library system, but in any public library outside of San Francisco. In addition, Independence has the largest circulating collection of poetry books of any branch in the free library system. The Independence Branch also has a special computer for the visually handicapped. This computer enables blind users to convert the printed page to Braille or to gain audio access to information on the Internet through special headphones. Only four other libraries in the free library system have such computer equipment for the blind. 116 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Curtailing the hours of the Independence Branch would be a grave disservice to these patrons: The blind, Chinese readers, the gay and lesbian community, and lovers of poetry. But I'm not here to ask you to keep the Independence Branch open; I am here to urge you, members of City Council whom we have elected, to find other ways than to curtail ours at any branch or to close any branch of the library system. The Independence Branch is unique in many ways, but it is also typical of branches throughout City. Each branch serves the community where it is located. Each branch is important to the people in those communities. Going to the library has become a habit, a pleasure, a convenience or a necessity to the people who use it. To close or to curtail the hours of any branch of the free library system would be a grave disservice to those people. Thank you for giving me this opportunity to testify. Miss Dougherty and I would be happy to answer any questions.
Thank you very much. Are there any questions or comments? 117 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing The Chair recognizes Councilman Ortiz.
Thank you, Madam Chair. I think you have it wrong. We are not here to curtail the hours. You send that message to the Mayor; he's the one saying that. So the hearing here is not about cutting services, and I don't think this Council would support cuts or pass a budget that would cut those services.
So I suggest that you send that speech to the second floor, 'cause he's the one who cuts -- or decides to curtail hours. That's his decision.
Thank you very much for coming in to testify. Our next witness is...?
Our next witness is Greg Paulmier, and then following that will be Robert Sworbrick. (Witness comes forward.)
Good afternoon, 118 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Greg.
Good afternoon. Thank you. Greg Paulmier, I'm the Democratic leader of the 12th Ward in Germantown. Good afternoon, Councilmembers and ladies and gentlemen. The City of Philadelphia is ill today. The former mayor once described our city as: A cancer patient with a gunshot wound." The gunshot wound was a fiscal crisis: Lowered City bond ratings; a dirty, dangerous Center City area; and a lack of pride in our city. That wound may be healing now, but the City is still dying of a cancer, a cancer which consists of population loss, jobs loss, property abandonment, and lack of educational and employment opportunities for our residents. Unless this cancer is cured, the City will continue to whither away. Philadelphia's wage tax is at the heart of this cancer. It is a punishing and regressive tax, which was created in 1939 as an emergency measure to save the City from bankruptcy in the Great Depression. Since that time, it has become a monster, driving business, driving people, and driving opportunity out of the City and preventing 119 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing its return. It creates blight in our neighborhoods and sprawl in our suburbs. It is punishment both for the employers and the employees in the entire economy of our town. Philadelphia is in the process of reducing this self-destructive tax, and we must remain absolutely committed to that process if there is to be hope for the future of this city. It always comes down to one thing: Jobs. Jobs means money in the pockets of our citizens. The only way to stop population loss and people moving out of the City is opportunity. And that means jobs. The only way to stop blight is reinvestment, and that means jobs. The only way to reduce the demand on City services is to reduce poverty, and that means jobs. The only way to save the schools is to increase revenues, and that means jobs. Water will not run uphill, people will not pay more in order to get less, and jobs will not come to Philadelphia as long as the wage tax remains as high as it is. No sacrifice is too great if we can reduce it, and we can if we stay the course. Another problem with the wage tax is that it's a regressive, flat tax, which punishes working 120 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing people. In a city which is seeking to reduce unemployment and dependence on welfare and social services, it is counterproductive to impose a non-graduated income tax on people struggling to live on minimum-wage jobs. It makes it that much harder to leave government assistance and social-service dependency. Federal income taxes are progressive, graduated taxes. Pennsylvania income taxes provide relief for low-income workers through the working families tax cut program. Why should Philadelphia not have the kind of progressive income tax structure which is universally expected throughout the western world. I ask Council to support Bill 82. I think it's a good bill, and I hope you'll seriously consider it and make Philadelphia the leader that it deserves to be. Thank you.
I like Bill No. 92, but I don't think it goes far enough. I think that we really do need in a time of welfare reform, in a time 121 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing of trying to get people back into the job market, we definitely need to show them that they count by not taxing them so heavily. You know, a family of three, a single parent, with two making under $20,000 a year, they get an extra $600. That comes down to $50 a month. That family's also probably a family that doesn't have health care, doesn't have benefits, doesn't have vacation time. And $50 a month for a single mother with two children is enough to take her family to the movies, it's enough to go out to eat occasionally. So I think we need to take it a step further.
Robert Sworbrick, and he will be followed by Jerome Bayard. (Witness comes forward.)
Good afternoon and thank you. 122 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing My name is Robert Sworbrick (ph), and I'm a real-estate developer represent in and outside the City of Philadelphia. I represent the Manayunk Development Corporation. Manayunk Development Corporation supports the continued reduction of the Philadelphia wage tax. You'll have to excuse me; I'm on the tail-end of a bad cold, so... We recognize the importance of tax stimuli, and this wage reduction to the business community is a stimulus. It will help us attract in Manayunk the office buildings to support our restaurants and retail shops that are currently moving on the west side of City Line Avenue, Conshohocken, and Valley Forge. All one has to do is look at these three areas to see the future of Philadelphia if we don't continue down the road of reducing the burden of taxes on our individuals as well as our businesses. In Manayunk, we don't always agree -- the business community and the residential community -- but on this issue, we are united. The reduction of taxes in Philadelphia is necessary for the continued economic growth in situations like Manayunk, which 123 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing have had their hands tied behind their back with restrictive taxation. Look towards Conshohocken, look towards the west of City Line Avenue, look towards Valley Forge, and that's the future of Philadelphia if we don't continue this. Thank you very much for your time.
Thank you very much. The Chair recognizes Councilman Nutter
Yes, thank you. Good afternoon, Mr. Sworbrick. Thank you for coming in and thank you for your leadership in the Manayunk community, both specifically with regard to the development corporation, but also your work in conjunction with the residential community and the community groups in the Manayunk neighborhoods. Manayunk is a very special place, and there are many other special places throughout the City, but Manayunk has a somewhat unique situation being so literally close to our suburban neighbors Lower Merion and Belmont Hills and Montgomery County. And your testimony is quite insightful to what it is that we're trying to do here and create a better 124 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing business environment, a more competitive business environment. And so the unique viewpoint that you can bring to these hearings from the Manayunk communities is very, very helpful, and I just wanted to express my appreciation for that.
Please identify yourself for the record and proceed with your testimony.
Good afternoon. My name is Jerome Bayard, and here to represent Unite; I'm a representative. And we're all in favor of the wage- reduction tax. There should be a wage-tax reduction to reduce a little strain off the underemployed, though this should not include the upper crust, even though they may cry out or become annoyed. Lowering of the wage tax would give the poor a little more money to spend, which would stimulate the economy, in turn, benefitting business and the private sector, as well as being beneficial to our community. We must stop overtaxing and taxing people who cannot afford 125 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing to pay taxes and who have jobs which offer little or no health-care coverage. A proportional tax that's like the wage tax has a regressive effect, even though it somehow seems odd. Legislators must join in expanding tax forgiveness to poor and low-income working families. This tax break is crucial, especially during this recession, in order to help the already-struggling and the needy. The tax-back and other programs must also include the single people whom are under the blade trying to make ends meet. This program and others like it must be implemented to improve the conditions of everyday citizens in our streets. The poor pay tax on already-taxed money needed for the barest of life's necessities; while the upper class pay taxes on monies used for savings or others luxuries. Legislation must made to assist the working poor, and legislators must finally admit that it must be. No longer can we continue to overlook our financially-challenged; we must help them end their poverty. Legislators must realize that the poor are with us and that we must relax, quote/ unquote, guidelines. 126 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing Alleviate some of their tax burden, for being poor is clearly without a doubt defined
Are there any questions or comments from members of the committee? (No questions.)
Our next witness is John Hogan, followed by Julia Hinckley. (Witnesses come forward.)
good afternoon, Madam President. My name is John Hogan. I live in East Mt. Airy and I work at the University of Pennsylvania. I'm a member of AFSCME, and I'm here on behalf the Greater Philadelphia Chapter of the Democratic Socialists of America, including about 250 people who live, work, and pay taxes in the City. Let me first welcome my brothers and sisters in the chambers to the politics of the street march. It's always a pleasure to see people assembling in public and petitioning government for 127 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing address of their grievances, even people who have both unusual opportunities to do so in private and unusual success when they do. We just hope the police weren't too hard on you since we've heard of that happening in other places. (Laughter.)
It's hard to talk about taxes apart from spending, and it seems to me that when people complain about how high our taxes are, we're largely complaining about how little we get for them. People in businesses leave the City for many reasons, and I think the wage tax has great symbolic value: It sets us apart from other cities, and it shows up on every pay stub we get. But the claims being made for even the largest cuts on the table here, about $250 a year for what the Inquirer calls a "typical taxpayer" make it sound like we already have a fine public school system, adequate mass transit, and affordable auto insurance. We don't, and if we were to think of ways for the State legislature to get us closer to those goals, I don't think a percentage point cut in the wage tax would be in the top ten. I wouldn't mind having the money, but I 128 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing think even $250 would mean less to me than the lost tens or hundreds of millions would mean to the City and to the residents who count on it. If it means not providing fair raises and benefits for our City employees, then you keep it, because they've earned that. If it means cutting te City workforce by attrition, you keep it, because I know what that means: Fewer people doing more work for more hours at the same pay. If you look at the fine print in the Inquirer's chart, you learn that their typical taxpayer makes $50,000 a year. I don't know what the Inquirer is paying these days, but that's almost twice the median per-capita income in Philadelphia. Most taxpayers in this city are not what the Inquirer is calling "typical." But after eight years of across-the-board cuts intended to benefit the people who can afford to leave the City, you now have the chance to offer much needed help to the people who can't afford to leave. Councilman Cohen's bill would offer relief to the truly typical taxpayers in Philadelphia, and they are the people most likely to spend the money locally, and many of them are the greatest users of City 129 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing services. This bill can mean less homelessness, less blight to remove, less crime. There's now a lot of talk about how much the City gets in taxes, but less about exactly where it comes from. Mr. Cohen's bill addresses that problem: It provides relief to those who need it most, even if they're not marching on City Hall. Thank you.
Thank you very much. Are there any questions or comments from members of the committee? (No questions.)
The next witness is Julia Hinckley. (Ms. Hinckley not present.) UNIDENTIFIED SPEAKER: I have her testimony, I'll hand it in. She had to leave because of the time.
Please make certain that the stenographer gets a copy of that.
Rick Morawski. (Witness comes forward.) 130 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing
Good afternoon. For the record identification, I am not Thomas Paine Cronin, but I am here today to bring his testimony to City Council. As I morphasize here... (Reading Mr. ) My name is Thomas Paine Cronin, and I am the President of AFSCME District Council 47. I want to thank City Council for providing me with the opportunity to provide input on the most important issue of tax reductions and, in particular, the lowering of the City wage tax. In the past two weeks, we've heard a chorus of voices from virtually every segment of the community advocating substantial cuts in the City wage tax. From the comments of politicians and so-called leaders both here and in Harrisburg, we seem to be engaged in some kind of reverse bidding war aimed at seeing who can call for the most reductions in the fastest timeframe. Advocating the cutting of wage tax appears to be the latest political truth test. Advocating the cutting of the wage tax is only the first step. 131 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing The real question is, are each of you in this Council prepared to accepted the responsibility for the substantial reductions in services that may very well follow on the heels of a decision to remove tens of millions of dollars from the City's operating budget in the next few years? For years, we have been told by mayors, political leaders of every persuasion, the business community, and the very members of Council that the City budget is a precarious proposition, that even though the City accumulated a substantial surplus over the years, that that could disappear at any moment and that, therefore, wage demands, health- benefit demands, and increases in services for the community had to be carefully weighed because the surpluses could disappear at any moment with the downturn in the economy or some other unexpected event. Those statements about the precarious nature of the City budgets and the need to the City to go slow and carefully were especially prevalent around the time of contract negotiations with each of the City's unions mincluding my union. Be careful, go slow, don't ask for too 132 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing much. These were the words that we heard from our friends and certainly from the Mayor's Office and the people on the other side of the negotiating table. Now all caution seems to have been thrown to the winds. Because the words "tax cuts" and "wage-tax reductions" have been invoked, the same people in the business community and in government-leadership positions who have spoken extensively of the City's needs to be conservative and be cautious in its fiscal outlook have now apparently thrown all of that caution away and decided that there are literally tens and hundreds of millions of dollars available for the asking and which can be freely returned to the City taxpayers in the form of an across-the-board wage-tax reduction and without the need to cut any City services. How can this be? How can we suddenly have found these hundreds of millions of dollars to pay for wage tax, which will not necessitate cuts in City services? Have the people who have been speaking for City government over the years and assuring us of the necessity for a conservative and go-slow fiscal policy lie to us? Or is it that everybody wants to be identified with a tax cut today, and damn the 133 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing expense tomorrow. Ask yourself, if all of this money has been available for these years, why haven't we invested it in the City's school system, why haven't we invested it in the community in the form of new housing, neighborhood cleanups, and other community investments. Why haven't we spent this money for the public good. Why have we been hoarding it. The answer more than likely is that we haven't been hoarding it because it doesn't exist. Cuts in the City current revenue stream through reducing tax are going to cause pain.
The pain isn't going to be felt directly by the members of City Council but it is going to be felt by the people that you represent, because when you have to come back here in a year or two years to pay the piper by reducing services and eliminating personnel, you're going to be talking about closing health centers, libraries, and rec centers that serve your constituents. Those constituents and their children are not going to have a place for needed medical care, education, or recreation. And the reason why they are not going to have access to those services is 134 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing because you are being asked today to do a reckless thing. You are playing with their money. You are going to give this money away in the form of wage-tax cuts on the unsubstantiated hope that thousands of new jobs are going to miraculously appear because of the wage-tax reduction, which will more than make up for the losses in revenue that you are being asked to undertake today. I certainly wish for this miraculous appearance of thousands of new jobs. I also remember a former mayor of this city advocating riverboat gambling as a means of balancing the budget. I have yet to see a paddle wheeler with slot machines coming up the Delaware. I expect that this miraculous appearance of new jobs is as much in the same vein as the gambling boats. They are not here yet, and they are not coming anytime soon. I am sure that some of you think, Oh, well, there goes Cronin again trying to protect his members. And you are right. I am for my members, I am for what's good for them, including a decent wage, good health benefits, and a decent retirement. Why shouldn't I be. Isn't that the American way of life. However, this is more than just about my 135 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing members' interests. Remember, they are taxpayers and they all live in the City of Philadelphia. They would benefit from a wage tax. This is also about the quality of life which will be left if we make irresponsible tax cuts. If we have to cut City tax services -- cut City services, my members are the people who live in the City and will be deprived of services. Yes, they could lose their jobs, their benefits, and their pensions. It's not a pretty picture, but it is a reality. The City cannot afford an irresponsible fiscal policy, and I guess there's somewhat of a role reversal here when the Chamber of Commerce is sponsoring public rallies and demonstrations and I'm the one sitting here talking about fiscal responsibility. But someone has to be reasonable and someone has to be responsible, and the people who are advocating mass, across-the-board tax cuts, which will remove tens and hundreds of millions of dollars from the City's operating budgets are neither. And they won't have to pay the bill; I will and my members will, and everybody who lives in the City 136 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing will when we have to cut services to the bone to pay for these irresponsible actions. And I assure you that if all of these rosy projections are wrong and the tax cuts cannot be sustained without cuts in services, these same business community types aren't going to be standing before you supporting your decision to raise the taxes again; they'll simply say cut the services. I say we cannot afford to cut the services now, not when the economy is bleak and the budget is precarious. So I say to you, be reasonable, be responsible, and be real. Don't make rash decisions which will cost the City its future. Above all, don't jump the gun on wage-tax cuts. Thank you for this opportunity to provide testimony on this most important issue.
Thank you very much. Any questions or comments from members of City Council? (No questions.)
Ruth Burchette? 137 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing (No response.)
Is there anyone else here who has not been called who would like to testify?
Please approach the witness table. (Witness comes forward.)
Thank you, sir. Good afternoon. And kindly identify yourself for the record.
Thank you. My name is Robert Latimore. I'm a Philadelphia citizen for almost 60 years, a businessman, a father, and, like I said, a longtime resident. I'm from your district anyway.
Yes, thank you. I'm here in support of the bill for taxes -- reduction of taxes. Not only that, I'm here 138 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing for any bill that is in benefit of uplifting the Philadelphia neighborhood as a whole. I don't care if it's a increase in taxes or a decrease; if it upgrades the living standards of Philadelphia, then that's what I'm for. Other than that, I'm here -- I spoke in front of City Council, this is my second time. The first time was in '99, October, and it was for my community, the Hawthorne community, and I'm here this time for myself and my family. I have been put upon by, I would say, the so-called increase in housing, the Hawthorne neighborhoods situation, and overall -- excuse me. If I'm nervous, it's because I do have a nervous commitment.
Okay. When I confronted City Council, I distributed one of these (holding up document) to every member of City Council, every member, including the Mayor. It tells you my plans to upgrade what was my business at the time, my plans to increase revenues for the City, my plans to upgrade my community, my neighborhood. 139 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing And from that point, I was put upon, like I said before, by the Redevelopment Authority, who came in my community and took all of my property, six properties.
I apologize for interrupting you. You understand that this hearing is about the wage tax?
And I understand -- no, you're speaking about the property in which --
No, I'm speaking about you and others all day have said that they wanted a reduction of taxes to bring businesses into the community. I'm here to say that I had a business for 30 years or more in my community, and Redevelopment came around and took my business and put me and my family out of business. And I don't appreciate it, and I'm saying to you that I'm still in it because I haven't signed anything, and I want a opportunity -- 140 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing
I've said to you on a number of occasions, including yesterday, that I would be willing to sit with you and Universal Homes to see what we can do about resolving your problem, as I said to you at the time of the public hearings two years ago, but I --
You may not have heard me, but I'm letting you know now that if you want, I will schedule a meeting with you, myself, and any other person you want from Universal Homes and the Redevelopment Authority to discuss your particular issue.
Okay. Well, I'll say -- that's okay, but I'm telling you here that I'm here in support of your bill. 141 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing
And I'm here in support of my family, which is suffering to no end. From that day, May 2000, we have suffered out of business with no income, and I don't appreciate it from my so-called representatives that they -- that Redevelopment took my property. I made -- that year, I made $54,000, and Redevelopment came in telling me that I'm a whatever, and just took my property without even consulting, because I was -- at the time I was sick, a heart operation and all of these things, seizures. But now I'm telling you I'm here and I'm raring to go to upgrade my community and to upgrade Philadelphia as a whole. I'm not here to stir up any of the resentments that anybody might have. I want -- I want a fair and just action for me and my family. We worked in this city for -- I worked since I was nine years old here, and I've raised -- and I've never been locked up and I've raised a family. All of my kids are grown now. And at this time in my life, when I'm ready to turn over a new 142 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing leaf to put in apartments and broaden my business and so many things for the community --
-- it takes it -- it takes it from me. And I'm just saying because it's really gotten me upset to know that I've worked all of these years, and especially a Democrat all my life, and have the Democrats put upon me this stressful situation. And I don't understand this. So I'm sorry that I got upset, President Verna.
Just take your time. I understand, I understand.
I'm here because this is a dire situation for me and my family. I'm saying we are almost out in the street. I've never had that problem before. And thank you, anyway, for hearing me.
Thank you very much for testifying, and I'm sure that if you work with Councilman DiCicco's office, he would do everything possible to try to help you. Do we have any other witnesses to testify? 143 4/9/02 WHOLE - TAX-REDUCTION BILLS, cont'd. hearing (No response.)
Council President and members of City Council, my name is Tim Kearney, and I'm a legislative aide for City Councilman David Cohen. I would like to hand in two written copies of testimony from people who -- well, from one person who couldn't stay this late and had to leave earlier today; and another paper from the Keystone Research Center in Harrisburg called "Tax Relief for Philadelphia's Poor," and the gentleman who wrote this paper couldn't get to Philadelphia today, so I only have it in written form. Thank you.
Thank you. Do we have anyone else to testify on any of the bill? (No response.)
Seeing none, this committee will stand in recess until o'clock tomorrow afternoon, o'clock, tomorrow afternoon. Thank you all very much. (Proceedings end at 11:31 a.m.) 144 CERTIFICATE I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia's meeting of the Committee of the Whole of Tuesday, April 9, 2002, are contained fully and accurately in the stenographic notes taken by me, and that this is a true and correct transcript of same. RE: Ordinance No's: 020030, 020035, 020096, 020116, 020144, 020145, 020182 _______________________________, Josephine Cardillo Registered Professional Reporter and Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)