Committee Hearing, March 17, 2010

COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, March 17, 2010 10:20 a.m. - - - PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL L. CLARKE COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN BILL GREEN COUNCILMAN WILLIAM GREENLEE COUNCILMAN CURTIS JONES, JR. COUNCILMAN JACK KELLY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN BRIAN J. O'NEILL COUNCILWOMAN MARIA QUINONES-SANCHEZ COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO BILL 100118 - An ordinance amending Title of The Philadelphia Code, entitled "Finance, 18 Taxes and Collections," by adding a new Chapter 19-3600, entitled "Sugar-Sweetened 19 Beverage Tax"... BILL 100131 - An ordinance amending Chapter 10-700 of The Philadelphia Code, entitled "Refuse and Littering," by providing for a sanitation services fee... BILL 100136 - An ordinance amending Chapter 23 19-3500 of The Philadelphia Code, entitled "General Acute Care Hospital Assessment"... - - - 2

Good morning, everyone. This is a continued public hearing of the Committee of the Whole. I would ask Mr. McPherson to please read the title of Bill No. 100136. MR. McPHERSON: An ordinance 9 amending Chapter 19-3500 of The Philadelphia Code, entitled "General Acute Care Hospital Assessment," by clarifying its applicability to High Volume Medicaid Hospitals, by revising due dates, by making changes to conform to amendments to State law, and making technical changes, all under certain terms and conditions. (Witness approached witness table.)

Good morning, Dr. Schwarz. Please identify yourself for the record.

Good morning, Council President Verna, members of City Council. I'm Dr. Donald Schwarz, Deputy 3 3/17/10 - WHOLE - BILL 100118, etc. Mayor for Health and Opportunity and the Health Commissioner. Thank you for the opportunity to present testimony today on Bill 100136, which represents an amendment to Chapter 19-3500 of The Philadelphia Code. This Chapter 8 established an assessment imposed upon every General Acute Care and High Volume Medicaid Hospital in the City. This assessment collected by the City is transferred to the Commonwealth and used to match federal Medicaid dollars, increasing the reimbursement for Philadelphia hospitals that provide a high proportion of Medicaid emergency and ambulatory services. The proposed bill will comport with State legislation, authorizing the retained portion of the revenue collected to refund a portion of the City's costs of operating public health clinics. It will also change the effective date for the hospital assessment applicable to the High Volume Medicaid Hospitals to October 4 3/17/10 - WHOLE - BILL 100118, etc. the 1st, 2009 and, at the request of the Commonwealth, will change the quarterly due dates for the assessment to be remitted to the City. I am proposing an amendment, and have copies for Council, to the bill 8 under Section 19-3504, Paragraph No. 2 that allows the quarterly installments for Fiscal Year '10 to be payable at different due dates. Thank you for allowing me to testify on this issue.

I believe the amendments are being circulated.

Very good.

Councilman Greenlee, I see that your light is on.

Not on this one.

Are there any questions from members of the Committee of Dr. Schwarz? 5 3/17/10 - WHOLE - BILL 100118, etc. (No response.)

Thank you, Doctor.

Thank you. MR. McPHERSON: Our next witness is Sandy Gomberg. (Witness approached witness table.)

Good morning. Please identify yourself for the record and proceed with your testimony.

Good morning, Madam President and members of City Council. I am Sandy Gomberg and I am the CEO of Temple University Hospital. Thank you for holding today's hearing on Bill 19 No. 100136, which would refine Philadelphia's General Acute Care Hospital Assessment by clarifying its applicability to High Volume Medicaid Hospitals, by revising due dates, and making other technical changes. Thank you also to Councilman Darrell Clarke for 6 3/17/10 - WHOLE - BILL 100118, etc. his sponsorship of this bill and for his unyielding support of Temple University Hospital, our patients and the communities we serve. I respectfully ask that City Council approve the circulated amendment and vote Bill No. 100136 out of Committee with a favorable recommendation in order to facilitate the timely implementation of the legislation. Our request for the current ordinance follows City Council's 2008 enactment of a citywide hospital assessment, which covered certain acute care hospitals in Philadelphia, but at the time excluded Temple University Hospital. The current ordinance would bring Temple University Hospital into the City's Hospital Assessment Program by taxing Temple University Hospital's net operating revenue and would make the assessment effective October 1, 2009. The Philadelphia Hospital Assessment Program, recently approved by 7 3/17/10 - WHOLE - BILL 100118, etc. the federal Centers for Medicare and Medicaid Services, generates additional revenues under Pennsylvania's Medicaid program. This increases access to critical hospital services for Philadelphia residents and provides additional revenues to the City and to the Commonwealth. In developing the assessment program two years ago, the Commonwealth recognized that its citywide hospital assessment would be the first such model in the nation. Therefore, it designed the program to maximize chances of securing federal approval for the Fiscal Years 2008 and 2009. This meant excluding certain classes of hospitals, such as those that serve an extraordinarily high volume of patients covered by Medicaid. Only one hospital, Temple University Hospital, fits this High Volume Medicaid Hospital category. As a means to address its financial challenges, Temple worked with 8 3/17/10 - WHOLE - BILL 100118, etc. the Department of Public Welfare to redefine the assessment to allow Temple University Hospital's participation, under the separate High Volume Medicaid Provider classification, in a manner that would not impact those hospitals already included in the assessment enacted by City Council last year. Authorizing legislation by the Commonwealth has been obtained for the imposition of this assessment against high-volume Medicaid providers, and regulatory approval by the federal government is being secured. Passage of this ordinance is needed to include Temple in the assessment program during the current fiscal year. Temple University Hospital is unique among Pennsylvania's full-service safety-net providers by serving the greatest volume of Medicaid patients. In fact, the proportion of Temple University Hospital's inpatient services provided to patients covered by Medicaid exceeds 50 9 3/17/10 - WHOLE - BILL 100118, etc. percent. The Commonwealth recognizes our role as an indispensable safety-net healthcare provider for North Philadelphia and its surrounding communities. As the City Council and members of our communities face mounting financial challenges, the services that Temple University Hospital provides becomes increasingly more critical. Thus, it's in the best interest of the City and its most vulnerable residents that Council support this means of securing additional federal Medicaid dollars to ensure continued access to care at Temple University Hospital. Last year, Temple incurred an operating loss of over $53 million.

Our mounting losses result from numerous factors, including an extremely high Medicaid mix, Temple's volume of Medicaid patients and coupled with the Medicaid payment policies that pay hospitals below 80 cents on the cost for the Medicaid 10 3/17/10 - WHOLE - BILL 100118, etc. patients. The ability to participate in a Medicaid financing plan that increases our reimbursements would help ease our burden for caring for our low-income patients. Ensuring an appropriate level of reimbursement to high-volume Medicaid providers is essential to maintaining access to care for the Commonwealth's most needy citizens. Participation in the Philadelphia Hospital Assessment is an important step towards that goal. Again, thank you, Madam President and members of City Council, for allowing me to testify here today, and I respectfully ask City Council to approve the circulated amendment and vote Bill 100136 out of Committee with a favorable recommendation in order to facilitate the timely implementation of the legislation.

Thank you very much. Are there any questions of this witness? 11 3/17/10 - WHOLE - BILL 100118, etc. (No response.)

Again, I thank you.

Thank you.

Do we have anyone else to testify on this bill? (No response.)

Seeing no one, I would request that Mr. McPherson please read the titles of Bill Nos. 100118 and 100131. MR. McPHERSON: Bill No. 14 100118, an ordinance amending Title 19 of The Philadelphia Code, entitled "Finance, Taxes and Collections," by adding a new Chapter 19-3600, entitled "Sugar-Sweetened Beverage Tax," under certain terms and conditions. Bill No. 100131, an ordinance 21 amending Chapter 10-700 of The Philadelphia Code, entitled "Refuse and Littering," by providing for a sanitation service fee, under certain terms and conditions. 12 3/17/10 - WHOLE - BILL 100118, etc.

Thank you. I believe Mr. Agostini and Dr. Schwarz will be testifying. And if Commissioner Tolson is here, I suggest she also sit up at the witness table. (Witnesses approached witness table.)

Good morning. Please identify yourself for the record and proceed with your testimony.

Good morning, Madam President, members of Council. Steve Agostini, Budget Director for the City of Philadelphia. I'm joined by the City's Health Commissioner, Dr. Don Schwarz, to my left. To my right, Finance Director Mr. Rob Dubow, and I believe joining me, the Streets and Sanitation Commissioner, Clarena Tolson.

Thank you.

Again, good 13 3/17/10 - WHOLE - BILL 100118, etc. morning, Council President Verna, members of City Council. My name is Stephen Agostini. I'm the Budget Director for the City. Joining me today are the other members of the Administration I just mentioned. We are here testifying in favor of the revenue measure that the Mayor has proposed in the FY11 through '15 Five Year Plan and FY11 Operating Budget. As was discussed in the Five Year Plan hearing on March 10th and during the Mayor's budget address on March 4th, the severe economic recession has taken quite a toll on the City's revenues. Since August 2008, most of the City's major tax revenues, except the parking tax, have shown dramatic declines from Fiscal Year '07. A comparison of the City's tax revenue estimates for the FY08 Five Year Plan show just how dramatic the recession's impact has been. For example, for FY2008, the business privilege tax came in ten 14 3/17/10 - WHOLE - BILL 100118, etc. 4 million drop from estimates. million less than estimated. million drop. Collections are also weaker than the amounts included in our current Plan. Wage tax collections, as you know, are now projected to be $50 million lower than anticipated in FY11. The substantial revenue declines required the City to cut expenditures and find ways to raise revenues. 4 billion deficit by 18 eliminating 1,250 jobs and slashing overtime by $50 million. Excluding pensions and debt service, we are spending $160 million less this year than we were spending before the economic meltdown began. Unfortunately, that weakness in our revenues has continued just as the 15 3/17/10 - WHOLE - BILL 100118, etc. impacts of the recession continue to be felt and we are forced to take additional budget balancing actions. For FY11 and the FY11-'15 Five Year Plan, the Administration proposes to cut an additional $33 million from departmental expenditures. The Administration believes that further cuts to departments that have already seen their budgets squeezed considerably in the last two years would have significant service impacts. In order to balance, the City therefore must look to revenue options. The Administration does not propose broad-based rate increases on any of the City's taxes. Economic evidence has shown the detrimental impact of broad-based rate increases of wage and business taxes on jobs and business growth in the City. Reform of the Board of Revision of Taxes and the significant data cleanup necessary for the Actual Value Initiative, issues that we have discussed with this Council prior, led 16 3/17/10 - WHOLE - BILL 100118, etc. the Administration to propose a moratorium on assessments until we can be assured that the data is reliable, not perfect. While the Administration will move to fix the assessment system as quickly as possible, the data cleanup process could take two years. Without these fixes in place, the Administration remains uncomfortable proposing an increase in property tax rates. And as you all know, the City increased the sales tax rate in last year's budget to address the shortfall we were faced with last year. To address the sizable shortfalls in the FY11 budget and the FY11 through '15 Five Year Plan, the Administration looked to new sources of revenues to fill the gap. The two revenue sources outlined in Commissioner Tolson's and Dr. Schwarz's testimonies are both necessary to raise much-needed revenue, as well as to improve services and residents' health. The Keep Philly 17 3/17/10 - WHOLE - BILL 100118, etc. 7 million annually, it would also allow the City to pay for improved sanitation and neighborhood services beginning in Fiscal Year '11. 6 million for the FY11 budget that is before you, it will also deter consumption of sugar-sweetened beverages and, in FY12, allow the City to fund anti-obesity programs in the Health Department.

My colleagues will now provide more detailed testimony on these two revenue sources and I would be happy, as those of us here from the Administration will be, to answer any questions after they have finished.

Good morning, Council President Verna, members of City Council. I'm Donald Schwarz and I'm here as Health Commissioner. Thank you for the opportunity to present testimony 18 3/17/10 - WHOLE - BILL 100118, etc. today on Bill 100118 amending Title 19 of The Philadelphia Code. As part of a Healthy Philadelphia Initiative, which is a comprehensive program for obesity prevention, the City proposes to implement a tax on sugar-sweetened beverages, or SSBs, beginning in Fiscal Year '11. A two-cent-per-ounce tax will be levied on retailers based on their annual sales volume of SSBs. 5 million for a half year's collection in Fiscal Year '11 and 77 million annually beginning in Fiscal Year '12. It will lead to decreased consumption of hollow calories and help the City support recreation centers, parks, safer streets, community planning and allow the City to provide $20 million in annual funding from Fiscal Year '12 onward for obesity prevention activities. These interventions will focus on making healthy foods more available and affordable and promoting 19 3/17/10 - WHOLE - BILL 100118, etc. physical activity in daily living. For the purposes of the tax, a sugar-sweetened beverage is any non-alcoholic beverage with an added sugar-based caloric sweetener, including sucrose, fructose, glucose and other sugars. This includes beverages with high fructose corn syrup and includes, but is not limited to, soda, non-100 percent fruit drinks, sports drinks, flavored water, energy drinks and pre-sweetened tea and coffee. This does not include beverages flavored with sweeteners such as aspartame or NutraSweet, saccharin, sucralose or Splenda, and Stevia or PureVia, Rebiana. Under this proposal, retailers will track and report their volume of sugar-sweetened beverage sales based on ordering, inventory or sales procedures. The Department of Revenue will facilitate reporting and tax collection. Retailers include restaurants, cafeterias, bars, supermarkets, convenience stores, corner 20 3/17/10 - WHOLE - BILL 100118, etc. stores, stadiums, entertainment venues and any site in Philadelphia with a vending machine. As this Council heard in compelling testimony just two weeks ago to the Public Health and Human Services Committee, obesity has become a norm and a public health crisis in Philadelphia. In 2008, 64 percent of adults and 57 percent of children aged six to 11 years were overweight or obese. Remarkably, in some of our neighborhoods, an average of 70 percent of the children are overweight or obese. S. has 17 tripled and obesity-related medical 18 expenditures totaled $147 billion in 19 2008. It is with this impetus that we 20 have chosen to tax sugar-sweetened beverages. S. can be attributed to increased caloric intake and decreased physical activity. 21 3/17/10 - WHOLE - BILL 100118, etc. Sadly, as nutrient-poor high-calorie foods have become cheaper and more available, nutritious foods have become more expensive. A symptom of this trend is children consuming much less milk today than 30 years ago and much more sugar-sweetened beverages. At the same time, we lead more sedentary lives and our children sit at computers and television screens rather than in ball fields and soccer fields. Philadelphians drink more than 60 million gallons of sugar-sweetened beverages annually, translating into just under a half liter or almost 200 calories per person per day. Multiple studies have demonstrated a link between sugar-sweetened beverage intake and obesity, not to mention diabetes, dental caries and osteoporosis. Sugar-sweetened beverages are empty calories and provide no or very limited nutritional value. Sugar consumed in beverage form does not cause fullness like sugar in solid foods, 22 3/17/10 - WHOLE - BILL 100118, etc. so people end up consuming calories from sugar-sweetened beverages on top of those from other sources.

Sweet beverages can change children's taste preferences for the rest of their lives, causing less sweet healthier foods to be less appealing. What we also know is that changes in price can affect consumption of sugar-sweetened beverages to a greater degree than other unhealthy foods. 2 pounds of annual weight loss and lower insulin levels, which is the precursor of Type 2 diabetes -- excuse me; higher insulin levels are associated with Type 2 diabetes. Years of experience with tobacco taxes demonstrate that cigarette prices increased and subsequently smoking decreased. In the case of Philadelphia's 23 3/17/10 - WHOLE - BILL 100118, etc. sugar-sweetened beverage tax, we will encourage retailers to pass on the costs of the tax to the price of sugar-sweetened beverages. If they do so, the price of sugar-sweetened beverages will increase by 30 percent for a 20-ounce drink and nearly double for a two-liter bottle. With the tax, if Philadelphians were to replace one 20-ounce bottle of sugar-sweetened beverage with water twice a week, they would save over $40 a year and lose seven pounds per person per year. )

Just a moment, please. We're not going to have any of that. We will show respect for each other. Doctor, please continue.

Thank you. A family that drinks a two-liter bottle of soda at dinner would 24 3/17/10 - WHOLE - BILL 100118, etc. lose nearly 24 pounds a year if they substituted water for soda just two days a week. If the same family cut back its consumption of sugar-sweetened beverages to three days per week, the members would collectively lose 47 pounds and save $77 per year. Moreover, $20 million in annual revenue from the tax from Fiscal Year '12 onward would allow the City to fund obesity prevention activities. These activities will include multi-faceted evidence-based interventions to promote healthy eating and physical activity. Recently, the Department of Public Health, in conjunction with other agencies, non-profit organizations and academic institutions, created a detailed and innovative multi-year plan for combatting obesity that will accomplish the following: First and foremost, it will make healthy foods more available to Philadelphians by increasing the value of 25 3/17/10 - WHOLE - BILL 100118, etc. things like food stamps to purchase healthy foods. It will establish affordable farmers' markets, particularly in low-income communities, expand a network of corner stores that offer healthy foods and produce, and improve the quality of food in schools and after-school settings. It will decrease the availability and consumption of unhealthy foods, both through education and media campaigns and instituting in schools bans on junk food. It will promote physical activity, both by supporting our recreation centers and parks and also creating physical activity standards for after-school programs, expanding a pedestrian and bike network through the City, and incorporating active living considerations into neighborhood planning. The Healthy Bucks Initiative will provide food stamp beneficiaries $2 extra for every $5 spent on fresh fruits 3/17/10 - WHOLE - BILL 100118, etc. and vegetables in farmers' market settings. Such an approach has significantly increased consumption of produce among thousands of low-income New Yorkers. Moreover, we plan to expand the Healthy Corner Store Initiative so that over 1,000 corner stores and bodegas in the City are provided training, technical assistance and mini grants to implement a sustainable business model for selling fresh fruits and vegetables. Some people suggest that people will simply buy sugar-sweetened beverages outside the City once the tax is imposed. Sugar-sweetened beverages are products of convenience. More than half of all sugar-sweetened beverages are consumed outside the home; for instance, in restaurants and bars, not from large-purchase shopping trips. We know that 70 percent of high-calorie energy drinks are sold in convenience stores. Others say that low-income residents will be harmed by this tax. 27 3/17/10 - WHOLE - BILL 100118, etc. Yet, it is these residents and their communities that are disproportionately harmed by obesity and obesity-related illnesses, such as heart disease, cancer and diabetes. Remember that sugar-sweetened beverages are empty calories that provide little or no 9 nutritional value. This tax would help low-income residents and all Philadelphians make healthier choices. Plus, as described, shifting to free, non-caloric water can save people money and help them to lose weight. We plan to put money back into the hands of consumers through programs like the Healthy Bucks Initiative, which I mentioned. Also, please remember that beyond the money used for obesity prevention beginning in Fiscal Year '12, the majority of the money generated from this tax will allow Philadelphia to support other necessary services, many of which help people stay healthy, like recreation centers, our own Fairmount 28 3/17/10 - WHOLE - BILL 100118, etc. Park and the services to keep people safer, like Police and Fire services. Lastly, some suggest that instead of taxes people should be given information about sugar-sweetened beverages through calorie labeling and health education.

We strongly applaud these efforts and are proud that this Council, under Councilwoman Reynolds Brown's lead, has passed the nation's strongest menu labeling legislation. However, while calorie labeling and menu labeling are important, we don't yet have any strong, consistent evidence about how these interventions affect people's choices and behaviors. Information alone is not enough. This is especially true because the beverage industry continues to market bigger, more caloric products in Philadelphia to our residents and targets advertising to low-income and minority communities, including those areas near schools and childcare facilities. This advertising has been 29 3/17/10 - WHOLE - BILL 100118, etc. particularly harmful in Latino and African American communities. For example, a recent beverage industry magazine highlighted one company's success in marketing a high-calorie relaxation drink through rap songs. Now is the time for bold action to preserve critical jobs and services and to address head-on the crisis of obesity in Philadelphia. I thank you for allowing me to present testimony on this important issue and I will be happy, after my colleagues have completed their testimony, to answer any questions you might have.

Thank you, Doctor. Commissioner Tolson. ) COMMISSIONER TOLSON: Good morning, Council President Verna and members of City Council. I am Clarena Tolson, the Streets Department Commissioner, and it's a pleasure to be 30 3/17/10 - WHOLE - BILL 100118, etc. with you today. The worst recession since the Great Depression continues to take a toll on the City of Philadelphia's budget. As the Budget Director described, tax revenues continue to be weak. After trimming the budget with tens of millions of dollars in reductions and new efficiencies, the City services residents value most are again at risk for devastating cuts. I am testifying in support of the Keep Philly Clean fee because it presents an option to save vital City services, have a cleaner city and substantially increase the City's recycling rate. Importantly, residents can earn back much of the fee with real savings that will inspire spending at local businesses. As currently conceived, the Keep Philly Clean fee will appear on residents' property tax bills as a separate charge for properties with City-provided trash collection. The fee 31 3/17/10 - WHOLE - BILL 100118, etc. will allow tax revenues that would otherwise pay for sanitation services to keep police on patrol, fire companies active, libraries lending and health centers open. If the fee is approved, revenue will be available for neighborhood cleaning and greening that had to be cut in recent years. Citywide cleaning crews will keep our neighborhoods cleaner and vacant lot cleaning will be expanded. The less than $6 per week fee will allow the City to cover the costs of sanitation services such as trash, recycling and neighborhood cleaning services. Properties that can document private trash collection will be exempt from the fee. A property owner who fails to pay their bill will be charged penalties and interest. Eventually a lien may be placed on the property. Trash, though, will still be collected so there is no 25 incentive to dump trash in vacant lots or 32 3/17/10 - WHOLE - BILL 100118, etc. other areas. The Administration recognizes that the Keep Philly Clean fee will place a new financial burden on Philadelphia property owners. For low-income property owners, the Administration proposes a $100 credit be applied to the fee, bringing the fee to less than $4 a week. A property owner with a family of four and a maximum income of over $42,000 or approximately $42,000 will qualify for the credit by participating in the Real Estate Tax Installment Program. An individual living alone would qualify with a maximum income of $37,000. The Real Estate Tax Installment Program has among the most generous qualification criteria of any low-income subsidy program, including the Commonwealth's property tax rebate. Unlike any other fee or tax, the Keep Philly Clean fee provides every property owner the opportunity to earn back a portion of the fee. In December, 33 3/17/10 - WHOLE - BILL 100118, etc. Mayor Nutter unveiled the Philadelphia Recycling Rewards Program. By July 2010, every property with City-provided recycling collection will be able to earn money-saving rewards just for recycling. This includes individual apartments in multi-unit buildings with City recycling collection. Regardless of whether you are single, married or raising a family, financially comfortable or working on a tight budget, Philadelphia Recycling Rewards saves Philadelphians money. Whether you are grocery shopping, picking up odds and ends at your local pharmacy, enjoying Philadelphia's nightlife and cultural attractions or taking in a movie, Philadelphians can now easily realize savings of $100 and as much as $400 a year by recycling and shopping at more than 150 local businesses. Some examples from the current program include $5 off of $40 spent at ShopRite or Fresh Grocer, $4 off $20 at a CVS, ten percent off at the Reading Terminal Market or 34 3/17/10 - WHOLE - BILL 100118, etc. free tickets at the Please Touch Museum.

The more residents recycle, the more money stays in the City's budget for other programs. Trash that ends up at the recycler instead of the landfill saves taxpayers upwards of $65 a ton. Philadelphians with City-provided trash collection dispose of about 700,000 tons of waste a year. Currently, about 105,000 tons is recycled, up from just 52,000 tons just a few years ago. The Philadelphia Recycling Rewards Program is made available to residents through a partnership with RecycleBank. The City's partnership is pay for performance. The company is only paid if recycling increases and the taxpayers are saving more. There are literally millions of tax dollars to be saved by increasing recycling. Philadelphia would not be alone in charging separately for sanitation services. S. cities have sanitation 35 3/17/10 - WHOLE - BILL 100118, etc. service fees, including Los Angeles, Houston, Atlanta, Minneapolis, Seattle, Austin and Cleveland. Many of the suburban communities also separately charge their residents for rubbish collection. The choice to propose a Keep Philly Clean fee was not easy. No one wants to pay more during challenging economic times, but the Keep Philly Clean fee creates real value by helping restore services, expanding the capacity of the City to clean vacant lots and freeing up dollars to preserve police, fire, library and recreation services. Philadelphia Recycling Rewards presents an opportunity for residents to earn back in savings much of the new fee. I thank you for this opportunity to testify today. )

Mr. Agostini, with Bill No. 100118, I see that a CPI is included in this bill. I 36 3/17/10 - WHOLE - BILL 100118, etc. don't ever remember a CPI being included in any legislation that we passed. Can you explain why this is done?

Yes, Madam President. I think the thinking behind the CPI was that as time progresses, having the adjustments necessary to be sure we were collecting the same dollars in real value as inflation eroded, the value of those receipts was important so that we didn't see a material loss in those revenues over time.

But we should see a loss if we're trying to have a change of behavior.

Yes, we should, and we have indeed built those into the estimates. The estimates that we are using -- and I expect that I'll get more questions about this -- the estimates that we built were constructed using information from the Rudd Center on Nutrition at Yale University, and we discounted those numbers an additional 20 37 3/17/10 - WHOLE - BILL 100118, etc. percent from what was provided, assuming that there would be a change in behavior over time, along with a factor just to be conservative as we moved forward with the revenue estimate.

With CPI being included in this bill, would the Administration have to come back to Council to reenact any of this legislation?

If the CPI were not included and we were desirous of having an increase because of revenue shortfalls, yes, indeed we would have to come back.

If the CPI were not included.

If the CPI were not included, then in the event that we thought it was prudent to come back with an increase in the rate, yes, we would come back.

Thank you. 38 3/17/10 - WHOLE - BILL 100118, etc. Doctor, I was wondering if you could expand a little on some of the -- I know it's the canned soda, the bottled soda that we're talking about, but we don't have a comprehensive list, and if we all find it somewhat confusing, I think that everybody else is going to find it confusing. For instance, if I went into Wawa and I wanted to get a cup of coffee and I drink sugar with my coffee, is that also included?

So if at the time of purchase when you pay your money it's an unsweetened beverage, it would not be included. So you may add sugar on your own. If it is sugar-sweetened by the retailer or the retailer sells you a beverage that has sugar added through syrup in particular or it comes packaged with sugar included, so on the list of ingredients there's a sugar substance, that would be included.

I 39 3/17/10 - WHOLE - BILL 100118, etc. know that Councilman O'Neill loves latte. Would that be included?

Cappuccino.

For his cappuccino, if it's unsweetened, it would not be included. If it's sweetened with syrup, the syrup would be taxed.

Point of information, Madam President.

Yes. The Chair recognizes Councilman Rizzo for a point of information.

Now you really have me confused. If you've ever been to a Wawa, they have the little packets of sugar. At that point, you put the sugar in the coffee and put the cap on, at that point it's taxable?

No. The retailer isn't adding the sugar; you are. And it's not added through syrup; it's added through a packet. So there are two reasons why it wouldn't be included. 40 3/17/10 - WHOLE - BILL 100118, etc.

Thank you.

Did someone say something?

Thank you, Madam President.

Doctor, I understand that the goal is to reduce the consumption of sugar-sweetened beverages by increasing their cost. However, we are hearing -- and we're only hearing -- that retailers may spread the cost of the tax among many other products instead of charging customers an additional two cents per ounce of sugar-sweetened beverages. In effect, this would defeat your commendable goal. How do you respond to that possibility?

I have two responses. The first is that, remember, this is a revenue measure. So if there is no change in consumption of sugar-sweetened beverages, the City will collect more revenue, and there will be no change in consumption. So that those 41 3/17/10 - WHOLE - BILL 100118, etc. who are concerned about a decrease in consumption will not have to worry. But remember also that we have proposed the dollars from this legislation ultimately fund obesity prevention. I would hope that if we collect extra dollars, we will use those dollars to increase the amount that we invest in obesity prevention for the City. The other way that I respond is, I don't know what retailers will do initially. Over time a retailer's tax will be decreased if they sell less of sugar-sweetened versus either artificially sweetened or non-sweetened beverages. I would hope that prudent retailers ultimately would change their pattern of behavior and consumers would change their pattern of consumption. So, as you know, in many parts of this country, and particularly in more affluent neighborhoods, consumption of bottled water and water beverages without 42 3/17/10 - WHOLE - BILL 100118, etc. sugar sweetening have increased dramatically. With that in mind, I would hope that Philadelphians who need to drink something, some will move to water from the tap and others who wish to purchase something at a convenience store, for instance, or in a restaurant will purchase beverages that simply are sweetened either without sugar or contain no sugar at all.

Thank you. I see we have a number of Councilmembers that want to be recognized. For the first go-around, we'll have three minutes. The second go-around will be also three minutes. At this time, the Chair recognizes Councilman Greenlee.

Thank you, Madam President. Good morning, everybody. (Good morning.)

Council 43 3/17/10 - WHOLE - BILL 100118, etc. President asked one of my questions as far as the spreading of the tax. The only thing I'll add to that is that retailers have already told me, some have already told me that's what they were going to do, and it would seem to me that if the store at 29th Street does it, then the store at 27th Street has got to do it, because they have to bring the customers in. But I guess that will be proven down the line. And just a little spinoff on another question the Council President asked. If indeed, as she said, if this tax is successful, Mr. Agostini, how much has it been altered over the years? Because that seems like a pretty real guesstimate on how much people are going to buy that kind of thing and how much they're not going to buy, if I'm making sense.

It is a good question. We tried to estimate what the impacts were. We actually spoke to the 44 3/17/10 - WHOLE - BILL 100118, etc. individual at the Rudd Center, Tatiana Andreyeva, who actually did the estimates. We spent some time on the phone trying to understand the impacts and how behavior will change, and we thought, as I mentioned earlier, it would be prudent to do a fairly sizable discount just at the beginning and carry that through. Now, we may indeed be off by some amount, but I think a percent 13 discount, especially in light of the 14 conversation we had, seemed to be a 15 prudent approach. 16

Thank 17 you. One last question, and this is a 18 very general question, but obviously 19 there's lots of products that add to 20 obesity, and Dr. Schwarz, you also said about life-style and all, and I'll start out by saying I'm not proposing taxing these things, but obviously a lot of things that are identified with Philadelphia, Tastykakes, cheese steaks. 45 3/17/10 - WHOLE - BILL 100118, etc. (Applause.)

It's better than getting booed, Council President. And, again, before Joey Vento puts up a sign against me, I'm not proposing taxing cheese steaks, but my point is why target one particular industry? And obviously there is concerns -- (Applause.)

And there are concerns about jobs obviously, but the thing is that I've heard estimates that sugar-sweetened beverages maybe add to, what, 10, 15 percent of the problem. Could you just -- and I'm not saying I have an opinion one way or the other. I'd just like to know what is your rationale for that.

Okay. Let me do two things. First is to respond to the point that you made, if I may, about the store next door. So if one store decides 46 3/17/10 - WHOLE - BILL 100118, etc. to levy the fee, if you will, across all of its inventory, I presume then that it would have -- the store down the block might choose to compete with that store on other product lines. So a prudent retailer might well try to balance this, and some retailers I presume will take the cost in sugar-sweetened beverages and keep other prices low while others will distribute it overall, and I don't think we know how that will happen. The good news for the City is the revenue will come in, and the good news for those folks who are concerned about jobs is impact may be much smaller than expected on consumption, and I absolutely admit that. Second is, why not other products. We know that beverages are different than solid foods in the way the body handles them. So the stomach in particular has a large part in telling us if we're full and telling us how much to eat. Beverages pass through the stomach 47 3/17/10 - WHOLE - BILL 100118, etc. quickly and the caloric intake, the amount of calories in what you drink, doesn't do the same thing as high caloric solids to make you feel full. So as a result, we don't think and I don't think that the total sum cause of obesity in America is sugar-sweetened beverages. But from the point of view of public health and trying to think about how do we make a difference to this epidemic, which will mean that children today, based on what we know, are likely for the first time in generations to live at least five years fewer than their parents. So for all the parents who are concerned about their children, public health has tried to figure out what public health can do to make a difference, and we believe that the marginal difference, just the little bit of difference, in reducing portion sizes around sugar-sweetened beverages -- so I'm not banning sugar-sweetened beverages. I don't want to ban 48 3/17/10 - WHOLE - BILL 100118, etc. sugar-sweetened beverages. I want to reduce the amount that people consume to a point where their caloric intake, particularly their children's caloric intake, each week is reduced so children don't become obese.

Okay. Thank you for your answer. My time was up, so I might be back to you on that. Thank you. Thank you, Madam President.

Thank you. The Chair recognizes Councilman Goode.

Thank you, Madam President. Good morning, Mr. Agostini.

Good morning, Councilman.

Mr. Agostini, what is the increase in the budget from Fiscal Year '10 to Fiscal Year '11? 49 3/17/10 - WHOLE - BILL 100118, etc.

Increase in expenditures?

Yes.

I believe it's about $162 million.

And how much are these two initiatives supposed to raise?

In combination, $38 million for the sugar-sweetened beverage and 107.7 for the Clean Philly fee. So in total, about 146 million.

Okay. And what is the largest item of increase in the proposed Fiscal Year '11 budget?

That would be for pensions, pension payments.

And that is 130 million?

Approximately.

So of the budget increase of 162 million, 130 million is going toward pensions?

That's correct. 50 3/17/10 - WHOLE - BILL 100118, etc.

So this is actually a revenue generator to cover pension costs? (Applause.)

Councilman, that is indeed a way to characterize it. As you know, we have some very crushing costs with respect to our long-term pension liabilities.

Well, we have $130 million in new costs, and particularly the trash fee will go to cover that cost; is that correct?

Again, that is a way to characterize it. It is also something that will be --

Well, let's do it another way, then. Commissioner Tolson, what is the average annual cost per household for trash collection?

It's -- I can give you that exactly, if you give me a minute. 51 3/17/10 - WHOLE - BILL 100118, etc.

Okay. Per household.

I can do it by property. I can't do it by household.

That's fine.

So for Fiscal Year '09, the actual cost per property was $337. For the current year, we're assuming it's slightly over $300, and for FY11, about $307.

Is that for roughly a ton of trash?

I'm sorry?

Is that for a ton of trash?

No. That is per property. That is for all of the associated costs of picking up trash.

And what does that cost entail in terms of equipment or labor? Can you break that down in terms of what we're paying for?

Yes, I can. And I can give it to you now and then I can 52 3/17/10 - WHOLE - BILL 100118, etc. give you the table through the Chair so that everyone can see that. I'll go with FY09 since that's the most recent actual data that we have. For personal services, it was about 47.5 million. For the purchase of services, principally our tipping fees for disposal --

I meant per house.

Oh, that I'd have to calculate for you. I'd have to calculate that for you.

Can you calculate that before we leave today?

If I get some time to get away, yeah.

What is the average cost per household in surrounding counties?

That I do not know.

What is the average cost per household in comparable 53 3/17/10 - WHOLE - BILL 100118, etc. U.S. cities?

We can try and collect that. I know that they have -- there are a number of fees. I think we have a table for those fees. In some cases, the fees are greater than what we're proposing, but we can bring that back.

But you weren't prepared to give that information?

I just don't have that here. I think we've provided a table in response to a question that was given to us last week.

How can we cut costs?

Councilmember, we can cut costs in --

In terms of trash collection, how could we cut costs?

Well, there are a number of ways to do that, but I'm going to turn to both the Deputy Mayor 54 3/17/10 - WHOLE - BILL 100118, etc. and Ms. Tolson to answer that. COMMISSIONER TOLSON: The two most significant cost sectors for trash are, one, labor and, two, disposal. Our labor costs come from the crews that collect either trash or recycling or to clean our streets, and our disposal cost is charged by a vendor for the privilege of putting our materials in a hole in the ground. Labor we look at very closely regularly, manage it very tightly in terms of having as much efficiency as possible. Our crews presently collect on average 15 tons per crew per day for trash collections. For recycling collections, that productivity is approximately nine tons per day per crew, a difference being the weight of the materials that are collected. Things like plastics are lighter, so it's much more difficult to get a heavier weight when you're using the systems that we have. 55 3/17/10 - WHOLE - BILL 100118, etc. We have created efficiencies to maximize the crew productivity, such as moving to single-stream recycling, as well as the use of compactors versus the open-air trucks, which we previously used, and had a productivity of approximately three to five tons per day. Relative to disposal, our present cost is about $65 per ton. That increases every year. The City has limited control or almost no control when it comes to disposal costs, because we do not own any facilities to dispose of our materials. Where we do have some control is the amount that we recycle. We have very aggressive recycling contracts, which provide for a very reasonable balance of costs to the City. We are presently receiving revenue of approximately $5.04 per ton for recycling. We have received as much as $44 per ton for recycling. However, we have also paid for those materials. So our ability to control our disposal side 56 3/17/10 - WHOLE - BILL 100118, etc. comes from our ability to increase the amount that we recycle and, thus, decrease the amount that we dispose.

Thank you, Madam President. On the next go-around, I will need the breakdown of that cost and how it compares to other cities and counties around us. Thank you.

Point of information.

Thank you. Councilman Green, you're next.

This is my point of information, Madam President. So don't start the clock, Charlie. The Sanitation budget is approximately -- the entire Sanitation budget is $87 million, so I assume you were grossing up the figures you have with benefits in terms of the cost per household; is that correct? 57 3/17/10 - WHOLE - BILL 100118, etc.

Councilmember, what I have included in that is fringe benefits, the central service cost allocation plan, the administrative costs allocated on a proportional basis of the Streets administrative function, along with a range of the normal costs, personal services, and deducted a series of costs that are not attributable to this.

So with respect to the Sanitation budget in the Five Year Financial Plan, how much of that is pure trash collection? 100 percent? And disposal. COMMISSIONER TOLSON: Yes. Our direct costs -- I assume that's what you mean when you say "pure trash collection." Our direct cost for labor and disposal is approximately 85 million that we're projecting for next year.

Thank you.

Point of information. 58 3/17/10 - WHOLE - BILL 100118, etc. Mr. Agostini, I would like some clarity, if you will. Can you discuss whether you included unfunded pension liabilities in your cost calculation? If you did, I will have two questions to ask you.

I did.

You did. Why do you believe it to be appropriate to include unfunded pension liabilities inasmuch as they represent services provided in the past, not the cost of services moving forward? Second, did you include unfunded pension liabilities for all former employees or did you focus on employees who were providing sanitation-related services?

I'll answer the last one first. We focused on the sanitation because we thought it was appropriate to just attribute the sanitation cost. So we removed Police, Fire and all of the other non-sanitation 59 3/17/10 - WHOLE - BILL 100118, etc. functions. And, yes, we do believe that the unfunded liability represents a cost of operating not just the Sanitation Department but every department in the City. Whether we agree with that on a going-forward basis or not, it's still a cost that we have that we have to pay for.

Thank you. Councilman Green.

Thank you, Madam Chair. Dr. Schwarz, in your testimony you say that, We have to take bold action to preserve critical City jobs. Whose jobs are you referring to?

Jobs of individuals who are part of, at the moment, the City workforce.

Okay. So let's talk about taking bold action. There were $33 million in cuts that the 60 3/17/10 - WHOLE - BILL 100118, etc. Administration proposed. How many of what the Administration is calling cuts are actually what the rest of us in the world would call cuts?

We believe that they are reductions in expenditures, so we're referring to them and we'll continue to refer to them as cuts. Whether there's a different opinion as to what your definition of "cuts," that might be, but --

For example, last year we brought in the Prison budget 15 million less than was budgeted for in FY09. So we are saying the Prison budget should be the same in FY10 as in FY09. The Administration is calling that a $15 million cut. That is not a cut. We didn't spend more than that. That's simply spending the same thing we spent last year. Then you can go through all of your -- basically if you go through everything that is referred to as a cut, it is basically either shifting dollars 61 3/17/10 - WHOLE - BILL 100118, etc. from operating to capital, spending the same amount of money. There's not one job that is cut from this year's budget; is that correct?

Actually, with respect to Prisons, that's not correct. The FY09 Prison budget was 241.3 million. That was actual. The FY10 adopted was 248.8 million. The current budget assumes we will be at 239.8 million. The FY11 assumes we'll be at 239.6. So that is a real reduction from the actuals in FY09. It is also a slight reduction from the current target. It is a reduction in expenditures.

I understand. We can be pedantic about it if you want, but essentially our run rate is $15 million less on an annualized basis today, and that is why we're projecting it. There's no service, there's no person, there's nobody impacted in any department. There's just no cuts. And when you testified last 62 3/17/10 - WHOLE - BILL 100118, etc. week, we asked very specifically to have prior to today two and a half, five percent and seven and a half percent cuts that the different departments gave you so that we can determine whether or not additional cuts, which would cause us to have to raise less than $180 million a year in new taxes, are possible. It is very hard to sit here and have a conversation about revenue measures without the context of what the alternative cuts are, because we only have four levers we can pull - wage tax, business tax and we have a $77 million increase in the business tax, the property tax and cutting the cost of government. So when can we expect that information from the Administration such that we can have an intelligent and informed conversation about where to go with the City's budget?

Councilman, we are providing those answers in as quickly a manner as possible. We've started to 63 3/17/10 - WHOLE - BILL 100118, etc. provide them. So we will get them to you as soon as we can.

I don't know what that means, "we've started to provide them." I don't know how we can have hearings without the same information that you have. How many pages of -- (Applause.)

How many pages of budget detail are there?

I'm sorry, Councilman?

How many pages of budget detail exist?

Actually, there were copies brought over today from Monday's and Tuesday's. They represent two books just from Monday's and Tuesday's. You should have received your copy this morning.

Oh, so I got 3,000 pages of budget detail this morning? 64 3/17/10 - WHOLE - BILL 100118, etc. (Applause.)

I just haven't had time to get to it. I'm sorry. Thank you, Madam Chair. I'll pick up on the next round.

Thank you. The Chair recognizes Councilman Jones.

Thank you, Madam President. Good morning. On the issue of cost and how we spend our money, I think a lot of people listening today want a cost-benefit analysis of, A, what we're paying for and then, B, what services and/or restored services we may get based on whatever revenue, and I'll start with the proposed beverage tax. That anticipates, you said if I recall, $77 million; is that right?

Yes.

And of that, 65 3/17/10 - WHOLE - BILL 100118, etc. you plan to use million of it to do exactly what?

That's in Fiscal 5 Year '12, and the work focuses in three 6 areas. One is increasing the 7 availability of healthy foods in 8 neighborhoods. Two is reducing the 9 availability of less healthy foods. And 10 three is increasing the opportunities and 11 use of physical activity and 12 activity-related areas. 13

All right. 14 That's a million dollars of it. What are 15 we going to do with the other 19? I 16 mean, those are very general, broad 17 strokes, and I think what people really 18 want to know is what does the thing cost 19 and what is the cost benefit if they pay 20 for it.

So I'm happy to provide you, for instance, an example would be working with a thousand corner stores in Philadelphia. The Food Trust from Philadelphia, which works 66 3/17/10 - WHOLE - BILL 100118, etc. nationally, has a successful model here in Philly working with corner retailers to make healthy foods, healthy fruits and vegetables available in communities. To do that, there needs to be education of the retailer. There needs to be connection of the retailer to available sources of fresh fruits and vegetables. There needs to be help with the fixed costs of refrigeration and display. All of those have now been done in corner stores in Philadelphia and have been found to create a sustainable business model for those corner stores. That cost, unfortunately, for a thousand corner stores is more than a million dollars.

We're up to $2 million. We're going to need a lot more detail to understand the benefit of that.

And I'm happy to --

I only get 67 3/17/10 - WHOLE - BILL 100118, etc. three minutes.

-- provide you with detail.

Okay. There you go. The second thing I want to know is, we tried the sales tax, bringing it up to eight percent, and one of the things that was in your budget assumptions was that eventually some day, somehow we were going to come out of a recession and revenues will somehow begin to come back to our coffers. If that is true for that tax, why is it not true for a beverage tax that could be indeed sunsetted at the time that we had a better picture of our economic situation?

I think two reasons for that. One is that while we do assume there's going to be some growth in sales taxes, as we are all living with right now, the recession continues, the jobs are not growing, and so we are under some economic duress. 68 3/17/10 - WHOLE - BILL 100118, etc. It is also the case that we've assumed that consumption will indeed decline and that the impact of the tax will have the kind of effects that Dr. Schwarz described in his testimony.

Finally, and I'm out of time, based on last year's testimony, you responded to Councilman Goode's question about personnel costs. One of the two considerations was automation and the other was, which connects to the second, injured-on-duty claims. How are we addressing those cost centers today? Are we making progress?

That's specific to Sanitation?

Yes. Correct. COMMISSIONER TOLSON: Thank you, Councilman. Good questions. Relative to the injured on duty, we have most recently revised some of our standards with regard to hiring, our medical assessment of people who are 69 3/17/10 - WHOLE - BILL 100118, etc. being hired, raised the requirements for them and how we inspect them, so that we can assure that we're getting people who are fit for the tough job that they will have in collecting tons per day. 7 Additionally, we are reviewing 8 with our staff on the management level, 9 the local management level, safety 10 procedures to improve their ability to 11 operate full day, uninjured, over long 12 periods of time. That is critical. 13 Secondly, with regard to -- you 14 asked the question about -- 15

Automation. COMMISSIONER TOLSON: Automation, yes. We had certainly paid a lot of attention to automation. It is something that's of personal interest to me. Our challenge with it is the requirements for automation. Automation requires that you have to be able to access a can that people have to hold in their house, access at their curb line. In Philadelphia, we have less than 15 70 3/17/10 - WHOLE - BILL 100118, etc. percent of the City with off-street collection or off-street parking availability, so that means either having a rear driveway or a side driveway where they can remove their car so that a trash can could be collected from the curb. That's challenge number one with them. Challenge number two is certainly with regard to storing a can in the house. Eighty-five percent of the City has front collection, and most people bring the trash through their house to the front yard, which is why we are a heavy bag city. Having said all that, I still support and am interested in looking for opportunities to automate the City. The other part of the challenge is that our city is very diverse logistically in terms of the size of streets that we have. We have wide boulevards intermingled with very narrow streets, and all of the areas that have the wide streets are not in one location and all 71 3/17/10 - WHOLE - BILL 100118, etc. the areas with all the small streets are not in one location. So as we look to automation, as we continue to examine opportunities for automation, it is finding five days' worth of work for a truck in the City in our neighborhoods, and that is a significant challenge. We have had in container companies to work with us to try to examine the opportunity for containerizing trash. That is a way to help with litter, and we just have some logistics that we're trying to overcome. And we're hoping that as technology changes, that it will be a help for us. Dealing with cable lines, the wires that we have hanging in our city, you don't find that in all your cities, and those are some of the challenges that face us in this city when it comes to automation.

Well, 15 percent --

Councilman, your time has been up some 72 3/17/10 - WHOLE - BILL 100118, etc. time ago. I would suggest you wait for the next go-around.

Thank you, Madam President.

Thank you. The Chair recognizes Councilman Clarke.

Thank you, Madam President. Good morning. (Good morning.)

Let me get one thing out of the way real quickly. Several references are made to the RecycleBank as we talk about offsets to the trash collection fee, and actually had a very successful RecycleBank meeting last night, and I guess the question I want to know, the RecycleBank program is a program that was in place prior to the announcement of the trash fee; am I correct? COMMISSIONER TOLSON: Yes. 73 3/17/10 - WHOLE - BILL 100118, etc. That's correct.

So this has been going on for a while. What's the relationship to the trash fee? Because it implies that this tradeoff somehow has something to do with the fee. It implies that if we don't pass the trash fee bill, then maybe the RecycleBank program will go away, and I need to know that, because I'm out here encouraging people at least two nights a week to recycle based on these meetings. And if somehow this bill 14 doesn't pass -- and I'm not clear what will happen with it -- will this recycling program go away? COMMISSIONER TOLSON: Absolutely not, sir. The Recycling Rewards Program is one that we had worked on for a number of years. It is a premiere system, and, in fact, some other large cities are looking at what we're doing and how we're doing it, because it provides an innovation and a value to the City and citizens in a way that has not 74 3/17/10 - WHOLE - BILL 100118, etc. been seen before by the vendor company. So this is something we set up and it stays with us.

Okay. So this has nothing to do with an offset for the trash fee? I mean, I continue -- and, Ms. Tolson, I respect you and I like you a lot, but the continued reference that somehow we're charging you this fee, but we're giving you $400 in coupons and discounts I just think is just ingenuous. I mean, one has nothing to do with the other. COMMISSIONER TOLSON: They're related from the standpoint of that you certainly can use the value that's in the rewards program to support or offset the notion of having a fee.

But that's going to happen regardless of what happens with this tax, is my point. COMMISSIONER TOLSON: But that Recycling Rewards Program will happen regardless. 75 3/17/10 - WHOLE - BILL 100118, etc.

So it would be nice if we couldn't continue to reference that as somehow a part of the trash fee. COMMISSIONER TOLSON: I think it's important only from the standpoint that it's a new and exciting program that citizens have not yet taken advantage of.

And will reduce its cost, and that's why I'm out there, but it has nothing to do with that. COMMISSIONER TOLSON: And we appreciate your leadership.

We had it before, as early as last year, and we're going to continue to have it. Your reference to -- and this continues to come up the other day, when we talk about our municipalities, and I see in your testimony today you actually reference some larger municipalities. What's the current wage tax for the City of Philadelphia, the rate? 76 3/17/10 - WHOLE - BILL 100118, etc.

Just under four. I can get you the exact in a minute. Just under four for the resident and closer to three on the non-resident.

What's the wage tax for the City of Los Angeles?

I don't know what that is offhand.

What's the wage tax for Houston?

Again, I don't know. We can compile those.

What about Atlanta, Minneapolis, Seattle and Cleveland?

We can pull those together. I don't have those at my fingertips.

But we don't know, or we don't even know if they have a wage tax?

In some cases, like Seattle, there is not a wage tax, but there's a sizeable business tax. 77 3/17/10 - WHOLE - BILL 100118, etc. There's also a much larger sales tax.

Some people would say we have a sizable business tax. My point is that we continue to compare ourselves with other cities as it relates to trash fees, but we don't put the data on those other cities. And as we're making decisions about whether or not it's proper for us to even continue this discussion, without information on other cities so we can compare apples to apples, I don't think it's fair to Councilmembers. (Applause.)

Councilmember, that's fair. We'll put that together. Having done the budgets for both the City of San Francisco and the City of Seattle, I would tell you that we're comparable, that while the mix of taxes is different, the amount that's raised for services is comparable. But you're right, we should get that to you.

It would be 78 3/17/10 - WHOLE - BILL 100118, etc. very helpful. Thank you, Madam President.

You're welcome. The Chair recognizes Councilwoman Brown.

Thank you, Madam President. Good morning. (Good morning.)

Mr. Agostini, Councilman Goode raised a number of pointed questions I thought regarding the pension fund. Who or what entity authorizes or dictates the rules around the pension fund, regulations around the pension fund?

Most of that is state, but I will defer to Mr. Dubow to answer questions on the pension. I guess I can't. He stepped out.

So if the state dictates those rules and the like, 79 3/17/10 - WHOLE - BILL 100118, etc. then the most the City can do is? Complete the sentence.

Is follow that lead. And as you may remember, the reason that we have such a sizable increase from the FY09 to the FY -- from the FY10 to the FY11 is that we as a city moved forward with a pension deferral. That pension deferral allowed us to reduce our pension payment in FY10 in order to address the very sizable issues that we had at the time, as you recall. Part of that deferral now is going away and so part of the cost associated with pensions is that we no longer can defer the entire amount. And as you recall, the sales tax, through state legislation, has been tied to the repayment of that deferral through FY14 when the sales tax increase sunsets.

Okay. Dr. Schwarz, this hearing is not about the menu labeling bill, but you did reference it, and I wanted to simply 80 3/17/10 - WHOLE - BILL 100118, etc. attempt to clarify the record. I completely agree that we don't have adequate research yet that shows that behavior change does happen, but what we do know is that if consumers are given the information at the point of sale, which was the linchpin in all this, they do indeed make different choices.

Yes.

Okay. All right. With that said --

We know that for menu labeling, yes.

Okay. The Healthy Bucks Initiative, what I learned early on with the stadium negotiations is that the devil really is in the details, and if we say that X number, should this proposal garner the necessary support, if X number of dollars are going to be used for the Healthy Bucks Initiative, is that in the text of the legislation as is currently written?

It is not. The 81 3/17/10 - WHOLE - BILL 100118, etc. legislation doesn't specify the use of the dollars, and according to the budget, remember, the use of the or the allocation of the $20 million would come in Fiscal Year '12, so it is not the subject of the '11 budget.

So my experience tells me that if it's not in writing, it doesn't exist, and as we go forward, as Councilman Jones indicated, the devil will be in the details. To the trash fee proposal, Commissioner, has any further discussion been given to the reality that that is a flat rate and/or protections necessary for seniors and low-income families? COMMISSIONER TOLSON: Obviously, Councilwoman, we will continue those discussions with Council. We have included presently in the rate a $100 discount for those who meet the low-income requirements for the Real Estate Installment Plan. So their fee will be a $200 rate versus a $300 rate. 82 3/17/10 - WHOLE - BILL 100118, etc. That is what's presently included in the proposal that we have.

The bell has rung. I have follow-up, so I'll just have to wait for my next round.

Thank you. The Chair recognizes Councilman Greenlee.

Thank you, Madam President. Once again, I'll start out by saying I'm not necessarily saying I agree with this proposal, but there's obviously been other proposals out there, and one of them, Mr. Agostini, you reference in your testimony about the big taxes, but there is some argument regarding the trash tax that people generate different amounts of trash, is it really fair to have a flat fee, and obviously there's been some suggestion that maybe the fairer way -- and, again, I'm not advocating it -- maybe the fairer way is 83 3/17/10 - WHOLE - BILL 100118, etc. to go with some kind of overall property tax increase. Just for the record, what would be your answer to that?

We would be open to considering other alternatives, ideas that would emanate either from this Council or from others with respect to how that is constructed.

So you're open on that? Okay. I hear you. Commissioner Tolson -- and I will start out by saying I don't agree with this proposal, but it's, again, been tossed out there, no pun intended, but, again, as far as the amount of trash, is it fair that some people put out one bag a week, some people put out six, that kind of thing? The whole throw-as-you-go proposal, just for the record -- and, again, I think we're going to agree on this, but I just want to see for the record what is your position on that and why you don't think that would work. COMMISSIONER TOLSON: What 84 3/17/10 - WHOLE - BILL 100118, etc. you're talking about is a pay-as-you-throw system?

Right. COMMISSIONER TOLSON: Where people would pay by bag or a sticker to be placed on a bag?

Right. COMMISSIONER TOLSON: A system like that is certainly possible. It's one that is very, very difficult, particularly on those who may be more poor. The challenge in the cost for a system like that is very, very high. Also, we would experience and with the time that I've been in this position, I would say that we've experienced a significant amount of illegal dumping in the City where we have people in the system, as they've been proposed in the past, were people to pay for each bag of their materials.

No. I certainly agree with you on that, but, again, that's been something that's been 85 3/17/10 - WHOLE - BILL 100118, etc. proposed as an alternative. I just wanted to get that on the record. Thank you. Thank you, Madam President.

You're welcome. The Chair recognizes Councilman Green.

Thank you, Madam Chair. Picking up on Councilman Greenlee's questioning, the Administration first proposed the trash fee last January. So it's somewhat surprising for us to be presented a year later with the same exact proposal and not a further developed one, especially given examples across the United States of how to structure different alternatives with respect to trash. As the Daily News reported, over 70,000 communities across the U.S., including 200 in Pennsylvania, charge a trash fee on a pay-as-you-throw basis. 86 3/17/10 - WHOLE - BILL 100118, etc. The policy reasons for tying the fee to the amount of trash produced, ones that mirror what the Administration has said about a sugar-sweetened beverage tax, include that it will reduce waste and increase recycling. Both waste reduction and increased diversion to recycling produces bottom-line savings to the City budget. I'd really like a full explanation of why the City did not go with a pay-as-you-throw tax, which was suggested by several members of City Council last year when the trash fee came up in the first place. COMMISSIONER TOLSON: Thank you, Councilman. As I mentioned with Councilman Greenlee, we believe that providing a flat fee, which is an average across all households, all property owners, is a more reasonable way of trying to approach the problem that we have right now. Allowing the fee of $300 or $200 for those who have less ability to pay allows us to cover not only the 87 3/17/10 - WHOLE - BILL 100118, etc. cost for our program, but allows us to remove our cost from the General Fund. Doing the flat fee versus a pay-as-you-throw also does not require the infrastructure to support a pay-as-you-throw system or the bag system, which, as I mentioned, does have some concern with regard to how citizens could respond to it. In this system, should someone not pay the fee, the City will still continue to collect trash. We will address the property owner through penalties and even possibly liens. In a pay-as-you-throw system, you don't collect the trash; you, in effect, leave it, and that could be very problematic, particularly in the places where we presently are dealing with illegal dumping as a significant problem.

Okay. Well, I don't understand your answer because it's internally inconsistent and it's contradictory with your answer to 88 3/17/10 - WHOLE - BILL 100118, etc. Councilman Greenlee. For example, you said that a pay-as-you-throw system would be hardest on the poor. So let's just imagine somebody living on a fixed income, $20,000, with a property that is taxed at $300 a year, who really has one small bag of trash that they put out every year, because they're a senior living alone or an older couple. Under the proposal of the Administration, no matter how much trash they produce, they would pay $200. Under a pay-as-you-throw system, if the bag costs a dollar, they would pay $52 a year. How is the system you're proposing better for the poor? COMMISSIONER TOLSON: Okay. Thank you, Councilman. One important point I think to make would be that the description that you just gave does not necessarily fit the reality that we have. In some of our poorer communities, there is more trash set out. And, secondly, as people were 89 3/17/10 - WHOLE - BILL 100118, etc. to -- as people would choose between buying a sticker or, say, buying something else that they may want to have, a sticker may not be the thing that people will buy, or a bag. And we'd also see -- that's why I said we will see the problem of illegal dumping or people taking their trash to somebody else's house would increase and be more of a problem than it is right now, because folks who have to make a choice each week about using a bag or a sticker would be challenged. Additionally, this fee would not directly impact the -- let's say in a poor community where people are renting a property -- does not directly impact them, because the fee does not go to the renter. It goes to the property owner, who would have the choice of not necessarily passing it along to a renter.

Well, that answer is internally consistent with what you expect to happen on the sugar tax, 90 3/17/10 - WHOLE - BILL 100118, etc. which is that it's going to be passed on to the end consumer. I'm certain the same thing will happen to the trash fee for tenants of landlords. And I'm really confused about what you're saying about the incentives we're creating, because as we have a pay-as-you-throw system, it diverts much more waste into recycling. A trash fee does not promote recycling in the least. And the more we recycle as a city, the more money we save on dumping fees; is that not correct? COMMISSIONER TOLSON: You're correct, Councilman. A fee by itself does not promote recycling. You're absolutely correct.

And doesn't a pay-as-you-throw system promote recycling, because the more trash diverted into the recycling stream, the less bags people will have to buy to put out their trash? COMMISSIONER TOLSON: You're correct on that too as well. A 91 3/17/10 - WHOLE - BILL 100118, etc. pay-as-you-throw system, if people are going to buy bags or buy tags, would promote recycling. However --

So as we -- COMMISSIONER TOLSON: There's a however that would go along with that, though. The however is that you still have to deal with the challenge of people who --

We can deal with short dumping. We can deal with that issue. We can deal with the issue of extra trash by charging enough for the bags to make sure that we are able to clean up lots and able to help people with bags. I mean, we as a city can deal with that issue. You're saying on the one hand, we want to promote a sound public policy of the sugar tax by diverting people from buying sugary beverages, and that will be good for the City and will raise revenue. It's inconsistent to then say, yes, we want to have a public policy promoting recycling 92 3/17/10 - WHOLE - BILL 100118, etc. because that in the end saves us the most money, but we don't want to put in place a system that is the most effective system to promote recycling throughout the City. COMMISSIONER TOLSON: Well, Councilman, I actually -- I could compare the sugar tax to recycling in this way. If we were --

I just did. COMMISSIONER TOLSON: If we were to turn back the hands of time, let's say three years, five years, ten years, we had a recycling rate that was under six percent in the City. People did not recycle, though it was available to them, and it appeared to be no extra cost and it was always good for our environment. So people did not necessarily recycle just because it was there. What we have done recently, though, to change the system for recycling to make it enticing to people 93 3/17/10 - WHOLE - BILL 100118, etc. is to provide it in a way that it is convenient and takes away all the excuses about why not recycle as much as possible by making it single-stream, adding additional commodities and also making it weekly.

Would there be significantly more recycling if we had a pay-as-you-throw system than a trash fee system? COMMISSIONER TOLSON: I'm not sure that I could say an absolute yes to that. I think that the --

You don't think that that would change behavior? COMMISSIONER TOLSON: It certainly would impact the behavior of some. It may not impact the behavior of others, and that's -- I'm trying to look at the system globally. My perspective is not one of just how I reside in my household or in my community, but I look at how I see citizens respond in total to different services that we provide, and 94 3/17/10 - WHOLE - BILL 100118, etc. when it comes to recycling or to trash, the behaviors vary greatly around the City. We have citizens who deliver their trash to the curb by airmail. They throw it out of the window from the second or third story. I can't imagine why that would make sense, but I do know that it happens, and it happens every single day, and that's part of the cost and part of the process that we go through and people that we have to include in our education and enforcement efforts to try to change how those things happen.

No matter what kind of -- that's under our current system. That will exist if you have a trash fee. That will exist if you have a pay-as-you-throw system. I'm trying to get to what trash fee system would create the most recycling. COMMISSIONER TOLSON: I think what we're looking at in terms of what we're providing to citizens with our recycling being weekly, single stream and 95 3/17/10 - WHOLE - BILL 100118, etc. also offering incentives, that we're going to expect the citizens to improve their recycling and increase it. And I'm not discounting what you're saying with regard to pay-as-you-throw. It certainly does offer the opportunity for increases and the incentive to increase your recycling, because no one wants to pay -- you want to reduce the amount that you put out for trash, but it also increases the incentive to put the raw materials into your waste stream and also to illegally dump. I'm sorry; not into your waste stream. Into your recycling container. The incentive to put that which is really trash into recycling, which is why when we reinvented our incentive program, we took it away from being an individual household in weight, because that did encourage people to abuse the process and the system and instead made it on a neighborhood basis and only encourage people to recycle that which is really recyclable. 96 3/17/10 - WHOLE - BILL 100118, etc.

Councilman Green, your time is up.

Thank you, Madam Chair.

The Chair recognizes Councilman Kelly.

Thank you, Madam Chair. I just have basically a question. According to your testimony this morning, you're projecting a tax increase of 38 million for the Year '11 and 77 million for the Year '12; is that correct?

That's correct, Councilman.

It sounds great, but the only problem that I have --

Excuse me, Councilman. Can you speak into the mike? We can't hear you. Thank you.

Okay. Now, 97 3/17/10 - WHOLE - BILL 100118, etc. the problem I have with it, are you confident in raising this revenue? Because at the same time, you're saying that the Department of Revenue will be responsible for the collection of this tax, and due to the past performance of collecting revenue from property owners in this city, I have questions about whether they're able to do it, and how many additional employees would the Revenue Department need to tack on this additional responsibility?

Rob Dubow, the Finance Director. I just want to kind of address the underlying assumption. While it's clear we have a large amount of uncollected taxes and we need to bring that down, I don't think it's right to say that most of our taxes don't get collected. Our collection rate approaches 90 percent for the first year. Within three or four years, we're up to about 95 percent. So the taxes -- most 98 3/17/10 - WHOLE - BILL 100118, etc. of the taxes do come in, and we assume that it will be the same for this tax.

Thank you, Mr. Dubow. I have another question and it has to do with the problem that retailers will have. According to your testimony, Dr. Schwarz, you expect to have a two-tier pricing policy with stores; in other words, if sugar drinks would be more than diet drinks. Is that true? Is that how you perceive this to be? Because what you're saying is that most people, if they want to save money and whatnot, would go to the diet drinks or the non-sugary drinks.

So we are able to tax retailers, and as has Council -- Council has pointed out and I mention in my testimony, how it's passed on by the retailer is not something we'll legislate. We can't legislate.

Yeah. Well, the retailers have a major problem with 99 3/17/10 - WHOLE - BILL 100118, etc. this, because -- I know you're in pretty good shape. You probably don't go into the fast food restaurants like many other people do, but if you go into a fast food restaurant, what they do is, they give you a cup. Now, the cup, of course, you go over and you can have diet soda or regular soda or whatever. You have a selection there. You can do that. Now, what happens if they have on their board that a large drink will be, a diet drink, will be $1.75, but a regular drink will be $2.50. Well, what happens when the person goes up there? They're going to certainly say, Well, I'm going for a diet drink. I mean, that would make more sense, right? (Applause.)

See, and that's the problem retailers will have, and what they'll do, they won't make it 1.75 and 2.50. They'll make it $2 for all drinks. That's what they'll do. (Applause.) 100 3/17/10 - WHOLE - BILL 100118, etc.

See, I know what your intent is, and believe me, I think I can sympathize with you, but we can't dictate to people how and what they're going to buy and how they're going to buy it and what they're going to drink. (Applause.)

That's basically what I just wanted to bring out, that for retailers it's going to be a nightmare, and I think that one of the things we have to do is really think this thing through if we're going to do anything in the way of this tax. Thank you, Madam Chair. (Applause.)

The Chair recognizes Councilman Goode.

Thank you, Madam Chair. Mr. Agostini, in your testimony, you say the Administration does not propose broad-based rate 101 3/17/10 - WHOLE - BILL 100118, etc. increases on any of the City's taxes. I'm assuming by that statement you mean that people who are employed in Philadelphia should not pay more taxes on their wage tax, that people who operate businesses within Philadelphia should not pay more taxes because of their gross receipts or because of their net income from that business, and you believe that's not fair. The question today is, what makes a soda tax or the trash fee fair. In my earlier line of questioning, I tried to deal with the fairness of the trash fee by saying that we at least have to have a way that compares the cost efficiency of trash collection. So my question again is, if we were to do such a comparison, if it were by property or by household or by ton, can you tell me how we match up in terms of cost efficiency with surrounding counties and with comparable cities in the United States? 102 3/17/10 - WHOLE - BILL 100118, etc.

I don't have that material in front of me. We --

You still don't have it?

As you may have noticed, I haven't left the table.

Okay. Well, as I noticed -- you said you reviewed it before, right?

Councilmember, yes.

You don't have to cite it for me, but did we rank high or did we rank low?

When we looked at it, Councilmember, we ranked pretty much in the middle of all of those communities that had a trash fee.

You remember that much?

Yes.

Do you remember that the surrounding counties were less than $300? 103 3/17/10 - WHOLE - BILL 100118, etc.

We were looking at larger communities. The Streets Department has been pulling information from surrounding communities. We looked at larger communities, and our view is that based on what we saw in larger communities, we're about the same.

So on my third round of questioning, by which I hope you have the information by that time, I will ask these questions again, but I will ask them based upon your broad memory of the data. Will the revenue from the proposed trash fee improve trash collection? COMMISSIONER TOLSON: The revenues that we are expecting from -- that will help support the General Fund will certainly continue to support the --

Will it improve trash collection? COMMISSIONER TOLSON: It will not improve trash collection in and of 104 3/17/10 - WHOLE - BILL 100118, etc. itself. Certainly any challenge that we're presently expecting --

That was a simple honest answer. Thank you. How much of the revenue will be dedicated to new services? COMMISSIONER TOLSON: Two million dollars will be dedicated to restore or new services in the first year.

So this is in fact a pension cost fee and tax? Mr. Agostini?

That's not my description, sir.

Okay. Your description is that these are two new initiatives that provide what new services?

As I mentioned earlier and as Ms. Tolson just mentioned, two million in additional services this year. Your line of questioning, if I recall, was about the increases in the 105 3/17/10 - WHOLE - BILL 100118, etc. budget. At the time, I mentioned what the largest component of that --

So we're raising $150 million to --

May I finish?

-- provide two million more in services?

May I finish, sir?

Go ahead.

And the largest component of that was for pensions. And at that moment, I believe you made the comparison or the statement that this is being raised for the purposes of covering our pension costs, and my response to you at that time was that we have very crushing pension costs and if you wanted to characterize it that way, that would be a way to characterize it.

That is where the money is going. There's no 24 need to revisit it, but I think if that's where the money is going, we should at 106 3/17/10 - WHOLE - BILL 100118, etc. least be able to talk about the cost efficiency, if you want to call it a trash fee, the cost efficiency of trash collection. If you can't even do that comparatively, then I don't know why you would even try to sell us a trash fee if you can't say that our operation is cost efficient. Thank you, Madam Chair. (Applause.)

The Chair recognizes Councilwoman Miller.

I'm sorry. I didn't hear you. I actually thought you said Councilman Rizzo. I have a couple questions regarding the Keep Philly Clean fee, the trash fee. Does our current real estate trash -- does our current real estate tax cover trash collection?

Councilmember, our current property tax covers a range of services, including sanitation. 107 3/17/10 - WHOLE - BILL 100118, etc.

I'm sorry. I didn't hear you.

Our property tax covers a range of City services, including a portion of the sanitation.

Okay. So one portion. Does that portion of sanitation mean trash collection?

As one of the services provided by the department, yes.

And is this a temporary tax? After the recession has passed and the economy has recovered, assuming this tax is approved, will this tax be eliminated?

We did not propose it as a temporary tax.

So it is permanent. Okay. And what is the current status of bulk trash collection and will this trash tax reinstate bulk trash collection? COMMISSIONER TOLSON: 108 3/17/10 - WHOLE - BILL 100118, etc. Councilwoman, the current status is that bulk trash is not collected at the curb. As you may remember, that is one of the services that we cut in the past fiscal year. However, it is certainly one of the services that we'd like to consider for our future years under the new service fee.

And this new tax will -- in the testimony it says it will help bring back services such as street cleaning and additional vacant lot cleaning. COMMISSIONER TOLSON: Yes. We will be improving our neighborhood commercial corridor street cleaning, as well as picking up on a number of vacant lots that are serviced. In addition to that, restoring the mechanical leaf collection program.

Are you cleaning most of the commercial corridors with the cleaning services? COMMISSIONER TOLSON: 109 3/17/10 - WHOLE - BILL 100118, etc. Currently, no. 3

Can we get a list of those corridors that are cleaned? Could you just get that list to the Chair? COMMISSIONER TOLSON: Yes.

And just some other mechanics about this trash collection. How would you deal with neighbors dumping trash in front of another person's house? I mean, how will we deal with that? Because some families might only have one bag. I have a friend that lives in Montgomery County. They pay, but they can only put out so many bags of trash. Is that in any way incorporated, anything like that incorporated, in this particular fee? Is it going to be a limit on how many bags of trash you can actually put out? COMMISSIONER TOLSON: The limit for set-out would not change. So people will not be incented to put their trash 110 3/17/10 - WHOLE - BILL 100118, etc. in front of someone else's property.

Is there a limit now -- COMMISSIONER TOLSON: Yes.

-- as to how many bags a household can put out? COMMISSIONER TOLSON: Yes.

What is that? COMMISSIONER TOLSON: The present limit is four cans or eight bags.

Oh, okay. Do people know about the limit? I had no 15 idea. COMMISSIONER TOLSON: Yes. Yes. They're in the regulations.

Okay. All right. Thank you. COMMISSIONER TOLSON: But that's how this system is different than, say, the pay-as-you-throw, where you have that situation that your friend experiences, that people would have to take their material someplace else if 111 3/17/10 - WHOLE - BILL 100118, etc. they didn't have the proper bags or tags on it.

All right. Thank you.

The Chair recognizes Councilman Clarke.

Thank you, Madam President. I just need to get some clarity on the low-income designation. I just want to make sure I'm reading this correctly. The low-income designation is solely based on the eligibility for the installment program? COMMISSIONER TOLSON: That would be the basis -- the installment program would be the basis of determining who will receive the --

For a family of four? COMMISSIONER TOLSON: Yes.

Under the current -- and I know the characterization from the Administration, 112 3/17/10 - WHOLE - BILL 100118, etc. one has nothing to do with the other. Under the current system on real estate taxes -- because personally I think this is a real estate tax, but we can leave that open for argument -- senior citizens who are PACENET eligible don't have to pay increases in their real estate taxes. Has any thought been given to this particular proposal for those senior citizens that are currently eligible for the PACENET/real estate program in the City of Philadelphia where they don't pay increases, increases in their real estate tax? (Witness approached witness table.) COMMISSIONER RICHARDSON: Excuse me. Can you repeat your question? I was walking. I couldn't hear everything.

I just wanted to clarify the whole issue about the designation of low income, but as you know, currently senior citizens in the 113 3/17/10 - WHOLE - BILL 100118, etc. City of Philadelphia now are eligible for the real estate freeze, real estate tax freeze, if they're eligible for PACENET. The question is, has any thought been given to this particular program -- because my personal characterization, that this is a real estate tax increase -- to looking at those seniors that qualify for PACENET being able to, in addition to freezing their real estate tax, not have the burden of increasing the tax for trash collection or basically being a part of that? COMMISSIONER RICHARDSON: Good morning. Keith --

Because if they don't have to pay -- sorry to cut you off. But if we feel that that person is worthy of having the ability to freeze any increases in real estate tax, as long as they live and own that home, I think it's reasonable to expect that that person also should not have to pay for an increase in this part of the real estate 114 3/17/10 - WHOLE - BILL 100118, etc. tax increase. COMMISSIONER RICHARDSON: Good morning. Keith J. Richardson, the Revenue Commissioner. In regard to your question, yes, we believe -- first of all, it's about 18,000 people in the program currently. Anyone who potentially may get this fee, if it's approved, when they get their real estate bill, there will be application also for them to apply. So the Revenue Department will look at the application to verify if someone is qualified to receive it or not.

PACENET? COMMISSIONER RICHARDSON: Yes.

But not the increase for the trash fee? COMMISSIONER RICHARDSON: For the fee also, yes.

So a senior citizen who qualifies for PACENET will not have to pay this trash fee? Ms. Tolson, are you agreeing 115 3/17/10 - WHOLE - BILL 100118, etc. with that? COMMISSIONER RICHARDSON: Again, it's -- COMMISSIONER TOLSON: He's going to clarify.

No. I just want to make sure that Ms. Tolson is agreeing with that. COMMISSIONER TOLSON: No. I think he wants to clarify what he said.

Oh, you didn't agree with that. COMMISSIONER RICHARDSON: Again, it's based on income eligibility.

Changing on me. Say it again now. COMMISSIONER RICHARDSON: It's based on income eligibility for the program.

So it's not based on PACENET? COMMISSIONER RICHARDSON: No. 24 It would be based on eligibility.

So a senior 116 3/17/10 - WHOLE - BILL 100118, etc. citizen that collects PACENET will have to pay a trash fee? COMMISSIONER RICHARDSON: This is very possible if they don't qualify, yes.

When you say it's very possible... COMMISSIONER RICHARDSON: If they don't qualify for the income eligibility or don't apply for the senior citizen program with us, they may have to pay the additional fee instead of the hundred-dollar credit.

Since you're not going to answer the question, will they have to pay the trash fee or not? That's a simple question. If they qualify for PACENET, which allows a person not to pay any increase of real estate tax, will they also have to pay a trash fee? COMMISSIONER RICHARDSON: Yes.

All right. You keep saying maybe. Yes or no. 117 3/17/10 - WHOLE - BILL 100118, etc. COMMISSIONER RICHARDSON: They will have to pay.

So --

Excuse me. Councilman, can I just piggyback on that a minute?

Absolutely.

I was distracted. You mentioned about people on PACE --

PACENET.

-- and PACENET. Do we have any indication how many of our constituents are on PACENET? COMMISSIONER RICHARDSON: I don't have the information for you, but I can get that information.

Would you, please. COMMISSIONER RICHARDSON: Yes, ma'am.

Thank 118 3/17/10 - WHOLE - BILL 100118, etc. you. Councilman.

Thank you. In my follow-up to that, in terms of the billing, will that bill be inserted into the real estate tax bill, the bill for trash? COMMISSIONER RICHARDSON: Right now the proposal is to be on the real estate bill, but we're discussing that right now.

On the real estate bill? COMMISSIONER RICHARDSON: Or in the bill, yes, as a separate --

So you're asking a senior when they get the bill on real estate, there's a form that says you don't have to pay PACENET, and then they have a confusing message, but you do have to pay this increase. It's on the same bill.

We're still looking at a couple of options for how we would 119 3/17/10 - WHOLE - BILL 100118, etc. do it. Having it on the bill is one of those. It's the one that we've kind of looked at the most, but there are still issues like the one you're raising that we have to figure out. So it may be that we have --

We can clear that one up. Just don't charge them.

Then we have a big gap we have to fill. (Applause.)

That's a real easy one. Only 18,000 people. Well, actually less than that, because a lot of those people --

Well, 18,000 --

-- don't actually live in properties that will be eligible for the trash fee. So I think we should just eliminate those people.

But other options include having a separate bill that's included at the same time as your 120 3/17/10 - WHOLE - BILL 100118, etc. property bill instead of having a separate line, or just billing separately, and we have to figure out which one of those works best.

What will be the fee -- because in the testimony, Ms. Tolson's testimony, it says a fee for a residential property. What will be the fee for commercial residential properties; i.e., income-producing properties?

We think that will be 300. We're looking at it, but we think that will be 300.

Why would a person who has a property that has multiple units in the building who is making revenue pay the same fee as --

Right. The way it's set up now, it's per property, but it may make sense to have it per residence. I think you and I have talked about that. So that is something that we should talk about, and if we need to 121 3/17/10 - WHOLE - BILL 100118, etc. change it to make it per residence, that's something we would be open to.

I know my time is up, but you said we've talked about it and I brought it up to you a couple weeks ago. At what point during this debate on this issue are we going to talk about the unfairness of charging a person who has a single-family home that does not produce revenue the same as a person who has multiple units and is an income-producing property?

Well, I think today is the time to talk about it and --

Then when are you going to do something about it? Because we've talked about it for two, three weeks, and my concern is that if there's going to be an additional cost associated with income-producing properties, I think that should be reflected in the single-family cost, and it makes this whole notion that a senior citizen who is qualified for PACENET 122 3/17/10 - WHOLE - BILL 100118, etc. should have to pay anything.

If we're going to make that change, we should amend the bill before it's voted on.

Well, all right. Maybe you want to have that understanding that there will be changes if you want to get it voted out. I mean, you know.

Right. I understand.

Not that it's going to pass at all, but I'm just suggesting that. I'm just saying that the improvements need to be discussed early on and not at the last minute and ask us to vote it out without having the benefit of a conversation leading up to that.

I agree with you.

Okay. Thank you. Thank you, Madam President.

123 3/17/10 - WHOLE - BILL 100118, etc. You're welcome. The Chair recognizes Councilman Green.

Thank you, Madam Chair. I just wanted to clarify something for the record. Can you tell me in last year's Five Year Plan what the estimated pension expense was going to be for FY2011? In the finally submitted to PICA Five Year Plan rather than the proposed budget. I can help you with that.

I think the point you're getting to is that it's virtually unchanged from that number.

Four hundred seventy-six million dollars.

Right. So that number --

And in the newly proposed Five Year Plan, what is the pension obligation payment?

It's roughly the 124 3/17/10 - WHOLE - BILL 100118, etc. same.

It's $479 million.

Right. That number did not change from what was introduced to PICA.

Right. So there's a $3 million difference between the Five Year Plan's projection for next year's pension payment. There was a suggestion or implication, I would say, that the increase in cost and fees is related to $130 million in increased pension payments over this year. That's not true, is it?

Take a step back. We had a Plan that was balanced last year that included that increase in pension costs. What's throwing the Plan out of balance is a number of things, including weakness in wage tax revenue, weakness in sales tax revenue, snow costs. There are a whole bunch of things that added 125 3/17/10 - WHOLE - BILL 100118, etc. together to create a deficit that required us to make these proposals to bring ourselves back into balance.

Sure, but it had nothing to do with pensions, because it's exactly what you projected it would be; isn't that correct?

That's correct.

Okay. I just wanted to make that clear for the record. And what was the sales tax -- at the time we knew what the pension cost was going to be, what was the purpose of the approval of the sales tax at the state level?

There were two points -- well, in the state legislation, the sales tax is dedicated to repaying the deferral of the pension payment.

Right. I just wanted to clarify that. So could you go through actually what the costs are, what the 126 3/17/10 - WHOLE - BILL 100118, etc. difference -- why we have to spend more money this year? What is the extra revenue needed for, going to be spent for, since we know it's not for pensions?

Well, there are two ways to look at it. One is what caused the deficit, which were the things I talked about, which is the falloff in wage tax, falloff in sales tax, increase in snow costs, a whole bunch of other costs. But if you're asking what's driving our budget, the single biggest cost that's driving our budget is the pension cost. It's a cost that was under $200 million at the beginning of last decade and it's going to be $600 million at the end of this Plan.

I understand that, but the pension cost remains the same through the Five Year Plan as projected last year. We're raising $600 million in new taxes. The pension costs are the same.

Well, by 2015, the 127 3/17/10 - WHOLE - BILL 100118, etc. sales tax is gone and the pension cost is $600 million.

Sure.

I think there are two different issues. One is, you're asking what caused the deficit that we're trying to close. I've answered that. If your other question is, what's it paying for and kind of what's the driving cost in our Plan, pensions is the biggest driver.

It is, but there's no difference in pension costs over the next four years from last year's Plan.

That's why I'm saying that the things that caused the deficit were all the other things I listed.

Okay. And it's also not causing the need for additional revenue at least over the next four years, because it's exactly the same as it was last year. Even though it's a 128 3/17/10 - WHOLE - BILL 100118, etc. big piece of our budget, it has not changed.

Right. It's not what created our deficit.

And we're not raising revenue for that because we're spending exactly what we thought we were going to have to spend in all four of the next years.

Right. It's not creating our deficit. On the other hand, if it wasn't going up to over $600 million, we wouldn't have the kind of issues we have.

Sure. Sure. I understand that's my time.

Thank you. The Chair recognizes Councilwoman Miller.

Thank you. Thank you, Madam President. I have a couple questions related to the sweet tax, the sugar tax. 129 3/17/10 - WHOLE - BILL 100118, etc. Hi. Good afternoon, Dr. Schwarz.

Good afternoon.

Have any other cities implemented this type of sugar tax? I think I did hear on the news that it was Philadelphia and New York. Are there any more?

There are a number of cities and there are a number of states which tax sugar-sweetened beverages.

Other than New York, are there any others closest to us?

New York actually doesn't at the moment tax other than sales tax.

So --

Point of information.

The Chair recognizes Councilwoman Sanchez for a point of information. 130 3/17/10 - WHOLE - BILL 100118, etc.

Wasn't New York voted down yesterday overwhelmingly?

Yes. (Applause.)

Okay. So what other cities, large cities?

Chicago has had a tax on sugar-sweetened beverages now for more than a decade.

My district is actually close to -- my district has a borderline of Montgomery County, part of my district anyway, and Montgomery County will not have a sugar-sweetened beverage tax. Have you done any analysis to estimate how supermarkets in the City, especially those closest to neighboring jurisdictions, what type of impact that will have on the particular supermarket, this tax?

So we've tried to estimate, based on information that we 131 3/17/10 - WHOLE - BILL 100118, etc. have, what proportion of consumption is from sugar-sweetened beverages purchased in supermarkets, and then we've tried to figure out how supermarkets, based on what you've heard from colleagues here, will pass on to price for consumers, and I don't know the answer to either one. I know approximately the proportion of sugar-sweetened beverages that are consumed from -- purchased outside of supermarkets. I don't know how supermarket retailers will pass the cost on to consumers. We know, for instance, that sales tax differs between Philadelphia and the suburbs. We know that there are differences in costs for lots of different things actually between Philadelphia and the suburbs because of that, and I think the question is, what will consumers do and how will that impact what retailers do.

Have you thought about how you encourage retailers 132 3/17/10 - WHOLE - BILL 100118, etc. to pass the tax on -- to discourage them from passing the tax on to all beverages?

The only thing that I can do is education and working with retailers to understand the impact they may have on obesity and passing it on.

With the Healthy Corner Store Initiative, does Philadelphia have or will Philadelphia continue with this initiative whether this tax is passed or not?

Philadelphia is hopeful that we will have some money over the next two years from the federal government to at least start. The amount that we expect from the federal government is less than we have asked for from the tax beginning in '12.

Okay.

Councilwoman, your time is up.

Okay. Thank you. 133 3/17/10 - WHOLE - BILL 100118, etc.

Thank you. The Chair recognizes Councilman Goode.

Thank you, Madam President. Mr. Agostini, do you have the information yet? (Applause.)

No. 12

Okay. Let me move on to other questions, then. What does the average homeowner pay in property taxes in Philadelphia?

I don't have that in front of me.

Let's say, for instance, the average homeowner in Olney pays less than a thousand dollars, as does the average homeowner in Cedar Park, Penrose, Pennsport, Ogontz, Morton, Summerdale, West Poplar, Elmwood, Bridesburg, Whitman, Juniata, Wharton, Southwest Germantown, Paschall, Southwest 134 3/17/10 - WHOLE - BILL 100118, etc. Center City, Cobbs Creek, Andorra, Feltonville, Richmond, East Germantown, Wister, Logan, and I have a couple more pages that I won't read in terms of neighborhoods around the City.

I thought your question was citywide.

Let's say they pay about a thousand dollars in their tax bill. Three hundred dollars represents a 30 percent increase. Is that fair?

That's an opinion. I'm not going to express an opinion on that.

What is your opinion? That was the question.

I don't have an opinion on that.

Does anyone from the Administration have an opinion on that?

I believe that we made a proposal, a series of 135 3/17/10 - WHOLE - BILL 100118, etc. proposals, where we believe that the alternatives, making very deep reductions in the service base, would be so damaging to the fabric of the City and so damaging to our ability to provide services to the City, in the aftermath of what has been the most difficult economic crisis since the 1930's --

And we're here to examine --

You did ask for my opinion. I'm trying to respond.

Point of information.

Excuse me, Mr. Agostini. The Chair recognizes Councilman Green.

Thank you, Madam Chair. I'd just like to note we would like to see what the Draconian cuts would look like. I understand in testimony last week we were told we'd have it by the end of last week. I don't 136 3/17/10 - WHOLE - BILL 100118, etc. want to beat a dead horse. I don't want Mr. Agostini to get mad at me, but it's hard to engage in this discussion about a revenue measure and receive that response without knowing what the actual impact would be of cuts by department, and I just ask the President to please try to get us that information as soon as possible.

Mr. Agostini, when do you anticipate that we will receive that information?

I saw a draft of that I believe yesterday. So my hope is to get that over sometime today or tomorrow.

Can we count on that?

Yes, ma'am.

Councilman Goode.

Mr. Agostini was still responding to my question.

Thank you, sir. 137 3/17/10 - WHOLE - BILL 100118, etc. In reviewing the budgets, after two very difficult budget years where we took out about 2.4 billion over six years, we thought it was very, very difficult to again go back and make reductions in services, and while we appreciate and understand the concerns that have been expressed here and that you, sir, have expressed with respect to both of these, in your case most notably the trash fee, we feel that in order to preserve the base of services, in order to preserve what we're doing, it's important to have revenue coming into the system. Unfortunately, it's either on the expenditure side or on the revenue side, and we believe that this is the best way to preserve that level of service. So with respect to the perspective of the Administration, yes, that's our opinion, and unfortunately there are a lot of difficult choices that are before us with whether we pursue this set of actions or not. 138 3/17/10 - WHOLE - BILL 100118, etc.

But my question is whether it's fair.

Councilmember, I believe that there are probably ways that we can tweak this, given some of the suggestions that have been made here on the Council floor by Councilmember Clarke and others, that we could probably make it a more fair levy, but we'll need some time to do that.

Would a ten percent property tax increase be more fair?

Across the board?

Yes.

If we have a sense that on the assessment basis that we can make that work rather than have the impact on a sort of flat fee for everybody, yes, it's conceivable. If we structure it properly, it would be more fair.

Would a ten 139 3/17/10 - WHOLE - BILL 100118, etc. percent property tax increase raise a similar amount of around a hundred million dollars?

I believe that to raise a similar amount, we would need something closer to or percent. 8