Committee Hearing, March 17, 2010

I just think I have a point, because now I'm being double taxed. Now, for instance, if you come to Chickie and Pete's today, which I hope you do, and you go in there and you got to buy a soda, it's $2.50.

But I wouldn't buy a soda.

Well, if you did.

If I did.

If you did and you bought a soda, right now I'm charging you cents tax, right this second. 17 Okay. Now, since that's sales tax, I'm 18 charging you 20 cents on it right this 19 second. Where does that come in your 20 tax?

So I can give you another example.

No, no. Where does it --

Well, with that 285 3/17/10 - WHOLE - BILL 100118, etc. related.

Okay.

Let's look at the cost of beer. People have preferences for beer. They spend what they spend. When they go into a bar, I presume they go into a bar for whatever other atmosphere and other things that are in the bar, and they may substitute drinks based on what the relative price is in a given institution, because what things cost at your place I think are probably not the same that they cost down the road toward Philadelphia, as well as further from Philadelphia. So I would hope that people come to you because they like being there.

I'm not just talking about me.

Because they like to be there. I know that.

I'm saying that I'm surviving.

I know that. 286 3/17/10 - WHOLE - BILL 100118, etc.

I'm saying that there is an industry of restaurants, a whole flock of them right above Chickie and Pete's. It's not -- do you want empty stores in Philadelphia?

No. 8

This is a fact. Not all Philadelphia is in Center City. If you're in Center City and you choose to come to it, are they that much -- I know we're better than Chicago and New York, but are we that much better?

I'm going to ask you a question.

Go ahead.

So as a competent and smart retailer, if this passes, what will you do?

I won't open any more stores in Philadelphia.

And what will you do about the price?

I'll have to 287 3/17/10 - WHOLE - BILL 100118, etc. give it to my customers and take a hit.

So you would pass it on to your customers?

I would try. I wouldn't be able to in the case of alcohol.

Point of information, Madam President.

Yes.

I would just like to ask Mr. Ciarrocchi, under your system right now, your computer system, if a person orders a drink, a rum and Coke, you would charge him a price based upon, of course, the cost of the Coke, and in Dr. Schwarz's premise here, it would be more --

He would say it was the Coke and the liquor.

-- than if it was a Diet Coke. Now, if someone were to come in and say, I would like a rum and Diet Coke, would there be two different prices for that drink or just 288 3/17/10 - WHOLE - BILL 100118, etc. one price for all?

We would probably try to even it out. There's not another drink. It's not going to help in my business.

So, therefore, it's not going to be sort of an incentive for people to buy Diet Coke.

No, it's not. Not in my restaurant. No, not in any restaurant. (Applause.)

That's my point. And I'm sorry to say Coke. I should say Pepsi also.

Doctor, I think you may have answered the question. Thank you very much.

Thank you.

I do like you, Doc. You can sit here any time you want. You're not my worst nightmare. You're just one of them; that's all.

And I should 289 3/17/10 - WHOLE - BILL 100118, etc. be -- it's St. Patrick's Day. I should be up there with your bartenders right now. You have to know that.

I agree. Let me just say as a Philly native -- and I love this City, and everybody here knows that. I mean, I love the City of Philadelphia, and I think what we're doing here -- we have a lot of out-of-towners that come to Chickie and Pete's. They come to watch a game. Now that we know how much more the drink would cost in Philly than it would in the suburbs, the people come to Philadelphia, they come to go -- like they might be from Dallas. We don't like Dallas, but they come. That's fine, I'll take their money. But they come from Dallas and they say, Hey, listen, let's go to a restaurant, and then they get their bill and their bill says liquor-by-the-drink tax, ten percent; soda tax, 32 cents on a drink. They think you're gouging them. I mean, we 290 3/17/10 - WHOLE - BILL 100118, etc. don't have major industry in Philadelphia. We have hospitality. That is our number one industry in the City, is hospitality. You're going to take that away by gouging people, tourists? I know we're better than Chicago, like I said before, but do we have that many more great things in Philadelphia that make you want to come here? Because we're going to gouge you when you want to go out and have fun and have a few drinks and come to the City and spend money, and then you look at your bill. These are educated people that fly around. They're going to look at -- they're not stupid. They're going to say, What kind of city is this? How do they -- why are they ripping me off? That's what it looks like. I just think you're taxing the restaurant industry. It's not an industry that's kicking it out this year. We're having a tough time. The City is having a tough time. It's a recession. 291 3/17/10 - WHOLE - BILL 100118, etc. We need to attract customers. We got to say it's a good deal to come here. We can't beat them up. Now, as far as childhood obesity, I understand that, but I don't think you're going to price yourself out of childhood obesity. I mean, you're going to buy what you want to buy. (Applause.)

Let me just charge you more and you won't have it. How about if I take a whip to you, too? I mean, what's the difference? You're punishing people. You're punishing them and in one industry. Is there not sugar in other products? Is there not candy out there? I don't want to throw them under the bus and have the candy guys come and beat me up, but there's candy, there's cakes, there's a lot of things. Is it just one item? Is it the easiest target? That's all I ask. I ask people to look at a business, think about the 292 3/17/10 - WHOLE - BILL 100118, etc. restaurant industry that's our hospitality, that are our open arms, that we're there to take all the tourists in and to entice people to come back to us. Or do we just want to sit here with empty pockets and say, The only people we can go after is these soda people, let's beat them up. I think it's wrong. I think it was a little easy. And with all the great minds in Philadelphia, they can't strategically think of a better idea than going after one simple product? I really have nothing else to say, but I hope they all listen to me. (Applause.)

Are you going to testify?

No. That was just Joe Campbell. He was former President of the Restaurant Association and he is my confidant and a worker that works with me every day, and he would kick me if I said something wrong. And 293 3/17/10 - WHOLE - BILL 100118, etc. he didn't have to kick me yet.

Not yet.

Thank you for coming in to testify. We appreciate it.

Thank you very much.

You're welcome. Jerry Mondesire. (Witness approached witness table.)

Good afternoon. Welcome. Please identify yourself for the record.

I'm Jerome Whyatt Mondesire, President NAACP, Philadelphia Sun publisher. Thank you very much for this opportunity to speak. I know there's a very long list of witnesses, especially from the community, after me, so I'm going to keep mine very brief. I'm going to send you a written testimony tomorrow. 294 3/17/10 - WHOLE - BILL 100118, etc. We just want to be on record as opposing the sugar/soda tax against beverages, number one, and also to oppose the tax on raising monies by taxing the refuse pick-up. But primarily today we want to speak about the sugar tax. We think it's an unfair levy to put on working-class people, poor people, especially those that we represent countless times in the City of Philadelphia. We just had a workshop the other day on diabetes, which is a second or third killer now of African Americans across this country and in particular Philadelphia and all big cities. So we understand the obesity problem very, very well, but like the previous witness that just spoke, we don't believe that picking on the beverage industry is the right way to go. We've got to change young people's dietary habits and the way young people relate to their parents and learn how to follow good eating regimen. 295 3/17/10 - WHOLE - BILL 100118, etc. Secondly, we also want to make it very clear that the beverage industry has been a strong supporter of the civil rights causes for more than half a century, and we wouldn't be in existence without strong labor unions, and both this tax would have a debilitating effect on these unions and this industry. And we want to make it very clear that we remember our friends, and when they're in trouble, we speak in their defense. And so I just want to sum it up by saying please vote no on this levy and especially that it would have a terrible impact on jobs, especially on the inner city parts of this area, because where the Coke plant is, where the Pepsi plant is and other facilities that manufacture, we stand to lose countless jobs, and that's something we just can't stand. Thank you very much for listening. (Applause.)

Thank 296 3/17/10 - WHOLE - BILL 100118, etc. you very much. Lois Fernandez and Madeline Shakomba. (Witnesses approached witness table.)

Good afternoon. I know you're going to have to leave very shortly and I do appreciate your coming in to testify. Please identify yourself for the record and proceed with your testimony.

Lois Fernandez, creator and founder of Odunde, Incorporated.

Please proceed with your testimony, Lois.

Yes. Thank you very much, Council President. I'm here to talk about and hopefully -- I'm going to try to be brief. As a senior, I want to talk about the proposed tax, that new tax coming up for trash, that's going to be for us with us, it appears, forever, that 297 3/17/10 - WHOLE - BILL 100118, etc. as seniors, we can't afford it. And my position is, I'm asking you all to exempt we seniors from that, to exempt us from the soda tax. I mean, most of us are on limited income. I mean, seniors didn't even get a cost-of-living increase for our Social Security this year. And so where are we supposed to get this money? You know, I know they're talking about obesity and diabetes and what-have-you, but not all of us have that. Not all of us have diabetes or are obese. I just happen to have RA, but I'm still hanging here. But the thing is is that we need to be exempt from this. I don't think that we should be taxed at all. We certainly have paid our dues through the years. We have served our city and this country, and so I'm asking Council to consider that. You know, we do the festival, Odunde, and certainly we have vendors there, and you all know we celebrate our 35th year this year. We have a lot of 298 3/17/10 - WHOLE - BILL 100118, etc. vendors who do sell sweet water, soda water, and certainly this would be a disaster for them. Certainly we have supporters, Jerry said, from other things. We have support from Pepsi, from Coca-Cola. They support our community. We're getting ready to build a senior complex down there on Grays Ferry Avenue. We have support. So I'm asking you guys to look at this, to consider this. This will be a disaster for many small businesses who try to survive in our neighborhoods. And so, again, I ask you to exempt we seniors from this tax at all, if it comes to be, for the soda and for those taxes for the trash. Thank you. (Applause.)

Please identify yourself.

My name is Madeline Shakomba. I represent North of Washington Avenue Coalition. 299 3/17/10 - WHOLE - BILL 100118, etc. I'm not here asking for an exemption. I'm asking that the tax be not passed at all. (Applause.)

I'm not going to talk about the sugar tax. Right now I'm talking about the trash tax. I see this as a process of gentrification, another method of removing working-class, low- and moderate-income people out of this city. You expecting to charge us -- (Applause.)

-- for our trash. Okay? That's what you're trying to do, charge us for our trash, and if we don't pay it, you're going to put a lien on our house. That's another method of trying -- if you can't get the real estate tax out of us, put another lien on our house for our housing so the Sheriff can sit it up there and sell it to somebody who got the money and these here middle-class -- these here so-called yuppies can come into our neighborhood. 300 3/17/10 - WHOLE - BILL 100118, etc. (Applause.)

Okay. Right now we're having trouble trying to keep the low-income and the moderate-income people in this city. This is just the beginning in terms of your taxes. Right now we faced with electric tax -- not an electric tax. Increase in our electricity, an increase in our gas, an increase in the water bill with this water company coming down with this so-called storm sewage drainage. And next year, come 2011, we going to see a 50 to 100 percent increase on our real estate taxes. And don't tell me that's not going to happen, because it is. You just wait in time to come in there and slash us with another tax on our real estate taxes. We're tired of this. You know, the money is there. I tell you where it's at. You want to know where it's at? In them ten-year tax abatements. You get rid of the ten-year tax abatement, you'll 301 3/17/10 - WHOLE - BILL 100118, etc. have the money. (Applause.)

Right now they're building up here on Rittenhouse Square, 17th and Rittenhouse Square, 50 buildings worth $3.5 million with a ten-year tax abatement. You know how much money that is the City is losing in a year? And don't come with that sorry survey about how much money they bringing into the City, because they ain't bringing into the City no $14 million that you're losing every single year. That's just from those 50 houses. That's not counting the rest of them being made at Symphony House or that house down on Lombard Street that's selling for $4 million. I'm just talking about on Rittenhouse Square. That's $14 million that's lost, and you're going to tell me they bringing in that much money? If they were, your coffers would be full with money. You wouldn't be asking us to pay for the tax on trash. So that means 302 3/17/10 - WHOLE - BILL 100118, etc. they're not bringing in the money that your survey was supposed to reveal to us that they were supposed to be bringing in. Okay? I'm also tired of the fact that -- I know a whole lot of businesses is here about your sugar tax. That's the least of my worries, about the sugar. I don't drink no sodas anyway.

Just a moment. You're going to have to speak into the mike, please.

But this tax on our refuse should not be passed. Okay? If you want to, go to every other week. Because I'm telling you, you pass that tax, you are after my home. And I'm a senior citizen, too. That $14 million that you are letting go on just those 35 houses at 17th and Rittenhouse Square is enough to pay the salary of at least ten first-year teachers. Okay? It's enough to pay the salary of maybe 20 to 30 people who receive minimum wages working 303 3/17/10 - WHOLE - BILL 100118, etc. at McDonald's. It's enough for senior citizens like me or others who may be receiving basic services, 50 to 60 of us could receive that money for a whole year, and you letting it slide out the door with this so-called ten-year abatement. We're tired. Now, I'm going to fight you on it. I'm telling you, I'm tired. I don't know about you, but I'm ready to fight you on it. And come next year, you'll be running -- putting your name down for petitions to run for office. I think it's about time we start letting some of our own folks getting some things going around here. If you want to join me, my address is northofwashingtonave, A-V-E, coalition@gmail.com, because I am really sick and tired. I repeat: northofwashingtonave, A-V-E, coalition@gmail.com, because I am really sick of this. Okay? Now, my solution, like I said, 304 3/17/10 - WHOLE - BILL 100118, etc. is collect the trash every other week, because the only thing you're going to end up doing is have dirty streets, trash-filled lots and rodents and rats running everywhere if you pass this trash bill, because you cannot exempt senior citizens. Some of them only get $7,000 a year. Where they going to come up with $200? Okay? I'm a Philly native too, and I love Philadelphia as much as anybody else. I was born and raised in the City, and I want to remain in the City, but at the rate you're taxing me out of here, I don't know if I'm going to be able to. And these taxes are all punishing just one group of people, the working-class and low- and moderate-income people and the older people. This is not hurting the rich and the well-to-do. That $300 that they're going to pay is like a drop in the bucket to them. After all, they getting a couple thousand dollars tax rebate from the City that they don't have 305 3/17/10 - WHOLE - BILL 100118, etc. to pay taxes on. So you're going to come up with $300 from them? That's a joke. But at any rate, like I said, it's wrong, and you got to, how you say, get rid of the ten-year tax abatement and some of them other things you been granting to the wealthy, because only the wealthy can afford the ten-year tax abatement. Us poor folks, we don't got enough money to do rehab or new construction.

Thank you for coming in to testify. We appreciate it. I do hope you can make your bus in time, Lois. MR. McPHERSON: The next witness is Al Taubenberger.

And Joseph Bright will be next, if he would come up to the table too, please. (Witness approached witness table.)

Madam 306 3/17/10 - WHOLE - BILL 100118, etc. President, thank you for the opportunity to speak before this Council. And as a German American, I was selected by the Northeast Philadelphia Chamber of Commerce to speak today on St. Patrick's Day on this most important occasion. On behalf of our nearly 1,000 members, I respectfully urge you to vote no on the Healthy Philly Initiative, which proposes to tax at the highest rate in the nation on sweetened beverages, including soda, energy drinks and even chocolate milk. This onerous levy, which would add 40 cents to the price of a 20-ounce bottle of soda, for example, seriously threatens the livelihood of two major bottling plants in the North and near Northeast of Philadelphia, about 1,000 jobs as a result. Additionally, it places an unnecessary burden on small businesses, like grocery stores, diners, restaurants who offer sweetened drinks since their customers demand it. I agree that there's ample 307 3/17/10 - WHOLE - BILL 100118, etc. evidence that many of us should eat healthier. Probably one of them sits at this table. However, it appears overambitious for municipal government to legislate this, especially when it has been written that only million of the 8 77 million in new revenues as a result of 9 this tax will actually be spent on 10 programs encouraging nutrition. 11 I recognize the precarious 12 state of Philadelphia's finances and the 13 desperate need to generate new sources of 14 revenue. However, this proposal is 15 shortsighted, potentially threatens jobs, 16 which would further deplete tax revenue. 17 I strongly urge you to vote no, and I 18 thank you very, very much for the 19 opportunity. 20 (Applause.)

Thank you very much for your testimony. Are there any questions of this witness? (No response.) 308 3/17/10 - WHOLE - BILL 100118, etc.

Thank you very much. MR. McPHERSON: Joseph Bright. (Witness approached witness table.)

Councilpersons, good afternoon. I'm Joe Bright. I'm a tax lawyer, and I specialize in Pennsylvania taxes, and I write a great deal on the subject and study them in some depth. I was asked to give my view/opinion whether this tax is preempted by state legislation, and I think the answer is yes. I was going to tell you it was preempted twice, but on the basis of testimony I just heard, I would say it's probably preempted three times. The first time is by the sales tax. Pennsylvania imposes a sales tax on a whole lot of things, mostly tangible personal property, including soft drinks. This tax proposed is styled a privilege 309 3/17/10 - WHOLE - BILL 100118, etc. tax on selling the product at retail, but I rely on three authorities for the proposition that it duplicates and is, therefore, preempted by the sales tax. The first is the City itself. The City says that the burden of this tax is going to fall on the consumer. That's the point of it. And all the talk and testimony we've heard about influencing consumer behavior and obesity only works if the tax is passed on. So the point is that the City says that the substance of the tax is to fall on the consumer, and that's exactly where the sales tax falls. The second authority is, the leading writers and professors in the field of state taxation all agree that whether you impose a tax on a consumer purchasing a product or on the retailer selling the product to the consumer is the same thing. In other words, the substance of it governs. The third authority is the Pennsylvania Supreme Court. We have, as 310 3/17/10 - WHOLE - BILL 100118, etc. you heard, a tax on liquor-by-the-drink. Before we had that tax, there was another tax which was struck down by the Pennsylvania Supreme Court as preempted, and the reason they said it was preempted was because there are two state taxes, a sales tax and a liquor tax, which are imposed higher up the chain. The proponents of the tax; namely, the City, said, Well, our first version of the liquor tax isn't preempted because that's at the low level of the chain and these taxes are higher up, and the Supreme Court said, We don't care. The point is, they are intended to fall on the consumer, precisely the same thing that the authorities that I cite say, precisely the same thing that the City says. So I think if the PA Supreme Court gets this case, this tax before it, it will say, We told you the answer once and this is now preempted. Second preemption: We have a business privilege tax in Philadelphia 311 3/17/10 - WHOLE - BILL 100118, etc. and it applies, generally speaking, to all businesses. Prior testimony confirms that this would be a second business privilege tax. There is a doctrine that the Pennsylvania courts apply which says that when the General Assembly enters a field and legislates thoroughly, there is no room for local additions or subtractions. The General Assembly has occupied the field, you can't add or subtract. If that doctrine is applied here -- and I think it would be -- the tax would be stricken on the second ground of preemption. The third ground, which I just heard today, is the tax evidently would apply to Coke in the rum and Coke, and that's already taxed by the ten percent by the drink tax, a second duplication. Now, I recognize that technically the drink tax is imposed by the School District, but only with the authority of this Council. So I think in substance, you get a third preemption, from what 312 3/17/10 - WHOLE - BILL 100118, etc. I've heard today. Consequently, I would bet, if asked to make a bet, that it would fall if the case were challenged in the courts. Thank you.

Thank you very much. Are there any questions of this witness? (No response.)

Thank you very much, Mr. Bright, for your testimony.

Madam Chair?

Yes. Councilman Jones has a question.

Can you repeat the two grounds by which it would fall succinctly, because you gave a legal briefing.

Yes. Actually, as I say, probably three for the reasons that I explained. And let me preface by saying what I expect you all know, but 313 3/17/10 - WHOLE - BILL 100118, etc. it's worth repeating. The City can tax under the Sterling Act anything that the state doesn't tax. So if the state does tax something, the City can't do it, unless the General Assembly says so. So here the grounds are the sales and use tax, which is imposed on soft drinks; the business privilege tax, which is a privilege tax imposed on all businesses, so you would now have a second privilege tax, second business privilege tax just on certain selected businesses; and the third is the liquor drink tax. So if you impose the sugar drink tax on the contents of the rum and Coke, you're taxing it twice. So those are my three points.

All right. I just wanted to -- thank you so much.

Yes.

Very interesting. Thank you very much. Mr. Bruce Cox. (Witness approached witness 314 3/17/10 - WHOLE - BILL 100118, etc. table.)

Good afternoon. Would you please state your name for the record and present your testimony.

Good afternoon, Madam Chairperson. My name is Bruce Cox. I'm a citizen of the City and County of Philadelphia. I'd like to speak on both the sugar tax as well as the proposed trash tax. There are challenges which confront our achieving the intended outcomes with the proposed tax increases in their present form. If the consumers purchase the sugary beverages in spite of the increased costs, then the intended behavior modifications would not be achieved. If, on the other hand, it does not deter the consumption of the beverages -- it does deter the consumption of the beverages, then we may not produce the intended revenues. Additionally, the trash tax 315 3/17/10 - WHOLE - BILL 100118, etc. could impose an undue hardship on persons having fixed incomes. I would like to suggest an alternative option for supplementing a reduced trash and sugar tax. A flexible levy option and obligation revenue or floor tax could be used, with modification, in conjunction with a trash tax and a tax on sugary beverages to minimize the impact the trash tax could have on persons with fixed incomes, such as the elderly and disabled, as well as minimize the impact the sugar tax could have on the beverage industry. This revenue could be produced through the City offering additional services, such as police foot patrol beats, at the taxpayers' request for pre-determined periods, or additional trash pick-ups for large events or pick-up of bulk or disposable refuse, at the taxpayers' request. These services could be paid for either at the onset of 316 3/17/10 - WHOLE - BILL 100118, etc. the request for these services, it could be paid at the conclusion of the service for a specified pre-determined period or it could be disbursed throughout the fiscal year. These services would raise revenues while also giving the taxpayer the flexibility to choose their tax expenditures. The taxpayer could -- the intent of these programs are to offset tax discounts or exemptions for businesses and qualifying individuals and distribute the cost over a broader segment of those persons benefiting from City services. The drawback of this floor tax is that while it may be -- constituents may take advantage of this unique opportunity, no one is compelled to do so. Consequently, it is recommended that this floor tax would be implemented in conjunction with a reduced trash tax and sugary beverage tax. This proposal is not intended 317 3/17/10 - WHOLE - BILL 100118, etc. to suggest that a decrease in the quality or availability of the standard services which Philadelphia citizens have come to rightly expect. Rather, for those persons or entities who desire to avail themselves of this option, it produces a flexible opportunity to obtain needed services while managing tax expenditures. Thank you for the opportunity to speak.

Thank you very much for your testimony. MR. McPHERSON: Our next witness is Rudolph Wallace. (No response.) MR. McPHERSON: Mr. Wallace? (No response.) MR. McPHERSON: Andrew Weikert? (Witness approached witness table.)

Good afternoon. My name is Andrew Weikert and I'm here representing Auntie Anne's hand-rolled soft pretzels and our stores located in 318 3/17/10 - WHOLE - BILL 100118, etc. the City at 30th Street Station, Cheltenham Square, Franklin Mills, the Shoppes at Penn and Philadelphia Airport. Our Auntie Anne's locations provide customers with a variety of pretzels, dips and, of course, a range of beverages, including soda and our famous proprietary lemonade product. I came here today on behalf of our franchisees in the City to urge your strong opposition to this tax. When we've analyzed the legislative language on this, it comes out to -- it would increase the price of a 21-ounce soda for our customers by 48 cents, and for the lemonade, which frankly is one of our biggest sellers in the beverage line, it would increase the same 21-ounce cup of lemonade by 72 cents that the consumer would have to pay on top of the price that they pay right now. At those levels, there's no 24 question at all that this tax is going to seriously suppress demand for beverage 319 3/17/10 - WHOLE - BILL 100118, etc. products, and when you consider that, we are concerned about the investment that our franchisees have made in the City and also the jobs that they are providing in the City. We talk to our franchisees all the time. We say, Whatever you do, take care of your employees. They're your most important asset. They're the ones who are going to make your business successful or not. You know, do everything you can to take care of your employees and support them. A lot of times for franchisees, that could mean healthcare benefits that they buy for their employees, all kinds of things. We encourage them to pay as competitively as they can. And this type of thing is going to hit a large -- the beverage mix is a large percentage of your overall sales in any retail food operation and this is seriously going to hit profitability and our franchisees' ability to take care of the employees the 320 3/17/10 - WHOLE - BILL 100118, etc. way we think they should. On the other side, we're also worried about our customers. These are products that our customers love. We just put out on -- we have a rather large following on Facebook and Twitter, and we wanted to get their feedback on this. We put out some things yesterday to try to gauge their response. So we're still waiting to see what they say, but we're asking them to tell us what they think about this, and we're pretty sure that when they start -- when the responses come in on those websites, we're going to find that they're not happy about this at all. So for the sake of our customers, for the sake of the employees who work in Auntie Anne's stores in the City and, of course, for our franchisees who made significant investments in the City, I ask you to please oppose this very, very steep tax on sweet beverages. Thank you very much. 321 3/17/10 - WHOLE - BILL 100118, etc.

Thank you very much. Councilman Greenlee.

Very quickly. As I see your business, you are kind of limited in what you sell. You just sell a few things basically, right?

Yeah.

Pretzels, your drinks, that kind of thing. So if this tax was imposed, you wouldn't, in a sense, have the ability that a lot of other stores would have of spreading it out, because you only have so much to spread, right?

Well, that's right. I mean, our principal product is the pretzel, and being that it's our core product, we just can't put up the price on our core product. It's already, since it is such a great product, it's already a premium price as it is, so there's not a lot of ability there to push that out much further. So the price would have to 322 3/17/10 - WHOLE - BILL 100118, etc. be added to the drink.

And I guess that would also put you at a disadvantage of other businesses that are also selling drinks that may have the ability, if they so choose, to spread it out among more products?

Yes. It would be a clear disadvantage.

All right. Thank you. Thank you, Madam Chair.

Thank you very much for taking time to come down to testify.

Thank you.

We appreciate it very much. MR. McPHERSON: Our next witness is Anne Croisier. (Witness approached witness table.)

I was going to present this in paper form, but somebody 323 3/17/10 - WHOLE - BILL 100118, etc. stole my flash drive at the Lucien Blackwell Library, so I'm unable to. I e-mailed all of City Council and the Mayor's Office about this. I was going to talk about the soda tax and the trash collection fees. I'll probably just have time for the soda tax. Anne C. , MBE. I think what we should do is what the State of California did about 13 or 20 years ago, and, that is, have a 14 junk food tax, apply it to food 15 substances in addition to beverages and include all beverages, except water and 100 percent fruit juice. As I learned at the Bally's Total Fitness 1995, the only drinks that are really nutritious are water and 100 percent fruit juice. A lot of other beverages -- milk is nutritious, but a lot of other beverages are really bad for you. And all soda is bad for you, even diet soda, because sodium makes you gain weight. I gained a lot of 324 3/17/10 - WHOLE - BILL 100118, etc. weight from drinking diet soda. And I think it would spread the burden a lot more fairly across the industry and be taxed at a lower level if we could -- the standards could be set in terms of things like trans fat, which is bad for you, saturated fat, fried foods, high levels of sodium. Like if sodium was more than, say, a thousand milligrams per serving or something, perhaps it could be taxed. White carbs are bad for you. White carbs really blimp you out at your midsection. I know that. Trans fat is really bad for your health. Sodium is bad for heart disease, and, of course, sugar, high levels of sugar, are bad for you and bad for diabetes, and perhaps the standards could be set like that. You can't single out cheese steaks or Tastykakes or things like that, but if the standards could be set, perhaps by Dr. Schwarz, the Health Commissioner, and by medical standards or nutritional standards, like the existence 325 3/17/10 - WHOLE - BILL 100118, etc. of trans fats or the existence of saturated fats, because monosaturated fats are good for you, like olive oil, canola oil and like almonds. Like that's one of the best sources of good fats. But I really think there could be a broad-based tax, because they did this in the State of California or 10 years ago, and that way, the percentage 11 of the tax could be lower because it 12 would be spread to food items and also to 13 beverages. 14 I really think that a lot of 15 emphasis should be put on educating the 16 public, educating the public, and in a 17 better economy, give fast food 18 restaurants and grocery stores tax breaks 19 for selling nutritious foods. That would 20 really encourage them. In a bad economy you can't do that. I gained 30 pounds since July eating fast food. Not because I wanted to; because I had to. I know what I'm supposed to eat. I cannot afford to. 326 3/17/10 - WHOLE - BILL 100118, etc. I'm living $3,500 a year above the poverty line, when the percent -- $25 4 a week Obama stimulus comes off 5 unemployment in July, I'll be $2,500 6 above the poverty line. 7 I know what to eat. I can't 8 afford to eat right. My only source of 9 money for food is food stamps, but 10 there's a lot of people have it far worse 11 than I do. 12 And my trash collection fees, 13 if I have enough time to talk about that, 14 the City is very deeply impoverished. I 15 think perhaps the Mayor's team of 16 advisors, I know they know that the City 17 is impoverished. I don't know if they 18 fully understand how deeply impoverished 19 it is and how needy citizens are of its 20 services who live below the poverty line. 21 There are citizens living 50 percent 22 below the poverty line. In Cobbs Creek 23 there's a housing complex, Cobbs Creek 24 Apartments, you have to be 50 percent 25 below the poverty line to get in there. 327 3/17/10 - WHOLE - BILL 100118, etc. Imagine people living on $5,000 or $6,000 a year. I think the trash collection fees, we should exempt those below the poverty line.

We should make it a gradational system, say one to two percent of the -- one to two times the poverty line have $120 a year; two to three times the poverty line, 240 a year; three to four times the poverty line, 360; four to five times, 480. It's far more costly to do a graded system, gradational system, than it is just the 200 and 300, but in terms of social equity, it might be a lot better. The thing is, it might be too costly to administer. I fully realize that. And the cost to implement a junk food tax, do it on all food items across the board and beverages and food items that are not nutritious for you. That would be very costly to implement and administer. I think a lot of emphasis 328 3/17/10 - WHOLE - BILL 100118, etc. should be placed on education, educating the public about what's nutritious. I've noticed like in impoverished areas, people eat a lot less healthy. I think it's not only because they cannot afford to eat right, they don't know how to eat right. I worked at Independence Blue Cross in the past three and a half years until June of last year and I learned that 50 percent of health conditions can be prevented through proper diet and exercise. We could really encourage the public to eat right because of the cost of the healthcare system, hospitals and insurance companies. It's a huge cost.

Thank you so much for your testimony.

Thank you.

Our next witness? MR. McPHERSON: Our next witness is the Philadelphia Coalition for Essential Services, Sherrie Cohen, Stan 329 3/17/10 - WHOLE - BILL 100118, etc. Shapiro, Jonathan Stein, the Reverend Jesse Brown and Anthony Oliver. (Witnesses approached witness table.)

Good afternoon. Welcome. Thank you so much for your patience. Nice seeing you again. Please identify yourself for the record and proceed with your testimony.

Thank you. Good afternoon, Council President Verna, Councilmembers. My name is Sherrie Cohen and I am the Coordinator of the Philadelphia Coalition for Essential Services, a coalition formed in the winter of 2009 to fight for and save essential services from Mayor Nutter's proposed budget cuts. Through direct action and community-based policy development, over 35 organizations have worked together in a labor-community alliance to demand that the City budget not be balanced on the backs of poor and working people, that 330 3/17/10 - WHOLE - BILL 100118, etc. revenue problems be fixed with equitable revenue solutions, not detrimental spending cuts that would hurt the most vulnerable, and that effective alternatives to incarceration for non-violent offenders be used so we can stop the escalating Prison budget from devouring the City budget and instead use these funds to increase prevention, treatment and reentry support services in order to reduce recidivism and renew our communities. We are here today to provide context to the current economic crisis, to oppose the trash fee and to propose fair and equitable revenue solutions. First, in addition to the fact that we are facing the worst recession since the Great Depression, let's not forget that Philadelphia began a tax reduction policy in 1996 that did not end until last year. Our current Mayor was the most ardent proponent of it. These reductions to the business privilege tax 331 3/17/10 - WHOLE - BILL 100118, etc. and the wage tax have drained our city's coffers of over $1 billion in revenue during this period. The people of Philadelphia and all of our city's institutions and infrastructure are still reeling from this loss of revenue. It is important to recall this history, because the Mayor is again proposing to soon reinstate these wage and business privilege tax reductions. Second, we oppose the trash fee as a regressive tax that disproportionately impacts poor and low-income Philadelphians. Though it is two-tiered, it is still basically a flat tax that is not based upon ability to pay. Nor is it intended to decrease trash and increase recycling, because it is not structured as a pay-as-you-throw tax. It is a backdoor property tax in a property tax system that is highly inequitable. It is even a greater burden for those who cannot pay it, because hidden 332 3/17/10 - WHOLE - BILL 100118, etc. within it are the interest and penalties and possible other collection costs and fees from privatized collection agencies when the fee is not paid. We also oppose one alternative that has recently been suggested, an increase to the property tax. The current unreformed real property tax is also regressive and discriminatory. Forty-four percent of homeowners would pay less under a reformed real property tax, and these are primarily homeowners who are low income and people of color. There should be no increases in real estate taxes until there are reforms and assessments and circuit breakers in which the share of income paid in property taxes is taken into consideration and homestead exemptions for low-income Philadelphians. On the issue of the tax on sugary drinks, our members are split. Though the tax is a regressive one that disproportionately impacts poor and 333 3/17/10 - WHOLE - BILL 100118, etc. low-income Philadelphians, should the tax succeed in curbing consumption of these drinks, it would have an important public health benefit. Members of our panel today may be expressing their individual or organizational positions on this tax, but it is not the position of the Coalition. The City budget that we demand is one that is based upon fully funded excellent City services and progressive taxes that are based upon a person's ability to pay. There are progressive alternatives to the regressive trash tax the Mayor proposed. First, we must close corporate loopholes and preferences. The business privilege tax now gives preferences to banks, utility companies and insurance companies.

These preferences must be ended. We demand to know from the City Administration how much revenue we are losing from these preferences. And, Council President, if we 334 3/17/10 - WHOLE - BILL 100118, etc. could ask the Administration to speak about that right now in response.

I think that's a state matter, isn't it? Is Mr. Dubow here? (No response.)

Mr. Dubow had to leave to make a very important phone call. He should be back probably before you leave.

Okay. Second, we should convert the City wage tax to a City income tax that would tax both earned and unearned income. This would replace both the wage tax and the inefficient and unenforced School District property tax that does not tax all unearned income. The City could establish a higher rate on unearned income, which would make the tax more progressive. We demand to know from the City Administration, and we'd like to know today, how much revenue we are losing from not having a City income tax. 335 3/17/10 - WHOLE - BILL 100118, etc. Third, the City's property tax abatement is unfair and must be ended. It is not targeted to meet the need for affordable housing in the City. It is forcing the City to make up the losses through major tax increases on all other residents of the City, including many low-income and fixed-income homeowners, and it denies the School District needed revenues from property taxes. We demand to know from the City Administration, and we'd like to know today, how much revenue we are losing from the City's property tax abatement. Fourth, our major hospitals and universities must contribute "Payments in Lieu of Taxes" to the City. These institutions like Penn and Jefferson pay no property tax, yet benefit from the services provided by the City. The Daily News published an excellent article by Anthony Campisi on Friday, March 5th, entitled "City Has Seen Its PILOT Light Go Out." The article stated that last 336 3/17/10 - WHOLE - BILL 100118, etc. year only institutions contributed a total of only $686,922 out of a $3.7 billion operating budget. Whereas, in 1995 when the PILOT program began, 46 non-profits agreed to pay a total of $9.4 million annually. Last year, the highest contributor was one retirement community, Cathedral Village, with a $275,000 contribution. Yet the University of Pennsylvania with its $5 billion endowment paid zero, as did Temple, Drexel, St. Joseph's, Children's Hospital of Philadelphia. The entire Temple Health System paid only 5,000 for each of its three hospitals last year. With all of the City's educational and medical institutions not contributing their fair share to our city, is it any wonder that Philadelphians have the poorest health of any county in the state and a failing educational system where only about one-half of our students graduate high school? 337 3/17/10 - WHOLE - BILL 100118, etc. Fifth, there is a way to bring in more revenue through the gross receipts tax and exempt most of our city's businesses from that tax at the same time. Stan Shapiro on our panel will be speaking more about this. There are so many ways we can increase revenue and equity at the same time in our city. Let's create a just and equitable budget with full funding for excellent services paid for by fair and equitable taxation. Let's also make sure that in the upcoming City contracts, our City workers are provided fair wages and benefits. Now that the Mayor's budget is in City Council's hands, we demand City Council preserve our essential services and fund these services through fair and equitable taxation. Thank you.

Thank you. Sherrie, I would suggest that you make an appointment with the 338 3/17/10 - WHOLE - BILL 100118, etc. Administration so that they could respond to the many questions you had.

Okay. Thank you.

You're welcome. Councilman Jones.

I don't want to interrupt, and we have an aggressive witness group, but could you repeat that about Cathedral Village, which happens to be in the 4th District?

Cathedral Village? It is the highest -- it provided the highest amount of "Payments in Lieu of Taxes" last year to the City. It paid 275,000 higher -- I mean, the University of Penn paid zero, Temple paid zero, most of our hospitals and universities paid zero, but Cathedral Village paid more than anyone else.

Duly noted. We're going to get some answers to that one. Thank you. 339 3/17/10 - WHOLE - BILL 100118, etc.

Stan.

Good afternoon, Madam President, members of Council. Nice to be here again.

Nice seeing you.

I actually wrote "good morning," Madam President, but that would be defunct. I'd like to start actually by thanking Mayor Nutter for opening up a discussion of how the business privilege tax can be truly reformed rather than destroyed, because, as you know, his proposal to tax sugary drink adds that tax to the business privilege tax, an idea that's rather novel. So BPT reform doesn't necessarily mean just cutting that tax. Indeed, there are ways to reform it that can both cut its impact and those who are unfairly hurt by it, raise the rates on those who can afford it, and obtain more revenue for the City. And with that 340 3/17/10 - WHOLE - BILL 100118, etc. revenue, we can reduce or eliminate the need for one of the most regressive taxes that has ever been proposed in this Council, the Mayor's proposed trash pick-up fee. For years we've heard that the BPT is the, quote, "job-killing" tax and that we will need to soon roll up the sidewalks of Philadelphia unless we repeal it. Well, the "repeal it" fever has subsided recently as we've come to realize the size of the revenue hit repeal would bring about. But the Mayor still insists on resuming across-the-board cuts in the gross receipts portion of the tax in 2013 -- will end on both sides of the tax -- even if services remain at the sharply reduced levels he cut them to last year. Presumably, the lost revenue from resumed BPT cuts would be made up in part by the trash tax the Mayor has proposed, a result that would tilt our tax base in a decidedly more regressive direction. 341 3/17/10 - WHOLE - BILL 100118, etc. We are definitely against that. There are better ways of dealing with the business privilege tax. For instance, the City could provide a credit of the amount of gross receipts tax paid by businesses against their net income tax liability. That would benefit local businesses that actually pay the net income tax, which not all businesses do. Companies that either hide their net income or are not located in Philadelphia and earn no net income here would have nothing to apply the credit against and so would continue to pay the gross receipts tax. Thus, companies that actually locate in Philadelphia would obtain a competitive advantage over non-resident companies or at least give companies less incentive to hide the fact that they earn net income here. Another alternative reform to the BPT would provide an exemption from the gross receipts portion of some amount 342 3/17/10 - WHOLE - BILL 100118, etc. of receipts, say $500,000, which would essentially abolish the gross receipts tax for about 85 percent of all taxpayers, all of them small businesses. Why should Council consider doing one of those things? Because as we know, small business is the driver of the economy, and relieving small businesses of the burden of paying the gross receipts tax is the smart thing to do. But the City needs revenue, and we can't just cut the tax for small businesses. However, if we shield these businesses, we can roll back recent rate cuts without imperiling those businesses, and much of that rate increase would fall upon businesses that are not resident in Philadelphia, many of which employ few or no Philadelphians and that are larger businesses with the capacity in earnings which would enable them to pay that tax. The existing rate is a low rate of tax. 9 mills 20 years ago. It has 343 3/17/10 - WHOLE - BILL 100118, etc. already been cut by two-thirds. 875 mills would raise $69 million per year, even exempting the first half million dollars of receipts. Of course, there is great opposition to rolling back recent cuts in the GRT. For some reason, the common wisdom is that the GRT is a particularly onerous tax, one that must be charged whether a business makes money or not. Well, that has never been true across the board. Retailers, wholesalers and manufacturers all have special rates enabling them to deduct the cost of labor or goods or both of them before they compute their tax.

So-called regulated businesses - banks, insurance companies and utilities - pay only the gross receipts tax capped at the net income rate of the tax. So if they have no net 344 3/17/10 - WHOLE - BILL 100118, etc. income, they do not pay tax. They do not pay gross receipts tax. The authorizing statute is not only rife with exceptions to the general rule that all companies must pay gross receipts tax even if they have no net income, but it gives this body, Council, explicit power to expand the list of companies that can pay less than the full tax. It does this in two places. S. " This Council. So that's a provision that allows Council to exclude businesses per se from the tax. And, of course, Council has used that authority to exclude port-related businesses and certain technology-related businesses from the tax. Second, Council has broad 345 3/17/10 - WHOLE - BILL 100118, etc. authority to exclude certain receipts that are otherwise taxable under the gross receipts tax. " Using that authority, Council has enacted a variety of credits to the tax, including credits for contributions to CDCs, for job creation, for investments in green roofs and for hiring ex-offenders. There is no reason why credits or exemptions can't be added that would simply make the tax more fair to small businesses across the board, perhaps exempting a working capital allowance, for instance. Here is another suggestion. As you know, the City can tax anything that is not subject to a state tax or fee. Council can impose a sales tax on some or all of those items that are excluded from the state sales tax. These include such 346 3/17/10 - WHOLE - BILL 100118, etc. things as the sale of gold bullion, rail transportation equipment, accounting services, ship cleaning materials, interior office cleaning services and the sale of airline tickets. These and other items excluded from the state sales tax could be taxed locally without burdening low-income residents. Finally, if a tax as regressive as the trash pick-up fee is going to be enacted, offsetting tax relief to low-income folks should also be enacted. The Cohen Tax Rebate has been sharply cut back and postponed until 2013. No one questions its legality. Bring that tax credit forward to next year. Or enact a real estate circuit tax breaker that would reduce the real estate tax for the same class of people eligible for the Cohen Rebate. Or finally pass a tax measure that gives relief -- or finally this Council could pass a tax measure that gives relief to long-term homeowners living in gentrifying neighborhoods. 347 3/17/10 - WHOLE - BILL 100118, etc. That tax exemption has long been in force as an authorized tax by the state. This Council could enact that for next year. Council last year came up with its own tax package. Hopefully it will do so this year and do so in a way that protects the poor and unemployed, who simply cannot afford more and more burdens being imposed on them in an economy that is threatening them with ever-growing hardships. Thank you for your time this evening and I would be happy to answer your questions.

Stan, what is your position on the sugar tax?

Personally, I'm opposed to it. As Ms. Cohen has indicated, CES has not taken a position on it. But I do think that it will not actually impact on consumption and I think that it's a regressive tax.

Thank you. 348 3/17/10 - WHOLE - BILL 100118, etc. Our next witness?

Good evening, Madam Chairman. My name is Andre Butler from the Philadelphia Unemployment Project and I'm a member of CES, also a member or TURN, Tenants Union Representative Network, and I am basically here speaking amen-ing everything that Stan and Sherrie have already said, because most of our clientele is poor, under class, low income, unemployed. And for the most part, regrettably to me, most things that this city -- often times this body look at when it comes to raising money is taxing the least of these. It seems to always be taxing or surcharging the least of these. And as Philadelphia continues to unfortunately have an increase in the poverty -- number of people who live in poverty every single year, now we come with a regressive trash tax, which you could say it's everybody to pay, but still you have an unfortunate increase 349 3/17/10 - WHOLE - BILL 100118, etc. every year of people who are living at or below the poverty level. Our organization sees people every day who are facing foreclosure, in foreclosure, being evicted, unemployed, trying to get on their feet, and whenever they seem to try to get on their feet, here comes something else stopping them. So I would just ask this body to look at and examine maybe, once and for all, if we're going to try to straighten the situation, try to look at progressive taxation as we tax those who have the ability to pay more than those who have the least ability to pay. And we're all in this together, but still, let's not try to be looking at always taxing and charging the least of these. Thank you.

Thank you. Good afternoon.

I'm Reverend Jesse Brown. I'm also a member of the 350 3/17/10 - WHOLE - BILL 100118, etc. Philadelphia Essential Services Coalition, and I also oppose both taxes, both the trash tax and the soft drink tax, but I also want to raise a number of concerns. My colleagues have given testimony to ways in which we can do revenue generation. I have a more social concern on whether or not as we attempt to implement these taxes, that we are seriously looking at their impact or simply want to raise revenue. And why I ask that question is because sometimes, as in this particular case, the soft drink tax has been masqueraded as if it is a public health initiative and that somehow it's going to improve our public health or decrease obesity in the City. The reality is that, of course, if such a tax were seriously going to do that, then far more money would have to be placed into the process in order to reduce obesity in the City and reduce possibly our healthcare costs. But that's not why 351 3/17/10 - WHOLE - BILL 100118, etc. that's just a tax. It's there to raise revenue, not as a public health initiative, pure and simple. And on that alone, knowing that the least of us are going to be those that are going to have to pay the price for that, that should be opposed. But I'm also concerned that last year when we were sitting at this very table, having these very discussions, it was clear that Council got the message that the City did not -- the people in the City did not want to raise property taxes. Yet, we come out again with another property tax proposal. You can call it trash if you want to, but it's a property tax revenue generator. I'm just wondering, President Verna, when will we have serious discussions, not just in the heat of budgets but outside of this, to discuss what revenue generation we ought to be engaged in, look at all of the sources of revenue generation that can be done and 352 3/17/10 - WHOLE - BILL 100118, etc. do it not just with Councilmembers, but collaboratively with the community. As you heard Stan's testimony -- he is pretty sharp on this stuff and has studied a number of ways in which revenue generation can be done. When will we have those kind of serious discussions?

I think I had suggested to Sherrie that she communicate with the Administration. I'm sure the Administration would be very happy to respond to her many questions, and I think that if that's what you're interested in, that issue ought to be taken up with the Administration also.

And I hope we will -- I'm sure Sherrie and this Coalition will certainly communicate that --

I'm sure she will, believe me.

-- with the Administration. 353 3/17/10 - WHOLE - BILL 100118, etc. But I want to conclude with this notion, that we need to raise revenue, we need to sell the City as the great city that it ought to be. Even in the midst of recessions, we still can sell this city as a great city and get more people involved, but we must also take care of the residents and the people who make this city great and not simply continue to heap the burden of responsibility on their backs and their backs alone. We need to look at fair and equitable taxation issues. And I would like to see City Council and the Administration go to the state and start talking about getting authority to be able to do progressive taxation, which, of course, will raise -- can raise revenue for Philadelphia. I would like to see that aggressiveness used for that as it has been used to try to sell us a boondoggle that somehow we're going to change the health outcomes here in 354 3/17/10 - WHOLE - BILL 100118, etc. Philadelphia by imposing some kind of tax.

We have heard you loud and clear. Thank you very much. Good seeing you, Sherrie. Any questions for this panel? (No response.)

Seeing none, our next witness will be? MR. McPHERSON: Shelly Yanoff.

Thank you again. (Witness approached witness table.)

Good evening.

Good evening.

Please identify yourself for the record.

I'm Shelly Yanoff. I'm Executive Director of Public Citizens for Children and Youth. We are the region's major child advocacy 355 3/17/10 - WHOLE - BILL 100118, etc. organization. Thanks for the opportunity to speak tonight and for the announced plans to have more public hearings on the budget. I am here to testify concerning recommendations for securing funds needed to balance that budget. We want to acknowledge the difficult situation the City and all of us are in due to the economy and to commend the overarching spending plan that reflects your, this Council's, insistence last year not to cut vital services. Within the framework that recognizes that libraries, recreation centers, health centers, services to the most needy not endure further cuts and that all segments of society should bear a fair share of the burden, we recommend the following: Number one, the use and application of new real estate abatements needs to really be reexamined. Limit them in number, scale and duration, and 356 3/17/10 - WHOLE - BILL 100118, etc. graduate their exemption. For those fewer abatements that would still exist, we recommend that, for example, a five-year abatement could provide 100 percent tax relief in the first year, 75 in the second, 50 in the third, in the 8 fourth, to zero. In that way, we would 9 not only have the wealthiest among us 10 paying a fair share of the cost that the 11 rest of us bear every day, but also it 12 would enable these Philadelphians to 13 avoid facing the huge cliff that will 14 happen to them when their tax abatement 15 ends and they then have to meet to pay 16 full taxes. 17 Bring back, please, and 18 reinvigorate the PILOT, Payment in Lieu 19 of Taxes, from the large universities, 20 hospitals, large non-profit property 21 holders. As Sherrie spoke about earlier, 22 most of our large institutions pay zero. 23 Somewhere over 25 percent of all our 24 properties in Philadelphia, in addition 25 to the abatements described above, are 357 3/17/10 - WHOLE - BILL 100118, etc. exempted from property taxes. Other cities secure voluntary agreements, voluntary, with these large land owners. Boston University contributes $5 million every year to that city. This city secures virtually nothing. Smaller cities in Pennsylvania, like Scranton and Erie and Pittsburgh, are somehow able to spread the responsibility and to receive more adequate funding than we do. We understand that many of our big universities will argue that their employees pay wage taxes to the City, but so do we all, businesses as well as non-profits. It's time that these hugely successful institutions help support the City as good corporate citizens by voluntarily entering into agreements and supporting a fair share of the City's costs. Councilman Jones, the list that Sherrie referred to of the non-profits and what they pay is attached to my testimony in the back. 358 3/17/10 - WHOLE - BILL 100118, etc. We do support some tax on sugary drinks. The New York Times just yesterday reported on a new study that taxes on soft drinks contributed to healthier young adults. This is but the latest in many studies that note that sugary drinks are not healthy and contribute to obesity. We do have an obesity problem, so taxing something on these drinks would help us, and the taxes would help us as well. I want to remind Council -- and, Council President, you remember this well. When the cross-the-bar liquor tax was in this Council, there were so many strident voices predicting the end of small tavern owners, the end of employment in the bar industry, the end, and they also predicted that the money would not -- was not near as much that would come in as was projected. Well, all those predictions were wrong. The bar owners did not close, the employment did not cease, and $20 million annually, 359 3/17/10 - WHOLE - BILL 100118, etc. increasing every year, has come in for the schools.

Due to the cumbersome way, however, that this tax on sugary drinks has to be collected, it may indeed result in smaller stores being unable to have the accounting mechanism to track the purchases. We ask, therefore, that you consider exempting small mop-and-pop stores as the tax is phased in. Apart from taxing the wealthy by reshaping abatement and PILOT policy and the unhealthy sugary drinks, we also recognize that all of us will have to bear some increase in order to keep our city whole. We hope it's temporary, but we know we must do this. We recognize that most places outside of the City do charge for trash collection, and we would not oppose it in general, but we are concerned that applying the same tax on all, no matter -- that flat tax, no 24 matter their income or property value, would be unfair. We would, therefore, 360 3/17/10 - WHOLE - BILL 100118, etc. ask that you consider a very small increase in property tax as a less regressive tax, not because we believe the property tax is in good shape at this point, but because it is broader and general and will hopefully hasten the time when we can indeed have more confidence in the assessments of our properties. Until we have a new system, we'll have to all pay into the old one. Therefore, adding a new fee will not distort the process any more than it's currently being distorted. We do ask that you consider that we begin -- every year we ask that you consider an income tax instead of a wage tax and it's always too late, so let's start it now so that by next year this time, we can have it in place. We ask that you do all you can to fix the property assessment system as quickly as possible. It is currently recognized to be neither fair or equitable, which, once again, diminishes 361 3/17/10 - WHOLE - BILL 100118, etc. the message that we are all in this together and we have to all pay for our fair share. Again, I conclude as I began, thanking you for recognizing that we cannot cut our way out of this crisis, which is affecting every municipality across the country, and that taxes are the price we pay to live in a civilized society. Thank you.

Thank you. Any questions from members of the Committee? (No response.)

Thank you very much. MR. McPHERSON: Our next witness is Tracey Gordon. (Witnesses approached witness table.)

Hello. Welcome. Please identify 362 3/17/10 - WHOLE - BILL 100118, etc. yourself for the record.

My name is Tracey Gordon. I'm here representing Southwest Concerned Citizens. And this is Maurice Jones. He's part of our coalition as well. So I'm going to let him speak first.

Maurice Jones?

Yes.

Fine. Thank you. Please proceed.

Good afternoon, Madam President. I'm a resident of Southwest Philadelphia, single father of a first grader in the public school system. I just wanted to give my views on this whole dialogue about the sugary tax. I don't have a particular professional knowledge on whether this is going to be an aggressive or progressive or whatever type of tax it is, but I know 363 3/17/10 - WHOLE - BILL 100118, etc. from direct knowledge of participating in the school -- I'm the Home and School President, I serve on the leadership committee, I attend every staff meeting, I participate in actually the budget. We just had a budget last week meeting at Southwest Philadelphia School District where we -- I participate in working to develop the budget for the school. I've also been 20-some-odd years in business. I understand budgets. So I know that there is a big issue with trying to close the gap that we have in the City. A lot of people are having some issues about this tax, but I know from direct knowledge of what the sugary drinks do to the kids. I participate in something called School-Wide Positive Behavior Support, which is a program with the Philadelphia schools and actually across the country, and what we do is address any of the issues that the children have by using positive behavior support. We have found that -- we 364 3/17/10 - WHOLE - BILL 100118, etc. examine the pink slips that come into the school, the times that they happen, the reasons that they're happening, and a lot of the times are consistently certain times. And then we search with the parents, find out what's happening with the child, and a lot of it is linked to diet. A lot of the kids are crashing at 10 or o'clock and they're having 11 issues of -- behavior issues, paying attention, et cetera, because we're finding that a lot of them are eating or drinking sugary drinks before they come to school. That seems to be a major issue. Now, I understand that the business owners have a problem with any type of tax that addresses that, and a lot of people say that it is a tax on the poor, but any type of pleasure type tax, whether it be cigarettes or the sugary drinks or et cetera, are going to affect the poor, because they're inclined to buy those, because that's the cheapest thing 365 3/17/10 - WHOLE - BILL 100118, etc. for them to buy. The healthier products are priced at a higher price point. I know that, being in retail business for many years, I know the gross profit on the fountain drinks, and you had a huge gross profit on the fountain drinks and that's where a lot of the businesses make their money. There is leeway in there for them to make money, but I think that the tax -- I approve of the tax, but there should be some more development and some more review of how extreme it should be. The two cent per ounce may be a little high, but there should be some more development into that to figure out where exactly it would be beneficial to the City and also to the business owners. The money has to be gotten from somewhere. But I'm just here to address how it affects the student body that I participate in. Thank you.

Mr. Jones, what opinion do you have of 366 3/17/10 - WHOLE - BILL 100118, etc. the trash issue?

The trash fee, I talked to a number of people in different places across the country, friends and colleagues, and I find that across the country, we are -- our city gets a lot of things free and there's a lot of fees that other cities pay far more than what we pay. But this is a problem at this time because of the economy, because of people losing jobs, and this is going to affect them. At any other time I don't think that this would be as big an issue. Any time you levy something on Philadelphia, it seems that a lot of people feel that it's an aggressive tax on them or if it's additional real estate tax on them, they feel that it's out of the ordinary, but I have friends in Colorado and Florida, et cetera, and they almost laugh at me when I say that we have to pay an extra $300 for trash pick-up. But at this time, I think that 367 3/17/10 - WHOLE - BILL 100118, etc. it's an issue because of the amount of unemployment. People are catching up now, and if it's something that can be looked at down the line, I think that that would be better, but at this time, it seems like it's the wrong time. Thank you.

Thank you. Tracey.

Yes. Again, my name is Tracey Gordon from Southwest Concerned, and I remember this time last year I was in here shouting, What about the trash, and I didn't know tax was going to be on the end of it. I might have said what about something else. As you know, Councilwoman, I'm very concerned about the quality of life and health issues regarding trash in our city, most particularly in our district, the 2nd Councilmanic District. For the record, I do want to thank you, because I believe had it not 368 3/17/10 - WHOLE - BILL 100118, etc. been for you and your delegation, I wouldn't have had the opportunity to make my environment look, I would say, 100 percent better.

Great.

So thank you for that.

You're welcome.

I also would like to thank the Streets and Sanitation Department, because they have been working with me. And I know I get on they nerves, but they've been patient with me, and if you come within a 12-block radius of my home, you will see a significant difference, and I believe that significant difference is contributed to the fact that we are aggressively giving people citations for not wanting to pick up the trash that they put on the ground. Irregardless of whether they put it there, if it's in 369 3/17/10 - WHOLE - BILL 100118, etc. front of their property, that's a problem. So I'm not here -- I'm basically here to say that under no 6 circumstances do I hope anybody in Council decide to decrease any of our services, but my problem that I'm having through my research is the lack of aggressiveness and -- not just this Administration, but Administrations in the past and I believe it's going to be Administrations in the future, which lies into Council indirectly, because most Councilmembers have been here for years and they get reelected and reelected and reelected. And so I'm going to come up with a solution that I happen to in happenstance find right in my direct neighborhood. And no disrespect to our Council district, but this is affecting the whole city: Delinquent rentals, non-tax-paying landlords. The City is losing millions of dollars in revenue, and it can certainly fill this gap. 370 3/17/10 - WHOLE - BILL 100118, etc. Recently, I conducted a study, because I noticed that quality of life is a direct correlation with homeownership and rentals. And everybody know that when you get the rentals in your neighborhood, not all of them, but a lot of them, they deteriorate your neighborhood. So I had noticed that within a couple-block radius of where Maurice and I live that -- I actually predict, I said, This whole block is a rental. That's how horrible it is. I said, The whole block is a rental. So L&I did -- they went, and I said, That block is a rental. I said, Check the block out for me. And 2100 block of South 65th Street, the entire block is rental. The 2100 block of South Gould Street, the entire block is rentals. So what I did was, I said, Well, let me -- in this package you will see, I'm saying, Well, how do you regulate rentals? Because we can't get 371 3/17/10 - WHOLE - BILL 100118, etc. rid of rentals, and I don't want to get rid of rentals, but if a rental comes in our community, I want them to act like they own the property, like decent folk. So when I looked up and I seen that in order to even think about doing business as a landlord, a rental in this city, you got to get this application here called a Business Privilege License fee, one-time fee of $300. That's nothing. Then you also have to get -- and this is before you can rent out a property in -- this is the law. This is not nothing that's made up. Then you got to get a license application, and depending on how many units you have, it's going to be from $75 to $85, notwithstanding that. So I took the block, and it's approximately 91 blocks over a two-block radius -- 91 houses and out of 91, darn near all of them are rentals. But I'm going to say, okay, maybe two aren't rentals, and it's abandoned within there. 372 3/17/10 - WHOLE - BILL 100118, etc. They done converted these houses -- and this is the new trend in Southwest Philly, with the people coming in and they converting these houses into duplexes and rooms. Okay? So I take that -- I took -- I said, Well, what revenue -- if you open a store in this business, you got to pay taxes. If you come and you renting the property and you making money, you pay us. Pay us. So out of 45 properties, 45 properties, based on what the going rate is for a two-bedroom apartment or one- or two-bedroom apartment between $500 to $700, sometimes $800 depending on what part of the City you live. So I took $600. Out of the $600 on these units of 45 properties, the landlords accrued $648,000.

That's how much they brought in, the landlords that's renting out. So if you subtract the hundred thousand dollars that they going to say that they did for expenses, that leaves us a 373 3/17/10 - WHOLE - BILL 100118, etc. taxable income of over half a million dollars, which is $548,000.

Tracey, I know how passionate you are about this issue and I know that we have tried desperately to work with you, and you with the Commissioner of L&I. Can you tell us how you feel about the two bills that we're discussing today?

I am. I'm getting to that. Thank you for asking. This taxable income would have earned the City -- the 500, half a million dollars, once they filled out the 2009 business privilege tax form, had they -- had they reported this to the City, the City would have got $72,526 for 2009 alone just for those 45 properties. So imagine if the City collected this taxable income on two blocks and went on all the blocks of these illegal rentals. Then we would be --

Tracey? 374 3/17/10 - WHOLE - BILL 100118, etc.

One last sentence.

Tracey?

Not to mention --

Wait a minute, Tracey. You are working with the Commissioner of L&I; are you not?

No, I'm not.

Why not?

That's the only Commissioner that is very hard to work with. That's why I didn't mention her. But that's off the record.

May I --

Not to mention --

May I offer you a suggestion, please? Put in writing the other blocks that you're referring to that may be rental properties, which you are really not sure of.

Well, I'll tell 375 3/17/10 - WHOLE - BILL 100118, etc. you what, I gambled on these two.

I want you to write a letter to the L&I Commissioner and cc me, if you will. Now please tell us how you feel about the two bills --

I wrote you a letter --

-- before us today.

Well, what Commissioner Fran Burns told me and your assistant, Maryanne Mahoney, for the record, told me, that I should walk around and knock on the doors in the entire Southwest Philly and see who the rentals and report them to you. That's what I was told. That's what I was told. It's been in writing, e-mails and everything. So I'm going to do it your way, but that's what they told me to do. I don't work for the City. I don't have the time, the resources or the revenue. 376 3/17/10 - WHOLE - BILL 100118, etc. It is not my job. You hire people to do that. But I'm just giving you a large number of samples. So besides --

And we appreciate --

-- the fact that we collect --

We appreciate all the work you do in the community. However, we can't go knocking at every door either. So if in fact you have this information, you send to the Commissioner of L&I and you cc me, the Commissioner has personnel whose responsibility it is to do precisely what you're asking. Now let me know how you feel about these two bills before us.

So I feel that until the Administration and Council address the money that we are owed from tax deadbeats to the tune of $955 million that's owed, don't ask us for a trash tax until y'all collect money that was due, 377 3/17/10 - WHOLE - BILL 100118, etc. 955 million of deadbeat real estate tax beats, not including we got illegal rentals all rampant through the whole City and they are accruing revenue, taking the pockets, probably living outside the City and not paying, and then you coming back to me and him and him and her and telling us that we got to pay more money for people that's not even paying money. And that's two blocks. And I'll tell you this for the record: Audit the whole Southwest Philly, because over 41 percent of them is illegal rentals.

Okay. Now how do you feel about, Tracey --

The soda tax?

The soda tax.

Tax it.

Pardon me?

I said tax it. It's not good for us. We gave you a 378 3/17/10 - WHOLE - BILL 100118, etc. report right there showing -- I worked in the school system too, and the teachers send letters home, Do not send little Jamal or Jamilla with a Hug in school. That's those little things. I don't know about the numbers, like he said, but like I said, if we got to close the gap, close the gap. But the gap is closed if we would deal with this. And, again, Maryanne Mahoney told me to knock on every door. I can't knock on every door, Ann Verna. That's not my job.

I totally agree you can't do that.

Thank you.

Any questions from members of the Committee? (No response.)

Thank you so much for coming in. Thank you for your patience. Our next witness? MR. McPHERSON: Our next panel consists of Beth Rezet and Andrew Hysell. 379 3/17/10 - WHOLE - BILL 100118, etc. (Witnesses approached witness table.)

Good evening. Kindly identify yourself for the record and proceed with your testimony.

Good afternoon. My name is Dr. Beth Rezet, and thanks to everyone hanging in there and thank you for your attention. I've been a pediatrician in West Philadelphia for over years, and 14 during this time, I've certainly seen a 15 dramatic rise in both overweight and 16 obesity in the patients and the families 17 that I care for. I've also seen diseases 18 secondary to obesity that I've previously 19 only seen in adult patients. These 20 diseases include Type 2 diabetes, high blood pressure, high cholesterol, fatty liver disease and obstructive sleep apnea, in addition to all of those that were mentioned earlier. As more children become obese and develop these medical 380 3/17/10 - WHOLE - BILL 100118, etc. complications, this becomes not just an issue for individual children and their families, but an enormous burden on healthcare and society in general. These diseases result in chronic morbidity and an increase in healthcare utilization for things like testing, medication and follow-up, as well as lost school days, workdays, productivity and an overall decrease in quality of life. There's no doubt that these diseases are medical problems, but the solution to our childhood obesity epidemic really can't be found in the doctor's office alone. The answer to this problem lies in supporting healthy choices in every area of a child's life - at home, at school, in the community and nationally. Through scientific research, we actually do know that decreasing the consumption of sugar-laden beverages in a child's diet results in healthier weights. That question has come up all 381 3/17/10 - WHOLE - BILL 100118, etc. afternoon. We have the evidence. We know that it decreases weight and results in healthier weights. At the Children's Hospital of Philadelphia's Healthy Weight Program, we use toolkits to assist families in making healthy choices. By replacing sugary drinks with milk or water, we have seen firsthand progress in a child's wellness. The toolkits use behavior modification that's based on education, readiness to change, monitoring or role modeling to help restructure life-style choices. I have some of those toolkits here with me today to share with you and I'll leave them with you. Families, though, need support in their changes and choices. At the doctor's office, we can share information about how sweetened drinks add empty unnecessary calories to a child's diet. Unlike eating solid sugar as food, we can explain that consuming sugary drinks does not result in satiety and feeling of 382 3/17/10 - WHOLE - BILL 100118, etc. fullness, and this is what distinguishes sugary-laden beverages from other sugar products. When you drink the sugar in a sugar beverage that has no other nutritional value, that leads to overeating and empty calories, without any nutritional value. In fact, consuming sugar beverages will make children eat even more after they drink their calories. We can tell families that eliminating sugar drinks from their diets may result in a ten-pound weight loss over one year. We can share this information with them once, maybe twice, maybe even three times a year when they visit us in the office for a regular visit. As a pediatrician, I use my time to help families and children make healthful choices, and I hope that my messages resonate and will result in healthier decisions. The medical community and society as a whole has seen that appropriate investment in health 383 3/17/10 - WHOLE - BILL 100118, etc. promotion leads to a prevention of both acute and chronic medical problems. We've seen this nationally with the Back to Sleep Campaign, and at CHOP, we've seen it through our asthma community outreach and our immunization focus. Continued investment in health-related activities in both the prevention and treatment arena will help with curtailing this obesity epidemic. Thank you.

Thank you very much, Doctor. Councilman Rizzo.

Thank you. Doctor, just a quick question. You talked about water and milk. Today you've heard about alternatives, non-sugar-sweetened, like Diet Pepsi, Diet Coke and all the other diet stuff. Is that a suitable replacement? Because I looked at the sodium content in a can of diet soda today and it was staggering. Your professional opinion about changing 384 3/17/10 - WHOLE - BILL 100118, etc. from the sugar to the artificially sweetened.

I can speak about children. Children should be drinking milk and water.

So to suggest to them to switch to something other than sugar --

I think that there are individual alternatives which are possibilities, and I wouldn't try to curtail that, but from a health aspect and from someone who advises families about healthy choices, I suggest milk and water.

To what age?

College.

Good.

I don't take care of them after that.

That's funny. Thank you, Madam President.

385 3/17/10 - WHOLE - BILL 100118, etc. You're welcome.

Thank you.

Doctor, I must say, I am very impressed in that we had a number of physicians here today who waited very, very patiently, as you did, to convey the message, and I want you to know that we all appreciate your coming in and testifying.

It's my pleasure.

Thank you so much.

Thank you.

Good evening.

Dear Chair and distinguished members, thank you for hearing my testimony tonight. My name is Andrew Hysell. I'm the Director of the Campaign for Healthy Kids. I'm the Associate Vice-President of Policy and Advocacy for Save the Children. I'm here today to enthusiastically support the 386 3/17/10 - WHOLE - BILL 100118, etc. measure before the City Council to create a two-cent-per-ounce tax on sugar-sweetened beverages. Your support for this public health measure today will strike an important blow against the problem of childhood obesity, helping create a better future for the children of Philadelphia. I'm going to make my remarks short and submit something for the record. I want to say, first of all, why soda, because that was raised tonight -- why sugar-sweetened beverages. Excuse me. Sugar-sweetened beverages are not a necessary part of a healthy diet. Further, they do not satiate hunger the same way as solid food does. Finally, serving sizes have increased dramatically over the past 20 years. For example, what was once a medium beverage is now labeled as a small at McDonald's. Starbucks has abandoned the short size and added a new 30-ounce option. And 387 3/17/10 - WHOLE - BILL 100118, etc. many of us can remember that a soda used to be ounces, not the ounces that's 4 the mainstay at convenience stores. So 5 it's no surprise to anybody that 6 consumption of sugar-sweetened beverages 7 has more than doubled in the last half 8 century, and children now drink more soda 9 than milk. This isn't because kids and 10 adults have been petitioning the industry 11 to increase serving size. 12 Taxes on sugar-sweetened 13 beverages reduce consumption, especially 14 when lower-cost healthy alternatives 15 exist. The science is there. In fact, 16 the latest study released on this topic 17 called Food Price and Diet and Health 18 Outcomes, researchers found more than 19 5,000 young adults -- they followed more 20 than 5,000 young adults for 20 years as they moved around the country and faced changing prices of soft drinks. Price changes were then matched to the participants' dietary choices in health. The study found that a price increase at 388 3/17/10 - WHOLE - BILL 100118, etc. 34 pounds of body weight loss per year. That does not sound like a lot, but in a population, that's huge. I want to mention too that the idea that this is a regressive tax completely misses the point that this is a regressive -- childhood obesity is a regressive disease. It afflicts the poor, who are the least able to deal with the health consequences. I want to also address the fact that this is not an excise tax. Granted, an excise tax would be ideal. However, the fact that this tax is the magnitude it is and the fact that it's based on volume, increase the likelihood that it would be passed along to the consumer affecting behavior. Also I want to address the fact that there has been discussion of a substantial amount. I've testified on 389 3/17/10 - WHOLE - BILL 100118, etc. these bills in other places, and this is by far the best allocation I've heard of for obesity prevention on a bill that I've testified. That money can be spent on creating a lot of economic opportunities. Next year, monies flowing into projects like building new sidewalks, upgrading bike paths, expanding the capability of a corner store to provide fresh food alternatives creates a number of jobs. It creates a number of opportunities for retailers to make money on new product lines in fact. In conclusion, I would just simply say that there is no evidence that a sugar-sweetened beverage tax will reduce jobs. I worked on the tobacco control issue. I heard the exact same arguments, and as a previous speaker spoke to this point, we have not seen that come to fruition. Healthy alternatives exist here on tax, like bottled water, juices and I would say diet soda, because I drink diet 390 3/17/10 - WHOLE - BILL 100118, etc. soda, that require workers to make them, to deliver them and to sell them.