Committee Hearing, April 12, 1999

COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COUNCIL COMMITTEE ON FINANCE - - - Room 400, City Hall Philadelphia, Pennsylvania Monday, April 12, 1999 11:10 a.m. - - - BILL 990116 - An ordinance amending Chapter 19-2400 of The Philadelphia Code, entitled "Hotel Room Rental Tax," by providing for an additional excise tax on hotel room rentals, and designating the expenditures for which such tax will be used, under certain terms and conditions. PRESENT: COUNCILWOMAN JANNIE BLACKWELL, Chair COUNCIL PRESIDENT ANNA CIBOTTA VERNA COUNCILMAN AUGUSTA CLARK COUNCILMAN JAMES KENNEY COUNCILWOMAN MARIAN B. TASCO COUNCILMAN MICHAEL A. NUTTER COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK DICICCO COUNCILMAN BRIAN J. O'NEILL - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 /99 FINANCE COMMITTEE I N D E X Nancy Kammerdeiner . . . . . . . . . . . . . . Revenue Commissioner, City of Philadelphia Dean Kaplan, Budget Director . . . . . . . . . 6 City of Philadelphia 7 Mickey Rowley, Executive Director. . . . . . . 19 Greater Philadelphia Hotel Association 8 Meryl Levitz, President and CEO. . . . . . . . 33 9 Greater Philadelphia Tourism and Marketing Corporation 10 Robert Cima. . . . . . . . . . . . . . . . . . 46 General Manager Four Seasons Hotel Service Secretary, Greater Philadelphia Hotel Association Ashley Andrus, Director of Public Policy . . . 54 Greater Philadelphia Chamber of Commerce Karen Lewis. . . . . . . . . . . . . . . . . . 59 Greater Philadelphia Tourism and Marketing Corporation 3 /99 FINANCE COMMITTEE P.R. O C E E D I N G S

Good morning. We would like to begin our committee hearing on Bill No. 990116, the hotel tax bill. The committee hearing will now begin. We would certainly invite any Councilmembers who are in their offices who would like to be a part of this or committee memories to please come into the chambers. The clerk will please read the title of the bill.

Amending Chapter 19-2400 of The Philadelphia Code, entitled "Hotel Room Rental Tax," by providing for an additional excise tax on hotel room rentals, and designating the expenditures for which such the tax will be used, under certain terms and conditions.

Thank you. The Chair will note for the record that we have a quorum. We thank President Verna certainly for her attendance, who is to my left, Councilwoman Tasco, Councilman O'Neill. Certainly to my right, Councilman Nutter, and we note that Councilman DiCicco is here, who is also available 4 /99 FINANCE COMMITTEE for purposes of a quorum. Also, Councilman Ortiz. And we thank them very much. We would now like to begin with your first witness, Meryl Levitz, CEO and President of the Greater Philadelphia Tourism and Marketing Corporation. Please identify yourself. I'm sorry, Dean Kaplan, I see you as well. Thank you. And I'm told that Nancy Kammerdeiner, Revenue Commissioner, will begin testimony. Please identify yourself again for the record and begin.

Good morning, Councilwoman Blackwell and members of the Finance Committee.

Good morning.

My name is Nancy Kammerdeiner, I'm the Revenue Commissioner for the City of Philadelphia. And I'm here today to testify in support of Bill No. 990116 and to request your favorable consideration of an amendment to this bill. Bill No. 990116 will amend Chapter 25 19-2400 of The Philadelphia Code entitled "Hotel 5 /99 FINANCE COMMITTEE Room Rental Tax." It will provide for an additional excise tax on hotel rentals to be known as the "tourism and marketing tax." This tax was authorized by State-enabling legislation signed by Governor Ridge in December 1998. It will be levied at the rate of 1 percent on the consideration that hotel operators receive from each transaction of renting a room or rooms to accommodate transients. The tax will be collected by the operator from the patron who rents the room and will be paid to the City. The funds that the City receives from this tax will be deposited in a special fund for the use of the regional attractions marketing agency known as "The Greater Philadelphia Tourism and Marketing Corporation," GPTMC. They will use the funds generated by this tax to advertise and publicize tourist attractions in the Greater Philadelphia area, and I'm sure you'll hear more about that from them. As drafted, this bill would be effective immediately after approval by City Council and the Mayor. 6 /99 FINANCE COMMITTEE I propose that the provision which appears as Section 2 in the proposed ordinance be amended to read instead that this ordinance shall be effective July 1, 1999. The amendment that I'm proposing would provide a date certain for the implementation of the tax, and permit both the City and the hotel operators to properly prepare for its implementation. Any tax change requires planning and communication, and to be effective, needs to have a certain date for its implementation. In the case of this hotel tax, the Department of Revenue must provide instructions, worksheets, and payment coupons to the hotels, and must make some computer changes to properly record the tax. But probably more importantly, the hotels need to do a good bit at their end. They need to reprogram their systems to collect and remit the correct rate of tax, and they need to develop and implement communication programs to ensure that all of their staff are properly informed about the tax, its purpose, its timing, and when it will take effect, so that there aren't any problems at the hotel's end in the implementation of the collection of the 7 /99 FINANCE COMMITTEE tax. If this committee amends the bill and reports it out of committee with a favorable recommendation, and then it's, of course, approved by the full Council, a July 1, 1999 effective date would allow the time necessary for his planning and communication so that we have a smooth implementation of the tax. Therefore, I would again request your favorable consideration of the amendment that would make the bill effective on July 1, 1999, and recommend your approval of the amended bill. For your information, I do have copies here of the suggested amendment.

Thank you very much. The Chair also notes the presence of Councilman Jim Kenny at the hearing and Councilwoman Clark also. To my extreme left is Councilwoman Clark. Thank you very much. Commissioner, what is the expected revenue that will be collected from this tax?

Based on the revenue we currently receive from the 6 percent hotel tax, 8 /99 FINANCE COMMITTEE we would expect the revenue to be in the vicinity of $3 million per year.

$3 million per year?

Yes.

Councilwoman Clark, are you piggybacking on part of this question before I continue?

Thank you. What would be the increase?

It's a 1 percent tax, 1 percent. So right now, we collect a 6 percent tax for hotel occupancy, and this would be an additional 1 percent.

Okay. So it takes the tax from 6 percent to 7 percent.

Correct.

But at the 6 percent rate, what did the tax yield, and what is the expected yield under the new rate?

Okay, just getting some numbers in front of me here. In Fiscal '99, we project that the 6 percent tax will total about $20 million. And 9 /99 FINANCE COMMITTEE based on those projections, we would expect that the new 1 percent tax would yield approximately $3 million per year.

So it's million. 7

So it's 8 approximately 23 million, but this 3 million has 9 -- according to the proposed legislation, is 10 targeted for the specific use of the regional 11 marketing agency, GPTMC. The other 6 percent is 12 divided between the Visitors Bureau and the 13 Convention Center. 14

Is it a dedicated 15 funding stream? 16

I'm sorry? 17

So it becomes a 18 dedicated funding stream? 19

Yes, it's a 20 dedicated fund for the regional marketing, and 21 that's in accordance with the State-enabling 22 legislation that we are using as the authorization 23 for levying this tax.

I yield back, Madam Chair. 10 /99 FINANCE COMMITTEE

Thank you. The money -- that part of the hotel tax now, is any of that earmarked for these purposes for advertising as this bill is?

I don't believe any of it goes for this type of regional marketing and advertisement. As I mentioned, some of it goes to the support of the Pennsylvania Convention Center, and some of it goes to the Visitors Center. I believe Dean Kaplan can amplify on that.

Dean Kaplan, the City's Budget Director. As members of the committee know, over the past several years, GPTMC has been supported jointly by the Commonwealth, the City, and the Pew Charitable Trusts, and Meryl Levitz, the President and CEO of GPTMC, will speak about that a bit further in her testimony. But in the past three years, Council and the Administration have worked together to provide a separate non-hotel tax-related subsidy for regional advertising. And, again, they will speak a bit about the impact of that. The goal of the State-enabling 11 /99 FINANCE COMMITTEE legislation, as I understand it, and our legislation which follows that, is to create, as one of the members dedicated, a dedicated funding stream so that we would not be in the position of trying to put in ad hoc appropriations for them, and that they would have a reasonable ability to project going into the future what their budget would be and how much would be available for this sort of promotion.

Commissioner, you said that the money collected now goes for the Convention Center and the Business Tourist Center?

The Convention and Visitors Bureau.

Convention and Visitors Bureau. Thank you. Councilman O'Neill and then Councilman Nutter.

Commissioner, the projection of $3 million additional from the percent, does that go up significantly in the year 2000, 2001 with the additional hotel rooms, that projection?

Well, it would go up 12 /99 FINANCE COMMITTEE as the revenue from hotel increases.

Right. And what is your projections for those two years?

We have not yet made a projection on that.

Has anybody? Mr. Kaplan?

We haven't made a detailed projection room by room, but we have assumed -- as you'll note, there's been quite a bit of debate in the City as to whether -- how many of those additional rooms will be occupied, and the fact that we actually have more room still means that you need people to fill them.

But assuming even the pessimistic outlook -- more pessimistic rather than more optimistic -- I mean, there's got to be some projection.

The way the Five-Year Plan is structured currently, it assumes that that kind of -- the level of the receipts that we've gotten in the last several years where we exceeded our projections slightly -- for example, as the Commissioner mentioned, this year, we have 13 /99 FINANCE COMMITTEE projected about 18 million; we're probably going to be closer to 20. That becomes very difficult kind of in the out-years of the plan, because even though conventions are booked several years in advance, really beyond about three years, the numbers are much more of an estimate. So over the plan, probably closer in, we're expecting maybe a little bit higher return; farther out, probably more than what the historic return has been.

But don't we have 65 percent more inventory of downtown hotel rooms coming on board just in the next two years? Is that --

I don't -- that sounds -- you'd have to ask the hotel --

There seems to be a lot of rooms to not be -- being optimistic about it in terms of the. . . Now, you may only have that built in to your --

Well, we have assumed significant growth as it is, yeah. 14 /99 FINANCE COMMITTEE

But assuming -- okay. You have a -- just assume you're at million growth for the next 5 years. Taking 5 that and then transferring that percentage growth 6 to the 3 million, what do we get? 7

I don't have the number 8 with me, but I can provide that to you. 9

One last question, 10 and maybe this is better addressed to Mr. Kaplan. 11 At some point, hopefully, in the next 12 year or so, we're going to be very seriously 13 engaged with the State in addition to the 14 Convention Center. We're going to need a whole 15 lot of that money from the State. But based on 16 history, the State is not going to give us 17 everything without some local share. 18 Other than taking a percentage of the 19 hotel tax or adding a percentage of the hotel tax, 20 what other options do we have for creating a local match or a local share? I shouldn't say "match" -- it better not be a match, but a local share for that kind of effort. 'Cause 14 percent kind of gets with your sales tax and you could see us pushing even 15 /99 FINANCE COMMITTEE further than that if there's an addition, or is there some other way of -- 'cause I'm sure you're all thinking about this at the same time.

Yeah, I think that there been a fair amount of discussion about the idea that we're fairly close to the end of the road on where you can push the hotel tax without creating a kind of resistance and a loss in terms of competitors, both in the region and more especially in similar cities. Nonetheless, clearly, a very small increment in that area is a small possibility. I think looking at some of the other revenue streams that are kicked off by increased convention business or other possibilities, and then the -- you know, exactly how we share those expenses with the State may be 00 given multiplicity of our relationship with them may be another area for that. The real issue is also the timing. I mean, in terms of if we were to engage in a discussion, as you're suggesting seriously next year, we may have a couple more years to get a sense of where the tax is actually going to land, 16 /99 FINANCE COMMITTEE what the impact of the additional hotel rooms are going to be, and post-Convention, what our kind of baseline is going to be in the future, which will give us, I think, a better ability to answer that question. But those are the kinds of areas we'll probably look at.

Okay. How much in the past, since the Tourism and Marketing Bureau was established, how much has the City's share been with the State and Pew?

Meryl can correct me if I'm wrong here, but the way the arrangement worked was, our share -- and I believe this also goes for the State's share, they both started out in Year 1 as half a million dollars; in Year 2, it was a million; and in Year 3, it was a million and a half. The Pew Charitable Trust was the reverse of that; they started out at a million and a half -- I'm sorry. They started out at 3, then went to 2, and then 1.

Okay.

So that the total was more 17 /99 FINANCE COMMITTEE or less the same each year, but we reversed the local. Basically what Pew is doing, obviously, is providing incentive for the State and the City to get into the business. So this would kind of formalize our contribution.

Is our million and a half still in there, or has that been pulled back and replaced with the 1 appears? That was general --

Yeah, our actual contributions were, I believe, for calendar '96, '97, and '98. So GPTMC is actually -- although undoubtedly, they have some residual funds from that effort, I mean, essentially, our contribution kind of ran out December 31st.

Right. But it was but General Fund money?

Yes.

Okay. And the contemplation was that the General Fund would be replaced with --

That we would eventually try to find some permanent funding stream for them 18 /99 FINANCE COMMITTEE rather than continuing to do that.

Okay, thank you.

Councilman Nutter.

Thank you, Madam Chair. Mr. Kaplan and Miss Levitz, let me first get on the record. I heard Miss Kammerdeiner's testimony, and I want to go back to the amendment that you raised. But I'd first like to get on the record, this is an Administration bill; is that correct?

Yes, that's correct.

And you are asking that we increase this tax?

Yes, that's correct.

Okay. It's only significant in the context of this Administration as priding itself on either not raising taxes or actually, we've been lowering taxes here recently so I just want to make sure the record is absolutely clear that this is your request, you've worked it out with people in the community or the hotel industry, and that you are asking us to do 19 /99 FINANCE COMMITTEE this.

Yes. It's our understanding that they're supportive of this measure and have come forward actually asking us to support this.

Okay. The current hotel bed tax is at 6 percent; is that right?

Yes.

And you're asking it to go from 6 to 7.

Yes.

Okay. At the 6 percent and at the 7 percent rate, where does Philadelphia match up to our other major competitor cities across the country? (Mickey Rowley comes forward.)

Mickey Rowley, with the Hotel Association.

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

Mickey Rowley, with the Hotel Association. That puts us 2 points below New York, about a point below Atlantic City, a point below 20 /99 FINANCE COMMITTEE Atlanta, a point below Washington DC, pretty much on a par with Boston, Baltimore.

Okay.

Even with Pittsburgh -- I think.

Is that just the hotel bed issue, or what is the total amount of tax if a person walks in and they rent a room, the room rate is whatever it is, but you've got hotel tax, sales tax, there may be other State and local taxes, what's the total lineup of taxes, including this now 1 percent matched up to all the other cities? Do you have a chart or a breakout of that? Philadelphia as compared to all of those other cities with all the other taxes that go into renting a hotel room.

Yeah, I do have that information. But for example, in Massachusetts, the State sales tax does not affect the bed tax, so the Boston hotel tax is 12.8 percent, I think, and it is all hotel tax; there's no sales tax component. In most other cities, the sales tax is incorporated into it. 21 /99 FINANCE COMMITTEE

So what is ours today and what would be 1 percent higher?

With the sales tax today, it is 13 percent.

13 percent.

That's correct.

That's made up of. . . ?

It's made up of 7 points of the sales tax, 6 State, and the 1 point that --

So we're going from 13 to 14.

To 14, that's correct.

All right. And what about the other cities?

What is the breakdown in other cities?

Yeah.

I can submit this, it's pretty detailed information.

And let me ask you -- excuse me one moment, Councilman Nutter. Would you provide the information you just mentioned, this comparative study of us with 22 /99 FINANCE COMMITTEE other cities. Would you provide it to the Chair, and we'll get it to members of the committee.

Yes. I will have to do that after I -- I will have to get exact information from the Hotel Motel Association.

Thank you.

You said our competitor cities are primarily Boston, Baltimore, Washington, and -- I mean, obviously, New York is out there, but virtually everyone, I guess, competes with New York. Boston was 12.8, it's all hotel tax; is that what you said?

That's correct. Well, there are different components of it -- some of it goes to the convention centers, some of it goes to the --

I understand. I'm not -- for this particular question, I'm not as concerned about where it goes as to where it comes from. Baltimore is how much?

12.5, I think.

Total? 23 /99 FINANCE COMMITTEE

Yes.

And D.C. is. . . ?

14.5.

14.5, okay. And you said Atlantic City on the hotel tax, we were a point below. Where do they match up all the other taxes included?

Well, Atlantic City is weird because they have a percent plus $1. So, you know, if you looked at a $100 room rate, that dollar would represent a point, but Atlantic City is. . . 15.44 percent.

Okay. And I think I heard the tail-end of the Chair's question. You were going to get us a more detailed chart or a printout or a facts sheet or something.

Yeah, I'll get you an update of the information I have.

So it sound like, at least from the testimony, that Philadelphia is either slightly below or right at where most other places are today; is that right?

Yeah. I guess when you "say most other places," we compete with some 24 /99 FINANCE COMMITTEE cities for tourist business and some other cities for convention business, and so look at both those sets of competitors.

Okay. So then the request that was made earlier, you'll match us up against all those various cities and take into account the different tax rates.

Yes.

Okay. This is an offshoot of Councilman O'Neill's question. It's a straight 1 percent based on total number of rooms, total number of rooms rented and what their various rates may be. Today, you project that that 1 percent will generate $3 million. As Councilman O'Neil indicated, though, there are more rooms scheduled to come on line, and with that, unless there's some havoc in the marketplace, we would generally have to assume that that $3 million figure over time will go up; is that a fair assumption?

Well, no, actually. I think it's worth pointing out more rooms does not necessarily generate more occupancy. However, we are projecting an increase in demand in the coming 25 /99 FINANCE COMMITTEE years.

Well, we have a tremendous amount of faith in your efforts. We assume that if you're going to have all these extra rooms and you're going to have $3 million for advertising, that you're going to bring a few more people here, right?

Well, we're hoping that if this tax passes, we'll be able to more effectively do that, yes.

I understand that. But for the theoretical discussion, there is no 14 cap on the amount that comes in the form of the 1 percent going to GPTMC; is that right?

That is correct. The tax is 1 percent of the consideration for the rooms that are rented, and there is no additional statement on that in terms of any cap or any -- lower than either.

So if GPTMC has the opportunity, at least for upside participation, they do what they do, the number goes up, more people come here, they get the benefit potentially of the increase. If things don't work, then they /99 FINANCE COMMITTEE suffer the deficit; is that correct?

Correct. The effectiveness of the work that they do to attract additional business to Philadelphia will be reflected in that revenue that they will then have to do additional work to bring in more tourists, more conventioneers.

All right, so in the financial services industry, we generally refer to that as "You get to eat what you kill." (Laughter.)

Okay. Has the matter between GPTMC and PCVB, there's a financial issue, has that been resolved?

Friday afternoon, there was a lengthy meeting involving PCVB, its president, GPTMC's president, the Mayor, myself, and a variety of others. And it's my understanding that we have reached an agreement and that all parties are prepared to proceed with this legislation.

Okay. The last question is, Commissioner, in your testimony, you talked about the uncertainty of the effective date 27 /99 FINANCE COMMITTEE of the bill, although it has never been, I guess, pointed out to me that this ordinance shall take effect immediately upon enactment, left anyone with any particular uncertainty, but I understand your issue is about a date certain.

That's correct.

My conversation, or when the folks came to see me, I almost, I think, had to hand Meryl a tissue, she was so expressive in the need for revenues coming out of this. Does an effective date of July 1 negatively impact their situation given that it's my understanding they're about to run out of money?

It does delay the start of the collection. However, it's my understanding that they were basing their estimates of the revenue from the tax on our previous collections, which were in the vicinity of $18 million; and, therefore, with the increase in the collections that we anticipate for Fiscal '99 and going forward, the amount of revenue should actually exceed their original projections. But Meryl Levitz will need to address 28 /99 FINANCE COMMITTEE the other issues directly in terms of the delay.

And how do those revenue projections impact them presently at all? They're not getting -- they don't get any of the tax to day, do they?

That's correct. What I'm referring to is the amount of money that they can expect during Fiscal 2000 should be slightly than what they were originally projecting for Fiscal 2000. We will see a slight delay in the collection, but the concern that we raised and discussed with them was the concern of the problem of compliance during the months of May and June and the potential for some bad publicity that could come as a result of that, and that --

They're in the publicity business.

We wanted to ensure a smooth implementation.

I understand. My only concern, I guess, about your response is that -- I mean, that would be somewhat similar to someone telling me that, you know, I can 29 /99 FINANCE COMMITTEE anticipate a major bump in my check in two weeks; the problem is that I'm running out of money. If I get to live to two weeks, it will be a wonderful day for me. But, I mean, there seems to potentially be a disconnect between, you, will in effect get more later, but you are literally running out of money now. And I'm just trying to make sure that both parties --

That is an issue that we have discussed, and they have agreed that the July 1 effective date is one that they can deal with; at least, that's my understanding.

Nancy, you have a way of getting people to agree to virtually anything from where you sit. (Laughter.)

Funny about that when you're the tax collector. Dean Kaplan again.

Right. I've had dealings with you in the past.

And essentially what we have is a cash flow issue, and we have had a brief discussion about that, and I think that were they 30 /99 FINANCE COMMITTEE to have some sort of temporary cash flow issue, that could be addressed rather easily.

Okay, thank you.

Am I next?

President Verna and then Councilwoman Clark.

Thank you. Mr. Kaplan, when you were testifying, I was distracted, and this question may have been asked and I didn't hear it. Will the surrounding counties be imposing a certain tax? And if not, why not?

To my knowledge, the counties -- the surrounding counties will not be imposing a similar tax. I'm not particularly familiar with all of the dynamics of the hotel tax increase to be at the State level, but my understanding is that a large part of the impact on the suburban areas is going to be met by the Commonwealth's continuing contribution to the GPTMC budget. And that may be something also that both the hoteliers and GPTMC can speak to.

Reading the 31 /99 FINANCE COMMITTEE testimony, it would appear that if we do not approve this bill, we really jeopardize the State money and Pew's money, and Greater Philadelphia's Tourism Marketing Corporation will be out of business. Is that true? Am I properly interpreting the testimony?

Again, I think that's probably best directed to GPTMC, but I believe that that is generally accurate, yes. There will not be any -- the three parties' funding is based on an agreement between all three groups to convene a funding, and this is our method of doing so.

Also in the testimony, it says that GPTMC will go out of business on June 30th of this year if this tax is not passed.

As I had mentioned a moment ago, we have had some continuing discussions with GPTMC and others about how to handle the cash issue for them and how to make it through the early part of the summer if the tax is in place, and we think that we will be able to provide adequate resources so that they'll be 32 /99 FINANCE COMMITTEE whole.

Mr. Kaplan, I think you're going to have to repeat that because many of us up here could not hear your response.

It was not clear as to whether or not --

Are they going to be able to stay in business?

We believe they will.

So the testimony was an inaccurate when it said they'd go out of business on June the 30th?

Well, I think subsequent to the drafting of the testimony, we've had some discussions with GPTMC about what their specific issues are around the June 30th date, and I think we're both satisfied now that we will be able to make that date, assuming that this -- that some funding source is in place that is going to begin on July 1st.

So if the testimony had been up to date, that sentence would have been stricken about going out of business as of 30, June. 33 /99 FINANCE COMMITTEE

Yeah, and maybe I'm not being completely clear here. If there is no 4 funding for them, obviously, they go out of business. If we enact funding, I think, getting back to Councilman Nutter's questioning, the question was, is July 1st starting to collect the tax soon enough? And I guess that's really the question I was answering is that if that's the case, we think we've worked that out. If there is no funding, I think the sentence is still valid. If there's no hotel tax, there's no funding source for them.

Could you make that any less clear?

That's not very specific, Mr. Kaplan. The question is whether or not the corporation will be in place at the end of June or whether it won't. What's the formality of it? And also what's the formality of it and what's the practical end of it?

I'm Meryl Levitz, President and CEO of GPTMC. And, essentially, if this doesn't go through, we have no funding source as of June 34 /99 FINANCE COMMITTEE 30th. However, we would be able to -- we actually run out of the money the second week in August, if that's what you're asking, because that's when our final bills for media bought are due, and we've made sure that no matter what happens, we're able to pay off all vendors. And so we figure we'll bottom out the second week in August. Is that what you're --

Thank you very much.

I think that was the question, Council President Verna, you were asking? Thank you very much. Councilwoman Clark?

Thank you. Will this bill completely supplant the funds lost from other governmental sources?

What happens is, the $3 million essentially replaces the Pew funding. What the governor has indicated is if this hotel tax is passed, the State would stay at their third-year level, which would mean a million and a half. The Pew Charitable Trusts said they would be willing, at their next board meeting, which is 35 /99 FINANCE COMMITTEE in June, to give us a bridge grant which would enable us to stay at the minimum level, which would be at about a $4.5 million level a year. What they're anticipating is what Councilman Nutter and Councilman O'Neill were talking about. The hope is that if we all do our jobs right, the additional rooms will give us the opportunity, along with the additional funds for the campaign, to get back up to that level through the hotel tax because the Pew money goes away. Just to give a little bit of information about the counties. Montgomery County has already chipped in $270,000 for GPTMC -- not through its hotel tax but through a grant, because they felt we would be able to better spend the money on their behalf than they would for a TV campaign. Delaware County is now able to collect 3 percent on its. They're only collecting 2 percent. Tom Killian (ph.), who's on their County Commissioners Board, has said that their board, which is made up of five people, is willing to add in the extra percent, which would generate about $400,000. What they would want to do is keep half 36 /99 FINANCE COMMITTEE of that for their own tourism generators within the county and then start paying in to GPTMC as their share. Chester doesn't even have a hotel tax and hardly any room so, so it would be almost unreasonable. Bucks County, very frankly, has told us that they would never chip in; they've happy to get everything for free, and they feel that they have a very good identity within New York and the major metropolitan area, and so they're not interested. However, we've received a lot of requests from Lancaster County, Lehigh County, and Berks County, who would very much like to join us should this happen but, you know, we've made no 18 promises.

Excuse me one moment. Let me welcome our public school students who are touring our City Hall, and we certainly say you're very, very well behaved, and welcome to our Finance Committee here.

What school? 37 /99 FINANCE COMMITTEE UNIDENTIFIED SPEAKER: The Mitchell School.

We certainly thank you. I've visited your school on several occasions, and we certainly thank the students of Mitchell School and their teachers and parents who are with them. Thank you. (Applause.)

Thank you. Councilwoman Clark.

I have had some concern about the marketing of Philadelphia, specifically its inclusivity as to ethnic groups. What is your plan with respect to remedying this?

Should we just start our testimony now because it's --

If we have no 20 other questions for the Revenue Commissioner, certainly. The next, according to your list, was Mr. Robert Cima, from the Four Seasons Hotel, general manager. Meryl Levitz, on the list, was due to testify number 4, so they've changed the order of their testimony. 38 /99 FINANCE COMMITTEE For the members of the committee, let me say that the requested list in order was: 1. The Revenue Commissioner 2. Robert Cima, General Manager, Four Seasons, and secretary of the Greater Philadelphia Hotel Association 3. Ashley Andrus, for the President of the Greater Philadelphia Chamber of Commerce 4. Meryl Levitz, CEO and President of the Greater Philadelphia Tourism Marketing Corporation. This is the order that they requested. Certainly, if members of the committee would like to alter that for one reason or another, it is your pleasure.

Madam Chair, I jus want to -- hope that before we vote this bill out today, we can have some real discussion on the committee. I hate to say start a tax earlier, but if we're going to do it and there's a half a million dollars on the table that would be lost -- with all the issues involved, and I know that there was a meeting Friday and there was an agreement. 39 /99 FINANCE COMMITTEE But to have another half a million dollars to work with on that agreement or the budget is, to me, something we shouldn't dismiss lightly. And I've heard the reasons from the Treasurer's Office in terms of why. But to me, if you're going to go out and do the kill, whether you do it July 1st, once you decide it, or May 1st if you're looking for a date certain, it seems like we should do it. I think they're getting ready to do this soon from the get-go when they're up in Harrisburg -- I just think -- I don't want to let that one go 'cause Michael, I think, raised some real good points.

Again, Dean Kaplan, and I'll speak of this for one second. We've had rather extensive discussions particularly within the Administration about the Revenue Department's ability to do their side of the tax. There are, as the Commissioner testified, some issues within the hotel community. One of our concerns was having making sure that there was sufficient revenue for GPTMC to operate. But I don't think that between the 40 /99 FINANCE COMMITTEE Commissioner and myself, we could strong enough urge you to start this tax on July 1st. It's a very significant issue for us on the City's side in terms of our implementation.

Okay. Well, I always think of the revenue as the real treasure in a city, so I'm sorry for that. . .

Let me certainly say that we do want a full discussion on these issues. I spoke with Councilman O'Neill prior to the start of the committee hearing, and there are many concerns I've learned, and certainly, the committee deserves a full discussion so that everybody's satisfied that we're moving forward and doing it properly. And after Councilman Nutter, Councilwoman Tasco, please. Thank you.

Mr. Kaplan and, I guess, Miss Kammerdeiner and then either Meryl or the gentleman from the Hotel Association. I mean, you're essentially saying, 'cause it's going to take us, even with the rules suspension, essentially two weeks before it gets down to the Mayor's office. The Mayor can take naturally up 41 /99 FINANCE COMMITTEE to ten days. So, I mean, we're already into May at that point. What you're saying is, you need half of April, all of May, and all of June for however many hotels there are to reprogram their systems to go from 6 percent to 7 percent and for the Revenue Department to do the same, and it's going to take two and a half months? I mean, that's the bottom line of this issue here today, right?

Our first concern was to have a date certain, not just the date that the Mayor signed so that we know ahead what it should be.

Fine. We would probably agree with you -- not speaking for the committee. But okay, I mean, the notion of a date certain is a wonderful concept. Now, what's the date?

I had some discussion with people at the working levels within the hotels who would have to do some of the work to put this in place, and they indicated they would like to have 60 days' notice but a minimum of 30. But I think what we were looking at was 42 /99 FINANCE COMMITTEE that they need the time after they get the instructions from us. And so we were into June with the time frame, and that's why we really went with July 1 to be sure it was complete and orderly and --

Not to get too far into revenue world, but what are these instructions? They've been doing this for years.

They need to have new information in terms of the coupons that they file; they have to be designed, printed, and given to them. It's not a difficult process but you do have some time delays in getting the material to them, and that's what we were concerned about. They also have to do programming at their end for their systems, and I was told they needed 30 to 60 days. That may not be correct but that's what I was told.

So what about June 1st? I mean, that's --

That could be a possibility.

That's 45, May 15th is a little more than 30. I mean. . . 43 /99 FINANCE COMMITTEE Look, I mean, I can barely turn my computer on in the morning, so I'm not making this to be, you know, a snap of a finger. On the other hand, all of you have been doing this for years. You're going from 6 percent to percent. How 7 complicated is this?

Ti's as much an issue of making sure that all of the people who need to collect the tax know what it is that they are collecting and what the effective date is on that. We can get into discussion of another date.

Well, Madam Chair, if I could suggest, I mean, we've still got GPTMC to give testimony. Nancy's here, Dean's here, the gentleman's here. I mean, maybe we just need to have like another discussion. I mean, that's just --

That's fine.

All right, we'll have one more question from Councilwoman Tasco, and then we will follow our script. Thank you.

Why did you -- maybe you answered this. Why did you change it 44 /99 FINANCE COMMITTEE from immediately upon enactment, which is standard practice with us, to a date certain?

To ensure the smooth implementation of the tax. We had initially expected that it was going to be an effective date of July 1, and it was submitted as immediately. And after internal discussion about the difficulties of not knowing what the date would be when the Mayor would sign it, we requested the amendment to have a certain date.

Well, the Mayor, this is his bill; wouldn't you think he would sign it immediately?

That's actually a difficult thing. We still don't know what date that would be, and the tax is collected or is --

Do you have to have a date certain in the bill? Do you have to have a date certain?

It would be extremely helpful, obviously, to have a date certain. When something comes downstairs, as you know, it's signed by the President, it goes to Law Department, the City Solicitor signs it, it get's 45 /99 FINANCE COMMITTEE to the -- you never know what day it's going to be. You can agree at the back end, but --

We'll give you a date since you can't figure it out.

You're saying your people could speed it up, they may delay it?

We can speed it up or slow it down, but within the time span the Mayor has to sign in advance, you can't know -- you can't know more than about a week in advance.

Would it be better for you if you left it immediately upon enactment rather than the date certain?

No. We would rather have a date certain.

Okay.

We will now hear from Robert Cima, General Manager of the Four Seasons Hotel and Secretary of the Greater Philadelphia Hotel Association to introduce himself for the record and provide your testimony. Thank you. (Robert Cima comes forward.)

Good morning. 46 /99 FINANCE COMMITTEE

Good morning, welcome.

Councilwoman Blackwell, members of the Finance Committee, good morning. I'm Robert Cima, General Manager of the Four Seasons Hotel, Philadelphia, and Service Secretary of the Greater Philadelphia Hotel Association. I speak to you today for Mike Boyle, President, and for all of the officers of the Hotel Association. GPHA counts amongst its members some 50 hotels and includes over 90 percent of the hotel rooms in Philadelphia. ), General Manager of the Warwick Hotel; Jack Little, General Manager of the Latham Hotel; Tim Herman, Director of Marketing of the Marriott; and Mickey Rowley, Executive Director of the Greater Philadelphia Hotel Association. I know many of you have met Mickey as he's made rounds talking to you about Bill No. 990116 and the Administration's amendment. Our members looked on with a high degree of interest three years ago when Pew Charitable Trust announced an initiative to launch consumer marking marketing for the Philadelphia 47 /99 FINANCE COMMITTEE region. At that time, we had felt at a disadvantage to other cities and regions who have so successfully marketed their cities as tourist destinations. The ""I Love New York"" and "Virginia Is For Lovers" campaigns come to mind. Cities that we regard as second-tier destinations, like Baltimore, are capturing more tourist visitors than Philadelphia. Our image needed some brushing up, and it appeared as though this initiative of the Pew organization was an opportunity for some aggressive and competitive marketing of the Philadelphia market. We should point out to you that Philadelphia, the nation's fifth largest city, was at the time ranked 21st among major cities and tourism marketing and media exposure. In short order, with the Pew, the City, and a State-funded agency known as "the Greater Philadelphia Tourism Marketing Corporation," a campaign for Philadelphia was launched. " You will hear shortly of research that points to the discuss of the campaign, and in a few short years, Philadelphia has been raised significantly 48 /99 FINANCE COMMITTEE in the minds of our potential market of visitors. It is the opinion of the hotels and of the City that this effort continue. We voted unanimously in February of '98 to endorse a 1-point percent increase in the Philadelphia hotel room tax. We have supported this tax, with the understanding that funds generated would be dedicated to advertising of this city and region for tourist activity. The bill you have before you does just that. These funds will be earmarked for the ongoing efforts of the Greater Philadelphia Tourism and Marketing Corporation. We of the hotel industry believe that marketing efforts of the city must continue in order to ensure the vibrancy of our business and the 5,000-plus Philadelphians who are employed here in our City hotels. The bill that you are considering is really an economic development bill. Let me give you a snapshot of our employees. 5 employees; so that by the time there are 10,000 rooms in Center City, there will be 7500 hotel 49 /99 FINANCE COMMITTEE employees. The average wage of these employees is over $20,000 per year, not including tips. But most importantly, and the reason we say that it's an economic development bill, is that over 80 percent of our employees are Philadelphians coming principally from North Philly, West Philly, South Philly, and Center City. The hotel industry -- indeed, the entire hospitality industry -- probably more than any other industry in the City, supports the neighborhoods of Philadelphia. In addition to funding for both the Philadelphia Convention and Visitors Bureau and Convention Center, a certain percentage of the hotel tax revenue is earmarked for the vitally important and successful hospitality training of the Philadelphia OIC, Opportunities Inn, and the High School Academies program. Combined, these programs have placed upwards of 2,000 trained and eager hospitality employees in good careers in the City.

In closing, I'd like to point out that the Hotel Association, of course, looked very closely at a tax on its own receipts, and you can 50 /99 FINANCE COMMITTEE be sure that we in Philadelphia would not put ourselves at a competitive disadvantage in room-rate pricing. We need only to look as far as Pittsburgh, whose tax is percent, and at nearby 6 Atlantic City, whose tax is both a 12-percent 7 assessment plus $1. And the sales team at the 8 Convention and Visitors Bureau has assured us that 9 a 14 percent tax here in Philadelphia puts us on 10 par, or in some cases, below cities we compete 11 against for convention business, such as New York, 12 Baltimore, Boston, and Washington, DC. 13 Lastly, and most importantly, the bill 14 you are considering today directs funding to benefit advertising and marketing programs that we are confident will represent a net economic gain for our city, industry, and the 7500 Philadelphians who we'll be employing by the year 2000. We ask you to support Bill No. 990116 and the Administration's amendment. We request a suspension of the rules, and we are open for any questions you have. Thank you for your support and for the opportunity to testify to you today. 51 /99 FINANCE COMMITTEE

Thank you. Just one question. We have embarked on, in West Philadelphia, a training program for the hotel industry, and it is a training program that we have in combination with the University of Pennsylvania, and we would like to be included in your program to train people in this field. And how do we do that?

Well, I think there are a number of different programs that are around in the community, and I'm certain that, with Mickey and with the folks over at OIC, that we could probably be able to assist and give advice and counsel in any way that they would feel that they need our help.

We have an initiative called "West Philadelphia on the Move" where we're trying to train and employ West Philadelphians. This training program alone would allow for 150 people per year. The University of Pennsylvania's already started it, West Philadelphia on the Move is in concert with them, and we're working with them in their Skills Development Center and have a new program with 52 /99 FINANCE COMMITTEE regard to the hotel industry where we want to involve the training of people. We want to be involved at the level that others are, and we just don't know how to do that. You mentioned the High School Academies and OIC, which is absolutely great, but we want to be involved at some level. I don't know how this is done.

Right.

But we want to be involved at some level to certainly help these youngsters and certainly unemployed adults in the area.

Excellent. Greater Philadelphia First has also put forward a task force to consider and look at all of these different organizations that are in the City and trying to give them counsel, advice, and help to be able to get those potential employees into our buildings and into this industry. There's no question about all the growth that's happening here in the City with hotels. And even as an employer of 550 staff members and a target for many of those staff 53 /99 FINANCE COMMITTEE members to join other properties. We would be delighted to have another organization helping. If I can be of help, then please call upon me.

Thank you 'cause I know that they receive funding, and certainly, we want these folks to be eligible to receive funding as well. That's specifically what I'm asking you -- not for advice only, but for the opportunity to receive funding as well.

It's my understanding that the source of the funds for both OIC and the High School Academies and also Mercy Academy is through the hotel tax via PCCA, Pennsylvania Convention Center Authority. And I don't know if it's legislation or how ever, you know, the money is disbursed there. It goes through PCCA, and you're right, it's about a million a year to those variety of training institutes, so I would talk to them.

Okay, that would be fine. Thank you very much. Any questions from any other members of the committee for certainly Mr. Cima while he's 54 /99 FINANCE COMMITTEE here? (No questions.)

Thank you very much. The next person to testify will be Ashley Andrus, for the President of the Philadelphia Chamber of Commerce. (Ashley Andrus comes forward.)

Thank you. Good afternoon. Please identify yourself for the record and proceed.

Good morning, Madam Chair and members. My name is Ashley Andrus, I am Director of Public Policy for the Greater Philadelphia Chamber of Commerce. And I'll just summarize my testimony; I don't want to belabor a lot of points that have already been made. But I just wanted to come here kind of -- the Greater Philadelphia Chamber of Commerce is a membership organization, and I'm sort of wearing two different hats because among our membership include the vast majority of the hotels in the City as well as GPTMC. So obviously, they're supportive and we're supporting their 55 /99 FINANCE COMMITTEE efforts. But also the business community at large is supportive of this because the business community sees a spin-off value of the hotel industry and hospitality as a whole, and are concerned about the great investment that the City has made in hospitality and want to make sure that we maximize those dollars. And because marketing is such a vital component of that, we're supportive of this tax increase. And I think it's important to note that Mr. Cima referred to this as an economic development bill, and I would wholeheartedly agree with that because the hotel community does serve as an employer and a source of jobs for a number of people in our communities of varying skills, and would even be an important component of welfare-to-work efforts throughout the City. And they represent a number of jobs and a number of dollars to the City's bottom line. And I think it's important to note also that the hotels are in support of a tax on themselves. It's not something that's a common occurrence, but they recognize the importance of 56 /99 FINANCE COMMITTEE the marketing and maximizing that investment. And they have taken a look at what this extra tax means and they want to make sure they remain competitive and have made sure that the room 6 rental rates will be competitive. But also, we want to make sure that the amount of marketing that's done for Philadelphia is competitive with that of our competitors within the hospitality field nationwide. So in short, the State has stepped up and played its role, and Pew has also come to the plate with an offer, and I think it's important that the City kind of make its share available to GPTMC as well. So we would urge a swift approval of this bill. Thank you.

Thank you very much. Any questions? (No questions.)

Thank you very much. We will now have testimony from Meryl Levitz, CEO and President of Greater Philadelphia Tourism Marketing Corporation. 57 /99 FINANCE COMMITTEE

Thank you very much, Councilwoman Blackwell and members of the committee. I'm joined here today by our Vice President Karen Lewis, with whom I'm going to share the testimony; we're going to tag-team it a little bit; by Rachael Delano, our Director of Marketing; and Angela Patterson, Assistant and Hotel Liaison. I'm also going to address the question that Councilwoman Clark and Tasco asked as well, because we think that's important. For the record, we are here to speak to you about GPTMC's role in Philadelphia's economic development and to testify in support of Bill 16 990116 and the amendment proposed by the Administration. We'd like to thank you again for your support since we began. The 500,000 and the million, the million and a half were really a risk that everybody took together because Philadelphia never before had had an advertising campaign outside of Philadelphia itself. Without this support, Philadelphia would not have achieved the following in the last two years: a sustained 58 /99 FINANCE COMMITTEE and effective television campaign which, I remind you, is the first for the City; and a national print promotional campaign. Last year, according to the Greater Philadelphia Hotel Association, we had a percent 7 increase in tourism after only one year of this campaign. We were able, by two separate studies, to generate an additional 1,133,000 trips made to Philadelphia in one year alone, and that generated an additional $97 million in incremental expenditures by these visitors. There was a return to the City, in other words, of $55 for every advertising dollar that's spent. This support also enabled to us give MAC, the Multi-cultural Advisory Congress, a $40,000 grant to help us strengthen Philadelphia's presence as a top destination for African-American visitation. In addition to the grant for MAC, we were able to support the following multicultural efforts, and I have a list of vendors and also efforts here, if anybody would like to see them, but I'll go through them quickly. $15,000 to the Fly Away Program, which 59 /99 FINANCE COMMITTEE is an American Airlines MAC initiative; $15,000 to the Underground Rail Tour Development Program; $30,000 to the Cultural Junket; $15,000 in each of two years to African-Americans Expose, 1997 and 1998, at the Convention Center; A $30,000 grant to African-American Women on Tour; $15,000 to PECO Energy in '98; $40,000 to the Black Nativity production at Freedom Theater; $40,000 to Cooley High at Freedom Theater; $15,000 to Pathfinders Tourism Program; And $50,000 this year to Love is More Than a Game, which included the PECO Energy Jazz Weekend of 1999. I would now like to introduce Karen Lewis, because Karen oversees this grant program, the multicultural effort and also all of our research.

Thank you. Good morning. As mentioned earlier, the Greater 60 /99 FINANCE COMMITTEE Philadelphia Tourism Marketing Corporation is a public-private partnership between the City of Philadelphia, the Commonwealth of Pennsylvania, and the Pew Charitable Trust. In 1996, the Trust commissioned a study to determine how Philadelphia could increase its share of the booming global travel industry. Among the study's first finding were the following: Philadelphia was spending only $200,000 per year on tourism advertising, a stark contrast to the spending of its many competitors. The city, therefore, was suffering from a weak, fuzzy, and sometimes negative image in the minds of the public, the travel industry, and the media. In 1994, the City's media spending ranked 21st out of 28 major cities monitored, and last out of 16 smaller cities measured. Meeting planners ranked Philadelphia 32rd out of 50 as a desirable destination. Philadelphia spending was running counter to that of its competitors; and as a result, Philadelphia was losing out in terms of day-trippers, overnight visitors, retail spending, tax revenues, and job growth. 61 /99 FINANCE COMMITTEE Yet, as the study concluded, the Rendell Administration had also recognized that tourism could serve Philadelphia very well as a replacement industry; therefore, the Greater Philadelphia Tourism Marketing Corporation was created as a three-year $12 million in total initiative dedicated to increasing Philadelphia's prominence as a primary destination.

Last year, the Hotel Association voted unanimously to raise the hotel room rental tax by 1 percentage point in order to continue this work on behalf of the City. As you know, the State legislature passed this measure in November of '98, and the Governor signed in December. Governor Ridge has also pledged to continue the 1.5 million per year, and the Pew Charitable Trusts are now considering a final round of operating support in the amount of $2.25 million over the next three years. Both of these revenue streams are triggered by the passage of the tax in City Council at this time. Indeed, we go out of business on June 30th, last bill's paid the middle of August if this tax is not passed, and the City would again 62 /99 FINANCE COMMITTEE be without an advertising and promotional budget. This loss would be especially difficult to recover from at this critical time. We would be in the middle of our tourist season and would have no 6 time to regain the lost momentum. The City is adding 4,000 additional hotel rooms to its inventory, which can supply a insanity number of new jobs if occupancy levels at all our hotels stay healthy. The City is adding new tourism attractions which are going to need considerable support. The City is competing for millennium visitation, and the City is hosting a major political convention which, among other things, brings in 15,000 members of the media, for a minimum of one week, to tell not only the Convention story but the Philadelphia story. The additional 1 percent makes the total tax paid by our visitors 14 percent rather than 13. We remain well within the acceptable limits. And the taxes, of course, are paid by visitors, not by our residents. As the advertising campaign has been very effective, due in large part to our celebrity spokespersons such as Bill Cosby, Oprah Winfrey, 63 /99 FINANCE COMMITTEE Kevin Bacon, Dr. J., and Nicole Miller, continued funding would enable us to build on the image correction that has been necessary. We would like just to take three minutes to show you six of the spots that be play in the New York to D.C. area 'cause I think these will answer some questions as well. Thanks, Ang and Rich. (Six Philadelphia promotional spots played on VCR).

Thanks, Ang and Rich.

Thank you. Before I continue, I just also wanted to mention that it was stated earlier that our competition is New York, Baltimore, Washington, and some of the other cities. Those cities have actually contacted us and asked us to give presentations in their respective cities because they have seen the commercials and they've seen some of the results of what we've down. So they believe that we are making progress and wanted us to help them along that path as well, so I just wanted to add that. In the hopes that we receive our funding, here are some other initiatives that we 64 /99 FINANCE COMMITTEE would like to do. We would like to zero in on specific travel itineraries based around a multicultural tourism and cultural tourism initiatives. In 1996, the Greater Philadelphia Tourism Marketing Corporation funded the Multicultural Affairs Congress to produce a guideline for us in our advertising buy, promotional support, and grant program. Additional research included in your packet outline the positive response African-American travelers have towards Philadelphia as a desirable travel destination. This indicates that they are familiar with our multicultural project and are visiting in response to our efforts. In fact, percent of 18 our visitors are African-American. We are 19 dedicated to increasing this number and are in the 20 process of incorporating yet more of our 21 multicultural message in our upcoming campaign. 22 For example, the following initiatives 23 are now in development: A specific African- American travel television spot, and this would feature some of 65 /99 FINANCE COMMITTEE the attractions like Mother Bethel, the African-American Museum, Freedom Theater, possibly the Johnson House. Also highlight some events that take place here in the City -- the PECO Energy Jazz Festival, Unity Day, and maybe some events at the Apollo as well as some of the activities with "Go West" in West Philadelphia; We also, for example, have advertised in various multicultural print publications -- Essence, Ebony, Black Enterprise, and Pathfinders; An expanded multicultural Share The Heritage Guide will incorporate many of the multicultural attractions mentioned; And also a do-your-own heritage Website with itineraries, camera-ready press releases for the African-American, Latino, and other multicultural weekly newspapers around the country; We'd also like to highlight some of the well-known celebrities that have either lived here or have an association with Philadelphia. For instance, Marian Anderson, Billy Holiday, John Coltrane, Henry Tanner, and Paul Robeson; Emphasize the fact that Philadelphia is 66 /99 FINANCE COMMITTEE now a restaurant city, hotel city, and night life city; Emphasize the no-sales-tax on clothing, shopping opportunities we have here like the King of Prussia Mall and the Franklin Mills Mall; Extend our geographic reach into Illinois, Florida, California, and Texas, all good feeder markets for multicultural, cultural and special-event travelers; Produce and promote special-interest packages to support hotel occupancy not only during the traditional season but at "soft" times, such as the holiday and the first-quarter months; Build a travel-friendly Website that is so necessary to continue and compete. Attracting overnight visitors is not easy. Competition is strong and close by, and they are not going to wait for us. Tourists cannot be manufactured when more are needed. When a city is out to get more tourists, it has to steal them from other destinations; it has to get them to come here rather than to the hundreds of other destinations that are all vying for them. It is a very "you-have-to-play" business, and we 67 /99 FINANCE COMMITTEE can't "pay" for only two years and expect results for five. In addition, Philadelphia has to play largely in one of the two most expensive media markets in the company -- New York.

If Philadelphia is going to stay in this business and utilize it to drive economic development, it needs the hotel tax from our visitors to make sure we continue to have visitors. It's not enough to have the best hotels, restaurants, attractions, neighborhoods, and people ready to love you back; we have tell the travel industry, the traveler, and the media that we do. The way to do that is a strong, consistent, well-targeted advertising and promotional program that defines the value of the experience for the travelers and invites them to spend here time with us. We'd like to thank you for the opportunity to testify today and answer any of your questions. In addition to this testimony supplied, we've supplementary materials in the packets that you have. You have an Advertising Campaign Overview, the Co-op Matching Grants Advertising Program, the Three-Year Budget, some 68 /99 FINANCE COMMITTEE letters of support and sample materials. We also have with us today some of the samples of the print ads. Thank you very much.

Thank you very much. In your testimony, you mention Pew as one of those who you are targeting for contributions. Do you have other major contributors in mind, and who might they be?

Yes. We've already secured Visa USA who, once they were assured that we probably were going to be permanent, have come back for a renewing grant. When we opened, they were very excited and gave us $600,000 over the first two years. We were able to work with them and they worked with us to increase Visa spending in the region by 31 percent. So they were very happy. They realized that the Philadelphia region is a very good market for them and us, so they've come back for another $300,000. We're working with the William Penn Foundation on getting grants for the upcoming Gateway Visitors Center. They gave a grant of 69 /99 FINANCE COMMITTEE which percent will go to us to help open the Gateway Visitors Center and to make sure it represents Philadelphia and the region. We're currently working with the Chamber of Commerce, SEPTA, Amtrak, U.S. Airways, PECO --

Could you say 9 those again. 10

Pardon?

Would you say that again.

Oh, I'm sorry. Yeah, we're also working with the Chamber of Commerce, Amtrak, SEPTA, PECO, Coca Cola -- and I'm leaving somebody out. We're also working on a VFR program, which would -- it means "Visiting Friends and Relatives" -- to turn the people in the region -- I'm sorry, you're right, Karen, thanks. PNI has come on as a large sponsor so that we're able to do some advertising locally so that our own residents can become more active --

And what's the name of that company? 70 /99 FINANCE COMMITTEE

PNI, Philadelphia Newspapers. It's The Inquirer and The Daily News. So that we can convert our own local residents into more active and enthusiastic hosts when people come here for the millennium, for the Republican National Convention, or whatever, and to support neighborhood growth.

All right. We have a list of vendors that was just given to us. I assume that these are minority companies?

Yes.

We certainly would like a list of all vendors. And let me also ask you -- and how vendors are used. We'd like a full list of all vendors with regard to this program, what part they play, and what percentage of the money they get. We would also like to know how these vendors are chosen, as well as how the multicultural initiatives on , how these folks are chosen to receive funding. Maybe you can answer the latter question now.

Yeah 'cause that would take a long time, some of the questions. Do you want to go over the grant program? Let's start 71 /99 FINANCE COMMITTEE with your last question, which was how the grant awardees are chosen.

Yes.

'Cause that's easier.

GPTMC has a co-op advertising grants program. It's an opportunity for communities organizations, cultural institutions to apply for a marketing grant from us to advertise and market their specific programs outside of Philadelphia. In order to be considered, you have to, of course, apply by filling out an application, but there are two requirements that you must have. One is an overnight component, meaning that you must have a hotel-room night program attached to whatever your event or activity is. The second is that you must fill out an application, and that application then comes to us, and we have a committee that reviews those applications and makes recommendations to our board of directors. Our board of directors actually makes the final decision on any grants that GPTMC awards. And, again, it is very focused on advertising and marketing. 72 /99 FINANCE COMMITTEE So, for instance, a person couldn't apply to us to get programming support; it has to be marketing and advertising support. And then they must match that by showing us how they're advertising and marketing those programs here.

Let me ask you a question. You said they have to have the ability to have hotel room accommodation. Now, Freedom Theater is a Philadelphia institution, we all love Freedom Theater, but certainly, Freedom Theater gives shows, daily shows. I don't understand the hotel room accommodation part you mentioned.

For instance, we worked with Freedom Theater on their successful Black Nativity program, and they then worked with hotels to create a package, which we could then advertise outside of Philadelphia so people could come in to see Black Nativity and stay overnight. They also included in that package opportunities for you to go on a multicultural tour and for you to have dinner at Zanzibar or Warm Daddy's.

Okay, so an organization doesn't necessarily have to have that 73 /99 FINANCE COMMITTEE built in; you work to create a package that can be advertised outside of Philadelphia.

Correct. And we also provide assistance. For instance, Mickey Rowley sits on this committee from the Greater Philadelphia Hotel Association, so anyone that's having difficulty getting to a hotel, he can be of assistance in that area.

Okay. Now, for the other -- and so you will -- when are the grants available and what's the turnaround time for groups to receive a grant?

Normally, we award grants twice a year -- in the spring and in the fall. However, we're currently reviewing this entire program to make sure it's -- well, we believe that this a good time to review a lot of the programs that we're working on, but we feel this is a particularly a good time to go back and review everything that we've done with this program to make sure it's been effective. So although, in the past, it has been twice a year, we may revise that program and only have it once a year so that we can do more 74 /99 FINANCE COMMITTEE advertising to support a lot of our community and cultural activities.

What we would like you to do, we're requesting that if you provide it to the Chair, I'll make it available to all members of the committee and Council information about any grant programs, when the applications are and the criteria so that we can let them know and be aware of this. And we're also requesting again the full vendor list and how that percentage works out.

Okay. And I forgot just to add one or two other quick things.

Certainly.

Another thing that we do to advertise this program is try to get information in many of the newsletters the organizations have so that they can pass that on to people. If you don't have a newsletter, we'd ask people to post information on bulletin boards at their organizations, and we've also gone out to meet with people individually and to also speak to community groups to explain the program. So I just wanted to add that. 75 /99 FINANCE COMMITTEE

Well, certainly I think that's great. We've been doing newsletters since, I guess -- let me see, oh, since my first or second year here, we do regular newsletters, and many people have started or do newsletters as well. So I think that that might be good information that we can pass out to members of our community. Certainly, in my district in West Philadelphia, we have the West Philadelphia Arts League.

Yes. I've spoken to them.

And we have Partners for the Arts -- that is a West Philadelphia initiative. And we also have pledged as part of our West Philadelphia on the Move that the arts is one of the areas in which we want to focus. So a lot of us are interested in receiving this information so that we can let those who are interested be aware.

Okay.

With that, let me ask Councilwoman -- I'm sorry, all right Councilwoman Tasco, then Councilman Kenney.

Good morning. 76 /99 FINANCE COMMITTEE Thank you very much. The promotions are very good. How many people -- do you know how many visitors come to Philadelphia and stay in Philadelphia but go to Bucks County to visit or use Philadelphia as where they stay in the hotel but go to the outlying county?

We know that in the research that's attached, we haven't broken Bucks County out specifically, but we know that of the 10 million people who came here in 1997 for overnight visits, only about 2.5 million of them were the kind of leisure tourists that we need to increase. The others were visiting friends and relatives so they stayed with family or they were here for convention. We know that Philadelphia is a very prominent, what's called "hub-in-spoke destination" so that people may stay here and they do go out into the other counties. The most popular attractions in Bucks County for other visitors is shopping, it's Peddlers Village and New Hope, so they'll go to Bucks County for those things. If they have little kids, they'll go to 77 /99 FINANCE COMMITTEE Sesame Place.

Well, since you testified earlier that they don't want to support the program financially, you have them advertised prominently displayed and promoted in one of your advertisements and on your brochures. It's one of the first counties that you list, probably listing them in alphabetical order, but --

The way the State's share of the money came in at first for the first three years, that was considered as sort of the counties -- the State was making the contribution for the counties. We also found for the research that the only county that outsiders really knew by its name was Bucks County, but they had no idea that Bucks was near Philadelphia, so we did use that to encourage more visitation to this area. We found that people really did not know where things were. We were still getting questions like, "How close is Philadelphia to Pennsylvania?" So we knew that we had to start out with making some extreme clarity in terms of mapping. We start with the real basics with this thing because when we said that the image was 78 /99 FINANCE COMMITTEE negative or fuzzy, we were being very kind. We also found through the research that people don't really care where the county lines are, they don't care when they're crossing from Chester to Delaware or into Philadelphia, and there's really no point in letting them know. So for the first three years, we accepted this. However, we feel, and certainty the Hotel Association feels, that once the funding streams are changed, the counties really ought to ante up. They would argue, Councilwoman, that because Philadelphia gets most of the attention and most of the room nights, that the contribution should be proportionately less. We don't have a big problem with that but we believe that there should be a contribution.

I agree.

Okay.

These ads, now, what is your market, where do you promote them -- all across the country or just in targeted markets?

I wish we could promote them all across the country, but we don't have 79 /99 FINANCE COMMITTEE nearly enough money to do that, so we concentrate in where the New York TV signal goes, and that's North Jersey, New York, Long Island, West Chester, Southern Connecticut. We go down to Baltimore and D.C., we go into central Pennsylvania. And through cable, we're able to go into Illinois, Florida, California, and Texas, which have proved to be good feeder markets for us, especially when they're hooked on to an event. We also know that with these markets, Philadelphia, as the place where it all began, the recognition of the Liberty Bell and Independence Hall will become increasingly stronger as we go on, once the mall is redesigned. So we're looking forward to pushing that more. As soon as the Liberty Bell has it's new pavilion, we have the Gateway Visitors Center, the landscaping of the mall, etc. That's one thing we have that nobody else has.

One other question. Going to the festivals, who will now -- will you promote the Jumbalaya Jam PECO Festival, all those festivals that we've had? Who's going to be responsible for that, you or the 80 /99 FINANCE COMMITTEE Philadelphia Visitors and Convention Bureau, or just what group?

It's going to be a combination of a few things, and each special event is really different. For the Jam, Penn's Landing has it's own in-house P.R. people, who are most concerned with the kind of publicity that you need to do for selling ticket, so they'll continue to be doing that. We'll do the outside, using the Jam as a regional image-builder. We would follow that basic formula with PECO Jazz, with Mummers Fest, with the Flower Show, with all of them, as we do now. Most of the events that have been around for ten years or more are very good at knowing where their local markets are and selling tickets to what they need. What haven't been able to do, and the basis of Karen's whole co-op Matching Grants Program is, is to enable them to extend their reach and use it as what we call a "destination definer" so that through these special events, people start understanding what Philadelphia really is. We would advertise them as well, 81 /99 FINANCE COMMITTEE instead of just promoting.

I noticed in one of the films that we did a lot of advertising there for Valley Forge, which is certainly a part of this regional history, and obviously, we have a lot we could that we could advertise in Old City, the Liberty Bell, etc., etc. Are they somehow great contributors to this?

Yeah. They contributed $270,000 towards the placement of that spot. And we're really glad we did it because when we had the Republicans in to get them to do the Convention here, they were real thrilled to see a Bob Dole spot, so it paid off.

Thank you. Councilman Kenney and then Councilwoman Clark.

Thank you. What research has been completed or anticipated in an effort to attract European, South American, and Scandinavian tourists considering our expansion of regular routes through our airport to Europe and to South America 82 /99 FINANCE COMMITTEE and Scandinavia? And what have we done in an effort to fold in the cruise ship opportunities that I understand this year is going to be very expansive, apparently, if we can get an arrangement with, I think, either Bermuda, where we may have every week a large cruise ship or two leaving Philadelphia over the course of weeks? 9 So could you talk a little bit those to 10 opportunities? 11

Sure. If you think that 12 local people are still fuzzy on where Philadelphia 13 is, you should start talking to people from other 14 countries. What we found is that until U.S. 15 Airways had direct flights here, it would have 16 been a waste of money entirely to try to establish Philadelphia as an international destination because people like to go where they can fly directly. Now that U.S. Airways has built up their routes, we have looked into what it would take. It would take about $3 million per country per year to be able to compete with all of the competitors who have been there who have had direct lift over these last years because what 83 /99 FINANCE COMMITTEE happens now is, nobody is doing consumer advertising anywhere for Philadelphia in Europe or Asia. U.S. Airways does some consumer advertising for American routes but does not break out Philadelphia as a particular destination, and it did not include Philadelphia as city break tour when that program of four-day weekenders was very popular. In addition to the consumer, you need to be able to market to the travel agents. The European consumer and the Asian consumer use travel agents a lot more that we do, a lot more we do, and they are used to having their whole vacation in one envelope made up of vouchers. And so you need the travel agent and then you need to advertise to the tour operator because the travel agent goes and buys the trips from tour operator, who then sends them to the consumer. So, basically, for the U.K., it would take about $3 million for, as I said, for each of a number of years. And it would take a little bit more for some of the other countries because you have certain language problems. But right now the 84 /99 FINANCE COMMITTEE consumer in these foreign countries is not really being talked to about Philadelphia. The other thing that would really help would be to have a movie that really celebrated Philadelphia. "City Slickers," for example, did an enormous amount for dude ranches, especially in the West -- they just bloomed, if a dude ranch can do that. Series like "Dynasty" and "Dallas," especially in the U.K. and Germany, just sent those two destinations, Denver and Dallas, into almost top of the mark in terms of that. We've had a number of great movies here but not the kind that really rally people to Philadelphia so we're working with the film office on that. In terms of the cruise ship terminal, that was one of the initiatives that GPTMC supported because we feel that this is a terrific addition to the Philadelphia product and can add nights on before and after.

Okay, thank you.

I have one more comment. I wouldn't beat up too much on yourself about Philadelphia. The problem of people who 85 /99 FINANCE COMMITTEE might not know where Philadelphia is might have something to do with the educational system across the country -- they probably don't teach geography anymore.

You know, that's a really good point. And we would also like to be able to correct the textbooks in America. All the 5th-graders read about Philadelphia, and what they read about Philadelphia is that it was really hot and sticky and our forefathers suffered so that when we get rated on weather, our weather came out worse than Buffalo's weather. And according to research studies that were done, a lot of people come through here just to see the bell on a class trip, then they think they're done with the whole city. That's why we need to continue to sell the bell plus everything else that there is. .

Thank you. Councilwoman Clark.

Excellent segue discussion about the film. What, if anything, would you do to standardize the bell as the symbol of Philadelphia, just as apple is to New York? 86 /99 FINANCE COMMITTEE There are no apples in New York City, and yet, and yet, the apple is their symbol. "I Love New York," i's probably the most disinterested town in the world, but it has a wonderful slogan. I am just hurting for us standardizing our bell. Sometimes you see William Penn, sometimes you see Benjamin Franklin, sometimes you see the bell, so we have so many that we don't have one. Is it anybody's plan to standardize the bell, which is our most unique historic relic? We need to do it. If you take Carpenters Hall, every old city has a building that looks like Carpenters Hall.

That's true.

Certainly Boston, certainly these eastern cities, so I don't think you can do it with the building. I think that the bell begs to be our symbol.

Mm-hmm. Well, let me start by saying that the Gateway Visitors Center coming to Independence Mall and the new Bell Pavilion will us greatly with that. We use the bell on everything that we 87 /99 FINANCE COMMITTEE do -- it's somewhere in there -- but it's not prominent. And, certainly, the bell is one of the most recognizable symbols in the world. What it has been symbolizing, however, to our hotels and our restaurants and our other attractions is that it's been kind of in the pavilion that it's been located in for the past few years, almost a drive-through attraction. And it doesn't seem to many of our attractions like a reason for people to stay overnight. History is such a daytime word, that they've been asking us to push not only the bell but more. In fact, one advertising came up with the slogan "Just ask us, Philly plus, it's bigger than the bell," and a bunch of other ways to --

Now, that's a whole paragraph, so please don't use that.

We didn't. You're right, it was just too. We have to get across the bell plus everything else that Philadelphia is. Fortunately, Philadelphia 2000 uses the bell prominently, the Gateway Visitors Center will use the bell prominently, and we use it. But our 88 /99 FINANCE COMMITTEE challenge these first three years has been really to correct the image. People already knew that Philadelphia had the bell; we had to show them what else it did. Once we're here and around for a while, we can incorporate it more fully, but we --

I disagree with that.

Okay.

I don't think you can fix it by not using it; I think you fix it by using it. Just the same way you use the Love statute, if you had put the bell everywhere you put the Love, you would start to establish this as the symbol. Now, I didn't even mention the Love, but that's one more thing that competes with the bell and gives us that kind of patchwork quilt look rather than a slick, smooth presentation. And it reminds me kind of White House. The White House is a lovely house that's been lived in by a lot of people, and everybody who was there tried to put their stamp on it so that it's not the one continuous family decorated house. 89 /99 FINANCE COMMITTEE If we don't find and focus ourselves on one historic relic, it will just be one more. So you have to do it, and this is the time for you to do it because you're relatively new. If you get caught up in something else, somebody who sits in my chair will say this to you ten years from now.

Okay.

So I would like to see you focus on our most historic relic.

Your advice is well taken.

"The City That Loves You Back" may one day catch on, but it's not "I Love New York," is it?

Yeah. "I Love New York" has been around now for about 14 years.

And it gets better.

Yeah, and they put 15 million into it a year.

That's right. And I really think that we ought to start to spend money on a slogan that rolls off your tongue, that fits easily on a bumper sticker or on a button. You know what I mean? 90 /99 FINANCE COMMITTEE

Yeah. And I think you ought to be in advertising or something.

Since I do this for free, you didn't have to pay me for it.

Thank you very much.

I really do not think that anybody has ever given us the kind of slogan, the kind of relic that makes Philadelphia come immediately to mind. You got to read almost a paragraph. Now, you talk about Philadelphia, "the place that loves you back."

Yeah.

That's almost a paragraph, too.

Yeah.

And the first button, that light blue or yellow --

Right, I know, I know, I know. We're sorry about that button.

I am too because that was just miserable.

Yeah.

What we have got to do is put some real money into a real slogan, 91 /99 FINANCE COMMITTEE and let's stop changing it. As soon as we get one, leap on it. I'll give you an example.

Okay.

No, don't write it down.

Oh, okay.

An example of a slogan that works.

Yeah?

"A mind is a terrible thing to waste." That is a beautiful slogan, it rolls off your tongue, it fits on a button, it goes on a bumper sticker, and when you get through saying it, it means something in your heart. Unless we get something that pulls on a heartstring like that, we will constantly change this. And I'm upset that we haven't done it yet.

Okay. Okay, thank you.

Thank you. Councilman DiCicco?

Thank you, Madam Chair. I'd just like to follow up on the line 92 /99 FINANCE COMMITTEE of questioning from Councilman Kenney. A couple of years ago, I had the pleasure of going to Italy, and I spent nine days in the Abruzzo region. And as I traveled to each of the four provinces of Abruzzo and met with the mayors and the people in the commerce departments in those provinces, most of the discussion was on how we could form a partnership between the City of Philadelphia and the region of Abruzzo, because we already have Florence as a sister city. And one of the areas we discussed was, how do we encourage people from Italy, when they come to American, to come someplace other than New York? Because New York is where everybody seems to want to go. And I was wondering, do you have any discussions with IVC, the International Visitors Council? Because they, the IVC, said to me that they would like to begin to do some more promotion for foreign countries who have significant numbers of people from their region in this country. And as an example in the Philadelphia region, they tell me there are about 450,000 descendents -- first, second, third generation -- from the region 93 /99 FINANCE COMMITTEE of Abruzzo, most of which are in Philadelphia, it's a heavily concentrated area for people from Abruzzo. And the IVC, it kind of got lost in two years, and it's a shame because we talked about it in Italy, we spoke about it here with the IVC, but I don't know if there's really been much follow-up. And I could appreciate the costs that you mentioned to Councilman Kenney of about $3 million per country, but I think you have a target in some of the countries. That might be less expensive since they do have family here, as a way of bringing them here. Just a thought I had, and I was just wondering, do you have any interaction with the IVC?

We do have some interaction with the IVC, but during these first three years, our mandate was to advertise only between 90 miles and 500 miles out. Because the advertising budget is so limited, the idea was to build on people who might be able to make return trips, so all of our advertising has had to stay within 500 miles. 94 /99 FINANCE COMMITTEE However, what you're bringing up is part of what Karen was mentioning in future plans. We talk a lot about how Philadelphia is the city of neighborhoods, but it's really time to apply the city of neighborhood strengths, which is just what you said. If there are 450 Abruzzeses?

Abruzzeses, that's right.

I wasn't too far off on that. We would like each of them to invite their relatives to come to Philadelphia and stay in a hotel, not with you.

That's -- part what we discussed was that maybe what we need to do is work with the travel agents --

Yes, absolutely.

-- who are trying to encourage -- when they encourage people or try to promote America, the United States, is to look at the family tree and identify where -- my grandfather, as an example, came from the Abruzzo region back around about 1910. I got to meet cousins of mine that I never knew that are third-generation. 95 /99 FINANCE COMMITTEE But when people come to America, typically, they won't come to the neighborhood or the area where the descendents came to; they will go to New York or Washington DC, and we kind of get lost in between.

We think it's definitely time to change that.

Thank you.

And that would strengthen the visitation to the neighborhood as well, and that's where that has to come from -- somebody has to invite you.

Thank you. No further questions, thank you.

Thank you. Are there any other questions from the committee? (No further questions at this time.)

Is there anyone else who would like to testify? (No response.) - - - 96 4/12/99 FINANCE COMMITTEE - Public Meeting

Then we would like to end our public hearing and now go into our committee hearing. I would like to ask the President for a motion for the proposed amendment to Bill 990116, that it be approved.

Thank you, Madam Chair. I move that on , Section 2, that the amendment read: "This ordinance shall be effective July 1, 1999." (Duly seconded.)

It's been properly moved and seconded. All in favor? All opposed? The ayes have it, and so the amendment is carried. And now I would like a motion for Bill 21 No. 990116, that it be approved, and with a suspension of the rules. Councilwoman Tasco?

There is no 25 suspension. 97 4/12/99 FINANCE COMMITTEE - Public Meeting

No suspension? All right, thank you very much.

Madam Chair, I move that we adopt the amendment as submitted to Bill 990116. (Duly seconded.)

All in favor? All opposed? The ayes have it, and so it's carried.

Madam Chair, I move that we vote out Bill No. 990116, with a favorable recommendation, as amended. (Duly seconded.)

All in favor? Opposed? All right, the ayes have it, and so Bill 990116 is reported out of this committee, as amended, with a favorable recommendation. Let me also add that since this committee was advertised to be held from 11 till 2 o'clock, that we move that this hearing be adjourned at this hour. May I have a motion and a second on that? 98 4/12/99 FINANCE COMMITTEE - Public Meeting

So moved. (Duly seconded.)

All in favor? Opposed? The motion is carried. Thank you, thank you very much. Thanks all for attending. (Adjourned at 12:53 p.m.) - - - 99 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Monday, April 12, 1999, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE ON FINANCE BILL NO. 990116 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter