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.
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.
Councilwoman Clark, are you piggybacking on part of this question before I continue?
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.
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 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
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.
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?
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 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 --
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.
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.
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.
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?
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?
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. 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.
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?
It's made up of 7 points of the sales tax, 6 State, and the 1 point that --
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.
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?
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.
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.
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.
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 --
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.
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.
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.
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.
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 --
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.)
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?
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.
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 --
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 --
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?
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.)
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.