You might need one. I guess that's it, Madam President. Thank you very much.
Thank you all very much. At this time, we will take a five-minute recess. Thank you. (Short recess taken.) - - - (Proceedings resume.)
We will now resume our public hearing. Our next witness is Herb Taylor from the Federal Reserve Bank. 121 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K (Herb Taylor comes forward.)
Please identify yourself for the record and proceed with your testimony.
My name is Herb Taylor, Vice President and Secretary of the Federal Reserve Bank of Philadelphia. Thank you, Councilman Rizzo for inviting me here today to talk about Y2K readiness of the banking industry in the City of Philadelphia. I am here on behalf of Federal Reserve Bank here in Philadelphia, which serves as the nation's central bank. As the central bank, the Fed has a unique window on the banking system's state of readiness for the century roll-over. People's questions about money and banking during the century roll-over are basic: Will my money be safe in the bank? Will my ATM work? Will my direct-deposit paycheck or 122 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K government benefit payment be there for me? Will I be able to get my mortgage and other bills paid on time? In short, people are asking: Will banks be prepared to conduct business as usual when the century roll-over comes? We at the Federal Reserve believe the answer is yes, based on the actions we've taken, and are taking, as the core provider of cash and other payment services. We also say "yes" on the basis of the examination of banks that we have made, and are making, as a federal bank regulator. Let me begin with our role as core provider of cash and other payment services. As the central bank, the Fed supplies banks and other depositories -- savings institutions and credit unions -- with currency and coins they need to meet their customers' demands. We also process about one-third of the checks that banks present to one another on behalf of their customers in the everyday course of business. In addition, we move literally trillions of dollars every day through electronic payment services. Large-dollar transactions involving funds and government securities travel 123 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K over our Fedwire network. Small-dollar electronic payments are processed through our automated clearinghouse. It is through this ACH network that employers make direct deposits of employees' paychecks, that the Social Security Administration and our government agencies make direct deposits of benefits payments to our senior citizens, veterans, and others. S. are processed through the Federal Reserve. So clearly, the first order of business in preparing the banking system for the century roll-over is to make sure the Fed's own internal payments processing systems are in good order. The Fed has completed that task as of the end of 1998. All of our cash and check processing systems and our electronic funds transfer systems were evaluated, remediated, and tested successfully for Y2K readiness by that time. The next step is to make sure that our electronic communications links to depository institutions will function properly so that payments can continue to flow to them in the new millennium. 124 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K The Fed began testing these links with banks and other depositories in July of last year, and that process will continue for several more months. The Philadelphia Fed has direct links to 348 financial institutions in the 3rd District -- which encompasses eastern Pennsylvania, South Jersey, and the state of Delaware. Thus far, we have tested successfully for connectivity with 269 of them. Another 30 have scheduled to test with us, and all are required to test with us by June 30th. The Fed also tested its connection with the Treasury for whom we process payments. And all of those connections have tested successfully. The bottom line is that the Federal Reserve's facilities for processing payments -- including direct deposit of payrolls and government benefit payments -- are ready to go for the Y2K roll-over. We realize that public concerns about potential problems during the Y2K roll-over will occasion an increased public demand for cash so the Fed has acted to make sure that there will be enough cash to meet everyone's needs. We ordered 125 3/16/99 COMM. OF THE WHOLE - RES.
980756 - Y2K an extra $50 billion in new currency from the Bureau of Engraving and Printing this year. This $50 billion, combined with money we already have in our vaults, will give us enough supply to double the amount currently in circulation here in the United States. And if financial institutions tell us they need still even more currency, we have several options to accommodate that increased demand. The bottom line here is that the Fed has plenty of cash on hand, and we are encouraging bank customers to order enough cash early so that they have enough in their vaults when customers ask for it. When it comes to providing cash, clearing checks, and moving funds electronically, the Fed can deliver for the banks. The next question is: Can the banks deliver for their customers? Speaking now as an agency that oversees and supervises banks, we at the Fed believe the answer is yes. The examination of banks proceed on a regular cycle. In order to assess the overall safety and soundness of a bank, examiners look at every major aspect of the enterprise. Federal 126 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K regulators began their formal oversight of banks' Y2K preparations in 1996. Bank examiners were given special training and focussed on banks' Y2K-related vulnerabilities. The list includes both those in banks' computer systems and in their automated operations -- heating systems, elevators, vault doors. It includes vulnerabilities both in banks' in-house systems and in the systems provided by outside vendors. Banks' ATM machines are on that list. What have we found? Evaluation of banks' Y2K readiness is proceeding in three phases. Phase 1 was completed at the end of 1998, and the results were extremely encouraging. Some 97 percent of the nation's banks were found to be making satisfactory progress in their Y2K preparations. They had developed adequate plans for remediation and testing of the systems, and their boards of directors and senior management were properly engaged in overseeing the process. The results of the exams conducted by our own Bank's examination staff at banks here in Philadelphia involving the banks in our district were consistent with these national results. 127 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K Bank regulators now approaching the end of Phase 2 of their examinations. In this phase, examiners are checking to see that banks are taking the remediation steps they planned, and banks must also be on target for completing their testing with the Fed and any other external service providers by the mandated June 30th deadline. And banks must be on course to complete their Y2K contingency plans by June 30th. The overall results of the Phase 2 examinations will be available nationally in May or June. Meanwhile, the third phase, Phase 3, begins on April 1st. Examiners in the third phase will concentrate on the largest national and regional financial institutions and on any institutions that are behind schedule in their preparations. The bottom line here is that banks and their regulators have been focussed on managing the Y2K roll-over for some time. Regulators are actively assessing banks' progress, and will continue to do so. And, as always, banks that fail to meet regulatory safety and soundness standards are subject to formal enforcement 128 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K actions, and those actions would be publicly disclosed. We recognize that no amount of work by banks and no amount of oversight by regulators can guarantee every transaction at every bank will go flawlessly when the century roll-over occurs. But any glitches should be localized, short-lived, and manageable. Now we come to the last link in the chain of assuring that bank customers find the transition to the new century to be a relatively smooth one: the preparations that we all make ourselves as bank customers.
The Fed joins fellow regulators, other organizations, and the banks themselves in urging people to take a common-sense approach. First, get good information and start with your bank. Your bank should be prepared to answer any questions you have about the best way to meet your needs during the roll-over. Second, take reasonable precautions. Our fellow regulator, the FDIC, recently published a handy "to-do list" for bank customers. Some of the items on the list: save your receipts from 129 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K bank transactions like loan payments or ATM withdrawals; if you do your banking at home by computer, make sure that your own PC is Y2K-compliant; and be wary of people offering products "guaranteed" to fix or prevent Y2K problems. The third step in the common-sense approach is to avoid extreme measures that will only increase your risks. Stockpiling and carrying around unusually large amounts of cash is risky business because cash is not insured against fire, against theft, or against loss. On the other hand, nobody has ever lost a penny of FDIC-insured deposits ever. One practical approached suggested in a popular Red Cross publication was to hold as much cash as you would expect a snowstorm -- timely advice this week in Philadelphia. org. 130 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K The fed in its fellow regulators and service providers have all been very hard at work for a long time to meet the Y2K roll-over challenge. We at the Fed believe that this hard work will pay off, and that the roll-over to the new millennium for the banking industry will be generally a smooth one. That concludes my remarks, Madam Chair.
Can I give a sigh of relief? I have heard so many people who have said, What do I do with my money? Do I take it out of the bank? And if I do, what do I do with it? But I'm glad to hear that we're well on the road to making certain that there will be no 17 problems. Thank you. The Chair recognizes Councilman Rizzo.
I concur 100 percent with the President's comments. I myself have heard many people suggest that they were going to withdraw their money and cash in bank certificates, which I think you alluded to, which would be devastating to cash in a security. So I would hope that the people 131 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K watching us on television today will settle down a little bit after hearing your testimony and not do anything that could be very disruptive to their finances by reacting inappropriately. I would also hope that the banking community would also work with us to assure, through advertisements or handouts within their statements to assure customers. Certainly they want to retain all customers they have. Especially some of our seniors are very, very concerned, like President Verna said, about this Y2K issue. I think today your testimony and whatever the banking community can do to communicate the fact that this shouldn't be a concern would be very, very helpful. And I thank you today for coming here, Mr. Secretary.
I agree. There has to be some communication with customers in verbal and in written form.
One of the processes that we are engaged in at this point is having banks include flyers in their statements to their customers, for example, discussing this Y2K issue 132 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K and inviting customers to ask your bank for more information and on how to proceed.
Actually,, we got one in our bank statement this month, so I expect that you'll be seeing them more and more. This was a great opportunity, and I want to thank you for the opportunity to make those words available.
Fine. Thank you very much. Next is Mr. Charles Isdell, Acting Director of Philadelphia International Airport. (Charles Isdell comes forward.)
I understand that there's a panel that will testify with Mr. Isdell. Dave Roberts from Amtrak. Do we have anyone here from the Delaware River Port Authority? (Barbara Jones comes forward.)
And Ralph Menzano, from SEPTA. (Ralph Menzano comes forward.) 133 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K
Mr. Isdell. I think you'll be the first to testify.
I'm Charles Isdell, Acting Director of Aviation for the City of Philadelphia. And I'm joined today by Jeff Shull, who's our Director of Security and Systems Technology. In the interest of Council's schedule and because the airport is actually a division of the City's Commerce Department, I would refer to the earlier testimony in terms of formal testimony that was presented by Brian Anderson, the City's Chief Information Officer. From the airport's specific perspective, we began efforts to address the Y2K problem in August of 1996. Since that time, we have been upgrading and replacing systems as appropriate to prepare for the end of this year. Throughout 1998 and up to the present, we've also cooperated with the airlines, particularly through 134 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K U.S. Airways, our hub carrier, on a survey done by the Air Transport Association, the airline trade association. We've also been cooperating with the FAA and the General Accounting Office on surveys of airport preparedness for Y2K, and we've been reviewed successfully in each of those surveys. In addition to that, as I earlier mentioned, as part of the City government, we have been working with the Mayor's Office of Information Services, the Managing Director's Office on their Business Risk Assessment Project, and we also participate now on the City's Y2K Steering Committee. Internally, the airport has identified 38 separate systems which requires some remediation or upgrade, and we have already -- we now have -- of those 38 systems are 100 percent 19 Y2K-compliant; the remaining systems will be by 20 June 30th of this year. 21 We continue testing systems. We also 22 are preparing for those contingencies which have been mentioned throughout the testimony earlier today, such as power outages that might occur that would be beyond our control. And our contingency 135 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K planning is also being coordinated with the City government. We will participate in the simulations being planned. We do emergency electrical power generator switch-overs on a quarterly basis. We're asking doing them on a monthly basis for the remainder of this year. We have not actually started that. But, in general, we feel that the airport is well prepared, and we're here to answer any questions that you may have. Thank you very much for the opportunity.
Thank you. Supposing we hear from everybody from the panel and then we could ask questions. I believe Mr. Roberts is next to testify.
I'm Steve Roberts, from Amtrak. I'm the Chief Information Officer, in charge of all the technology plus the Year 2000 which, encompasses everything from computer systems to tracks fuel to electricity. I'm the spokesman.
Excuse me? In the 136 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K schedule, right. Amtrak began our Y2K preparedness in October of 1996. We established a permanent project office that was dedicated to it at that time and continues to this day. We also hired external people to evaluate our systems. And we've actually employed two companies -- one of which is IBM -- to renovate all the systems that we have. I'm happy to report at this date that one of our main systems, which is our reservation system, which drives 100,000 travel agents in 240 stations across the country, has been taking reservations since February 6th for the Year 2000, so people are actively making reservations. So we're in business, as far as all that goes. The majority of our other systems are already back in production. We have some that are still in final testing. Final target date is the end of June to put everything back in shape. Because we actually own the railroad between Washington and Boston here, we have an engineering department which has basically been evaluating all the infrastructure or the embedded systems that we 137 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K have. And we have detail reports from them which basically itemizes all of our embedded systems, which includes things like track circuits interlocking, timers, battery chargers, crossing predictors, data recorders, engines, global positioning units. Most of them are not date-dependent. In the railroad, if you talk to anyone in the Class 1 railroads or some of the commuter lines, you'll find out that the railroad -- the equipment or the embedded systems is primarily event-driven, which means it's triggered by trains passing by, rather than by dates. For the embedded systems that do have microprocessors in them, very few of them actually have a date in them, and virtually none of them is the date used in any safety or operational consideration. Where the ones do have it, which is basically dates that are used for recording events, it is primarily a logging function, and all of those have been inventoried. The few that need attention are receiving it, but we really see no safety-related or operational concerns in our embedded systems. 138 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K In addition to that, we run a fairly large network across the country, communications to all our offices. We work with IBM, who is responsible for it, and mainly all of the infrastructure looks pretty good. We've looked at all of the telephone systems, the computer networks and so forth and so on, and they appear to be on track for the Year 2000. In addition to that, we, as everybody else here in the hearings here, have been working closely with the power companies up and down the corridor here. We're quite confident that the power grid looks pretty good, as you've heard here today. We are making certain contingency plans with upper management and the operational people to play the "what-if game" -- if the worst happens, what would we. We have both electric and diesel engines in the systems since outside of the corridor, we're exclusively diesel. And we're looking at some of the nuances of that primarily in the New York City area, where we have some restrictions on us. Fuel is -- we've had a detailed analysis of our fuel situation and talked to all 139 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K of the suppliers. Most of the fuel is actually gravity feed; it's not highly dependent upon any computer systems to fill up the fuel trucks. The facilities. We are doing a detail review of all the system inside of there -- which is the elevators, the air-conditioning, those kinds of things. Many of the facilities are leased, so we're in contact with our landlords across the country. By the nature of the beast known as "the railroad," our normal day-to-day, minute-to- minute operation is based on safety and getting the public moved around, especially in the corridor here.
So there are mandated work rules that we have that have to do with if the switch freezes in the wintertime, which it does; if a backhoe cuts through some power, which it does on our system. So there are embedded procedures in place to handle all of those contingencies. We've pretty much looked at after our review of all these plans and details that, you know, Y2K, if there's anything that happens, will just be another day on the railroad. But not to kind of leave that the way it is, we are going 140 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K ahead with some additional contingency planning. We also intend to, later in the year, set up a training program for our staff to basically review those operating procedures that are in place. I'd be happy to entertain any questions.
Thank you. I believe our next witness will be from the Delaware River Port Authority.
I'm Barbara Jones, the chief Administrative Officer of the Delaware Port Authority. With me today is Steve (inaudible), conceive our Director of Technology and Management Information Systems. We are here today representing our chairman, Manuel Stamitakis. And Councilman Rizzo, Mr. Stamitakis asked us to extend his appreciation to you for inviting us to participate in this hearing. The Delaware River Port Authority of 141 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K Pennsylvania and New Jersey is a bistate agency that owns and operates four bridges connecting Pennsylvania and New Jersey: the Commodore Barry, Walt Whitman, Benjamin Franklin, and Betsy Ross Bridges. Through its subsidiary, the Port Authority Transit Corporation, it operates the PATCO High-Speed Line, providing rail service between Lindenwold, New Jersey and Philadelphia, Pennsylvania. The Port of Philadelphia in Camden is a DRPA subsidiary that promotes regional port development. Additionally, the DRPA supports and promotes economic development throughout southeastern Pennsylvania and southern New Jersey. The DRPA, PATCO, and PPC have been well aware of the Year 2000 issues for quite some time. " Essentially, that guide outlines five-phased process that consists of awareness, assessment, renovation and conversion, validation, and implementation. The following describes what the DRPA, PATCO, and PPC have done in each areas: 142 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K Staff began an awareness campaign last year. An internal steering committee representing all facets of our operations was formulated and charged with the responsibility of monitoring Year 2000 progress and taking steps to assure that the organization moves towards compliance. Thus far, our awareness efforts have been internally focused, providing information to staff, commissioners, and directors. The steering committee meets periodically, and monthly status reports are provided to commissioners and directors. The DRPA, PATCO, and PPC understand the seriousness of the Year 2000 problem and its potential adverse impacts, and we are working diligently to minimize our risks to the greatest extent possible. In the assessment phase, we worked with our hardware and software vendors to define potential areas of risk and the options for minimizing or limiting those risks. DRPA determined that its hardware and most of its software was compliant. Three software applications were identified as non-compliant and 143 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K targeted for replacement. PATCO determined that all of its mission-critical systems would be compliant upon the replacement of its Unisys A-4 mainframe, and that hardware was targeted for replacement and replaced in January of this year. PPC determined its hardware to be compliant and identified two software applications to be replaced. Essentially, DRPA, PATCO, and PPC assessment revealed their information systems to be compliant. As problems were uncovered, upgrades and patches were identified and applied to ensure Y2K compliance. , a Boston-based consulting firm to further assist us in determining potential risk. Law Risk is working with the DRPA, PATCO, and PPC employees to determine our Y2K readiness and technological, business, and legal risk. Law Risk has provided us with an assessment and recommendations in areas 144 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K such as key business relationships, contracts, insurance, financial services and systems, facilities, utilities, etc. Our overall Law Risk assessment revealed that we are in pretty good shape and have made great strides towards compliance, but we still have a few areas to concentrate on within the next few months to further minimize risk. "Renovation" is defined as the phase in which code is actually changed to become Y2K-ready. Conversion involves modifying product components and business applications to become Y2K-compliant.
In this phase, the work to correct Year 2000 projects is actually carried out. The DRPA, PATCO, and PPC have upgraded applications programs, firmware, operating systems, and hardware over the past year. The problems identified during our assessment phase have been rectified or are scheduled to be remedied by the end of this month. PATCO, and PPC have completed their conversions; DRPA is still scheduled to replace two packages. The validation phase involves actual testing. Complete systems are tested, using 145 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K software specifically designed to test for Y2K problems. DRPA, PATCO, and PPC have tested and continue to test their hardware and software systems. Most testing has been done by staff. PATCO also utilized the services of a consultant to assist in verifying that all of their code sources are compliant. I would add, however, just as the gentleman from Amtrak did, that PATCO's system, in terms of train operations, is not date-sensitive. To date, all testing has gone well. Neither DRPA, PATCO, nor PPC have experienced any problems or system failures to date. January 1, 1999 was targeted as a potential date on which to expect Y2K-related problems. Fortunately, we did not encounter any such problems. Testing and validation is expected to be complete at PATCO by March 31, 1999; DRPA and PPC will complete testing and validation May 28, 1999. Additional testing as required will occur throughout the year. The final phase is implementation. In this phase, tested systems and applications are put back into production. As the DRPA, PATCO, and 146 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K PPC complete the phases outlined above, once a system is tested and no errors are found, it will be immediately put back into operation. In summary, the DRPA, PATCO, and PPC have worked toward achieving Y2K compliance for over a year. We have identified areas of potential risk and attempted to eliminate those risks. Over the next several months, we will continue our testing efforts and put contingency plans in place to assure our Y2K readiness and minimize the risk of our services being interrupted on January 1, 2000. We will do all we can to continue to provide safe and efficient transportation services well into the new millennium. That concludes our testimony, and we're prepared to answer any questions.
Thank you. Our next witness is Ralph Menzano, who is the Chief Information Officer from SEPTA.
That's correct. Thank you. Good afternoon. Thank you for allowing me to appear here in front of City Council. In January of 1997, I was working for 147 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K Chase Manhattan Bank in New York, and we had put a lot of effort into the Year 2000 already. And I had to come back to Philadelphia, where my roots are -- I was born in South Philadelphia, went to school at St. Joe's Prep in North Philadelphia, went west to Villanova University, and I'm glad to be back here and helping the City with its Year 2000 efforts.
You've done a great job with the place. It's a beautiful city once again. SEPTA had a late start with the Year 2000 effort. When I came on board, it had not started, although the board of directors had vigorously pursued the topic. I have provided you with materials that are a presentation of sorts as well as our official Year 2000 Readiness Disclosure. Everything that I will say here are included within that handout. In spring of '97, we actually started the project. The Board of Directors provided the initiative, and we started to get funding. By 148 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K summer, we did an assessment -- or an inventory, really, of all of our systems. We came up with 195 systems that we needed to validate and see if they were Year 2000-compliant or not. By fall of 1997, we had to provide money to the project. The board of directors awarded $3 million. It has since been expanded to $5 million for the project. By winter of 1998, we actually started work on the project -- that is, to change code and to check all of these systems. Right now, we're tracking 349 systems from the 195 that we started with. The difference is, the traditional systems where code is involved can't be calculated. You know, you have millions of lines of code and dollar per item. But we did not take into account embedded systems -- that is, processors and signal switches, elevators, escalators and the likes, and now we've added those to our inventory. As of this point in time, we are compliant for most of our critical systems. We are 80 percent complete in the total project, and our General Manager, Jack Leary, says that on 149 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K January 1, 2000, the train might be the best place to be. You know, January 1, 2000 is a work day for SEPTA. Even though that's a Saturday, it's one of our biggest days of the year in terms of ridership, and we're proud to say we will be ready. I agree with Amtrak's Steve Roberts that the train systems are definitely ready to go. We were together at the Federal Railroad Administration meeting, and that was the general feeling amongst all the railroads -- Union- Pacific, Wisconsin Central, you name it, CSX, they all agree that the trains are ready to go for the Year 2000. We do worry about things like grade crossings and wayside equipment that measure events, but all of those are triggered by non-date issues. So we're ready for the railroad. We do have some things that we need to cover -- things like fare boxes and turnstiles. For example, in a fare box, you have a logic board, and on that logic board, there is a chip. That chip in and all of our fare boxes today is not Year 2000-compliant. We have a project where 150 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K we're taking each logic board out, replacing the chip, and putting it back in. It's 1500 fare boxes, and we'll get that done, but it's a time-consuming evident, but at least we've recognized it. " But you'll note that that system is date-driven and time-driven, and we will have ready for the Year 2000 as well. So we're not tracking just January 1, 2000. In my handouts, I have a series of dates that we're tracking that all of you should be aware of. Besides January 1, 1999, we're also looking at April 9, '99, this coming April, where the electrical systems will be tested nationwide. We're very interested in the results of that test. We're tracking September 9, '99 -- or in systems terms, it would appear as 9/9/99, a date field that many programmers used in the olden days of ten years ago. 151 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K We're tracking, of course, December 31, 1999, January 1, 2000. We'll look very carefully at February 29, 2000. Well, why is that important? Well, it's because uses a tertiary rule of the Gregorian calendar. The first rule is that every four years is a leap year.
But the second rule is that if that leap year is an end-of-century year, it is not a leap year; except if that end-of-century year -- and this is the third rule -- is divisible by 400, which the Year 2000 is. So the Year 2000 is a leap year, February 29th does exist. But back in 1900, 1900 was not a leap year, so it's a very interesting occurrence, and we wonder if our systems are smart enough to handle that. So when we test our systems, we're testing for that date as well. One other date. You mentioned, Councilman, about mobile communications and satellite. We're also interested in August 22, 1999. That is the date when many of the satellites will change their calendar and their clocks, and we did have to make a change in many of our mobile data terminals for our paratransit 152 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K vehicles and for our transit police systems. So you were right to be concerned about satellite communications. And I'm ready, as everyone else, to answer.
Thank you very much. You all gave very good testimony. The Chair recognizes Councilman Rizzo.
Thank you, Madam Chair. As you just stated, the testimony was complete, and I have no questions of these witnesses. Thank you.
Fine. Thank you all very much. Rob Giacopetti, Counsel for the Delaware Valley Health Care Council. (Mr. Giacopetti et al come forward.)
Good afternoon. Please identify yourself for the record.
Council President Verna, Councilman Rizzo, and members of City Council, my name is Robert Giacopetti, and I'm here on behalf of the Delaware Valley Health Care 153 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K Council, which represents and advocates more than 160 --
I'm sorry, could you pull the microphone closer to you, please.
I am here on behalf of the Delaware Valley Health Care Council, which represents and advocates for more than 160 health care organizations in the region. Joining with me today are Patricia Harsche, Fox Chase Cancer Center; Loretta Lawler, Temple University Health System; and John Rooney, of the University of Pennsylvania Health System. DVHC of HAP and its members are committed to taking whatever steps are necessary to prevent potential Year 2000 problems from interrupting the delivery of quality health care. We appreciate this opportunity to update you today on our efforts. As others have discussed this morning, the potential for problems across society is tremendous. Nearly every area of activity is affected -- electric grids, banks, stock markets, shipping, and health care. No segment of the 154 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K economy can afford to ignore the possibility of disruption on January 1st and afterwards. Hospitals and health systems face the same types of concerns as most other organizations. Cellular phones, pagers, security systems, elevators, and heating systems can all be affected by Y2K problems. However, hospitals are distinctive organizations, and in addition to numerous disruptions that could emerge at any organization, there are several unique Y2K concerns specific to the delivery of health care that I will address today. The practice of medicine is increasingly dependent on the use of technology. The reliability of technologically advanced medical devices and equipment is crucial to the delivery of quality care. Ensuring that all medical equipment is Y2K-compliant is a priority for all of our city's hospitals. In addition to being reliant on high-tech medical equipment, delivery of quality health care is also very dependent on the adequacy of sufficient medical supplies. Should Y2K problems prevent adequate distribution of medical 155 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K supplies to hospitals, the access to quality care for patients could be adversely affected. Many organizations that rely so heavily on supplies to perform their mission can prepare for this possibility by stockpiling; hospitals cannot, for three reasons: First, many health-care supplies have expiration dates and cannot be stockpiled. This is especially true for pharmaceuticals and blood products, which have limited shelf life. Second, widespread efforts to stockpile these supplies with longer shelf lives may create widespread shortages. Third, hospitals in this region operate on thin margins and do not have the resources at their immediate disposal to stockpile supplies. For fiscal year 1996, data compiled by the Pennsylvania Health Care Cost Containment Council illustrated that approximately two-thirds of the City's general acute care hospitals operated on margins less than 2 percent of net patient revenue. Perhaps the greatest difficulty associated with hospitals' and health systems' 156 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K preparations for potential millennium problems is a dependency of suppliers upstreamed to provide adequate information about Y2K compliance of their products and services. Additionally, hospitals and health systems are vulnerable to possible financial disruptions from third-party payers. As mentioned earlier, hospital margins are thin. A severe Y2K disruption in claims processing could hinder a hospital's ability to pay suppliers, meet its payroll, and thereby affect the quality of patient care. For example, most hospitals and health systems in Philadelphia receive roughly more than half of their revenues from public programs such as Medicare and Medicaid. If that much revenue were to be cut off because of Y2K failure of claims processing and/or payment by either the Health Care Financing Administration or its fiscal intermediaries or carriers, hospital operations could be seriously disrupted.
The same concern would apply if one of the Delaware Valley's major health insurers experienced widespread Y2K troubles that slowed their processing of claims. 157 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K Further, the ability of hospitals and health systems to provide quality patient care is not only dependent on vendor and payor Y2K compliance, but also in the possible increase of demand for services that could be generated as a result of other Y2K and crises in the community. Individuals who cannot necessary medications at home, widespread failure in home heating, and industrial equipment malfunctions would result in an in emergency department visits and hospitalizations from associated health problems and injuries. Increased demand on inpatient service this time of year could put a significant strain on the region's health-care delivery system. To help address these concerns, disaster planning is an integral part of the region's health-care delivery system. Hospitals have in place disaster plans designed to manage a wide range of problems in our communities. Hospital disaster plans are continually revised and improved to be able to accommodate any number of occurrences that could range from a severe weather condition, a major transportation 158 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K catastrophe, or terrorist attack. For example, DVHC has collaborated with the area leadership of the National Disaster Medical System to form the Philadelphia Local Emergency Planning Committee's Hospital Subcommittee. The goals of this committee include creating a forum for discussing and promoting joint disaster planning activities among Delaware Valley hospitals and local agencies, as well as heightening awareness of the potential for disasters that would go beyond the capability of an individual hospital. This committee will consider Y2K issues and the implications for hospitals in our emergency medical system. And I also offer the resources of this committee to Council in future consideration for Y2K planning. Hospitals and health systems are committed to ensuring that patient care is not disrupted on January 1, 2000 and are making the financial investment needed to see this mission through. What exactly are the costs of Y2K compliance and health care expected to be? The American Hospital Association estimates that the average hospital, with 100 to 300 beds, of which 159 3/16/99 COMM. OF THE WHOLE - RES. million to ensure compliance. Much of the money hospitals will need to spend on Y2K compliance will be spent this year. For our communities, Madam Chairman, this expense couldn't come at a worse time. The immense challenge of ensuring Y2K compliance for hospitals comes on top of a series of financial pressures that include declining Medicare reimbursement brought on by the federal Balanced Budget Act of 1997 that will reduce payments in this region by approximately $1 billion. HealthChoices, the State's mandatory managed-care program for Medicaid patients in Philadelphia has also resulted in a decrease of patient revenue. Further, hospitals are caring for increasingly uninsured and under-insured City population. DVHC of HAP believes that hospitals and government agencies, utilities, financial organizations, and others in the community must work together to meet this challenge. While hospitals have been working on this issue for some time, we hope that all key parts of our regional 160 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K infrastructure are conducting internal risk assessments, inventories of potentially affected systems, and the development of contingency plans while working closely with community partners at each step. Obviously, the best approach to manage potential disruptions on January 1st is to anticipate them. Specifically, it is incumbent upon hospitals to prepare now to respond to the potential loss or disruption of any essential hospital process or service.
These efforts need to be directed both internally across the hospitals' facilities, and externally in the broader community. This would include working with such entities as utility companies, emergency medical services, government agencies, and other health-care providers. The area's hospitals and health systems look to City government to help facilitate this process of coordination between City services, utilities, and health-care organizations, and we applaud the action of Councilman Rizzo and City Council of convening this hearing.
Thank you. 161 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K
To date, DVHC of HAP is taking a number of steps to inform, educate, and our assist our members with Y2K compliance, which I will not go through but which are included on the written testimony. The initiatives undertaken by DVHC complement programming offered at the nation level -- by the nationwide level of the AHA. And together, we have been working to make sure that hospitals and health systems are informed, educated, and have assistance in Y2K contingency planning. And at this time, I'd like to introduce my colleagues to discuss specific the Y2K initiatives being undertaken at City hospitals and health systems. I thank you for this opportunity and I will be available to answer any questions following the remarks of my colleagues.
Thank you, Madam President and Councilman Rizzo for this opportunity to speak. I am Pat Harsche, Vice President of Business Development and Regulatory Affairs at the Fox Chase Cancer Center, and I chair the Y2K Steering Committee. 162 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K Fox Chase has been engaged in Y2K 2000 planning for the last five years in order to assure the continuity of our core business operations and key support functions. We've dedicated staff in a center-wide effort to ensuring that we will be absolutely ready -- and I can assure you that we will be. We build on a high-tech infrastructure that is natural for a national cancer center, and so our Y-2000 efforts parallel the system of upgrading our technology that would be natural in order to continue our business operations. It is a dynamic process, it is ongoing. Nearly every month, we install major new systems to support science and medicine, and we ensure during that process that they are Y-2000-compliant. We've established an internal Website to provide staff at Fox Chase up-to-date information on resources on all computer assets, and we have a vibrant and healthy communication process -- not only with staff but with members of the board and the community. We have focused on five main areas: our administrative and research computing, our 163 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K financial operations, our patient-care operations, building systems, and utilities. And in addition to our hardware, software embedded systems which are on campus, in house, we are also looking at those vendors in our value chain, many of whom you've heard speak today: medical and drug suppliers, third-party payers, banks, and so on. We're concerned as well about our key suppliers and were very relieved to hear the testimony of the water, electric and gas utility providers this morning. All managers, laboratory heads, and physicians have been consulted regarding Y-2000 matters. And we're working with, among others: the Commonwealth; the Hospital Association of Pennsylvania; the Joint Commission on Hospitals; a variety of Y-2000 databases, many of whom you've heard about this morning; outside vendors to test and patch our systems; and our colleagues at Jeanes Hospital, with whom we share a campus which is a part of the Temple University System. So where are we? We've inventoried all assets in all of our focus areas. All vendors and suppliers of our hard and software have been asked 164 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K to certify Y2K compliance, and when we haven't received that certification -- and we have not from a number of vendors -- we've gone ahead and tested their equipment anyway. We are now at 98 percent compliant for all systems, and all critical systems are 100 percent compliant. Contingency plans have been formulated in all critical areas in the event of equipment breakdown, failure of hardware or software, failure of key utilities to provide power or water, or failure of payers to transmit payment. Disaster planning at Fox Chase is built on a long history of disaster planning with our sister organization, Jeanes Hospital, and so we have a long and healthy history of understanding what can happen during a disaster. The hospital staff are educated and included in all aspects of contingency planning at every level, every individual. What kinds of contingency questions are we asking? We're wondering what do we do to ensure electricity, water and heat, what do we do in the event that there is a breakdown? How do we safeguard patients in the event of a 12-hour 165 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K failure, a 24-hour failure, a 48-hour failure? Will distributors with computerized inventory management systems be able to deliver medicines and supplies? And as has been noted, we're not depending upon those inventories; we're taking a look at what we can do in order to put in supplies ahead of time to be safe.
What steps should we take to safeguard patients in the event that critical supplies are not available? How do we pay our bills and meet our payroll in the event of payer breakdown? I can tell you that we have detailed contingency plans in answer to all of those questions. Insofar as our reliance on the City, we would hope and congratulate City Council in convening this effort to take a look at public information, traffic control, and public safety and the supply of water and gas, and we're grateful for your ongoing activities. This concludes my testimony. I'll be happy to answer any questions at the proper time.
Thank you. Perhaps we can hear from the next person to testify, and then we'll ask questions. 166 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K
Good afternoon, Madam President and Councilman Rizzo. My name is Loretta Lawler. I'm the Assistant Director of the Year 2000 Project, from Temple University Health System. Temple University Health System consists of Temple University Hospital, Temple Children's Hospital, Episcopal, Jeanes, Temple Lower Bucks, Neumann Medical Center, Northeastern, Temple Physicians Incorporated, Elmira Jeffries, and Northwood Long-Term Care facilities. Temple University Health Systems is committed to the delivery of high-quality and high-value health services. In support of its commitment, TUHS has formed a project team to coordinate the Year 2000 compliance efforts of its participating hospitals and other entities. This System-wide initiative began in January of 1998. A major component of our Y2K readiness is our reliance on products and services that are required for manufacturers and suppliers outside the health system. The following steps describe Temple University's strategy to determine and achieve readiness: We've provided an inventory of all 167 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K date-sensitive systems, which includes -- without limitation-- the following: all computer hardware, software, operating systems (both mainframe and PC-based); network hardware, software, and operating systems; communications systems; systems interfaces; biomedical equipment; environmental equipment, such as air-conditioning, heat; safety-related equipment, security and fire systems. We've also implemented a change management strategy to ensure the ongoing accuracy of this inventory. As far as our strategies, we've assessed manufacturer Year 2000 readiness via direct correspondence with the manufacturers, the information gleaned from manufacturer Internet sites, by contracting with third-party consultants for independent product assessments, for information provided through industry and government-sponsored resources such as the FDA. We've also targeted specific testing on selected equipment and systems within our health system. We've ranked and performed remediation based on the number-one priority, which is patient safety; and secondarily, institutional viability. 168 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K We've identified and assessed critical business partners whose potential and ability to provide contracted services could directly impact our operations. And, again, we've heard from several of those today -- utilities, government agencies, and other critical suppliers. We also are working to identify alternate sources and potential on-site storage and generation capabilities as part of our ongoing contingency plans. We've incorporated Year 2000 compliance provisions in all contracts for the purchase of goods and services. We are also reviewing each site's contingency and disaster plans and are implementing appropriate changes to ensure preparedness. We also provide awareness throughout the health system with informational newsletters, a Website, posters, and awareness events at each of the hospital locations. The current status is, we are in the process of ongoing testing and remediation. The biomedical and facilities components and systems will be Y2K-ready by July 1, 1999. We have already identified and remediated several 169 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K information systems, applications, and systems. We will be completely finished by October 31, 1999. Some of the problems that we've encountered on the journey specifically in the area of dealing with vendors and manufacturers of various equipments and systems are matching the exact vendor information to model numbers that we have; locating vendors who have, as a result of mergers and acquisitions, changed names. Many vendors still do not have reliable information available for some of their equipment. And we've identified the need and are making plans within our project team to provide ongoing monitoring of compliance information.
As far as contingencies, as part of our overall review and update of our business continuity plans, we are developing contingencies for backup generation, assuming the possibility of up to a three-day power outage, as well as contingencies for water supplies and pharmaceuticals. We are also evaluating the readiness of our major suppliers and critical business partners and are preparing contingency 170 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K plans accordingly. Our most pressing concerns are around the availability of critical business partners to supply the critical services we discussed today -- electric power, water, telecommunications, fire and police emergency services, waste management, government funding, pharmaceutical and laboratory services. We appreciate again the actions that Councilman Rizzo and the City Council have taken to provide this forum today. We ask that you continue to heighten the awareness of this issue and balance prudent action versus some of the media hype that's surrounding this issue. We also suggest that public information be made available similar to the information provided through the Red Cross regarding prudent preparations Year 2000. We'd also encourage a citywide initiative that would include the City of Philadelphia, PECO, the police and fire emergency, telecommunications, and area hospitals to provide an ongoing forum to coordinate efforts and contingency plans. 171 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K Thank you again.
Thank you very much. Do we have anyone else to testify?
Fine. Thank you. Are there any questions? (No questions.)
Robert Eckert, Senior. (Robert Eckert, Senior comes forward.)
Mr. Eckert, before you start testifying, I just want to say that I want to thank everybody for their patience today, and I think that everybody's testimony was really very good, and I know that it's going to help us go a long way. And I do want to thank Councilman Rizzo also for insisting upon a public hearing on this 172 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K issue, and I think that it has proved to be very, very interesting. And I want to thank you again for your patience. Please proceed.
Madam President, good afternoon. My name is Bob Eckert, and I am the Chief Executive Officer of both North American Networks and its sister company, I-BOB Internet Services, and I'm here today representing the Northeast Philadelphia Chamber of Commerce. We are both a computer manufacturer and a tier-one nationwide Internet service provider. It is truly an honor and a pleasure on my part to address this distinguished Council today on the subject that is a difficult problem for both the general public as well as the business community. My presentation this morning will address both the business community, focussing -- will address the small-business community, small- to medium-size businesses in the Philadelphia metropolitan area. I was impressed with the testimony today from some of the larger corporations and the rigorous programs that they've embarked on and the 173 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K achievements that they have made to date on the issue of Y2K compliance. It was very impressive. Larger businesses are generally more specialized, and it was apparent in the compliance requirements anyway, and they have devoted considerably time, money, and resources -- and other resources to the resolution of the problem. Small businesses, on the other hand, are -- do not have these kind of resources available to them, nor the time and personnel to devote to resolution of the problem. Yet, collectively, the impact of Y2K on that community is considerable, both in terms of employment and economics, so I will address the small-business community issues. The issue is a simple one, yet very complex, due in part to its pervasiveness. It resulted from a common practice of using two digits to represent the year, a practice that was first started in the 1800s by the accounting community. When programmers in the early '60s wrote their instructions for computers, they used logic in their design that depicted by the last or least two significant digits, omitting the two 174 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K century digits, or most significant. However, we aren't talking just about very old systems alone. Many systems sold up to 1996 may have some type of problem, and those sold after '96 similarly could have a problem with Y2K compliance. The Year 2000 issue is, though, not just a large system problem. Most small businesses incorporate PC's from one degree to another. PC's have unique characteristics that must also be addressed. In addition, embedded systems must also be looked at in many organizations. Many businesses underestimate the effects of supply chain also on their business operations. These factors must also be considered. Starting today, businesses must stop thinking of this just as a computer issue; it's really a business issues. If a business is not prepared for Year 2000 transition, that business could fail. It can't simply hand the issue over to its computer people and tell them to come up with a solution; it must implement a business plan approach to address every aspect of the issue. By addressing the Year 2000 now, a 175 3/16/99 COMM. OF THE WHOLE - RES. S. businesses will fail due to the Year 2000 compliance issue. S. may fail due to the Year 2000 issue. Further, up to 82 percent could have problems with their mission-critical system, yet only 50 percent have done anything about it to date. These are staggering statistics and indicate the severity of the problem in the small-business community. By aggressively preparing, a company sends a message to its customers and suppliers that it is ready to meet the Year 2000 challenge, a position that could attract new business as well as enhance its competitive status in the marketplace. There is no within single remedy and no silver bullet to address the issue. Every business and issue is unique. The only way to approach it is to implement it through a plan to take action. We don't have 15 months left in the Year 2000.
Indeed, if my memory serves me correctly, I saw in the post 176 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K office that we have 240 days, but who's counting? That's the nature of the problem, who's counting correctly as we transition to the Year 2000? The Y2K issue is everywhere, including in PC systems. In a large business that relies on PC's for field tracking of information or spreadsheet analysis or their business is tracked on one, they may be at risk. Spreadsheets may contain date-related data in non-date fields. This can cause major problems when sorting or comparing dates, and these problems can start occurring today. The good thing is that solutions are available, but they won't come to you; you must seek them out. There are numerous automated tools available to fix the issue; some are free of charge. If you install the tool prior to the Year 2000, it automatically addresses the issue. Most are easy to install and relatively inexpensive. These tools are very effective, unless they are inadvertently removed from the system prior to the Year 2000. If for any reason you should reinstall any portion of the operating system, you should verify that your Year 2000 fixes are still 177 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K installed and operating. This is prior to the transition to the new millennium. Businesses must become educated about this problem. The Small Business Administration, for example, has schedules near-term Y2K educational events in the Philadelphia and West Chester area, and I bring this as an attachment just for information to any parties that may be interested in learning more about the subject in a forum or environment. These events take place March 29th through April 1st of this year. And as I said, I have a copy of that. gov/y2k, and that also links to many other vendor sites that provide Y2K information. com, also provides very useful information on the entire subject. These are places that are readily accessible to the public. Having recently gone through a mini Y2K compliance exercise in our own company, I felt that it would be beneficial to share that experience, as we are a small business, and many of the problems and experiences we had might be 178 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K very helpful to other small businesses. In an Internet service industry such as ours, there are several mission-critical real-time applications that potentially could be impacted by Y2K. For instance, we routinely process Internet traffic; that is data packets and e-mail. We host Websites on our servers that are accessed on the Internet in real time, and we provide dial-up and dedicated Internet connections for businesses across the area. Our approach to the Y2K problem was accomplished as follows: One was awareness or assessment of our business and processes. We looked very long and hard at all areas of our business and its associated processes and identified major functions such as accounting, payroll, customer billing, customer database, and Internet service computers and components. The second phase was to develop a plan to evaluate each of these areas to determine and verify Y2K compliance. In some cases, we determined this could not be done by direct testing, particularly with the embedded systems and processors; while in other instances, 179 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K verification could be done readily. The third phase was to begin testing. And we performed specific tests on each of our servers to determine if the Y2K problem even existed; and if so, to what extent as much as was practical to do. m. and shut each one down and allowed it to transition through the midnight hour into the new year 2000. We turned the systems back on and observed that they booted up properly, and allowed them to run and produce reports that we could verify that the accuracy of the data, and more importantly, the time of them. And we could manipulate that data on a time basis accurately.
We currently tested unit servers. We have a Windows NT server, Window '95, and Windows '98 operating systems in our office. All of these were tested. The unit servers were no 21 problem they are the ones that do radius authentication, I don't mean to get too technical here. I'm sorry if I am.
But they do radius 180 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K authenticating and they do e-mail and they also host Websites. They're the primary functions of those where the business applications are done in a Windows '95 and '98 environment. The network is Windows NT. These are common operating systems and common to -- a lot of small businesses use them. So what we did and what we found out would be very useful to any small business having them. All of our -- as I said, our Windows NT servers are not yet Y2K-compliant, as we're working to Microsoft's schedule. You can visit their site on the Internet and obtain the various packets of Y2K software patches and download them to your computer for implementation. The fifth packet on the Windows NT server is expected to be released in the second quarter by Microsoft, and it's not yet available, so therefore, there's only a beta version there, so we're waiting till that's released officially. Okay, in addition to testing the various operating systems and real-time applications, we've proceeded to address work station applications -- specifically Microsoft 181 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K Office '97, and this is not uncommon in small businesses again. This is a bundled software package Microsoft that includes Microsoft Word, Microsoft Access, Power Point, and Excel Spreadsheet. To achieve Y2K compliance, we discovered we had to download SR-1 from Microsoft. This is another patch; and again. It is free from their site, and it can be found at www.microsoft.coms/office for the Office '97 product. The last remaining area that we addressed in the Y2K compliance was that part of our system which was not directly under the control of the application and software or operating system and the subject of embedded systems. From a practical standpoint, we do not have the resources and time that we would like to have ti evaluate each of these systems individually; but rather, we took an approach of going back to the manufacturer to verify Y2K compliance, which is something I think small businesses would opt to do. In summary, all businesses need to take 182 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K a proactive approach to work with suppliers and customers, both to see that they're prepared to handle Year 2000 compliance. And starting now, businesses can develop alternate plans if necessary to minimize any impact. And that's pretty good advice. Are there any questions?
Thank you for being here since very early this morning. I appreciate that very much. His testimony was very informative.
Especially talking about some of those home systems. I'm sure that people watching this on television will appreciate that.
Well, all of it applies to home systems and to small businesses alike. 183 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K
Tarren Gaddy, from Red Cross. (Tarren Gaddy comes forward.)
Good afternoon. Good afternoon, Madam President and members of City Council. This will be very short and sweet. I am Tarren Gaddy, Community Education Program Coordinator in Emergency Services at the Southeastern Pennsylvania Chapter of the American Red Cross. I am happy to be here today to represent the Southeastern Pennsylvania Chapter in addressing the Year 2000 computer issue for the City of Philadelphia and its surrounding counties, including Montgomery, Chester, Bucks, and Delaware. Our testimony today is to put forth our commitment to the City of Philadelphia that we will be there to respond, be it Y2K or every day. For more than 100 years, the American Red Cross has been on the cutting edge of disaster 184 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K relief, helping people to prevent, prepare for, and cope with disasters and other emergencies. We were there 100 years ago, and we will be there tomorrow and beyond the Year 2000. The American Red Cross, a humanitarian organization, led by volunteers and guided by its Congressional Charter and the fundamental principles of the International Red Cross movement will provide relief to victims of disasters and help people prevent, prepare for, and respond to emergencies. The American Red Cross response to disasters, such as hurricanes, floods, earthquakes, and fires, or other situations that cause human suffering or create human needs that those affected cannot alleviate without assistance. The American Red Cross is a support agency responsible for mass care, and we will work in conjunction with local City officials if large emergencies occur as a result of the Year 2000 computer complications. We will help to open and manage shelter sites for those evacuated or displaced by a disaster, and provide meals and snacks to families and to emergency workers in 185 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K impacted areas if the need arose. The Red Cross also lets people know about other available community or government resources and helps those needing long-term recovery assistance when other resources are not available. On an everyday basis, we provide common sense, preparedness, education, and awareness information regarding Y2K and other emergencies and disasters to the general public through our Community Disaster Program. Thank you our community disaster education program. That concludes my testimony, Madam President. I would like to thank Councilman Frank Rizzo, Jr.'s office for inviting the American Red Cross here today. Thank you.
Thank you. And may I say publicly that I think that the American Red Cross has done such a magnificent job for years and, as you say, will continue to do it for many more years to come. Thank you very much for coming in.
Yes. 186 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K
Just to add to what you've said, I've experienced just recently in my neighborhood two emergencies involving fire. And I'll tell you, what a difference with the American Red Cross there to give aid at an apartment complex fire on Stenton Avenue. Those folks were just without -- didn't even have a toothbrush and emergency prescriptions. And it was just nice to see personally how this organization made a difference in so many people's lives, and I want to thank the American Red Cross and all the people that --
And they do that throughout the City. And, as I said, I just had to publicly applaud you. I think they do a magnificent job. Thank you again.
Ron Weikers? Is there anyone else here to testify on this resolution? UNIDENTIFIED AUDIENCE MEMBER: Yes. 187 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K (Ron Weikers comes forward.)
Good afternoon. Madam President, I would like to thank Councilman Rizzo for inviting me to attend today's hearing. I would also like to thank the City Council for its attention to this important matter. My name's Ron Weikers. I am an attorney and I handle software litigation matters in federal courts across the country. I regularly speak on the topic of the Year 2000 problem and have just written book about Year 2000 litigation, which will published by West Group at the end of this month. Today I will speak about two issues. I have more extensive testimony which I'd like to submit for the record. (This testimony was not submitted to stenographer and, therefore, not attached.)
Today I'll just cover two issues: one, real world instances of harm that have already been caused by the Year 2000 problem; and two, pending Year 2000 litigation matters and 188 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K the potential legal implications for the City of Philadelphia. By my testimony, I hope to convey the following message to this esteemed Council: First, harm has already occurred as a result of the Year 2000 problem and additional harm is readily foreseeable. Second, it will be less expensive for the City to remediate the problem before it occurs rather than to litigate it after it occurs. I'd like to cite a few examples of real world harm: In Australia, on January 1, 1999, some hospital defibrillators and patient monitors experienced date-related problems, causing them to cease. In Canada, notices of fines for traffic violations were sent out to 300 drivers. The notices indicated that the violations occurred 100 years in the future, that the drivers were convicted 100 years and month in the future, and that failure to pay the fines may result in suspension of driver's licenses, liens on houses, garnishment of wages, arrests around the year 2100. England. Supermarket scanners are 189 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K currently rejecting use by bar code dates, the bar code dates that say that you must use certain perishables, which indicate the Year 2000. This is already occurring as well in South America. In England, a loading dock crane locked up when its embedded chip thought that it was overdue for an inspection. In Hong Kong, January 1, 1999, a computer system used by the harbor master to track the movement of vessels crashed. In Illinois of 1998, a University of Chicago hospital billing system prevented patients' names from being entered for a day because the system was unable to project months 16 into the future, as it had been programmed to do. 17 In Maine, in 1995, a Portland insurance 18 company's list of brokers with whom it does business was destroyed as a result of the Year 2000 problem. In Michigan, in 1997, a computerized point-of-sale cash register crashed whenever credit cards containing expiration dates after 1999 were processed, repeatedly preventing a produce store from completing sales. This 190 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K resulted in a lawsuit. Currently Visa, the credit card company, receives roughly 100 to 150 reports per months of other date failures. In Missouri, on January 1, 1999, the unemployment insurance system, which automatically projects claim eligibility forward by one year shut down completely due to Year 2000 compliance. In Nebraska, software that's used by large credit-card dispute resolution company would not accept expiration dates after 1999. This also resulted in a lawsuit. In New York, on January 1, 1999, employees of an insurance company were locked out of their offices due to a non-compliant security access system. Also in New York, computers that print automobile inspection stickers with two-digit year fields were unable to print stickers that expired in the year 2000. Instead, they printed stickers with the year '91 on them, causing a number of people to receive tickets as they drove around with their uninspected cars. In New Zealand, a smelting plant 191 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K suffered a million dollars in damages. In Oregon, the state's Office of Risk Management ran a report for its self-insurance reserves, which resulted in gibberish. In Oregon, in Portland again, in 1997, the Water Bureau's inventory management system failed when it attempted to project water inventories into the Year 2000. Also in Oregon, in the year 1998, a county's budgeting system rejected data that contained the Year 2000.
Now, in Pennsylvania, in the mid-1980s, the Philadelphia Police Department's own computer system, which automatically deletes parolees' records after their parole has ended erroneously deleted the records of parolees who were given a 20-year parole term because it appeared to the computer that the parole terms had ended decades earlier. Thus, the City of Philadelphia was one of the first entities to become aware of the Year 2000 problem in real terms. A Pennsylvania mortgage company 30 years ago started experiencing the same problems when they were issuing 30-year mortgages. 192 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K Also in Pennsylvania, in 1998, approximately 75 hospitals suffered a shutdown of their computer system when dates after the Year 2000 were entered. Also, as the Council is aware, the Peach Bottom facility suffered a problem when they were running Year 2000 testing. Now, all those instances which I just mentioned were actual Year 2000 failures. The testing is obviously of concern because of the loss of the monitoring capability, which is what occurred at Peach Bottom. In my opinion, it's kind of like driving a car that's fully functional but without looking where you're going. I'm sure that the Peach Bottom situation is unique, won't occur again in the Year 2000, and that everything will be resolved normally. But it's a sign of things to come. Most of the problems that will occur will not be catastrophic; most will be headaches. For example, you may find that your thermostat just dies unexplainably. And I'll skip to a couple more examples. United States, nationwide, January 1, 193 3/16/99 COMM. OF THE WHOLE - RES. 2 million federal employees crashed, and it caused almost 100,000 prescriptions to be rejected until it was fixed about a day later. Finally, in outer space, experiments that are being remotely conducted on two orbiting satellites will be halted due to Year 2000 problems with their Japan-based control computers. So in sort, the Year 2000 is coming, we've seen that harm has already occurred, and additional harm is readily foreseeable -- again, not catastrophic but of the headache type. What are the pending Year 2000 litigation matters, and what are the potential legal implications for the City of Philadelphia? Well, as explained before, there are tens of millions of computers and tens of billions of embedded systems in the United States alone. Many will fail due to the Year 2000 problem, but the exact number is unknown. Some have estimated that it will collectively cost over one trillion dollars to fix the Year 2000 problem in the United States alone, and that number's pretty accurate. For those Year 2000 problems that are 194 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K over looked, however, it has been estimated that over $10 trillion in legal damages will result, $3 trillion of which will make its way into attorneys' pockets. Now, as I stated earlier, litigation involving non-compliant software embedded systems has already erupted. And 39 lawsuits have been filed, of which are still pending. There are 10 also a number of cases that have not been brought 11 to the public's attention. 12 Of the 19 cases that have been 13 resolved, only 7 were disposed of in court; 6 were 14 dismissed due to lack of harm -- that is, in those 15 cases, the software hadn't actually crashed yet. 16 One case was dismissed based on the party's 17 contract; the judge found that the contract waived 18 warranties. Another case was decided in 19 Pittsburgh by an arbitrator in favor of the 20 defendant because the party's contract specifically did not provide for Year 2000 remediation work. Eleven cases, however, were settled, and they were outside of the court system without going to trial. These settlements, however, came 195 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K at a substantial cost to the defendants.
Each case was settled for hundreds of thousands of dollars, and that amount does not take into account attorneys' fees, which were probably also in the range of hundreds of thousands of dollars for each case. Now, the legal theories, as discussed earlier by City Solicitor Franklin-Suber, include tort claims, such as negligence and breach of contract claims. Now, these legal theories are very important to the City of Philadelphia when it comes to the Year 2000 issue. Negligence in the Year 2000 context is the failure to take reasonable precautions to present harm resulting from Year 2000 failures. For example, if a number of cities have spent considerable sums of money on making sure that their utilities, police departments, fire departments, housing services, and more are compliant, then it may be unreasonable if the City of Philadelphia fails to do the same in any particular instance. And it may result in a negligence claim. Also, breach of contract in the Year 196 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K 2000 context is the failure of a party to continue to provide a service or working product beyond December 31, 1999 when it has agreed to do so. For example, if the City of Philadelphia has expressly or implicitly promised to deliver utilities to its citizens and companies within its boarders after the year 1999, but the City fails to do, then this may lay the groundwork for a breach-of-contract claim. Now, the City of Philadelphia may be immune from liability from some claims under Pennsylvania sovereign immunity laws, and those are 42 Pennsylvania consolidated statutes 8541. The City, however, is not immune from liability for certain types of negligence and breach-of-contract claims -- in particular, also under Section 42 Pennsylvania consolidated statute Section 85-42, the City may be subject to liability for negligent acts involving, among other things, damage to personal property and bodily injury resulting from utility services that are in a dangerous condition. The city may also be liable for breach of contract such as the failure to provide various types of services, like 197 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K the provision of utilities, police protection. Fire protection. And much more. Regardless, however, of whether the City is or is not protected by any sovereign immunity, the City may indeed find itself a defendant to a number of lawsuits resulting from City services that were not provided or were improperly provided as a result of the Year 2000 problem. The result will be that the City may spend large sums of money on defense attorneys and it may spend even larger sums of money on settlements or damage awards. This may directly impact the City's financial coffers. This may also indirectly impact the City's bond rating and cost of borrowing money if sometime during 1999, the City's found to be in a poor state of Year 2000 readiness by any other credit rating agencies. From the testimony today, however, it doesn't sound, however, like that's the case. At the moment, there is one bill 23 pending in the Pennsylvania General Assembly which attempts to provide sovereign immunity to the Commonwealth and to municipalities specifically 198 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K for negligent acts that fail to prevent Year 2000 harm. I spoke with the senator who had proposed that bill last week, and they informed me that a hearing was held in October of last year and that they expect that it will move shortly onto the Senate floor. I am not hopeful, however, that this legislation will be passed, and the City should not act as if it will get passed because 38 states have proposed similar legislation, but only 7 have passed such laws. S. Senate is also considering legislation that limits but does not absolve liability. It should be noted that the Information Readiness and Disclosure Act, also referred to earlier by City Solicitor Franklin-Suber, does not limit liability for Year 2000 failure.
There is no such law that would protect the city at the moment. In short, the City must remediate and it must remediate quickly for two reasons: first, it will be less expensive for the City to remediate rather than to litigate; second, the City should remain vigilant to prevent harm to its citizens, harm that may result from a foreseeable, 199 3/16/99 COMM. OF THE WHOLE - RES. 980756 - Y2K technologically simple problem. Thank you.
Thank you very much. Did you want us to make all of your -- I don't know if you read your entire testimony, and I don't know whether you want us to give it to the stenographer.
I will submit it by e-mail later to Councilman Rizzo' office in its entirety.
That's fine. Thank you for your patience. This will conclude the public hearing for today, and we will continue the public hearing until the call of the Chair. Thank you all very much. (Adjourned at 1:42 p.m.) - - - 200 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 Tuesday, March 16, 1999, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE OF THE WHOLE RESOLUTION NO. 980756 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter