Committee Hearing, April 14, 2004

COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING - COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, April 14, 2004, 10:35 a.m. BILL 040455 - An Ordinance adopting the Operating Budget for Fiscal Year 2005. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DAVID COHEN COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JACK KELLY COUNCILMAN JAMES F. KENNEY COUNCILMAN JUAN F. RAMOS COUNCILMAN FRANK RIZZO COUNCILMAN FRANK DI CICCO COUNCILWOMAN JANNIE L. BLACKWELL COUNCILMAN MICHAEL A. NUTTER COUNCILMAN DARRELL L. CLARKE COUNCILWOMAN JOHN L. KRAJEWSKI COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN BRIAN J. O'NEILL - - - V A R A L L O Incorporated Litigation Support Services 1835 Market Street, Suite 600 Philadelphia, PA 19103 215.561.2220 215.567.2670 2 Whole - 4/14/04 - Bill No. 040255 P R O C E E D I N G S - - -

Good morning, everyone. I regret the delay of the Committee. This is the continued public hearing of the Committee of the Whole regarding Bill 9 No. 040255. Our first witness is representatives of the School District. The Chair recognizes Councilman Goode.

That was a mistake.

Fine. Councilman O'Neill, did you want to be recognized?

Yes. I was just going to ask since yesterday afternoon if there was any more definitive information on some of the key issues we discussed yesterday. I also had a question that I found intriguing. Very positive, I think, but intriguing. I had a constituent call me, telling 3 Whole - 4/14/04 - Bill No. 040255 me that his daughter could not get seated for the SATs, there was no room. And no one had ever heard of this. When I called over to the School District, I was told that the School District -- and I didn't get how long it's been going on, but the School District has been paying for the SAT exam for public school students. Now, I have no problem with that. In fact, apparently it spiked the attendance at the SAT exam so much that there isn't room 13 for everybody. Now, to me, there are other strategies, and some of them apparently are being deployed, to try to increase numbers. They seem to be very effective, but I just want to mention that, maybe get some comment on it later. But primarily we had some discrepancies yesterday between information that was given to us, information that Councilman Ramos had gotten, and I thought maybe we should start out just with a follow-up on that.

That 4 Whole - 4/14/04 - Bill No. 040255 would be great. Are you prepared to do that this morning?

Yes, Madam President. I believe in one instance we were asked for some updated overall enrollment figures, so I'd like to provide those as a starting point. And these numbers are provided by the School District and as of November of '03. I believe what I reported yesterday was what was from the Pennsylvania Department of Education as of May of '03. So these are now several months later into the next school year. Total enrollment being 214,350 --

I'm sorry. You're going to have to speak into the microphone.

I'm sorry. Total enrollment as of that date being 214,350; the total number of high school students being approximately 60,000; the total number of seniors being 12,508. Again, including, as 5 Whole - 4/14/04 - Bill No. 040255 all these numbers do, both Philadelphia School District schools as well as charter schools. And, again, the graduation rate -- or, I'm sorry; the number of graduates from the class of '03, which I did report yesterday, the same number, 9,507.

The Chair recognizes Councilman Nutter.

Thank you, Madam Chair. Ms. Kahn, let me make sure I'm understanding. The numbers are as of November '03, but when you gave us the number of graduates, I'm going to assume that that must have been from June of '03?

If you could just -- and I want to introduce him. Roger Jackson, who is representing the School District, who is the Director of College and Career Awareness at the School District.

Well, perhaps, Mr. Jackson, if you have the information, you could provide it to the Councilman as well as us. 6 Whole - 4/14/04 - Bill No. 040255

College Career and Awareness?

Yes. Councilman, your question is accurate. The graduation rate was for last year's graduation class. The actual graduation numbers, obviously until we complete this school year and summer school, we would not be able to provide the number of graduates for the class of '04 and the enrollment number --

That's what I kind of figured.

And the enrollment numbers that Ms. Kahn just stated were from November of this school year, so November of '03, which is the present school year.

All right. And that graduation figure for June '03, was that the 9,507?

Correct.

Okay. And I'm sorry. I didn't catch your name.

Roger Jackson. 7 Whole - 4/14/04 - Bill No. 040255

And what are your responsibilities?

I oversee the Office of College and Career Awareness, which includes, but is not limited to, oversight of our Federal and State Gear-up Programs, as well as our college preparation and awareness activities, and also career awareness and development activities.

And how many people are in your office?

We have presently nine.

And is there someone at every high school that's responsible for college and career awareness?

Outside of the general responsibilities of guidance counselors, there's not an additional designated person, no. 22

Well, how many guidance counselors are there at every high school?

It varies based 8 Whole - 4/14/04 - Bill No. 040255 on enrollment. Every high school has at least one, and pending the enrollment level, upwards to -- I believe four is the maximum we have at any one high school.

What's the ratio?

Again, it varies from school, but it ranges anywhere from one to 500 to one to 750.

These are the guidance counselors?

Guidance counselors, correct.

Is a part of that person's job specifically tied to college and career awareness?

Part of their job, as it has historically been, is tied to the college application and awareness process, correct.

In addition to all the other responsibilities?

In addition to all their other responsibilities. 9 Whole - 4/14/04 - Bill No. 040255

And is there any one person who is specifically responsible for either juniors or seniors tied into college and career awareness issues?

Again, that would be the guidance counselors, with support and information provided by our office.

Well, what do the nine people in your office do?

Provide support to the schools in areas of college awareness. The Councilman had mentioned the SAT program. A large amount of work goes into the implementation of that. And just a further point of clarification, the District is providing support for our junior class this year to take the May SAT exam. Additionally, we provided support for our sophomore class to take the PSAT exam last October. We additionally provide support for coordinating college visitations, both off site to colleges and on site at the schools.

Of the 10 Whole - 4/14/04 - Bill No. 040255 9,507 graduating seniors in June of 2003, how many of them went to college?

We don't have exact figures for that. The national average is at about 30 percent. We are in the process of contracting with an organization called the National Student Clearing House to get us exact and accurate data for our college enrollment rates for our graduating class.

Well, Mr. Jackson, I appreciate the statistics based on the national norms or averages, but that doesn't do us a whole lot of good here in Philadelphia. Why would we not know how many students went to college last year?

Historically that data was gathered anecdotally from reports from guidance counselors, and generally what the guidance counselors were most able to report were either application figures or figures based on what students indicated their next step would be. It would be -- there was no -- 11 Whole - 4/14/04 - Bill No. 040255

Is it the students who tell the District or has the District asked every graduating senior what they're doing or what their plans are?

Through the guidance counselors, the District was inquiring of the graduating class. And even when a --

Well, if you were doing that, then why don't we know?

Because that was not done consistently.

Why?

That pre-dates me. I can't answer that question for you.

How long have you been on the job?

Since August of 2003.

Well, who was in the job before you?

The office was created at that time, during this past summer.

So you're 12 Whole - 4/14/04 - Bill No. 040255 telling me based on the information you have, and you've been on the job less than a year, that the School District of Philadelphia had no consistent data-gathering mechanism, no 6 tracking mechanism to know with some high degree of accuracy what the graduating seniors were doing in terms of --

Consistent and with a high degree of accuracy? No. 11

Well, do you have a system in place now?

Yes, we do.

What is it?

That is a contract with the National Student Clearing House, which is an organization that works with colleges and universities to gather enrollment data of their student population, which they then filter through and provide reports to individual districts as to where their students actually end up enrolling and matriculating.

Well, is there something that prevents you from 13 Whole - 4/14/04 - Bill No. 040255 gathering that information in June of the year that the student is graduating? I mean, don't students usually find out -- it's kind of ancient for me, but don't you usually find out somewhere in the February, March, April time period or so whether you got accepted and have to send something back to the school to say, yes, I'm coming; no, I'm not?

That does happen at roughly the timetable that you indicated. However, a number of things can occur between June when a student would report that to a counselor and September when they actually enroll in the university.

Well, I understand that, but you'd at least have some sense of what was going on. I understand that young people, parents, everybody can make all kinds of decisions over the course of the summer, but it's probably not enormous.

Again, previously it was collected anecdotally. The system that we're now putting in place would give us accurate and precise enrollment numbers. 14 Whole - 4/14/04 - Bill No. 040255

Okay. My last question is, so are you involved in the Last Dollar Scholar Program?

Yes.

What's your involvement?

Our office handles the application and information process from the School District side of things.

And for the 12,508 present seniors, give or take a few who have moved or dropped out or whatever else they might be doing, do you have any projection at the moment, given that it's April, how many people are going to graduate this year?

Projection based on past history would project somewhere between 9,500 to 10,500.

And how many of them are going to go to college?

Again, the only thing that we could go on is the national 15 Whole - 4/14/04 - Bill No. 040255 average or anecdotal data from previous.

So that was 3,000. What happens to the other 7,000 students?

Either I would assume entering the work force or other post secondary training programs.

And how many do you believe are going to go to any of the colleges that are eligible to 12 participate in this program? 13

We believe that 14 that will be somewhere in the neighborhood of 15 2,000 to 2,500. 16

And so even 17 if they all received the maximum grant, it 18 would not cover the total $10 million that's 19 proposed to be available, correct?

For the initial year, that would be correct.

So what do you do with the balance?

The arrangement as it stands or as it's proposed is that the 16 Whole - 4/14/04 - Bill No. 040255 School District has an obligation for a certain portion and that obligation would be met. The remaining money would be reallocated for future years.

This will be my last question. Is it my understanding from the paper this morning that the CEO of the School District, Mr. Vallas, has expressed an opinion that the program should be open to all students?

The opinion of Mr. Vallas has been that he was not opposed to parochial school students being included in the program, but that the District would not be in a position to provide financial support for that inclusion.

Well, that's a best-of-both-worlds kind of position. I mean, what does that mean? It's all right as long as somebody else pays for it?

If that's how you would choose to interpret it. Basically that it's not an opposition to other students being included, just that the identified dollars on 17 Whole - 4/14/04 - Bill No. 040255 the School District side would not be able to support, financially support, private and parochial school students.

You don't have to try to answer this now, but I'd like you to forward to the Chair a listing and the number of students served and the cost of any services that the School District provides to non-public school students.

Absolutely, Councilman.

The School District does provide some services to non-public school students; is that correct?

That, I'm not able to answer.

But you can get the answer, right?

Certainly.

Thank you. Thank you, Madam Chair.

Thank you. The Chair recognizes Councilman 18 Whole - 4/14/04 - Bill No. 040255 O'Neill.

Yes. Mr. Jackson, the testimony yesterday, as I remember it, was that the School District isn't putting any of its own money into this program. And I'm just following up on the Vallas statement. $3 million coming from the Federal Government, proposed 4.2 million from the City and the other 3 million or so is going to be raised but not School District funds. Could you clarify that?

Correct. The identified funds for the School District is via a Federal grant, a Federal Gear-Up grant, that is awarded to the School District. Additionally, the School District is engaged in additional fund-raising for the purposes of scholarships for our students. And at this present time, we do not project that the full $10 million will be needed to fund the program for this first year, but certainly if we are successful in our reform efforts within our high schools and in increasing our college-going rates, that we 19 Whole - 4/14/04 - Bill No. 040255 would begin to approach that amount in future years.

How much do you estimate the program will cost in the first year in its current form?

In its current form, we're projecting that the total cost would be somewhere between 6 to 7 million.

So you could run this program in its current form without the City money?

Based on our projections, that was not how our projections and our earmarking of funds for this year was calculated.

I didn't ask you that.

I'm sorry.

Based on the budget for this year, the 4.2 million for the City wouldn't be needed, correct? Just do the simple math.

Correct from the simple math standpoint. Incorrect from a 20 Whole - 4/14/04 - Bill No. 040255 previously at least verbalized arrangement of a 60/40 cost-sharing method for the scholarship.

But if the School District has enough money within its own fund-raising and the Federal grant to do it, it would seem to me that Mr. Vallas would be perfectly satisfied if the City used its money to cover all high school students whose parents are taxpayers; is that correct?

That would not be correct, as we have earmarked monies from our Federal Gear-Up budget based on projections of the first year.

Are the Federal funds discretionary? Can you use it for something else?

Within the Federal Gear-Up Program, there is a provision for use of funds for scholarship purposes.

Correct.

So it's not completely discretionary, no. 25

So you 21 Whole - 4/14/04 - Bill No. 040255 have to use the million for scholarships. 3 The other 3 million is also a School District commitment, and then the City money comes in after that. So what I think is coming across loud and clear is that Mr. Vallas, if the City would take the position -- and I'm assuming it would be this City Council that would involve itself in this decision -- would only give the 4.2 million if it were non-discriminatory, he wouldn't have a problem with that?

I would believe that that would be incorrect.

You think that would be incorrect?

Yes. I believe the School District entered into exploring the possibility of the program with the understanding that the cost for implementing the scholarship, whatever that cost ended up being for a particular year, would be shared in a 60/40 arrangement with the City.

Why would they need the City money if they have enough 22 Whole - 4/14/04 - Bill No. 040255 themselves, the School District, between the Federal money and their own?

Based on the projections for this year, the District would not have enough money completely on their own for funding of it. The 6 million/4 million amount that has been discussed was based on a projected level of participation that we do hope to achieve at some point, but the calculations and projections that were done initially are based on a 60/40 cost-sharing arrangement, and we have projected that we will not be at the full 10 million, so our projection and our identification of funds is not based on the full 6 million for year one.

What would happen if the City withheld its 4.2 million because City Council would not pass it in its current discriminatory form? What would be the result of that?

We would probably be in a situation where we would have to deny scholarship opportunities to students.

Okay. And 23 Whole - 4/14/04 - Bill No. 040255 would that be your choice rather than to work the City's 4.2 million into a non-discriminatory plan?

I'm not sure of your question. Could you rephrase that?

You said that without the City money, you projected that the scholarships would not be offered, so that that $6 million or so would just be sitting -- it would be staying on the table over at the School District. I think I understand that answer very well. However, if the requirement was -- we weren't withholding the money, but if the requirement was that if the 4.2 million would only be forthcoming from the City if the program were non-discriminatory, which Mr. Vallas sounded very happy with this morning in the Inquirer, would there then be a scholarship program?

Again, the School District has not moved forward under the premise that the full 6 million would be needed for the first year, nor would the full 24 Whole - 4/14/04 - Bill No. 040255 million be needed for the first year from the City. The School District has moved forward with the premise that we would operate the scholarship the first year and subsequent years on the agreement of a 60/40 cost-sharing arrangement, and based on initial projections of participation, we have identified 3 million from a Federal grant program to be sufficient for our portion of what we understood would be the first-year cost of the program.

So that's it for you, is the Federal grant. How much of the City grant of 4.2 do you project you'll need under the current form of the program?

Under the current form, we would project somewhere between to million.

Okay. So if we gave you 4.2, what happens to the rest of it, of the 4.2?

Under the present projections, we would not be in a situation where we would need to use the full 4.2 for 25 Whole - 4/14/04 - Bill No. 040255 the initial year.

Well, we got a lot of money, the City, so we can hand out money pretty easily that's not going to be used in the present year.

Councilman, I don't think Mr. Jackson answered your question.

He did not.

He didn't answer the question.

If we gave $4.2 million to the School District, as is in the Mayor's budget, but it has a string attached to it that it only be used if the program expands to include all high school graduates of City taxpayers, primarily the parochial schools, but I'm sure there's others in smaller independent schools, what happens to the scholarship program? I mean, somebody had to be talking about this. This has been going on, this conversation, for at least a month in City Whole - 4/14/04 - Bill No. 040255 Council, starting a year ago almost when Councilwoman Reynolds Brown asked us to sign on to a letter supporting it. Many of us signed with a verbal understanding that we could only support this if it was expanded. It was a matter of keeping the program alive supporting a letter, but many of us made it loud and clear to the Councilwoman and have said so in the past. Councilman Ramos has had meetings months ago on this subject. So the School District is aware that there is a strong sentiment in City Council that this not be a discriminatory program. What is the position of the School District that if the 4.2 million only gets sent to the School District for this program if it's non-discriminatory? What is the School District's position? It sounds like Mr. Vallas's position was not quite as clear as the Inquirer reported it today.

Initially in the initial design, the City portion of the money was never designed to be given to the School District for the purpose of the Sun Maiden 27 Whole - 4/14/04 - Bill No. 040255 scholarships, but rather that upon completion of the application process, a bill, so to speak, would be generated as to the cost for operating the program. The School District would then give their portion of their bill, so to speak, to a third agency for the administration and actual check-writing of the process and that the City would give their portion of the bill to that same agency.

I'd still like an answer to the question. The process is interesting, and I'm sure we'll get more into how that works, the mechanics of it, but will there be a scholarship program? You said there won't be one without the 4.2 million. That's your opinion. If the 4.2 million is forthcoming but only with the restriction that the program be expanded to a non-discriminatory program, what is the position of the School District? And if the School District hasn't talked about this, as hard to believe as that is, I'll accept that as an answer and wait for the 28 Whole - 4/14/04 - Bill No. 040255 School District to take a position and come back and tell us. That's the critical question right now, as far as I'm concerned.

Councilman, if I can interject here. I think that, first of all, Mr. Jackson probably would, in fact, need to go back and confer with Mr. Vallas on that, but from our perspective as the City, what I would hope is that if we had the unfortunate situation where the $4 million was not approved in the school year '05 budget, that because of the communications that have already been made to students and families and because of the fact that applications have been submitted, that if, in fact, within the School District 6 million they could be able to satisfy the need and the applications for the current proper students for this graduating class of '04, that, in fact, they could have the scholarship program for this year and all of those applications would be satisfied. And then I think that the question would have to be what could happen in the future, because we do expect and we are 29 Whole - 4/14/04 - Bill No. 040255 required to have demand exceeded, and if their resources couldn't cover it, then we'll just have to see what would happen in the future.

Ms. Kahn, I appreciate that and that sounds reasonable, but the person who runs the program sitting next to you, Mr. Jackson, who didn't answer the question about what would happen with strings attached to the 4.2 million, was emphatically clear that without the 4.2 million, there would be no scholarships. This is a School District program and he couldn't have made himself clear. Now, based on what you just said, Mr. Jackson, you just heard Ms. Kahn, has your position changed in the last ten minutes on that? Without the 4.2 million, what happens to the scholarship program? You said it would not occur.

No. My initial statement was that it would not be able to occur in the form we've originally designed for it. And, again, just for a bit of further clarification -- 30 Whole - 4/14/04 - Bill No. 040255

You said it wasn't going to happen next year without the 4.2 million. You said the scholarship program would not happen.

It would not occur in its present form next year, correct. It would have to occur in an altered form. And, again --

That was not your answer. Your answer wasn't about an alternate form. It was a yes or no, and the answer was no, it would not happen. If you're going to further clarify, now that Ms. Kahn has interjected her opinion, I don't mind that, but that's not what you said. And I still want an answer, if there is one, and I want it from you. You work for the School District and you run the program. What is the School District's position if the 4.2 million only comes to the School District if it's non-discriminatory?

Again, and I'm not trying to be argumentative, the initial 31 Whole - 4/14/04 - Bill No. 040255 set-up was not that the money would ever come to the School District in any way, shape or form.

I don't care about the process. That's mechanical. That's how the money gets from here to there. What is the position of the School District if the program has to be expanded in order to get the 4.2 million? That's all.

Well, I think the process is important, only in that given an amount of 4.2 million under the initial cost-sharing proposal, the City would be able to pay their bill, so to speak, and there would be money left over from the 4.2 million to do whatever the City chose to do with it. If that was to expand it to private and parochial school students, that would certainly be the City's prerogative to do that.

I'm not talking about extra money. I'm talking about the 4.2 million the City only puts in the program if it's non-discriminatory. Let's get 32 Whole - 4/14/04 - Bill No. 040255 real clear on that. We're not talking about if there's any dollars left over. In reading Mr. Vallas's statement today, it was very positive, very upbeat, it seemed very clear that this was the City's call. The City has 4.2 million to put in the program. The rest is basically coming from the Federal Government or any private sources that are out there. It's the City's call. The City up to this point, the Mayor and the Administration, have said they want the program to be in its current form, only for public school students. So if the City said, Sorry, the only way you can do this is if it is non-discriminatory, what happens to the program? And I'm talking about the program or not having the program, not a program that has a few dollars left if there's any parochial school students out there. What is the School District's position? This is not something that came up this morning. This has been discussed publicly and privately for months. 33 Whole - 4/14/04 - Bill No. 040255

What's the position of the School District?

If you can't speak to the position, we'll get Mr. Vallas in here when he's available.

Well, as I said, the School District's position is that the School District is not opposed to the program being opened up to private and parochial schools. The School District's only position is that the School District portion of the funds would not be used to support private and parochial school students.

I understand that. So the City can do whatever it wants with its 4.2 million, is what you're saying. The City wants to open this program up and put its 4.2 million into a program that's non-discriminatory. However you allocate the 6 million and the 4.2, that's okay with the School District. Is that what you're saying? I just haven't gotten a direct answer to this yet. Will there still be a program? 34 Whole - 4/14/04 - Bill No. 040255 However the money is allocated as to what part of it is School District, what part of it is City, is there going to be a scholarship fund, as far as you're concerned, the School District is concerned, if the 4.2 million requires parochial school and other non-public school involvement?

Yes.

So there will be? Thank you.

The Chair recognizes Councilman Rizzo.

Thank you. Mr. Jackson, knowing that there was an interest in what I think is even in Little League, you keep statistics of how many hits and strike-outs, don't you think knowing the interest that we have in wanting to know again something very basic, how many kids go to college that graduate from our public school system, don't you think we could poll the principals of the various schools? I'll bet you the information is out there. I mean, you really should be 35 Whole - 4/14/04 - Bill No. 040255 embarrassed by this, not knowing that number. I'd be terribly embarrassed if I were Paul Vallas today. I knew when you came and he didn't that we were going to get this kind of an answer, because he brings the good news, you're delivering the bad news. But my question is, if a principal of a high school wouldn't care to know, even personally in a desk drawer to know how many of their students went on to college, did anybody ever think of asking the principals of the various schools to try to help pull this together to satisfy Council?

Again, Councilman, the previous process was one of polling counselors and receiving the information anecdotally. There are figures out there that contain that. How reliable they are, I would not want to base major decisions on those statistics. Moving forward, we have a system in place to get very accurate statistics on exactly that question. 36 Whole - 4/14/04 - Bill No. 040255

So what I'm hearing, that you would not have confidence if you picked up the phone right now and called the principal of one of the major high schools and said, if that principal were the principal last year, How many of your students went on to college, you would not have confidence in that?

We could certainly get a number. How accurate it would be, I can't vouch for.

Tell me about this program that you're going to contract with. How much is that going to cost us, this data that seems stupid to me, but maybe it's --

The contract is for approximately $5,000.

$5,000 to find out how many kids went to college from our system?

Correct. And that will actually give us enrollment data based on university information. 37 Whole - 4/14/04 - Bill No. 040255

Okay. So I'd be curious, and I'm going to ask you to do this, I'm going to ask you, I'm sure you have an internal e-mail or some system that you could send a spray message to all principals. I'd like to see you maybe save 5,000 bucks since we're talking about -- and maybe the principals will come back and say, Yeah, we have a reliable way, we know. If they're doing their job, they should know. But I'd just be curious to test the system to see what kind of feedback you get before you spend this money. Not that it's a lot of money, but what's that cliche about the little dollars add up to big ones? I think I'm close to that. But it just amazes me. It really does. Thank you, Madam Chair.

You're welcome. The Chair recognizes Councilman Clarke.

Thank you, 38 Whole - 4/14/04 - Bill No. 040255 Madam President. Good morning.

Good morning.

I have a couple of questions, relatively brief. One, I'd like to get a number -- and I'm assuming the School District may not have this. So, Ms. Kahn, you may need to help on this. I'd like to get a number of the total students in the City of Philadelphia, both public and private currently. The other part of that, I'd like, if at all possible, to kind of categorize those. I noted you obviously have public school students, and parochial school students would be the next category in terms of numbers. And if there are any other categories that have substantive amounts, I'd like to get that number, if at all possible, as we continue this debate.

We can certainly provide that.

All right. The other thing, on the Federal dollars, you 39 Whole - 4/14/04 - Bill No. 040255 indicated that there was some limitations on the ability to spend that money and it was primarily targeted for scholarships. Are there any other prohibitions? Does it speak about different categories of schools, like private schools, religious schools, or is it purely targeted to public schools in the allocation?

It was a grant awarded to the School District of Philadelphia, and other than the general limitations that are contained within the Federal language for the Gear-Up grant, there are no additional restrictions. But it was a grant awarded to the School District for the purpose of programming and enhancement in the Philadelphia School District.

Generally in the sense of college scholarships, but not necessarily targeted to this particular program, Gear-Up?

Correct. Scholarship is a component of the Gear-Up Program. The Gear-Up Program is a general 40 Whole - 4/14/04 - Bill No. 040255 program to increase college-going rates and college preparation among school students, and it's a program that operates nationwide, and we're the recipient of one of those grants.

Okay. This is more or less a suggestion, because we're entering into this debate and we're talking about commingling of resources, be it Federal, Municipal level, State level and from a broader policy perspective. I think that as we move ahead, we may want to entertain having this discussion, because I think that this could possibly -- I hate to use the word slippery slope, but as I listen to the testimony, when we talk about funding for SAT courses or test-taking, we talk about potentially funding for other issues, such as vouchers, I can see that we will broaden the discussion as it relates to the commingling of funds and the commingling of educational opportunity. So it's just a suggestion. You can take it back to Mr. Vallas and Ms. Kahn. We may want to, as we move ahead in this process, 41 Whole - 4/14/04 - Bill No. 040255 consider having that serious conversation to talk about the broader policy implications of what we're discussing today, because I can see that we ultimately will be going there. Madam President, thank you.

You're welcome. The Chair recognizes Councilman Ramos.

Thank you, Madam Chair. I'm getting the impression that the School District, the second floor or the Office of the Secretary of Education aren't on the same page on this issue. I'm hearing conflicting positions on where you really stand on this issue of the scholarship program. Paul Vallas said this morning that he's okay with it, I picked up as I walked in, and maybe that's not exactly true. The Secretary of Education yesterday, in all due respect to her, said that there was no 25 information compiled by the School District 42 Whole - 4/14/04 - Bill No. 040255 for last year's graduation class. I called the School District late yesterday afternoon, early evening and they told me that between 4,000 to 5,000 seniors of last year's graduating class went on to college. And I'm hearing today that you don't have that type of data and that you could not rely on the principals' information of how many kids went to college. And that continues to astound me, because to compile that data, you don't need computer technology. What you actually need is pre-computer era gadgets, like a calculator, that when you tell a principal to provide a -- and I know a lot of them get that information from the counselors. I know the counselors have that information. That is a matter of just getting a pre-computer era calculator and adding. And it's not like our public school kids are going to college at 100 percent. By some of the information that I have, it might not be 100 percent precise, but less than 50 percent of our kids are going off to college, and that might be a very generous number; that it 43 Whole - 4/14/04 - Bill No. 040255 doesn't take a whole lot to add up 100 from one school, 200 from the other, 50 from the other, 800 from the other to come up. What's so sophisticated about adding the number of kids graduating and going off to college in the school year? I mean, did you have to get a special computer from Dell or a special program? I still use a pre-computer era calculator that I used as a construction worker to do all my work. And I don't mean to be funny, because it's a very serious issue. I also got -- Madam President, you requested I do this. I just talked to the Archdiocese. They still are in talks and using me as an intermediary to see if they can work this out with the Administration and Congressman Fattah. And that's what they just finished telling me. And I don't know what else I can do. Councilman O'Neill has stated very clearly that we're running out of time, and I concur with him. I don't know what else I can do. The Administration has put or the School 44 Whole - 4/14/04 - Bill No. 040255 District or somebody, I don't think they're all on the same page, has put an April 15th deadline to this. If we do work this out, how can we get our non-public school kids to benefit from this program, I don't know. So although the Archdiocese feels at this time that they're still in talks with the Administration, I think that I'm running out of my involvement in this matter when it comes to being an intermediary when we're actually running out of time. This needs to be settled one way or the other. If not, what I was trying to avoid, and that it is a vote in this City Council on this matter, might have to happen, I sure hope not, but might have to happen unless this is resolved like very, very soon. Thank you, Madam Chair.

You're welcome.

Madam Chair?

Yes, Mr. Jackson.

Can I just 45 Whole - 4/14/04 - Bill No. 040255 address one of the Councilman's concerns? The initial deadline that was set was one simply to allow time for processing of the number of applications that we anticipated receiving. It is certainly possible to either extend that deadline across the board or to establish an additional deadline. If the decision of Council is to include private and parochial school students, that they can even have a separate deadline. The initial deadline was simply to try and insure adequate time for processing of the number of applications that we anticipated receiving.

So you're still open to have this extended to go to -- so that this scholarship will be available to non-public school children, right?

Certainly.

So when are we going to make that happen? I mean, we have so many other departments here, and we have addressed this issue now and talked and 46 Whole - 4/14/04 - Bill No. 040255 debated this issue for days now. We need to get this resolved right away, and I think that you're in a position or someone is in a position, the Administration, to get this resolved soon, like today. I mean, here, this is -- I want to read this. This is in today's paper. It says, "I can't argue with the logic behind that, he said. I think it should be for all kids. Parochial school kids' parents pay taxes too, don't they?" And this is not a quote from my colleague, Brian O'Neill. He said something yesterday. This is a quote from the Chief Executive Officer of the School District of Philadelphia, Paul Vallas. So can someone listen to the head of our School District and make this happen?

Councilman, if I can respond on a couple of points, because I do think that there are several issues underway. First, on the issue of the data and the information, I would ask Councilman Ramos now or some time later, I know that I would be 47 Whole - 4/14/04 - Bill No. 040255 sincerely interested in finding out to which office that you spoke at the School District to get that information, because --

I will make it available to you as long as there's no 7 repercussion on the person who gave me the information.

You can take --

It came from the College Career Awareness department. Is that your department?

Correct.

It came from your department.

Well, we'd like to --

You guys need to get your act together and get to letting us know -- you guys need to get your act together before you come here, because with all due respect again to you that were kind enough -- I've had the good fortune of working with you in the past. For you guys to be on the same page and have this -- you have 48 Whole - 4/14/04 - Bill No. 040255 a coherent answer to where you really stand. The School District chief is saying one thing. You're saying another. Your office has provided me information. You're saying that information is not available.

The Chair recognizes Councilman Mariano.

Thank you. I'm old school. I have a meeting coming up. I just want to do this. I just did a very unscientific poll with my cell phone here. I called a principal of a high school and I asked him, I said, Listen, Pal, how many people graduated last year? Off the top of his head, 420. Out of those 420, how many people went to college? Off the top of his head, 65 percent. That's 273 people. I did that in three minutes. I think we can do that without a computer. A couple of phone calls, how many high schools we have. So obviously what Councilman Ramos and Councilman O'Neill and the rest of the 49 Whole - 4/14/04 - Bill No. 040255 Council people here are trying to do -- Mr. Jackson, welcome to Philadelphia. This is great, but this is obviously going to happen. We will afford this program, but want to jump on it and get this done now. All these excuses in the world aren't going to pay off when you have -- the magic number here is nine. You obviously have more than nine. So it's going to happen. Go back to the School District, tell Vallas it's going to happen. Start doing the math. Figure it out. Get it ready. It's going to happen. Thank you.

Councilman Ramos, are you finished with your questioning?

Yes. We got a lot of people here waiting. We need to get an answer very, very soon. If not, we're going to be put in a position to vote on this. I think it's very obvious to the public, to the people that have been here, that there's some very serious concerns around this, there's some very serious votes around here. 50 Whole - 4/14/04 - Bill No. 040255 That's all I have to say.

Thank you. The Chair recognizes Councilman O'Neill for a moment.

Thank you. Just with the information we received today, you could delve into this program, the background of it, what the School District is doing, how it compares to other districts. We don't have time for that right now. In fact, time is of the essence in a very unusual way. This 4.2 million in normal circumstances in a budget, if it were money with the Art Museum or any other piece of the budget, we know when our deadlines are. They're basically on or around May 20th to get a budget out of Committee, and that's when the hard and fast negotiations go on and restrictions and if we move money to a certain area where we have more control. That's not the case here. There's a deadline tomorrow and we have the real-world 51 Whole - 4/14/04 - Bill No. 040255 school year to deal with. I just want to put on the record for our witnesses that I've spoken both to the Council President and the Majority Leader this morning to ask that a letter be drafted by Council leadership with as many signatures as want to sign of Council members, because of the extraordinary nature of the timing of this, to go to the Administration of both the City and the School District and make it very clear that these monies, the $4.2 million, will only be supported in this budget with an expansion that is non-discriminatory and with a deadline moved -- I don't want to get into whether it should be for all students or for the non-public. I'd hate to start getting discriminatory now that we're talking about the very opposite of that. But that this happen by tomorrow so it's very clear to all students, all parents that this is being worked out, that what Mr. Vallas said he means and that what he said, Council also agrees with. So hopefully by the end of the day 52 Whole - 4/14/04 - Bill No. 040255 or the next few hours both the Mayor and Mr. Vallas will have such a letter and we can get some movement on this, get issues that are -- this is a very difficult budget. There's a whole lot of other issues, but they're issues that can be worked on over the next four to five weeks. This is not one of them. This is extraordinary because of the school year, because of the deadline in place and the need to send the right message out to Philadelphia taxpayers. So hopefully we'll be getting that. Obviously the two witnesses will be copied on it, and we can get some movement on it by the time we're in City Council session tomorrow. Thank you.

That's great. Thank you. Councilman Kelly, in view of what Councilman O'Neill just said, do you still want to be recognized?

Yes, I want to be recognized, Madam Chair. Thank you. Mr. Jackson, I just want to follow 53 Whole - 4/14/04 - Bill No. 040255 up with what Councilman Ramos was getting into. What negotiations have taken place with the School District with the Archdiocese of Philadelphia? Have you been having regular meetings with them or is it just something you don't discuss with them that much or you let Councilman Ramos do most of the negotiations for you?

If there have been meetings that have occurred, I have not been a part of them, so I can't speak to that.

In other words, you haven't really been in any discussions with the Archdiocese of Philadelphia?

Again, myself personally, no, but I can't say that the School District has not.

To your knowledge, has anyone from the Administration been negotiating or having meetings at least to get input from the Archdiocese?

To my knowledge, 54 Whole - 4/14/04 - Bill No. 040255 I'm not aware.

Well, this scholarship program, 4.2 million, where is that money coming from? Is it from the school budget? Is that coming out of the '05 school budget?

No, Councilman. That is coming from the general operating budget of the City.

General operating budget of the City.

And I do just want to clarify one point. I know that the line item does show up as 4.2. The $200,000 is an allocation that has been in there for many years now for a program called the City Scholarship Program, which is separate from the 4 million for this core program.

So the City just increased it by $4 million?

For a different program, but, yes, to initiate and to launch this core scholarship program, correct.

But as it is 55 Whole - 4/14/04 - Bill No. 040255 set up today, it is discriminatory. It excludes private schools, Archodiocan schools; is that true?

Well, as I testified extensively I believe yesterday and on other occasions --

Well, let me tell you, you have a problem. You have a real big problem. And I think everyone here, most of the Council members here, have sent you a real strong message, and that message is this scholarship program is in deep trouble, deep trouble. And I think that you're going to have to do something. As Councilman O'Neill said, you're going to have to do it very, very quickly. I would think that you would go to your offices today, meet with Mr. Vallas and see if we can get this cleared up. I'm very, very -- I should say I'm very surprised and very shocked that since speaking with Councilwoman Reynolds Brown, I thought this thing was supposed to be cleared up months ago. It was just a no-brainer that 56 Whole - 4/14/04 - Bill No. 040255 you were going to include all schools. It makes no sense whatsoever the way you're doing it. So I would like to go on record as being strongly opposed to any program that's going to be initiated by either the School District or the City of Philadelphia that's going to be discriminatory against anyone. Thank you, Madam Chair.

You're welcome. The Chair recognizes Councilman Nutter.

Just a couple of last questions, Mr. Jackson. One, let me make sure I'm understanding. The School District's position is -- and I'm not suggesting for a moment at this moment that there would be any lack of funding available from the City, but I just quite possibly didn't hear all of the answer. Councilman O'Neill I believe asked you questions with regard to the program going forward, either with restrictions -- or no 57 Whole - 4/14/04 - Bill No. 040255 restrictions, actually, on City dollars or if somehow, some way at the moment only the School District dollars were available, would the program still proceed. Because I was slightly confused by at least a part of your response that I thought I heard, that somehow the arrangements that had been made or the financial commitments that were made were based on, I guess, the School District and the City dollars being made available. But you would still do the program. I guess ultimately you would have fewer dollars.

We would have fewer dollars and the program would have to operate in an altered form, correct.

What does that mean?

We would probably have to look at either reducing the amount we could award to students or not awarding every student who is eligible.

And the expectation here is that every student who applies, as long as they meet the other 58 Whole - 4/14/04 - Bill No. 040255 eligibility criteria, will get a scholarship?

Correct.

Do you have a concern that you could, under that circumstance, just run out of money?

Based on the initial projections, if the program was fully funded by both the City and the School District, initially, no, that was not a concern.

And this particular program has no need-based criteria?

It has a need-based criteria only in that it is a last-dollar scholarship, which fills the gap between what the university awards and the cost of attendance.

Let me ask you a question. For the school children who went to college last year -- or I'll rephrase it. How many children did not go to college last year because of a lack of funds?

I'm not sure that we have statistics that would accurately 59 Whole - 4/14/04 - Bill No. 040255 reflect that. There have been national studies done --

Don't tell me about the national. I want to talk about Philadelphia. How do you know the program will help if you don't know how many people didn't go to school because of a lack of funds?

We know that a number of students are forced to take on an inordinate amount of student loan obligations to try and meet the cost of college, and we know anecdotally --

I know a little bit about that.

And we know anecdotally that students have indicated that cost of colleges was one of their deterrents.

How many students indicated that to you?

Again, we have national figures and we have anecdotal figures, but not a full-scale study within Philadelphia to give that amount. 60 Whole - 4/14/04 - Bill No. 040255

Well, how did you decide on the $3,000 cap?

$3,000 was based upon, one, history of a last-dollar scholarship program that's been implemented through the Philadelphia Education Fund, and additionally a study of the average financial award for students who meet the majority of our economic demographics in the City and the cost of attendance at a university.

But after all of that, you still don't know how many students of the -- you have 9,507 students that graduate and -- I'm sorry. What was the number again for last year, how many went to college?

Again, the national average is at about 30 percent. So our assumption is that roughly 3,000.

And I think from our earlier discussion, we don't know where the other 6,000 to 7,000 young people went --

Correct. 61 Whole - 4/14/04 - Bill No. 040255

-- or what they ended up doing, and we also apparently don't know of that 6,000 or 7,000 how many did not go to school because of funding --

Correct.

-- problems? Do we know of the 6,000 or 7,000 how many of them even applied to college?

We have estimated figures that we had roughly 5,000 applications on average.

What do you mean "estimated figures"? Where did the estimate come from?

Those, again, are self-reported information from counselors.

Okay. On the School District side, are you going to administer your portion of the program or is this all going to be done by Philadelphia Education Fund?

Philadelphia Education Fund will actually process the 62 Whole - 4/14/04 - Bill No. 040255 applications and coordinate with the universities for the issuance of the checks for the students.

Is there an administrative cost for that service?

Yes, there is.

How much is it?

I believe it is about 200,000, which is a cost being borne by a third party.

Who is the third party?

Sallie Mae Fund.

Now, I understand your position is you're -- are you the Director of College and Career Awareness?

Correct.

Who is actually in charge of the high schools?

That would be the Deputy Chief Academic Officer, Dr. Craig Williams.

And is he 63 Whole - 4/14/04 - Bill No. 040255 involved in this program? Who is in charge of the program on the School District side?

Overall he has the responsibility. The day-to-day operations of the program is my responsibility.

Okay. And I guess my last comment would be, is your statement in response to Councilman O'Neill this morning in concert with or slightly different than the statement that we read in the paper this morning by CEO Paul Vallas?

In concert with.

And can you forward to the Chair a copy of the provisions specifically related to the funds that the School District is using for their portion of the program, whatever the statute is and the requirements and regulations that go with these funds?

Certainly.

And one last question. Are these funds only for scholarship or are they just for general use of School District students? 64 Whole - 4/14/04 - Bill No. 040255

It is part of a program which is designed to increase college-going rates, the Gear-Up Program, a component of which has provision for scholarship.

So you can use some of the funds for scholarship, but you can use some of the funds for other things. And is there a requirement within the funding source that some portion or some percentage of the funds must be used for scholarship?

It's not a requirement, but it is an option available to grantees.

Okay. All right. When do you think you can have that statute?

I can go back and begin to pull that together today to have available by tomorrow.

If you can get it to the Chair, I would appreciate it.

Certainly.

Thank you. 65 Whole - 4/14/04 - Bill No. 040255

Thank you. Are there any other questions or comments from members of the Committee regarding the two witnesses? (No response.)

Thank you both very much.

Thank you.

Thank you, Madam Chairwoman.

The Finance Director is up next. Good morning.

Good morning.

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

I'm Janice Davis, the Director of Finance of the City. On behalf of the employees of the Office of the Director of Finance, I am pleased to provide testimony on the department's proposed FY05 operating budget. With me are Finance 66 Whole - 4/14/04 - Bill No. 040255 representatives who are available to answer your questions. The Office of the Director of Finance's FY05 budget for all funds totals $1,062,522,407. The single largest component of the all funds budget is employee fringe benefits budgeted at $794,864,130. This represents a $127,194,500 or 19.05 percent increase over the current FY04 projection. This change is due to continued increases in pension fund and healthcare costs. The general fund budget request is $844,558,745. The general fund share of employee fringe benefits is $713,724,000. Other significant elements of the finance budget are legal services and witness fees, contributions to educational organizations and refunds and indemnities. This budget includes a contribution to the Community College of $21,717,924, a decrease of 750,000 from the FY04 contribution, but still $2.45 million more than at the beginning of this Administration. The Office of the Director of 67 Whole - 4/14/04 - Bill No. 040255 Finance is comprised of six divisions: Executive Direction, the Accounting Bureau, the Office of Budget and Program Evaluation, Minority Business Enterprise Council, the Office of Administrative Review and Risk Management. The proposed direct appropriation in FY05 general fund budget for the office is $14,819,891, a decrease of $1,824,061 from the current projection for FY04. This decrease is the result of reductions in appropriations across all divisions, except for the Minority Business Enterprise Council. This budget anticipates 165 full-time positions, an increase of 10 positions from FY04-filled positions, six in the Minority Business Enterprise Council, two in the Executive Direction that are water funded and two in Risk Management. Our departments, boards and commissions under the direction of the Office of the Director of Finance will provide separate testimony. I am happy to answer any questions you may have at this time. 68 Whole - 4/14/04 - Bill No. 040255

Thank you. Ms. Davis, on of the detail, I see that you were budgeted for 141 full-time positions in FY04 and you are requesting 159 full-time positions in FY05. What is the justification for this increase of 8 positions? 9

Part of those 10 positions are the additional positions that 11 were provided for MBEC -- 12

I'm 13 sorry? I didn't hear your response. 14

Part of those 15 positions are the positions that are in 16 Minority Business Enterprise Council and the 17 others are the clusters. We've gone to 18 clustering. And so a lot of the finance cluster happens to sit within the Finance Department. So a lot of the administrative people who would have been in other departments and are now housed in Finance --

So they're not actually employees?

They're not 69 Whole - 4/14/04 - Bill No. 040255 actually an overall increase in the general fund. It's our way of reducing the administrative services, but they happen to be housed in Finance.

Okay. And would it indicate in the budget books that we have which departments these positions are coming from?

It's not indicated in -- you have to notice a reduction in those other departments.

Can you supply us with that information, please?

We will provide it.

Thank you. During the hearings on fiscal stability, you mentioned that the City was looking into various self-insurance models for employees' health benefits and that there would be a savings of $5.6 million. Was that included in the FY05 budget?

It is included.

It is 70 Whole - 4/14/04 - Bill No. 040255 included? We don't know what we're doing yet, but we've gotten there. It's already in the budget.

There are other ways that we can get those savings.

Can you tell us what consultant services are required in this endeavor, how much did it cost and is it in the budget?

We will likely require consulting services. It is not specified as a line in the budget at this point and will come from the savings that would be derived.

But weren't the savings already taken out of the budget?

It is usually our practice never to take 100 percent of any savings that we anticipate, especially in those situations where we know that there will be expenditures required to reap those savings.

71 Whole - 4/14/04 - Bill No. 040255 Please explain what is in the Administration's revenue estimates for the general fund with regards to the scope?

We still have the scope at the original 4.9, but that will be reduced.

If the Water Department's sinking fund reserves are paid over to PIDC to fund a portion of the Mayor's economic stimulus program and as a result of this the Water Department will not be able to pay the scope, aren't we, in essence, unbalancing the budget and the five-year plan?

The budget and five-year plan are already unbalanced at this point by the recent events related to PGW. So that will be part of our consideration as we go back to our rebalancing efforts.

Yes. We did hear yesterday that the Administration is waiving the $18 million for FY05 through FY08, and we will defer the 45 million, a lone payment, until FY09? 72 Whole - 4/14/04 - Bill No. 040255

Yes, ma'am.

When will you be submitting your proposed adjustments to the plan?

We have to internally get together and start to work on it. I would expect that before -- I need a little deliberation here. We anticipate that we'll have something for City Council within two weeks.

End of this week?

Two weeks.

Oh, I'm sorry. Does the Administration expect PGW to be downgraded again?

If PGW's attempts to restore liquidity are not successful, and that's what our foregoing of the 18 million is intended to assist them with, if those attempts are unsuccessful, then there is a possibility that the company will be downgraded. Our efforts, however, are 73 Whole - 4/14/04 - Bill No. 040255 directed towards restoring that liquidity.

Ms. Davis, I would like you to comment on the City Controller's audit report of the City Treasurer's office for 2001 and 2002. The Controller found that the City's fiscal agent held over $15 million in unclaimed bond payment funds. Of this amount, over 10 million was held over two years and over $8 11 million was held over seven years. 12 It is my understanding that any 13 payments that have been unclaimed for two 14 years can be paid over to the City. Do you agree?

Bond fund payments are usually considered payments in trust. I'm not an attorney, so I would have to defer to the Law Department. However, we do derive the benefit of the interest that those uncollected bond payments are making.

Well --

And I'll get an answer from the Law Department as to whether 74 Whole - 4/14/04 - Bill No. 040255 we have the right to spend those dollars.

I think you did receive a memorandum from the City Solicitor, Nelson Diaz, on December 24, 2003, if you'd like to see it.

That would be helpful. I don't recall.

Give that to Ms. Davis, please.

These monies remain under our control and they're in the bank accounts under our control and we derived a benefit, which is what he says in there, and we're not subject to a sheet.

Well, doesn't that indicate that we could bring those monies into the general fund?

We could bring them into the general fund, but the liability to pay them still exists.

I notice that there are a number of Council members that would like to be recognized, but I think we have to be very specific on this. 75 Whole - 4/14/04 - Bill No. 040255 Does this issue, is it reflected anywhere in the budget in FY05?

Excuse me. What issue?

The issue that I'm just talking about.

About taking these bond dollars back in?

Yes.

It would be a cash flow transaction. It would not be -- it wouldn't show up as a budgeted item if we're talking about pulling these as sheeted funds back in. Those are on our books as cash. We're not showing spending these dollars if -- maybe I'm not understanding.

Isn't it revenue to the general fund, Ms. Davis?

These would be revenues that would be offset by a liability. The liability to make a debt service to pay these funds is still there. So it would not have a material impact other than in cash flow. 76 Whole - 4/14/04 - Bill No. 040255 I've never seen taking bond payments that are held in trust back into our Government's books as new revenue. I will be happy to investigate it. I've never seen that done, because the liability still remains.

I think it's worth looking into it, because it is a sizable amount of money.

Yes. I think our bondholders might have a problem if we started doing that consistently.

Maybe we can buy a surety bond of million. 15

Actually, we couldn't do that for that. I wish we could.

The Chair recognizes Councilman Goode.

Thank you, Madam President. Good morning, Ms. Davis.

Good morning.

In your testimony I note that you're asking for six new positions at MBEC and in yesterday's 77 Whole - 4/14/04 - Bill No. 040255 testimony in response to yesterday's testimony by the Chief of Staff, I noted with her that, in fact, there does not appear to be a hiring freeze, clearly because the first two offices in the departments that come before Council are asking for increases in the Office of the Secretary of External Affairs and the Office of the Inspector General and now at MBEC. And while these appear to be strategic investments, it also appears to be not necessarily a strategy, and she was not able to articulate one for what the new positions at the Inspector General's office would do. Can you tell me what the six new people at MBEC would do?

The six new people in MBEC are intended to provide a capacity and capability that we don't have now. We spend a lot of time on certification, very little time in monitoring. And it is a fact that we do not have enough people to actually do the level of monitoring in outreach that's required to make this --

Do you, in 78 Whole - 4/14/04 - Bill No. 040255 fact, have a strategy that calls for a specific number of people and specific duties? Do you have, in fact, have a strategy that you can tell us about today?

We have not laid out what the assignment of staff will look like, if that's the question.

So how do you know you need six people?

We have six people available. We have had a study that identified that many, the Ganz and Ganz report. If, in fact, that number is not needed, we are not going to fill positions that we will not need.

Let me ask you a few questions. How long have you been in the Street Administration?

It will be four years on May 15th.

And who interviewed you?

A transition committee. 79 Whole - 4/14/04 - Bill No. 040255

And did the Mayor make the final decision?

I don't know. I met the Mayor for five minutes before --

Did he, in fact, interview you?

No, he didn't.

Did the Mayor ever question you about your experience in minority business development or your plans for MBEC?

No, he didn't.

Did he give you any policy directives in your first term regarding MBEC or minority business development?

Excuse me. I didn't understand.

Did he give you any policy directives with regard to MBEC or minority business development in the first term?

Our directive was to increase minority participation. 80 Whole - 4/14/04 - Bill No. 040255

But no 3 specific policy directives? No need to revamp the agency?

No specific directions.

Did you come with any vision for MBEC before accepting the job of Finance Director?

I knew how minority programs worked effectively in other places. I've had responsibility over those areas previously.

So what is your understanding of the legislation passed by City Council last year related to disadvantaged businesses and minority participation and how it differs from what was in the Code before that?

What was passed by City Council was a goal-based program where we really didn't in the past have a specific goal-based program.

By "goal-based," you mean annual participation 81 Whole - 4/14/04 - Bill No. 040255 goals?

Yes.

So how do you intend to set those annual participation goals? Is it per the legislation or do you have a process by which you plan to -- or do you, in fact, plan to set annual participation goals?

We intend to comply with the Ordinance to the extent that it is permitted by law.

But the Executive Order differs from the Ordinance 15 with regard to setting annual participation goals; is that correct?

There were some differences, yes.

I'm talking specifically about the setting of annual participation goals.

I believe you're correct. I don't know --

Goals that would be set based upon the present 82 Whole - 4/14/04 - Bill No. 040255 availability of qualified disadvantaged businesses, the utilization of qualified disadvantaged businesses, the past contracts, a for-cash of eligible contracts and basically how you're meeting, what capacity has been demonstrated and the amount of contracting you're going to do. Is that type of data-driven process and that type of monitoring going to be done in terms of deciding what the capacity is and deciding what the actual disparity is on an annual basis?

Yes, it is.

Tell me broadly more specifically, how do you actually believe the issue of disparity in city contracting is resolved?

It will be resolved when the entire region becomes more accepting of diversity, and that happens through our office providing outreach, providing opportunity.

I'm speaking specifically. How do you resolve the issue of 83 Whole - 4/14/04 - Bill No. 040255 disparity in city contracting? For instance, four years ago --

Oh, just in the city's, not in general?

City contracting.

Our efforts have to continue within the departments to hold them accountable for their individual department's performance.

But still there's no specific new strategy? Four years ago we identified the same type of disparity in small business lending to minority and low-income neighborhoods. Administration didn't take any steps to deal with that disparity. Can you tell me specifically, do you have any strategies that you can share with us today with regard to disparity in city contracting or disparity in small business lending?

We do not have the specific strategy identified today. 84 Whole - 4/14/04 - Bill No. 040255

I look forward to my second round of questioning, but thank you, Madam Chair.

You're welcome. The Chair recognizes Councilman Nutter.

Thank you, Madam Chair. Ms. Davis, I wanted to go back -- and I apologize. I was slightly distracted. The issue of the -- is it 15.8 or basically about $16 million in unclaimed bond proceeds --

Yes.

-- or bond payments?

Bond payments. Debt service payments.

Now, they've been unclaimed for how long?

Apparently varying months of time. I think one statement was made that up to seven years. And I would 85 Whole - 4/14/04 - Bill No. 040255 assume that there are some that have been outstanding longer. I've worked in -- I would assume that there are some that have been outstanding for a much longer period. I've worked in organizations where they've been outstanding for the full 20, 30 years. When on old lady misses the coupon or that bond and they find it after she's passed away and the estate then presents it.

Well, the audit of that seems to indicate that it's $8.8 million that's been outstanding over seven years and 14 million over two years, and the statute seems to provide that after two years, basically the money reverts to the City?

Under City's control, and we derive the interest from it, yes.

And are we taking the interest into the general fund?

The interest is coming in, yes. It's part of our interest means.

What is the 86 Whole - 4/14/04 - Bill No. 040255 plan for the $15.8 million? I mean, how long would we let it sit?

I will ask the Law Department if, in fact, our statute extinguishes an obligation to the bondholders. I've not seen that happen in other places, where you can just extinguish an obligation by the passage of time. And I'll be happy to investigate it. If these are funds that we can take in without liability, we'll be more than happy to use them, but I've just not seen that done.

This may go to your issue. It seems that the Bond Act out of Title 53, Impertinence, seems to say excess monies in the Sinking Fund, including monies for the payment of the interest, principal or premium of bonds unclaimed after the due date for two years, shall be repaid to the City for its general purposes or applied as may be provided in the Bond Ordinance, but such repayment of unclaimed monies shall not discharge such claim, which shall continue subject to applicable law. 87 Whole - 4/14/04 - Bill No. 040255

Yes. So I would still have to see a liability on the books if I use the funds. They would not be new revenue.

I'm sorry?

They would not be new revenue. They'd be revenue offset by a liability. So while I might have cash and the availability of cash, if someone presents that claim, that is still a valid claim.

Well, I understand that, but --

So it's not really revenue in its truest sense. It's just a shifting in a position on a balance sheet.

Well, I don't want to have an accountant debate with you, but we make these kinds of judgments, I think, on a pretty regular basis about what we take in, what we send back out, the risk associated with it. I mean, this is a situation where at least for 8 million of the 15.8, a little more than half has sat unclaimed for seven years. I mean, the longer 88 Whole - 4/14/04 - Bill No. 040255 it goes, I think would you agree, the less likely it is that someone is going to show up?

Yes.

I don't think people generally use us as their bank.

Well, it's usually somebody lost something and they find it later.

Is this something where they passed away or forgot about it?

Yes.

I mean, we do make refunds.

And I'll be happy to investigate what we need to do to pull those funds in.

Okay. I appreciate it. So you'll get us something about that?

Yes.

Okay. In a hearing -- I can't keep track of them all these days -- I think it was last week, and I 89 Whole - 4/14/04 - Bill No. 040255 don't know whether under questioning by the President, there was further discussion about the self-insurance issue. Have we had any of that discussion this morning?

There's been very little.

I'm sorry?

There has been some, but not extensive.

Is the Administration any farther along on that?

No. We've not decided the particulars of the program, if that's the question.

Okay. Can you give us any particular information with regard to the recent decision involving PGW and the $18 million impact on -- and Mr. Dubow tackled some of this yesterday -- impact on the upcoming budget, as well as the five-year plan?

As we discussed yesterday, there's 18 million in the plan each year from fiscal year '05 through fiscal year 90 Whole - 4/14/04 - Bill No. 040255 '08, and the $45 million loan is soon to be repaid in fiscal year '07. Last week we didn't get any of that revenue, so there would be $72 million less that we would receive over the life of the plan, including $18 million in the budget year. And since we had a surplus at the end of the budget year of 13.6 million, we would then have a $4.4 million gap as a result of not getting the $18 million, if nothing else changed. So we need to go back and look at the budget and the plan and figure out how to make them balance.

Did I hear the bell?

You did.

I'll come back. Thank you.

We'll have a second go-around. The Chair recognizes Councilwoman Tasco. 91 Whole - 4/14/04 - Bill No. 040255

Thank you very much. Could you explain the $125 million to be taken from the water revenue reserve to be used for the Administration's $500 million economic development initiatives, and are these restricted funds and can they be used for other things other than water-related expenses?

These funds, as we currently expect to withdrawal them from the water fund, are restricted to water-related items. What would be involved is that the City would purchase a surety policy to replace those funds that are withdrawn, and the surety policy acts as the insurance against the possibility that the City would not be able to pay debt service at some point in the future. The reserve fund -- and at this point, that reserve fund has a cost to carry that is negative, because we paid much more in debt service for those funds than we're earning in interest because of the interest environment. So your negative cost to carry 92 Whole - 4/14/04 - Bill No. 040255 is probably in the three percent range. But those funds are there as insurance against the City not being able to make a debt service payment. We can buy a surety policy that provides that same type of coverage for a one-time fee.

How much would the insurance policy cost?

Between $3 and $4 million.