In fact, I have a copy here of letter to the Chamber of Commerce from Mayor Wilson Goode, January 9, 1987, reporting on the first three years after that substantial wage tax increase, and the first three years of his administration from 1984 to 1986 as you were becoming Commerce Director, the City had already had a net gain of 33,100 jobs. For the next couple of years that job expansion continued tremendously. I think at some point, you could tell me probably better than I can tell you, I think upwards of 50,000 jobs in terms of net job gains. How do you explain that?
Well, I think it was a time of great downtown development throughout America. And as you recall, there was a major debate about the height limit in Philadelphia. During that time, we had four major office towers coming up, the first one being the Liberty Tower. And I worked on keeping CIGNA here instead of moving out to Conshohocken. But let me tell you how it has changed since that time, Councilman. When I was in that battle to save CIGNA and to keep them in Philadelphia through the efforts 254 4/8/02 - WHOLE - TAX REDUCTION BILLS and leadership of Mayor Goode who provided me all the support I needed to do that, we kept them here in Philadelphia and Conshohocken lost. But since that time, Councilman, you will note that Conshohocken is overridden with office buildings upon office buildings upon office buildings in small Conshohocken. That is the difference between that period of time and up to the late '80s and into the '90s.
My question is more specifically from experience as Commerce Director and before that First Deputy and Deputy and your experience with Chamber of Commerce, how do you create jobs in the City of Philadelphia, particularly looking at a period when we had the greatest job gain over the last three or four decades? Can we separate this notion that it's only tax cuts or that it is tax cuts or incremental tax reform that is actually going to create jobs in Philadelphia?
It sort of brings me back to when I was a member of the Goode Administration. But let me tell you what I would tell people then. You create an environment. Mayor Goode created an 255 4/8/02 - WHOLE - TAX REDUCTION BILLS environment by breaking the height limit on skyscrapers on offices. He created the environment. Remember how some people would criticize him for cutting ribbons? He created an environment because he called and he was there for every expansion of business. Do you know -- I'll tell you a story. It's a great story. He would call companies. I would give him a list of companies to call every week. He would call people up and say -- I'll never forget this. He called. I'm in his office. He said, "Hi, this is Wilson Goode." The guy was like flabbergasted. Holy molely. He was flabbergasted. The Mayor created the environment. That's what he did and that's how you create economic expansion.
Thank you for that testimony for dispelling the myth of how jobs are actually created and for dispelling the myth that Center City revitalization happened during the '90s rather during the'80s-'90s and that a bulk of it happened during '80s.
All the plans, Councilman, all the plans and all the financing happened in 1985-'86. 256 4/8/02 - WHOLE - TAX REDUCTION BILLS
One last question. Moving beyond the issue of tax reform but still on the issue of job creation, what role do you think bank redlining and the lack of access to capital plays in the growth opportunities or lack of growth opportunities for neighborhood businesses?
Well, it's very important that everyone has access to capital. Without capital, you cannot succeed in a free economy, in a market-driven economy. And that's why we got, frankly, involved in the Philadelphia plan where we had 12 companies provide a 10-year commitment for $250,000 a year to join with community development corporations to ensure that they would. And lots of those institutions were banks who provided the capital.
I guess the question I'm really asking is most of our businesses are located within neighborhoods and neighborhoods that are redlined by banks because of their income status. Isn't it true that we're not able to grow businesses throughout Philadelphia also because of bank redlining?
I do not believe the banks 257 4/8/02 - WHOLE - TAX REDUCTION BILLS redline. I can't tell you about the history of that. But I can assure you in every neighborhood there are bank branches --
Well, I'm not a banking expert. I can't speak on what they do or what they don't do.
When we produced the Greater Philadelphia Access Report within a few weeks of my coming into office, they wanted to look at our data because they realized they weren't doing business in those neighborhoods but they finally realized that other people weren't either. And so they began to look at it as a market niche and wanted to go after that small business market. So clearly, beyond tax reform, there's an issue of capital access for neighborhood businesses. And is the Chamber willing to take on that fight as well?
Well, let me just give you without mentioning names. I and Judy were at a breakfast of a major banking institution who has moved into this region and he specifically cited the opportunities in the inner City and that they were 258 4/8/02 - WHOLE - TAX REDUCTION BILLS going to aggressively respond to those opportunities. And he said that, and I take him at him word.
Well, I'm glad that I authorized deposits in that bank then. Thank you for your testimony.
Thank you. Good afternoon. Let me first echo Councilman Rizzo's remarks and sentiments and I agree with him completely to applaud you for this debate. It is healthy and some might say is long overdue and hopefully yields the kind of resolution 17 that we all think is appropriate and in order. Secondly, let me say thank you for as a business leader of this City at least making a connect between taxes and schools. On you speak to that, and I thank you for that because for me that is the Number One issue. Would you first answer the question, do you believe that taxes are the only reason for population losses? 259 4/8/02 - WHOLE - TAX REDUCTION BILLS
I believe it goes in this order, taxes, public education, and crime.
I thank you for that because my research tells me that since 1970 Detroit, Washington, D.C., Baltimore, Cleveland, Pittsburgh, and Buffalo all have lost a higher percentage of their population than Philadelphia and I think it's important that we present the big picture and the complete picture when we're talking about why we lose residents from our City. The question for me remains in this debate -- the issue for me is redundant. How does one reconcile the funding for our schools, knowing that their future tenuous and unpredictable with regards to funding from Harrisburg, and at this time do wage tax reductions in a manner that is responsible? I posed that question to both City Controller Jonathan Saidel and Sam Katz, and I'd be interested in hearing your response as well.
Just so long as I have this correctly, Councilwoman, you want me to answer -- 260 4/8/02 - WHOLE - TAX REDUCTION BILLS could you just phrase it one more time?
Sure. The City now has committed itself for the long-term to contribute an additional 45 million to the Philadelphia Public Schools. Given that, and that's just one new area of financial responsibility that we have, how do we honor that commitment and still today as Jonathan Saidel put it very succinctly, deal with wage tax reductions in a manner that is responsible and meet what I still believe should be for me, it is for Blondel, the Number One issue facing our city -- some might say it's wage tax. I say it's poor schools.
Well, I think the answer if you want to just use the economic model is growth. See, we're in the position we're in now because we've suffered not from growth, but from decline in our population. And if you put out free market opportunities we will get growth. I believe that in the five years that we had wage tax reductions, during those five years of those reductions, we actually have had more revenue from the wage tax even with those cuts. We have to grow this City. We have to grow it and that's why it's a matter of 261 4/8/02 - WHOLE - TAX REDUCTION BILLS opportunity. And I believe that we should put ourselves maybe not with Detroit or Buffalo, but we should put ourselves with Phoenix, Atlanta. Let's compare ourselves with the best in the class because Philadelphia, as you know, deserves no less. We are a great City. (Applause.)
I would just like to add to what Charlie said in that we really think that state-wide tax reform is what's called for here. And if we had our druthers, that's where we'd be marching. But we look at this as a small step, if you will, in the right direction. And as you know, the business community has always tried to work quietly behind the scenes. We have tried numerous times, Charlie has, to have meetings with the Mayor so that we wouldn't have to be here today because we really don't want to be here today. And I think what we're imploring you to do is get us all off the hook and vote for this Bill 92. It is not a big deal but it just sends a powerful message, the kind of message I think that we really feel so strongly about for the whole community, that Philadelphia is on a roll and that we do want 262 4/8/02 - WHOLE - TAX REDUCTION BILLS businesses here and that we're going to grow. And I think if we can grow, if we can get the revenues in the door, we can solve all kinds of problems. And I think that's our message.
I thank you for that response. There is for sure a consensus that state-wide tax reform is long overdue. But while we wait optimistically for that new date to happen, Philadelphia is confronted with the current reality that we have $45 million that we have to start contributing post haste. So while we wait for tax reform, we're obligated to the $45 million and we have this new issue before us that I'll state again for a record all of us agree that there should be wage tax reductions, but we cannot deal with it in a vacuum and do it still in a responsible way. Thank you very much. Thank you, Madam President.
Thank you. The Chair recognizes Councilman Kenney.
Taking off on what Councilmember Brown has just talked about, I want to create for you a little scenario and I want to get your response to what may happen if in fact we do 263 4/8/02 - WHOLE - TAX REDUCTION BILLS substantial and aggressive wage tax cuts into the future for not only for Philadelphia residents, but for suburban commuters. I believe that that kind of reduction for the suburban commuter population creates a much better attitude and environment amongst those constituents of state representatives and state senators who surround Philadelphia who need to help us in state-wide tax reform to fund our schools. If in fact we can argue that the City of Philadelphia has done their share, their bit, to help their constituents, then the pressure and the negativity and the antagonism towards helping Philadelphia schools, in my opinion, in many ways goes away or at least subsides. (Applause.)
So if I have a tough vote the senator needs to make from Montgomery County or Berks County or from Delaware County or a statehouse member need to make a tough vote to help reform charter school funding or to help Philadelphia get more money for its schools along with the rest of the school districts within the state, that's a much easier sell when they can say, You know what, Philadelphia is at least doing their 264 4/8/02 - WHOLE - TAX REDUCTION BILLS share to take the tax burden off us. Even though we don't live there, even though we make our livings there and we take advantage of some of the services there, you know what, maybe it's time, maybe it's a little easier now for you to help Philadelphia schools and other issues. What's your opinion on that? I don't know if you live in the suburbs or not.
I think we're in total agreement with that. And we work with the Chambers and we work with the commissioners in the surrounding counties in every way we possibly can to be supportive of that. We're working with people in Harrisburg, the rest of them that are in trying to initiate initiatives like that as it relates to charter school financing as another possible solutions. So anything we can do to send a signal that we in Philadelphia are looking at the big picture here and that we're not parochial, I think that's a large part of what this is all about. 265 4/8/02 - WHOLE - TAX REDUCTION BILLS
So anything that we can do to shift some of the tax burden through actions we take here potentially shifting that tax burden indirectly to Harrisburg by giving their representatives a little more breathing room and leeway to help Philadelphia may in long term be a good thing for us.
Yes. Councilman, that's a very good point because it's a growth strategy that you've just outlined, it's a vision. And I can tell you, I am closely engaged in the real estate world here in this region. I can tell you, as I was quoted when the Nutter/DiCicco bill was introduced, I was quoted in the Inquirer as saying, "This is a major signal to Harrisburg that we are willing to take on the issues that will make our City competitive. And it sends a very strong signal to all those suburban legislatures who you help bring to our City for the expansion of the Convention Center that we're able to do our part, that we're willing to do our part, that it's not only about how much can you give us; it also has to be the two-way conversation. And that's why this is very important. It's a two-way conversation. And it is 266 4/8/02 - WHOLE - TAX REDUCTION BILLS a powerful message that we are sending to Harrisburg. And I think that's why the response from Harrisburg in the last week has been overwhelmingly positive.
I just want to add that I think if the business community and City government can speak with one voice, that is so powerful. And I think that's really what we're all about. If we can somehow get to the point where we're on the same hymn sheet here and we can speak, you know, our business constituency that we represent with this Chamber and hopefully the City Administration combined, we've got so much more clout. And I think that's what we're after.
So I guess in some ways a vote to reduce the wage tax for both City and for commuters in some way may help down the road in providing more money for our schools and for things like expansion of the Convention Center.
Thank you. 267 4/8/02 - WHOLE - TAX REDUCTION BILLS The Chair recognizes Councilman Nutter.
Thank you, Madam President. Good afternoon, Mr. vonSeldeneck, Mr. Pizzi, and Mr. Weintraub. Mr. Pizzi, I just wanted to ask you a question with regard to it's my recollection, but I don't have your resume in front of me that -- and maybe someone went over this earlier. If I missed it, I apologize, and you can just tell me. You have previous experience with the City?
Yes. I worked from 1976 through 1984 at PIDC. I ended my career at PIDC as vice president. I was in charge of working with companies and putting together financial packages. I then became Deputy Commerce Director, First Deputy Director, and then finally Commerce Director in 1988. I then by virtue of being president of the Greater Philadelphia Chamber of Commerce appoint eight members to the PIDC Board Execute Committee, and so I presently am vice chairman of PIDC today.
Can you share with us -- and again, I apologize if I missed any of this from either your testimony or other questions. 268 4/8/02 - WHOLE - TAX REDUCTION BILLS Please don't answer a question a second time. Can you tell us from your government experience or your quasi-governmental experience and now your private sector experience your perspective on the impact of the wage tax first for the City in terms of trying to attract or keep businesses or in the parlance "do deals" either from the commerce side or from the PIDC side?
I think the wage tax is very important to every business and every individual. From a business side specifically, it is very important to all the major employers in Philadelphia who do not sell things in Philadelphia. See, most of the largest employers that we have, the gross receipts tax has absolutely no effect on them.
Because they are multi-national companies and they do most of their business around the world, around the United States, around the region. How many companies actually do business within the City? So it's a cost of doing business. They view the wage tax as a cost of doing business. So what has to happen, and I have done this for several years, you have to then create 269 4/8/02 - WHOLE - TAX REDUCTION BILLS economic stimulus dollars to offset what the companies are doing because of their labor cost. So the perspective from a business or a commerce department is very important because there is where the office workers are going and they're not going here.
Does it surprise you at all or what's your reaction to have many of the programs or tools, if you will, that the City has been able to utilize in the area of economic development over the past at least 10 years that I've been around and maybe some before that? Almost all of them are tax related. We have Empowerment Zones which are about reducing or eliminating certain taxes. We have the Keystone Opportunity Zones which were created for the same reason. We actually have had two rounds of the creation of Keystone Opportunity Zones all designed to attract business. And the primary benefit of being in those areas is not paying taxes. Tax Increment Financing Zones have been created for that purpose. Council bills that have come through here in recent times, you have new construction tax abatement as well as building conversion tax abatement because of the tax 270 4/8/02 - WHOLE - TAX REDUCTION BILLS situation here in Philadelphia. I'm left with the impression that the only way that we can either get businesses to locate here or keep the ones that we have, all the discussions revolve around the level of taxes, the type of taxes, and basically what are we the government going to do incentives, if I will, those companies to stay beyond the creation of the Kimmel Center, beyond the sports stadiums, beyond possible expansion of the Convention Center, which are all good and all appropriate and add to the life of the City; you do have to come to Philadelphia to enjoy certain things. No matter where your business is located, if you want to see a sports game, if you want the cultural experience, the restaurants and the like, they are here. But I'm left with the impression that the chief financial officer of the company that has to make the recommendation to the president and CEO, that has to make the recommendation to the board of directors, I don't necessarily know that they have a whole lot of conversation about how many restaurants we have or what our stadiums look like or what our cultural facilities and the Art Museum and all of that 271 4/8/02 - WHOLE - TAX REDUCTION BILLS because you don't have to locate in Philadelphia to take advantage to any of those wonderful opportunities. You can be -- and I heard you in the back. You can go to Bala 123 or any of those places and you only added another five minutes. So I'd just like to get your perspective on doing business, making a deal, and what are the ultimate and final factors that a chief financial officer and other people involved in that decision-making process, what are they talking about in the private of the room as to where they're going to locate their business?
Councilman Nutter, I think we're all going to participate in the answer to this question because it is a wide-ranging question.
Well, I think it helps stimulate good discussion. Let Judy vonSeldeneck who recruits people, CEOs, CFOs, and she can tell you firsthand of her experience first.
Well, you know, I remember back when we had the Council of Economic Development back in the '80s, and what we did then 272 4/8/02 - WHOLE - TAX REDUCTION BILLS as we aggressively went after companies to try to convince them to come to Philadelphia and we would do things like we had the printing industry come together, we had all of the companies in the region that are in printing come. We brought all the key people in City Government that they need to do business with. We brought leadership in the business community. And our message was, we are really business friendly, we really care about you, here are the people that you need to work with in the City, we want to help you grow your businesses, we want to retain you here, we are your partner. And Walter Lesio (ph) headed that up, and I had the privilege of working with him on that too. And we had a number of those industry specific. We also had another group that targeted the business locators around the country that we would go meet with to try to sell the City of Philadelphia and why they should come here. So the message was that the City of Philadelphia is pro business, we want you here. And I think that's, again, what this is all about. If we can send a message out there -- we can go out, we as the Chamber go out across the country and say, "Hey, look what just happened in our City. 273 4/8/02 - WHOLE - TAX REDUCTION BILLS We just took a major step in cutting that onerous wage tax. We are really on a roll. We want you here. We've got all these new office buildings. Here we are. We're going to make this happen for you." And that is a powerful message. And we can do that and that's job in the Chamber, but we can't do it with our hands tied.
Councilman, I can tell you, not from any surveys or any scientific studies that were done, mine is purely anecdotal, but I get calls once a week almost from clients and potential clients about locating businesses, relocating businesses and the idea of whether or not Philadelphia is a place for them to locate. And they'll ask me, it could be the CFO or the CEO directly I have on the phone, and they'll ask me, "What taxes do I have to pay if I put my business in Philadelphia?" After they get up off the floor when I tell them about the business privilege tax, they'll then ask me about any local income taxes, and I'll tell them about the wage tax. The reaction consistently is, "You mean I'm going to pay out of my salary" -- and this is the decision-maker talking 274 4/8/02 - WHOLE - TAX REDUCTION BILLS now. "-- either 3.9 or 1/2 percent of my salary to the City of Philadelphia by putting my business there. Thank you, I'll go someplace else."
And as a result, I guess, of that decision, the City potentially losses the opportunity for those businesses and residents, current or future, actually lose the opportunity in some instances because of location to even get that job which they theoretically at least have a much higher possibility of getting if the business is located in Philadelphia?
Thank you. Let me just lastly ask this question. And I have tried to be as direct as possible about what these bills are presently and what they are not. I'm hopeful that people understand that whether it's Bill 92 or Bill 30 from the Administration with the gross receipts tax, these bills are about tax reduction. They are not at the moment about tax reform. And I can only ask and encourage both the Chamber and GPF and many other supporters to clearly understand and hopefully buy 275 4/8/02 - WHOLE - TAX REDUCTION BILLS into the idea that, again, hopefully with the passage of these bills we will at least establish a path that we're trying to pursue but that we subsequently take that enthusiasm and that interest and not let the moment slip away in the belief that we have actually finished the task, but that the passage hopefully of these bills is actually the start of a much larger process that will lead to -- (Applause.)
That will lead to true tax reform which will require a whole host of additional difficult conversations and choices, analysis and debate. But I have felt very strongly that if we're not able to get over this particular hurdle, and quite frankly, I didn't think it was that big of a hurdle when this started. But if we're not able to do that, then I don't see what the prospect is for local tax reform if we can't at least have a legitimate debate and discussion about these tough issues around the mere restoration of cuts that most of us believe were just going to continue to happen. There's never been debate or a discussion about these cuts since the day they started. 276 4/8/02 - WHOLE - TAX REDUCTION BILLS
Councilman, if I had a tape recording of what you just said and I played it to businesses in the suburbs who were thinking about 5 relocation, I guarantee you, because this is what I 6 used to do for a living, I could get three people to 7 come into this City. It is about leadership. It is 8 about looking and having a vision. That's why we 9 went to the mat to support your bill now and that we 10 will continue to do that in the future. (Applause.)
Thank you very much. I do appreciate that. I must say, though, there are a lot of people who have supporting the bill, various Members of City Council, and this has been a collective process. And I don't have a tape for you to take out to the 10 businesses, but I might be able to do one better. I would be more than willing to travel with you in person.
Well, I would hope so. I'd be glad to take and maybe we could get that number up three to possibly even four. Thank you.
I would just like to 277 4/8/02 - WHOLE - TAX REDUCTION BILLS add to that, Councilman, that we surely will join in supporting all the Members of Council that support us in this, too. We will not forget and we'll be there for you and you can depend on it. (Applause.)
Thank you. The Chair recognizes Councilman Ortiz.
We all know the renaissance that Center City has gone through.
And we all know the difficulties that may come into Center City as leases come into play in the foreseeable future. However, any renaissance of the City that does not take into consideration of the rest of the outlying area of the City is a very limited type of victory and it leads to the creation of two different Philadelphians: One very poor, one very well-to-do. Unless we begin -- and I think Ms. vonSeldeneck is probably a very personnel example of what this is. The small business, doesn't the small business people, the small business person constitute the 278 4/8/02 - WHOLE - TAX REDUCTION BILLS backbone of any real job growth within any urban area, the small business person, the person who employs as many as 15, people? 5
Well, let me just answer the 6 series of questions you asked. First and most 7 importantly, you see our rallying sign, "Wage tax 8 cuts and build up our neighborhoods." We think they 9 are linked. 10
Sure. I think -- and I'll 13 let David Thornburgh follow this up. And correct me 14 if I'm wrong, David. I believe that all the jobs in 15 downtown Philadelphia, 44 percent come from the 16 neighborhood. 44 percent of hundreds of thousands 17 of jobs in downtown come from our neighborhoods. My 18 whole career we have focused on building the 19 neighborhoods through employment and jobs 20 opportunity. Test.
But we have -- and I want you to perhaps to comment on this. We have places like the 52nd Business Corridor and the 60th Street Business Corridor. And they have been up and there have been deterioration and Fifth Street has 279 4/8/02 - WHOLE - TAX REDUCTION BILLS been devastated over the years. How do we build up these corridors so that as Center City employs Philadelphia neighborhood people also can become employed in their neighborhoods.
Well, if you move business -- see, Philadelphia is such an attractive place for a move their business into. We can create the jobs for those people who live in the neighborhood. But you have to send the signal out. Let it beam out, we want your business and we are providing an environment for you to create jobs for our neighborhood people. We cannot -- this whole situation would not be worthwhile if we weren't able to build our neighborhoods up, whether it's Fifth Street, whether it's 52nd Street, whether it's Frankford Avenue, whether it's Main Street, Ninth Street, whereever, Broad Street, this is all about providing jobs. And I think the most compelling statement is 44 percent of all the people working downtown, and they're making a very good wage, come from our neighborhoods. And I think it's providing the environment. If I take back 30 years --
If I may. A lot of those jobs are in the service industry and a lot of 280 4/8/02 - WHOLE - TAX REDUCTION BILLS those jobs -- because this relates back to the wage tax. The lower your wage, the more onerous the wage tax is. It's a very regressive tax.
I think the daily news has reported on this I remember a few weeks ago what this tax bill went meant into the household.
So if you're a person who lives in Hunting Park and comes into the Marriott and you clean up the rooms and you go back, the wage tax has a greater impact on your income than it does on the CEO of CIGNA, right?
Right. Well, don't forget, those dollars -- say we're talking a household who has $50,000, the husband and the wife work. We heard that that's only $50 a year. Well, do you think anybody in those neighborhoods would turn down $50. Would you think those people in those 281 4/8/02 - WHOLE - TAX REDUCTION BILLS neighborhoods would say, "Oh, no, I don't care about $50"? Do you think so? I don't either.
So what we're talking about is as you lower this burden, you grow the economy but you also provide more income for those individuals and those business actually who are on the edge of closing down and becoming an empty store front.
We can't have that happen. Councilman Ortiz, we cannot have that happen. If we lose sight of that, we've lost our future. A good friend of mine who is a economist said we can either create a City that is like a doughnut or a danish. A danish means everybody participates, not just the middle.
I asked the City this. You may have the statistics and the numbers on it. I asked the City when they were at the table if they knew the unemployment rate within the City of Philadelphia, if they knew the unemployment rate for neighborhoods in the City of Philadelphia. Because I know as you travel and you go to North Philly, the unemployment rate in those areas is huge. 282 4/8/02 - WHOLE - TAX REDUCTION BILLS
It's close to 60 percent people residing in those areas.
Well, I know when I was Commerce Director, you know, when you go from downtown and then when you start to go into those neighborhoods, it rises to percent. I mean, 10 that's what we have to cure here. We have to bring 11 opportunity to those people. If we don't do that, 12 if we don't bring opportunity to everyone, I 13 wouldn't be brining the enthusiasm unless I thought 14 we could do that through this effort. 15
And unless we begin 16 the job creation, we don't begin the repopulation 17 Philadelphia. 18
Right. Well, I'll just tell you four weeks ago in the Philadelphia Inquirer they had a front-page story about the Russian immigrants who came here eight years ago and how they're moving already. I mean, these are telling signs. You know, this is very simple.
Let me tell you something. Up at Sixth and Diamond and the 283 4/8/02 - WHOLE - TAX REDUCTION BILLS Empowerment Zone went through a whole series of -- we had a great problem in attracting a supermarket. And then Brown came in and in essence, the infrastructure of jobs and expenditures and disposable income were not there. So we build housing around there. There's still subsidized housing and people that went into those subsidized housing probably did not have the income necessary.
It has gone through financial now we have cousins which runs a very different type of supermarket. But it is the sustainability of that type of mall within major city that becomes a question unless those individuals can provide jobs that are necessary for the neighborhoods. You can't have it. Thank you.
Thank you. Councilman Ortiz, are you concluded with your questions?
The Chair recognizes Councilman Clarke. 284 4/8/02 - WHOLE - TAX REDUCTION BILLS
Thank you, Madam Chair. Good afternoon. I just want to follow-up on a couple statements that were made earlier. One, the most recent with respect to Sixth and Diamond and with respect to some of the concerns associated with businesses and some of the more closer -- some of the areas who have some problems there are certain conditions that are not conducive to businesses and I want to talk about the other side of the story, stepping aside from the tax issue. The reality is that the supermarket at Sixth and Brown and the mall was not even discussed at a serious level until the surrounding community was built up with new housing and other infrastructure improvement. Those conditions were created as a result of a number of different initiatives relating other than wage tax. So we had to build those conditions in a critical masses of housing before the supermarket operator made the decision to come there. When I had some of the those discussion with 285 4/8/02 - WHOLE - TAX REDUCTION BILLS some of the businesses in my district that live in some of the areas that have some problems, they talk about the fact that there are not enough police in the immediate area. They talk about some of the conditions around the perimeter of that particular business. And they also talk about the tax issue. So it's not a singular issue. There are a number of things. I continue to be concerned that if we just focus on the wage tax issue and not be in a position to deliver those other critical services that people need to make the decisions to stay in some of these communities, let alone locate in some of these communities that will expedite or accelerate that decision to leave. That brings me to one of my questions. My understanding that in Center City under the recent census and actually in the last census, the one area in the City where the population actually increased was Center City. And in representing that area and working as a staff person in that area and decisions with individuals who made the decision to move in that area, the primary reason that they made those decisions was the quality of life. They 286 4/8/02 - WHOLE - TAX REDUCTION BILLS talked about the fact that we had additional police in the area. They talked about the fact that we had these ambassadors who walk around and kind of give people direction. It just sends the appropriate signal. They talked about the fact that we have folks with the green uniforms on sweeping the sidewalks and businesses really like that. But the reality is is our ability to do that had to do with the fact that we imposed an additional tax on businesses in Center City. You're aware that?
Do you want me to answer that? I'll tell you, I am so much aware of it because, first of all, when I left the Commerce Department, I went to work for Ron Ruben. Now, that same year, Ron Ruben became chairman of the Center City District. There was a reason why Ron Ruben did that. Because I asked him to. I never said it publicly. I never tried to take any credit it for it. But I thought that was very important and I pushed Ron Ruben for the first time to go out and really get engaged. There is a tax. It represents, if my memory serves me correctly, about 2 percent added. But Councilman, the significance of that tax is people know what they're getting. They see the 287 4/8/02 - WHOLE - TAX REDUCTION BILLS value in their tax because they get a return on that tax. They see it and they have seen it. And I think that that's very important.
So are you suggesting that people don't know what they're getting as terms result of their current tax payment in terms of services.
Councilman, if you travel to South Philadelphia, Northeast, if you travel throughout the City and you ask them what services they get for all the taxes they pay when they're kids go to parochial school, when they don't really require any services of the City, they will tell you, we're spending an awful lot of --
Where in the City of Philadelphia is it that you are not requiring of services? Are you telling me that there are places where you don't police, you don't need fire, you don't need the Water Department, you don't need sanitation?
Well, if the services were so great, why did people leave? Because the value of what you're paying --
You said they're 288 4/8/02 - WHOLE - TAX REDUCTION BILLS leaving because of the wage tax.
Well, here is my point. The value of what they're getting for their tax is not worth it, and that's why they're leaving.
Well, it's the cost of those services to be residents. That testimony of the letter to the editor by -- I'll repeat this. "My wife and I moved to the Philadelphia area. While we were absolutely in love with Chestnut Hill area, we had to eliminate it to our serve economics of buying in Philadelphia simply didn't make sense. A nearly 4 percent tax on dual incomes as tax too much of a hurdle to get over. The level of tax withholding would represent furniture for our home, possible vacations, and savings. My wife and I are exactly the type of late 20-something that the City should be trying to attract to come spend that discretionary income. Instead we are spending it in the suburbs to furnish and fix up our new home."
Can I just say 289 4/8/02 - WHOLE - TAX REDUCTION BILLS something? I've been here for five and a half hours, and I've heard you ask that question to lots of people. And you are absolutely that the population in Center City did increase a small percentage which was really exciting. And isn't that a wonderful model that we should try to duplicate throughout the whole City. What I take issue with, Councilman, is when you equate -- when we bring politics into this and we mix it up with the wage tax. Why can't we be reducing the size of city government or finding ways to save that kind of money so we can do it elsewhere? Every single company in the United States is reducing. My company is. Everybody I know in business, the companies that I recruit for, they're all downsizing, not the City of Philadelphia. And you mean to tell me there are not some areas where we could reduce our expenses so that we have the money to do what we've been doing in Center City so effectively. It's got nothing to do with the wage tax. It's got to do with reducing expenses in city government minutely.
Ma'am, first of all -- 290 4/8/02 - WHOLE - TAX REDUCTION BILLS
I think I'm asking the questions here. First of all, that's the first time I made that statement with respect to Center City. You Said I've asked everybody.
No, no, but you've been equating -- all of you have been talking about how that if we stop this wage tax the police and fire and recreation centers and City services are going to go right down the tubes.
Ma'am, I have not said that. You've been reading the newspapers. I have not said that. So I'll ask you a question with respect to the letter that you just read. What does that have to do with services.
The cost of services are so high, people who can afford to pay them are not here. They're moving to the suburbs. And one other question about what is happening in downtown 291 4/8/02 - WHOLE - TAX REDUCTION BILLS Philadelphia ,a lot of people once their children have been raised have been moving back into Center City Philadelphia.
Right. But a lot of them are no longer worker so they don't have to pay the wage tax because they're retired. And that's why a lot of people moving downtown again.
I think that's a minimal amount. Most of the people that I know and work with in Center City do in fact work.
The issue with respect to services is important to me for all parts of my district because I do represent Center City, I do represent Logan Square, I do represent Fairmount, I do represent North Philadelphia, and I do represent Sixth and Diamond. And my issue has to do with our ability to continue to deliver the services. If you want to change the way we provide service delivery, we can have that discussion. Some people may talk about privatizing certain aspects of our service deliver. We can have that discussion. But I don't think that simply reducing the revenue 292 4/8/02 - WHOLE - TAX REDUCTION BILLS associated with our ability to deliver those services works.
Well, what I think what we'd be happy to do is have a poll in those areas to get what people think. Are they getting their money's worth out of the taxes they pay? And I think we'll try to do a poll to get you that information.
I don't have a sense of what the people in my district, how they feel, then I'm probably going to get un-elected next year. So I don't need to poll to get a sense of what's going on in my district. I've worked there for the last years and lived there all my life. So I 15 think I have an accurate reading as to what people 16 think. 17
Well, Councilman, let me ask 18 you this. Do they think they're getting their 19 money's worth for their tax dollars? 20
Nobody ever does in this wonderful country that we live in. That's just not human nature.
With respect to your position, Mr. Pizzi, have you ever taken a position 293 4/8/02 - WHOLE - TAX REDUCTION BILLS that we should freeze wage taxes?
Wanted to freeze the reduction in the wage tax, have you ever taken tat position?
No, I don't. See, here's the difference. I'm not an elected official. I 294 4/8/02 - WHOLE - TAX REDUCTION BILLS don't have a public record. So if you know something that I don't, if you tell me, I would be happy to explain it to you.
The Councilman is asking a question. Maybe you don't quite understand what he said. Repeat that question please.
I'm asking a question if you have ever taken the position that there should be a suspension in the wage tax reduction plan that was currently in place.
Oh, I know what you're talking about. You mean when I got a phone conversation from the Administration?
I'm just asking you a question. MR. Pizzi: I think it's important -- I'm sorry, Councilman, I just didn't know. This had to go to the -- it was about January, late January I believe, and I was it was a late Friday afternoon. It time was about 4 o'clock, 4:15. I was driving in 295 4/8/02 - WHOLE - TAX REDUCTION BILLS my car and I got a call from the Finance Director and from the Budget Director. During that conversation, they talked about their notion of what they would like to do and they talked about in terms of freezing the wage tax after 2004 and then working on the gross receipts tax. I said to them that it sounded good to me. Then the Mayor gave his budget address before you all and he said of his plan. And specifically in his plan he said, and I'd like to quote, I'll paraphrase because I can't give it to you back directly, but he said when the economy becomes better or when we are out of the recession, we will reinstate the wage tax cuts. So I talked to a couple of very nationally-known economists. I said, "What do you think, are we coming out of the recession?" They said, "Yeah, I think we'll be out of the recession. We were all planning coming out of the recession by the end of the second quarter. I think we may be able to come out of recession after the first quarter." So I said, "Well, that sounds good then. Then we're going to continue with the wage tax cuts and we're going to have a gross receipts tax. And 296 4/8/02 - WHOLE - TAX REDUCTION BILLS then there was the Bill 92 that came out and they said, well, not only are we going to continue with the wage tax cuts, but because we've actually got more money from the wage tax revenues when we've lowered the wage tax over the last five years, you can then accelerate the wage tax. Well, I said I'm for that. And that's how I came to is that conclusion. So there was a moment in time maybe about a week. And then I asked the economists, I went to our board, and I put it before them. And what the Board told me what my constituents told me -- and we also did a survey. We did a survey, we got answers back from 189 companies in Philadelphia and then we did the survey. So it was a process. It was a process that we went through.
Did I ever? Well, I thought it was a beginning, but it was a process.
Councilman, I think that is a legitimate question. I think when you are -- I learned this when I was Commerce Director. When 297 4/8/02 - WHOLE - TAX REDUCTION BILLS you're wrong, you say, "I made a mistake." I'm willing to stand up because I went through a process. I had to go back to my constituents and found out overwhelmingly where they where on it.
That's fair. With respect to the potential of the 290 million in cuts, is it your position, assuming there will probably be some raises for municipal workers, there will more likely be contribution to the school district above and beyond what we're currently doing. Hopefully, the impact as it relates to the PGW's problem won't be substantial, although I think it probably will be. Is it your position that we can do the 290 cuts and not affect services to the degree where it's unacceptable to people in communities?
First of all, I'd like to start with what is going to be done with that $230 million surplus because that's our money. I'd like to know where that is in this whole equation. (Applause.)
I'd also like to know that when we talk about percent, $30 million over five years, I really think that anybody can do that. And 298 4/8/02 - WHOLE - TAX REDUCTION BILLS I think we have the wherewithal within the administration to do that.
So again, I'm not sure I understand your answer. So it's your position that we can do 290 in cuts, provide --
So it's not 290 in the first year. It's only -- we heard like a few million in the first year. It's not even that much. But $290 million to do billion, I think we an do it. 13
Yeah, over five years. I mean, you're using the 290 term. I think by doing that, you should triple the budget by the same amount of years.
Okay. I just want to make sure I understood what you were answering.
In your testimony, you made reference to an issue that's kind of near 299 4/8/02 - WHOLE - TAX REDUCTION BILLS and dear to my heart. Neighborhood Transformation Initiative. And it implies that using the strategy to issue bonds to fund that program was somewhat different than the strategy that we used to fund the Convention Center, to fund stadiums, to fund other major ticket items. Why is that? Why is it different for us to issue bonds to fund the Neighborhood Transformation Initiative as opposed to other big ticket item? Is it of less importance.
No, no. As you will recall, and you can see my testimony, the Chamber voted and was here in support of the Neighborhood Transformation bill that before City Council. I believe we have testimony supporting that. So we were a very major advocate of the neighborhood initiative. But let me tell you how that all comes about. See, that is a defensive major. Why do we have to do neighborhood transformation bond is because we didn't have the right tax policy in the beginning so people left. And now it's defensive move. They left, we have all these vacant houses, now we have to knock them down. See, what I'm proposing is growth strategy.
Are you suggesting 300 4/8/02 - WHOLE - TAX REDUCTION BILLS that we don't do this?
Oh, no. Councilman, we are on the record, that's what I'm trying to tell you, we are on the record and I would be happy, I'll furnish you my testimony. We sat here in support and we gave testimony that we were in support of the neighborhood transformation act. Actually, we did a full page ad in the Inquirer and the Tribune supporting that. Did you know that?
I only ask the question because of the way it was referenced as if somehow this was an abnormal way of financing major ticket issues. Based on your testimony, it implied that. That's the way we always do these things.
Well, I just think we have to be careful of how many bond issues we do. That's all.
Would you suggest that we not finance the expansion of the Convention Center in this manner?
So we should finance 301 4/8/02 - WHOLE - TAX REDUCTION BILLS the expansion of the Convention Center by issuing bonds?
Is there a reason why it's problematic in terms of financing the Neighborhood Transformation Initiative but not the expansion of the Convention Center?
NO, I think they're both tied. When I was Commerce Director, Councilman, my whole cry if you look at my testimony before City Council back then, you will find that we tied the neighborhood expansion to neighborhood development. And it's interesting because we were all proven right. All of the jobs coming out of the Convention Center and the hospitality industry are mostly tied to the neighborhoods. And that's what we predicted was going to happen back then.
I agree with you. You made a couple of references, one with respect to the deterioration of neighborhoods in an earlier statement that you made, and maybe I heard you wrong, that there was not redlining by the lending institutions in various neighborhoods. I think in large part particularly in North 302 4/8/02 - WHOLE - TAX REDUCTION BILLS Philadelphia redlining was a substantial reason why we have some of the conditions that we have North Philadelphia and it was a strategic plan, it was government driven, so I want you to understand that there are other issues. It wasn't simply the wage tax.
Yeah, but I'm here to talk on an issue. You're bringing another issue that I'm not prepared for to talk about.
So I don't have an idea. I don't like to talk unless I have the facts. I do not have the facts on that.
Thank you very much. Mr. Pizzi, if I understand what you're trying to say is based on NTI was that if we had a reasonable competent tax policy for the last 20 years, we wouldn't need to be borrowing money to 303 4/8/02 - WHOLE - TAX REDUCTION BILLS rebuild neighborhoods that were abandoned because of taxes and schools and other such flight; is that accurate?
Thank you, Councilman. It said it much more succinctly than I.
One think I want the record to make sure is very clear, under the Mayor's currently proposed five-year plan, the $170 million in tax cuts for the accelerated gross receipts tax is already in the plan. It is not new money that needs to be found to cut. The Mayor and the Mayor's financial people are comfortable with the $170 million they have proposed to accelerate and cut the gross receipts tax in a faster way. What we're talking about is $120 million which represents what Bill 92 would do, and that is $30 million that we've been talking about over four years. The issue which gets clouded is the one that we deal with when we talk about potential cuts. And always when cuts are talked about, it's always surprisingly police, fire, recreation, libraries. I haven't heard anyone at all talk about cuts in other areas of government that don't represent what are very high impact and politically dangerous cuts that would be 304 4/8/02 - WHOLE - TAX REDUCTION BILLS contemplated, which I don't think are necessary. And I'll tell you why. Under the Mayor's current proposed five-year plan, the projected fund balance for Fiscal Year '04 is $62,627,000. The impact of Bill 92 is $11.2 million. Still a five-year plan would have a -- the effect of Bill 92 would create a $51,427,000 fund balance FY '04. FY '05 under the Mayor's current proposed plan with the accelerated taxes for gross receipts there's $40 million surplus. The impact of Bill 92 would be $23.2 million, still a $5,820,000 surplus. Not until Fiscal Year '06 do we anticipate because of 92, without any consideration for the growth and the wage collections, do we look at a potential budget deficit of $41 million. Any cuts in services that would have in fire, police, recreation, sanitation, you know, you name it, anything you want to put out there to scare anyone would have to put forward in FY '04 for the FY '04 budget which would have to be put forward and exposed in FY '03, in January 03 during the period of time we're discussing FY '04 budget. I'll guarantee you, no mayor, this mayor or any other mayor, this council or any other council is going to be proposing any cuts in police, any 305 4/8/02 - WHOLE - TAX REDUCTION BILLS cuts in fire, recreation, sanitation, libraries in the year that they're running for re-election. They will find the money somewhere else. They will find the money in the fat that's in the bowels of this government that nobody wants to talk about that needs to be sought out. It's not going to be cops and fireman and rec leaders and librarians, which is what they're trying to scare people into believing because no Mayor running for re-election, this one or any other one, no councils running for re-election, this one or any other one, is going to approve such cuts in the election year their running for the proposed budget for FY '04. So look, we have between FY '03 and FY '06 to deal with the problems of potential loss of revenue, which I don't think is going happen because I think every model has shown that there's not going to be a loss in revenue, it's going to be an increase in revenue. So all this scare tactic and Chicken Little sky is falling stuff really doesn't even come into account if it's accurate until FY '06. That gives us enough time to do these cuts to potentially get the accelerated cuts that are necessary to grow this economy and grow our residents and grow our business 306 4/8/02 - WHOLE - TAX REDUCTION BILLS so we won't have to be talking about this. We could be talking about enhanced services in FY '05-'06 as opposed to Chicken Little scenarios. So I want the record to be clear. (Applause.)
Thank you. I would just like to remind my colleagues that we have approximately 38 more witnesses to testify. I would ask that we try to be a little brief with our questions. Is there anyone else that would like to be noticed? The Chair recognizes Councilman Clarke.
Thank you, Madam Chair. Madam Chair, I don't know who Chicken Little is, but with respect to the five-year plan -- pardon me?
Some people would say it's on the third floor. The 170 in cuts in five-year plan with respect to what the Administration has proposed has not necessarily been agreed with by the Council of 307 4/8/02 - WHOLE - TAX REDUCTION BILLS the City of Philadelphia. So although the Administration has made those proposals in the five-year plan, we in fact have not signed off on that yet so that is still to be discussed.
Any other questions or comments by Members of the committee? Yes, Mr. Pizzi.
Madam President, Members of Council, I just wanted to thank you for all the hard work and the hours of time that you're going to have to put on in this. And we just appreciate the opportunity to make us be heard.
Our next witness. Is Mr. Thornburgh in the audience? Good afternoon. Thank you for your patience.
Good afternoon, Council President, Members of Council. I want to join with the crowd here in recognizing on behalf of 308 4/8/02 - WHOLE - TAX REDUCTION BILLS we, the citizens, of time and the effort and the leadership that you're putting into this issue. I don't know that there are many more significant issues than this one. If it's all right, Council President, I thought I would abbreviate at least the beginning of my testimony.