- - - COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING - COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, March 9, 2005, 10:45 a.m. - - - OPERATING BUDGET Bill No. 050003, Bill No. 050002, Bill No. 050001, Bill No. 040789, Bill No. 040767, Bill No. 050007, Bill No. 050008, Resolution No. 050022 PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE L. BLACKWELL COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DARRELL L. CLARKE COUNCILMAN DAVID COHEN COUNCILMAN FRANK DI CICCO COUNCILMAN JACK KELLY COUNCILMAN JAMES F. KENNEY COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN JUAN F. RAMOS COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO - - - V A R A L L O Incorporated Litigation Support Services 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 427 Operating Budget - 3/9/05 - - - P R O C E E D I N G S - - -
Good morning. I apologize to everyone for the delay. This is a continued public hearing, regarding Bill No. 050003, 050002, 050001, 040789, 040767, 050007, 050008, and Resolution Number 050022. Mr. McPherson, please call our first witness. MR. McPHERSON: City Planning Commission. I was afraid you were going to have to wait until 2 o'clock before your next meeting. Please identify yourself and proceed with your testimony.
Miss Griffith, in order to save time, we do have a copy of your testimony. We will give it to the stenographer. It will be transcribed in 428 Operating Budget - 3/9/05 full, and maybe you could simply abbreviate your testimony.
Certainly. Let me read the first, perhaps, two paragraphs which focus on funding. Good afternoon, Council President Verna and members of the City Council. I am Maxine Griffith, Executive Director of the Planning Commission, and Secretary of Strategic Planning. I want to thank you for the opportunity to present the Commission's proposed operating budget for fiscal year 2006 of $4,062,675. This budget has three components, a General Fund request for $3,294,081, a Community Development Block Grant request for $218,163, and a request for $550,431 in Federal Transportation grant funds. And I also want to thank the Council President and members of Council for accommodating our change in schedule. It's very much appreciated.
I know. I 429 Operating Budget - 3/9/05 was rather fearful that you were going to have to wait until 2 o'clock to testify.
I would have waited. And I'd also like to point out that I'm accompanied by Rich Lombardo, Deputy Executive Director, and extend apologies from Paul Nice, our Administrative Services Director. He had a funeral and could not be here today. Any questions, however, of a detailed nature that would be for him, we're happy to get back to you. Thank you, Miss Griffith. Before I go into the line of questioning on the budget, I would just like to make a statement. Council members introduce bills that are scheduled for public hearings. And the public hearings may not be scheduled for maybe a month and a half or two months after introduction. And invariably we will be told at the public hearing that City Planning has yet to consider their position on the ordinance. 430 Operating Budget - 3/9/05 My question to you is, why can't the bills upon introduction be worked on?
Be scheduled? It's my belief that we do at least attempt to schedule these bills as soon as we receive them. But I'm going to ask Rich Lombardo, who actually is the administrative officer for our public hearings, to respond as well.
Good morning. Part of it, I think -- Part of it -- I'll begin with taking the blame.
I just want it corrected because it's very embarrassing after a bill has been introduced, you know, three months or more prior to the public hearing, that City Planning has to come in and say that they don't have a position on it yet because they 431 Operating Budget - 3/9/05 have not met.
I agree with you. That is a problem. We're going to correct it. We used to meet every two weeks, and it was a matter of our own internal policy. People do not schedule bills until a hearing had been scheduled. With a two-week lead time, that did not create a problem. Normally we could come here with a commission position. With our new commission about two years ago, we started on a once-a-month basis. It hasn't caught up to all of the planners that they should schedule their bills. And, you know, that's where we're going to correct; that normally the way the bills get on our agenda is, the person responsible for working on it, when they feel they have all the information and are ready to go, they put it on our agenda. We are going to correct that, that people should put the bills on the agenda as 432 Operating Budget - 3/9/05 soon as they are made aware that they have been introduced, and not wait until a hearing's been scheduled. So hopefully we will correct that in the future. I apologize for that.
So in the future, with any public hearings that are scheduled, we will have a position of the Planning Commission.
With one small caveat. The commission themselves at the time that we take it to the commission, table it or take it off the agenda for some reason, a room full of protestants or unanswered questions, then we will -- those cases we will testify that the commission held it up or didn't -- has not reached a position on it, but normally --
Let me also add, the reason we went to once a month because it was difficult getting a quorum twice a month, especially -- 433 Operating Budget - 3/9/05
Oh, why would you say that? It's difficult getting a quorum?
I know it's odd to think that would be a problem. But sometimes we had agendas with only one or two items. It was very difficult to get a quorum. Now we get a quorum, but as Rich said, we're remiss in having the scheduling catch up to our new process.
Thank you. I'm glad to hear that that will be corrected. Miss Griffith, you mention in your testimony that you are continuing your planning efforts in support of the New River City Initiative. Can you explain what this initiative is and the support your office has given to this project? Also, what is your department's role in this initiative in the coming fiscal year?
Let me answer the last question first, if I may. The lead agency in the initiative is the Commerce 434 Operating Budget - 3/9/05 Department, and the Commerce Director is the lead manager. River City is a team initiative. As you know, this administration very much likes working by consensus and in teams. And our focus is planning and related areas of expertise, especially, though not exclusively, zoning and land use regulation. As I understand it, River City has a number of components. One is simply focusing in sort of public relations, in a marketing way, on the fact that we have these two wonderful rivers. A lot of folks don't think of Philadelphia in the context of waterfront. The other is trying to knit together in a planning way the many plans and initiatives that are already taking place along the waterfront, to make sure there are no gaps, to make sure that there's some continuity in the way we plan for the waterfront. The other is to promote appropriate development along the waterfront, and to make sure that the agencies of government work 435 Operating Budget - 3/9/05 together in a synergistic way, and think of the waterfront as something that's perhaps a little different and a little special. One of the things that we've started to do, and will be doing over the next fiscal year, is looking at the idea of special land use regulations for the waterfront. We find that whenever there's a waterfront project, there are issues that reoccur. Folks want to view the water, so we talk about view corridors. They want access to the water, et cetera. So, our development in Zoning Division, along with our Urban Design Division, is taking a look at those issues, and we hope they will be working with Council members to see whether any of that would make sense.
Excuse me. I assume the Navy Yard is part of the planning initiative?
Yes, the Navy yard is a big part of the planning initiative. We've been on the sort of advisory committee for 436 Operating Budget - 3/9/05 the Navy Yard planning. As a matter of fact, we have a zoning action this upcoming hearing, I believe, to appropriately zone a component of the Navy Yard to receive new development. So, yeah.
Thank you. You mention in your testimony that the primary responsibility of our Strategic Planning and Policy Division is the coordination and preparation of the City's Capital Budget Program. In your opinion, will the City be able to maintain its infrastructure in a prudent manner in the coming years?
With great difficulty. Certainly in this coming year my personal belief is productivity increases and new ways of working and reaching objectives will sustain the Capital Program for this year. But I think I've stated on the record previously that for the long-term other approaches really need to be brought 437 Operating Budget - 3/9/05 into place. We were involved in the right-sizing initiative that was part of the Mayor's 21st Century Planning Program, and believe that one way to approach this would be to right-size the City's infrastructure, to meet the needs of the people that are here now, because we have 1.4 million people supporting the infrastructure, capital infrastructure, for 2.2 million people. And given the dearth of capital monies, that's going to be tremendously difficult.
How is the size of the capital budget determined and who determines it?
We work very closely with the Budget Office. Our focus is the programmatic side. How one parses over the Five-Year Plan the debt-incurring capacity of the City is the purview of the Budget Department and the Finance Department. And they basically give us a number. I know there's a representative 438 Operating Budget - 3/9/05 here, if you'd like to go into that in more detail. But we're smart enough to know that the folks who really have the expertise in budget and finance and bonding are the folks that should --
Well, I still don't know how they determine the number.
Good morning. Please identify yourself for the record.
Good morning. I'm Diane Reed, Budget Director. The Capital Budget authority that we have each year is determined by formulas and some practical considerations, based on a couple of conditions. One of the things is, we take the amount available from the prior calendar year and forward that, and the --
Forward that to whom? 439 Operating Budget - 3/9/05
Let's not go around in circles. How is the size of the Capital Budget determined? And who determines it? Is it Finance? Is it Finance in conjunction with the departments? How is it done.
Well, please just tell us how you do it. How do you come to the determination?
Well, I was in the process of doing it. Part of the calculation is bringing forward the amount that's available from the prior calendar year. And from that, we must include the amount of debt that needs to be discharged, and we also need to end up with a positive number at the end of the year. We put all these numbers together, and we come up with the amount that will available for this year, because we must have 440 Operating Budget - 3/9/05 a positive remainder so that the Controller can certify a number for the next year. And that number, we cannot take it down to zero or we will have no capacity going forward. Now, one of the elements that goes into this as well is the growth in the assessed value. In fact, as we keep track of this number and have kept track of this number this year, the increase in value of assessments that has been occurring has allowed this number to bump up a bit.
I was just saying, and one of the elements that goes into this, that we wait before we actually, you know, finalize the estimate for the current year has to do with the latest number that we get from the Board of Revision of Taxes which is that ten-year average of the value of real estate. And that actually went up a bit this year from some of the earlier estimates since the beginning of the calendar year. 441 Operating Budget - 3/9/05
I know you're conferring there. Is there something else that you'd like to add? (No response.)
No? Are there any questions from members of the committee? The Chair recognizes Councilwoman Brown.
Thank you, Madam President. Good morning. Good morning.
On your testimony, you give a mention to the... Let me just state what you said. We would also look strategically at planning oriented issues on a city-wide scale. These include working with the Fairmount Park Commission. I thought you actually mentioned the open space...
Okay. And so, I read with interest discussions about open 442 Operating Budget - 3/9/05 space in some of the parks' newsletters, because they give mention to that. So if you could share with me what that means for the City Planning Commission and how will that differ from the Philadelphia Fairmount Park Strategic Plan which has been released.
There have been for a while, under the purview of the Managing Director, an Open Space Task Force because, obviously, open space is the purview of a number of different agencies. Fairmount Park, of course.
Recreation Department. And in addition because... in part because of N.T.I., we're bringing large amounts of open space into the inventory --
And out of that 443 Operating Budget - 3/9/05 effort came a conclusion that we needed to plan better for all of that.
Not just Fairmount Park. The first component of that is planning, of course.
And the Managing Director has very graciously said that he thinks the Planning Commission should take the lead, but again, in a team way...
...in that Phase I. And we got a very small grant, we think, a $30,000 grant, to bring on a project manager to do that.
And the first phase will be first just cataloging and put on G.I.S. database what we have.
Because all of that is not in one place. 444 Operating Budget - 3/9/05
This team is then going after a larger grant, to be able to develop some standards and criteria -- That will be voluntary...
...about how we move forward and how we recommend to Council that we deal with parcels as they come into the inventory; and what it looks like when it's all done.
What happens now is, a piece of property -- Perhaps someone passes away and says, this is a beautiful piece of property. I'd like to give to it Fairmount Park.
Fairmount Park... That's their business. So, they may take it into the inventory, but they don't necessarily have a guiding or anchor document 445 Operating Budget - 3/9/05 to say, is this going to be passed? Is this going to be active?
And I would imagine a representative from the Fairmount Park Strategic Planning Committee... I mean, someone who has an intimate knowledge of the elements of the Strategic Plan are a part of this task force.
I certainly know that representatives of Fairmount Park are part of the task force --
-- and they report back. We are only now forming what will be an advisory committee for this particular effort which in a way is a little different from the task force.
The Strategic Plan, as I understand it -- and I can't say that I've committed it to memory -- but focuses a great deal on issues of operations, financing, funding. This effort will be more of a landscape design and process focus.
Yes. I would hope so, because if I remember correctly, there were recommendations on the back end of that Strategic Plan. And so, to the extent that we can, where appropriate, tie in those recommendations with the open space planning, since we were looking at the big picture, that might be useful. The angst is making sure that the Strategic Plan becomes a working document and 447 Operating Budget - 3/9/05 doesn't end up sitting on a shelf, given the amount of dollars that were invested in that.
Thank you for your testimony. Thank you, Madam Chair.
Thank you. Talking about Fairmount Park, I saw on television last night that they installed the surveillance cameras in the park.
Oh. Well, they look wonderful; they really do. And I understand that that was done by a grant; is that true?
No, no. They received a 448 Operating Budget - 3/9/05 grant. I would have to find out for you from whom they received it.
That would be interesting. I'll tell you, if they're successful, I think that we are to think of installing them in a lot of other places. But I was really pleasantly surprised to see the installation of the surveillance cameras. The Chair recognizes Councilwoman Blackwell.
Thank you, Madam President. We want to say congratulations again on the National Planning Award.
That's very important, and it's important to your department. It's certainly important to our City. And you make us all look great. We thank you. Let me ask you, in terms of the Center City parking studies... You know, how 449 Operating Budget - 3/9/05 long do you think that will be, and what will the scope be there?
Well, we hope there are going to be two phases. The phases under way now will be completed in June, and that is a Center City study that will focus on policy and policy recommendations. But in addition, because of everything that's happening on the Parkway now, not only the new institutions coming on but also existing institutions expanding, such as the Art Museum, it was felt that we needed to take a more focused look at the Parkway and environs, the communities adjoining the Parkway, et cetera. Our Strategic Planning and Policy Division has put together a proposal which, through the good offices of the Commerce Director we hope will be funded very soon. If that happens, then the policy work that comes out of the existing study will be connected to this more focused study on the Museum Mile, as the Mayor likes to call it, for specific recommendations. And 450 Operating Budget - 3/9/05 hopefully some of those recommendations will also be useful for other parts of Center City.
Councilwoman, if I could just piggyback on that, please.
We were talking about the expansion of the Library. There was mention made about underground parking. How could we move forward on that project? Without knowing what it's going to cost for the parking, is it feasible? Have you checked into all of that?
No. I can share some things with you, and then perhaps the Budget Director also has some input. I do know there's great interest on the part of the architects of the Library in beginning a dialogue with the folks that will be hired for the Barnes, to see whether there might be some cooperation that can happen, 451 Operating Budget - 3/9/05 with regard to parking. And I also know that the parking study that I spoke about, the Parkway Parking Study, will include recommendations for that component of the Parkway. I was on the advisory committee for the architect selection on behalf of the Mayor. And this first phase, the building itself, was the only scope of work for the architect at that time. So, it's my understanding that the funding and financing is primarily connected to the expansion of the Library. And I will... We may need to get back to you for more specifics in writing. I'm looking at the Budget Director. And I think we probably need others here to respond more fully.
I just don't know how we proceed with the expansion without knowing about the parking issues and the costs related because I don't know who's going to pay for that because we were told that each parking slot would cost 452 Operating Budget - 3/9/05 approximately $40,000. Councilwoman Blackwell, I thank you for your time.
Oh, certainly, Madam President. Just a couple more questions. I notice that you have grants dealing with transportation and studies dealing therein. We wondered if you're able to get any more T.C.D.I. funds, if you would consider our area where we're having all the Market Street elevated problems, in terms of transportation, how it's affected. So we were wondering in the future if something like that comes up, you'd consider helping us out a little bit in that area.
Absolutely. And let me say also, Councilwoman, that I've already had a conversation with Deputy Director Traylor at his request...
...even without additional money, to see how we can be 453 Operating Budget - 3/9/05 helpful. And Victoria Mason and her staff, along with the Office of Strategic Planning, has already started it, again, at Mjenzi's request, to think through some of these issues. Money is always helpful, but even without additional funding we stand ready to help. We certainly understand the impact that this project is foisting on this community.
Thank you. When we have various... Before various areas are funded, so I know, for example, we'll have the Community Development Block Grant hearings through the Finance Committee. And is it not true that the City Planning Commission pretty much gives a blessing on a project, and that all the other departments have... they all give input to you when things are ready for disposition or to be dealt with or no? Or does it depend on the project? 454 Operating Budget - 3/9/05
You're talking about block grant -- projects funded by block grants in general?
No. The City's Housing Office and Secretary of Housing, Community Development are the leads on block grant projects, depending on the project. Certainly if there's a plan for the area, that plan is taken into consideration. We are often consulted on funding possibilities, but we are not the lead, and there's no -- there's no formal link between the plan and implementation of the plan.
I asked that question because we were dealing with -- In fact, it was in the Lucien Blackwell Homes. A few weeks ago we were dealing with some aspect of some properties. And so, since we're kind of watching over it, we were told there was an issue at that time with trees, and that there were two trees needed that weren't funded. It was some other City departments. 455 Operating Budget - 3/9/05
Let me confer with my Director of Community Planning to see whether --
It's all right. We got it resolved. I was just curious for the future to make sure that I'm operating in the way I should, in terms of how we coordinate with our City departments. Thank you, Madam President. I can come back. Thank you.
Thank you. The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam President. Good morning. The traffic study plan, is that just for the area along the Parkway west of City Hall?
You mean the one 456 Operating Budget - 3/9/05 that's not funded at this point. COUNCILMAN DiCICCO: Right.
That is... I don't have the boundaries in my head, but the focus is the Parkway and the communities adjacent to the Parkway. COUNCILMAN DiCICCO: Is there a plan to look at parking in general in Center City, with the possibility -- taking into consideration the possibility of Convention Center expansion and possibility of a slot parlor or two?
Well, there is an ongoing study that is funded, the one that we hope will be completed in June, that is a Center City wide study. The difference is... I'm trying to think of something that might illustrate it. That study focuses on policy. For instance, one of the things we're looking at in that study is remote parking, parking on the edges of Center City, with some kind of shuttle system, et cetera. It wouldn't say this is where it 457 Operating Budget - 3/9/05 should be, and it should be this color, and et cetera, but it would perhaps indicate where, in a policy way, that would make sense. The follow-on study will be more specific, in terms of sites and more specific, in terms of recommendations, with regard to this should go here, we think that should go there. COUNCILMAN DiCICCO: Well, this should go here, that go there, in relationship to the possibility that a Convention Center expansion were to take place.
Yes. COUNCILMAN DiCICCO: And a possible casino parlor as well.
Yes. COUNCILMAN DiCICCO: And so, you would say if these things occur --
Yes. COUNCILMAN DiCICCO: -- Convention center, slot parlor, we would need additional parking, and these are certain sites or areas 458 Operating Budget - 3/9/05 where we would either have to create parking or enhance the existing parking?
If I hesitate on the slot parlor issue, it's only because I'm somewhat bound by the fact that I'm now a co-chair of this task force, and it is an independent task force. So, in a way we would be -- I would be guided by the Mayor in this regard, and he would be guided by the way the task force wants to approach it. COUNCILMAN DiCICCO: These are all possibilities. I mean, I think for the most part the safer bet -- no pun intended -- is that we will get Convention Center expansion. The not so safe bet is to say we're going to have a slot parlor in Center City, because it's all up in the air.
That was my only point, Councilman. COUNCILMAN DiCICCO: Right. Okay. Thank you. No further questions.
The Chair recognizes Councilman Kelly. 459 Operating Budget - 3/9/05
I just wanted to get an update here or just... I'm very curious about how much revenue was generated by your charging for mapping services. Just curious about that.
I'll have to get back to you. I mentioned earlier that our Administrative Services Director, and the person who I thank in my testimony for organizing that program, could not be here. He had a family emergency at the last minute.
I just wanted to know if it was profitable, after deducting, of course, all the expenses for that program.
It is not what we would have... I can tell you conceptually, it is not what we would have hoped because the original projections were based on everyone who got a map for free paying for one. I guess common sense should have 460 Operating Budget - 3/9/05 told us that everyone who gets a map for free is not going to give us a check for $75 for that map. However, because we have such a constrained budget, and a relatively small budget, and because we have been in situations in the past where we have run out of toner, and $100 would have gotten us through for a week or two, even the small amount that we're getting is very useful for us. And I should also say that we did this in response to a city-wide call, really a mandate, because of the scarce resources in general, for all agencies to try to generate some funds.
I should add that we did a little bit of a survey, informal survey, of our sister agencies and other 461 Operating Budget - 3/9/05 areas in the city. And this is not uncommon. As a matter of fact -- and I'm not saying we're going to do this -- New York City even charges for reports, just a minimal amount, two or three dollars, but they charge the cost of duplication indication.
Yeah. I believe the Police Department also charges for their reports. I want to follow up on something that our Council President has alluded to, and that was the development of the New River City Initiative. Is there any time frame? Is there any time frame that this is going to be presented to Council, as far as development of the River City? And it's going to be done in parts? Are we going to receive an overview of exactly what the development is going to consist of?
I would really have to confer with the Commerce Director on that.
The Commerce 462 Operating Budget - 3/9/05 Director? You mentioned that. That's very, very important to, I think, all of us here on Council, to really get involved in that.
I mean, of course, we have presented components of this. The North Delaware Riverfront Plan was presented sometime ago. Certainly the Navy Yard Plan was presented. But if you're talking about a presentation that would knit these together, I should say Rich Lombardo gave a brilliant presentation at the Economic Development Summit, that sort of conceptualized how we're going to do this. But in terms of formal presentation, it would be the Commerce Director that would lead us.
You have no idea when that presentation would be made? It would come from the Commerce Director?
I wouldn't say -- I might have some recommendations, but it probably would be more appropriate for me to 463 Operating Budget - 3/9/05 give those recommendation to her directly.
You're welcome. The Chair recognizes Councilman Rizzo for a point of information.
Have we tried to market this mapping to outside the government? Have we tried to go to the utility companies, P.E.C.O. Energy, P.G.W., that would spend a significant amount of money on needing to know that kind of information? Have we tried to market that?
Rich is trying to whisper something to me. So, why don't I ask him to...
I understand everybody in this administration is allowed to talk, so...
Don't talk, Rich; 464 Operating Budget - 3/9/05 don't talk.
The next step is the outreach. We also have the ability with G.I.S. to map data.
And we know that there is a market out there. Simply a retailer says he wants to know what the disposable income is within a quarter mile of this corner.
We're going to reach out to that sector and say, we also can map this data, give you maps, give you charts, give you graphs that you can use. And I think we will be able to, you know, capture part of that market because we have that data.
That's terrific. That's good because they're buying that service from someplace else.
That's right. And 465 Operating Budget - 3/9/05 it's probably not as accurate as what we have.
I understand. I would hope so. Thank you, Madam President.
You're welcome. The Chair recognizes Councilwoman Miller.
Thank you, Madam President. Good morning, Miss Griffith.
Can you tell me a little bit more about this transportation and community development 466 Operating Budget - 3/9/05 initiative, and maybe to project an outcome. Does this have anything to do that... I've heard in other cities people have really done great economic development and retail development around existing transit terminals. Because when you're looking at Wayne Junction, that's...
There's sort of two answers to that. T.C.D.I. grants, that's a specific program that comes out of D.V.R.P.C., the Regional Planning Commission. We... I represent the Mayor on that commission, and we broadly circulate the R.F.P. when it arrives. Agencies make application, according to the specifics of the R.F.P., and hopefully -- And in this case three agencies did get funding. However, the focus on transit oriented development or transit hub development is one that we're committed to across the board, not only with regard to T.C.D.I. grants, but our Strategic Planning 467 Operating Budget - 3/9/05 and Policy Division is very much focused on that. As a matter of fact, if you were to read... review our Phila-shops document -- And I think that might even be online now -- you will see that a whole chapter is focused on this idea of transit oriented design and development, and how you capture the buying power of folks as they come and go from work. So we'd be happy to... If you have some specific areas you'd like us to focus on, we'd be happy to do that. The staff would be eager, as a matter of fact.
Okay. Well, there has been some discussion. I know that Commerce has been a part of the discussion. And I'm not sure whether City Planning has... On 22nd Street we're doing development in Tioga that moves up 22nd and then ties in the Budd site up on Hunting Park. And in your testimony you actually note Lower Germantown. And I'm assuming that's -- Of course, you mention Wayne 468 Operating Budget - 3/9/05 Junction. We have a lot of R.D.A. properties, vacant lots and what-not.
All right. Okay. So I would be happy to get further information. We have people that are interested in development in those areas. And we certainly wouldn't want to do anything that would not be able to enhance and tie in this whole transportation hub. So, I'd like to meet with someone further about that.
Absolutely. That's one of the reasons that support for S.E.P.T.A. is so important. There's cities all around the country that would die to have the kind of transit infrastructure that we have, as an economic development spur. So, we'd be happy to continue working with you on that.
Okay. One other question. In your Community Planning Division... And this is actually -- I was 469 Operating Budget - 3/9/05 going to call and ask you about this, but since you're here, I might have as well ask you today. I think what we need or what I need as a Council member is someone to help us put together a whole district plan that can also be somewhat regional. For example, Councilwoman Tasco and I share boundaries, you know. She's one side of the street; I'm the other. So if we look at what we're doing in a regional point of view, then we can create a vision for development, future development or present development, that would enhance the needs of both districts. So, we really need that kind of help.
I think that would be a good idea. What I might suggest is that we get together and perhaps try to get some funding to be able to do that. You know, I don't have to tell you, Councilwoman, that we have relatively small staff, and a large work program. 470 Operating Budget - 3/9/05 But we've been very successful in the past in -- especially when we have these sort of targeted initiatives, getting funding, as with the Parking Study, as with the Community Heritage Study that we did some time ago. And we actually have someone on board now who's -- We sent her to a one-day course at Penn and who's focused on actually getting funding, and from an array of sources, not just the usual suspects. So, be happy to work with you on that.
You're welcome. Again the Chair recognizes Councilwoman Tasco.
What is the 471 Operating Budget - 3/9/05 time line for the completion of the new Zoning Code? Has that been asked?
Well, as we say in the testimony, we're doing it in phases. What we hope to do this coming year is focus on -- And actually, we have... Why am I talking when we have the guy who's actually doing it here? I'm going to ask Tom Chapman, who's Director of our Development and Zoning Division, to be more specific.
Good morning, Madam President and members of the committee. Good morning, Councilwoman Tasco.
Good morning. You have to identify yourself for the record.
Thomas Chapman, Director of Development Planning for the City Planning Commission. Thank you. Councilwoman, this year we have... I have a number of drafts of ordinances right now that we're in the process of kind of doting i's and crossing t's that would amend a number of provisions of the Zoning Code. 472 Operating Budget - 3/9/05 It would -- They would eliminate a number of districts that we don't map any more, that we haven't used. Another bill would put a new definitions section in the Code. And there are a couple other bills that we're working on that would deal with some provisions of the Code in various sections, that do nothing more than prevent people from getting permits, permits they should otherwise be able to get. And also, as we move forward this year, we are going to be focusing on the commercial districts in our Zoning Code. I'm sure that you know that's an area where... You know, we're dealing with Code provisions that are 40-something years old at this point. And it's something that we want to try to deal with in this coming year.
Now, you have a Zoning Code Revision Committee, right?
Is this group having input into the ordinances that you have drawn?
I thought there was a committee put together to address the issue of looking at zoning changes city wide. Is there -- Isn't there a Zoning Code Committee? I thought you all put that together.
Maxine Griffith. I'm sorry. The Planning Commission is the... obviously the commission charged with assisting us in moving these initiatives forward and making sure that we get a broad range of input, and especially through the public hearing process. There is a development committee.
Development Services Committee, chaired, again, by Commerce, with 474 Operating Budget - 3/9/05 broad representation. And that committee is actually being augmented as a result of recommendations by B.I.A., the Building Industry Association, to ensure that every agency of government has input. So, for instance, if a recommendation came out of that committee, that to enhance development, X, Y, Z zoning change should occur, Tom, who's on that committee, would obviously vet it, based on our policies, and bring that forward to the commission, with consultation with the appropriate Council members.
Okay. Well, I'm going to check. Miss Johnson from my office, I thought, was... I may be confused on this. Are you looking at zoning overlays for commercial districts? One of the concerns we have in our dealing with commercial districts is that we want to be able to determine what should go in a business trip. 475 Operating Budget - 3/9/05 Instead of having ten naileries, and five hairdressers and, you know, ten dollar stores, there should be some way -- And I do think there is a process in the City where you can do a zoning overlay that some businesses are allowed and some aren't, that you have too many of one, you don't add one another. Is that part of your discussion?
Councilwoman, I guess you're talking about spacing requirements. Well, to answer your question broadly, we're looking at commercial districts in general. We're certainly looking at the overlays that we have in the Code now. I think we would like to get away from that system as much as possible, and have the provisions of the districts deal with concerns about uses, as opposed to having different zoning requirements for every commercial strip in your district or Councilman DiCicco's district. We'd prefer that the individual zoning classifications deal with your concerns. 476 Operating Budget - 3/9/05
I have 5th Street which is zoned commercial. And then we find the applicants going before the Zoning Board requesting a variance for wholesaling. And some of them just go in and open wholesale shops without -- without a permit, a zoning variance. The other thing is, though, if we had this zoning overlay, they would know that they could not open up a wholesale shop there.
One of the reasons that it takes some time to evolve these and put them into effect is, we want to make sure there are no unintended consequences. However, if there is an underlying zoning that, for instance, says there shall be no more than two of the same kind of commercial enterprise within X blocks, it really wouldn't matter what the commercial 477 Operating Budget - 3/9/05 enterprise is. So, I would think that you wouldn't want a cluster of any one thing, unless you were doing a wholesale district or some kind of district. So, that's the way we would prefer to approach it, if possible. And it may not be possible. The problem now is, with this proliferation of overlays, in some areas, from block to block it's very difficult for an entrepreneur to know what they can and can't do. So, if we can standardize, and then only have overlays for things that aren't -- are really special, where there's a special condition where there's a certain situation in a given district that's really not revocable in other districts, and it would be silly to try to put it in, you know, the underlying zoning. And overlays are a great tool. So, that's what we're vetting through now. Just as we did with the residential, we'll be working with your staff, and come 478 Operating Budget - 3/9/05 about midway and make a presentation, and get back your concerns, that we're trying to balance not being an impediment to development or to good businesses opening, with the need of the residents of a given district to get what they want from these entrepreneurs.
The Chair recognizes Councilwoman Miller for a point of information.
Thank you. Around the whole issue of overlays, in some of our business districts, we believe that the owner of the property is just interested in the length and getting that space rented. And we have to, I believe, use zoning overlays or special controls to stop the influx of the same type of store. At Germantown and Chelten, we have at least ten dollar stores. And we had another dollar store just open. We just had, 479 Operating Budget - 3/9/05 you know, in Germantown we've had a farmer's market I think since my mother was a child. And now that farmer's market is a dollar store. It just opened up probably a week ago. And I believe that the way for us, me and business people and neighbors that are concerned about the quality and the types of stores that are now coming into Germantown and Chelten which used to be the shopping district in this City that was second only to Center City. But now we have dollar stores. We have stores that have just sell hair products...
...nail salons, barbershops, hair... you know, hair salons. And we have to figure out a way to stop this. And the only way that I can think about doing that and having some kind of impact is to do zoning overlay.
What I'm suggesting, Councilwoman, is that I have heard that 480 Operating Budget - 3/9/05 complaint probably from half of the Council folks in here. And so, what we're suggesting is that there might actually be a zone that could be developed, that could be used by a wide range of people, where the zone would say, you shall not have the same kind of store within, you know, X feet or blocks, et cetera; and that if we can do that, what you would say is, I want X zone here. And wherever that zone is in place, the entrepreneur would know, uh-oh, I can't put another hair salon here because this is... I shouldn't use the word X zone because it evokes X-files, you know what I mean... that this zone is telling me that I cannot do that. So, what we're hoping is to meet the same objective, but to do it with a City wide regulation that Council people could use when they wanted to. Not saying that overlays might still not be used if there's a special condition. You look at the zone and say, well, Max, this 481 Operating Budget - 3/9/05 is nice for 95 percent of what I want, but we have a problem in this block that's really unique. Still use an overlay for that. And this is a concept. And it's the reason why Tom and his staff are taking some time to look at it, to talk to folks in other cities that have done it. It may be we get to the end and say, you know, we thought this would work, but it's not going to work. But that's what we would... That's what we're working towards, if possible.
Well, I think that we just really want to have something that will work and that will help us upgrade our commercial strips because right now it feels like we have no control, that, you know, we could have another dollar -- we could have another store, you know, become vacant or available, rather than vacant. And we'll have another dollar store tomorrow. And we've got to figure out some way to stop it.
This might be useful, 482 Operating Budget - 3/9/05 actually, to have a small meeting on this because there's also the other side of the coin which is attracting the kind of stores you want. And we also have some ideas about how to do that.
Well, you know, attracting... You know, people might take a look at the demographics, income levels, et cetera. But I'll just use Germantown and Chelten again as an example. There are a variety of income levels there. People would probably shop there more if there was more variety of stores available. We also have probably about five institutions that... The employees that we have, we probably have about six schools. We have three public assistance offices. And all these people have staff that are there, that are making, you know, pretty good income, that would that go to Andorra or Cheltenham and shop because they can't find things at Germantown and Chelten during their lunch hour. So...
And there are 483 Operating Budget - 3/9/05 mechanisms for reaching out to these entrepreneurs and putting together packages of demographic material that we could prepare. They're also some national chains that focus on communities that may be in transition or that other chains might not see as vital. So, we'd be happy to work with you --
-- and with some folks in the Commerce Department that we've been talking to about this issue. We've actually had a little working group on our staff that's been looking specifically at the problem of supermarkets, but that's also branched out into this broader area, and would be interested in working with you on that.
All right. Thank you. Thank you, Councilwoman Tasco.
Welcome. 484 Operating Budget - 3/9/05 Are there any other questions?
The Chair recognizes Councilwoman Tasco. I'm sorry.
Was my time up? Let me just go -- Well, I think that the whole issue around zoning is very important. And if you've heard it from the majority of the District Council people, I think we ought to be a little more pro-active in trying to address those issues because while we're thinking about it and planning -- I know your job is to plan -- we need some action.
You know, you can't -- Once it's done, you can't change it.
Right. I think probably where we've been remiss is in not sharing more of what we're doing. And what I'm going to do is to ask Tom in the appropriate way, probably through the Council President's Office, perhaps, to 485 Operating Budget - 3/9/05 arraigning a briefing, to give you some of the nitty-gritty. What we're doing is getting early input so that we know we're on the right track.
Thank you. The other question is for Mr. Lombardo from the Sinking Fund. Who's the Sinking Fund?
Oh, I'm sorry. I'm sorry. Okay. I think that's it for me.
I think it is a good idea to come and share and let us know what's going on because I read the minutes of the Planning Commission maybe a month or two ago -- I'm not really sure -- but in there it 486 Operating Budget - 3/9/05 made a statement that Council was going too far with some of these bills and things that have been introduced here. And I know that... I don't believe that any of us introduce bills because we personally want to do. We're looking out for the district. We're looking out for the district. And I think that that statement was written as it related to some of the legislation around take-outs and hours of operation, et cetera. Okay? So if you talk to us, you'll know why we're doing this, instead of thinking we're just trying to go too far.
That was absolutely an inappropriate comment. Hopefully, it wasn't one I made.
Well, actually, it was in the Planning Commission's minutes, yes.
I'm sure someone made it. But you're absolutely right. I mean, probably even an access course, someone from 487 Operating Budget - 3/9/05 my staff said that the objectives are laudable. The objectives are ones that we concur with. We just want to make sure that the laws really reflect the objectives. One of the things that's happening now, unfortunately, is that we have a process where if the laws don't quite meet the objectives -- and probably some would say even if they do -- folks end up going to the Zoning Board. And it becomes sort of a circle. So it's -- it's -- it's -- it's a difficult -- it's a difficult issue to -- to focus on. And I think you're right that having this conversation early on, sharing with you what our thoughts are, you making sure that what we think are your objectives are really your objectives. And I think that's a good idea. Hopefully within the next month we try to do that.
The Chair recognizes -- Councilwoman Tasco, your microphone's not on. 488 Operating Budget - 3/9/05
I think it's important -- I just piggybacked on Councilwoman Miller -- that you all talk to us because we live in our neighborhoods.
We deal on a daily basis with the concerns raised by the constituents. We all have people who represent us before the Zoning Board. We can share with you the kind of reasons that we have to deal with over there. We have the thinking of our community, in terms of what they like and what they don't like, what they will and what they will not buy. And so, as we plan -- and I'm glad that you are talking to the Commerce Department, because their job is to promote and develop this, that there is this collaboration and discussion around needs. But you can't do it in a vacuum. You have to talk to those of us who represent these areas, where we run into problems 489 Operating Budget - 3/9/05 constantly about the kind of stores that are going into a community, which some of them can be problematic for us on the other end once they get there. So, it's important that we meet as quickly as we can, so that we can share with you our concerns, because I know you have to work from a viewpoint where, we're the City and we have to think of the broader... the blah, blah, blah, blah. And that's fine. And that's very good philosophy. But on the practical side, we have to deal with all of that.
Well, that's why there are two branches of government. This creative tension happens. And I think there are also -- Another sense where there are two tracks. It's my sense that on the day-to-day items that come before the Zoning Board, there is good communication. I think 99 percent of the time we support the Councilperson's view before the Zoning Board. And I think our staffs work 490 Operating Budget - 3/9/05 well together. I think on the strategic kind of thing where we're thinking ahead, that could use more front end collaboration. And I'm committed to doing that.
Thank you. The Chair recognizes Councilman Clarke.
Just made it. How many planners do you have, area planners now?
About 35, and that includes folks whose title are G.I.S., geographic system coordinators. But most of them also have degrees in planning, that kind of thing. 491 Operating Budget - 3/9/05
Not really. There was, as you know, an initial increase. And thanks to the... not only to the Mayor but to the Council, we got authorization, I think, in my second year here, to bring on... I believe it was new planners. 10 Some of those have gone on not to 11 better things because there can't be anything 12 better than working in Philadelphia, but gone on to other things. And there had been a freeze. And we have in some cases gotten authorization to hire; in other cases not. So, I would say where we are now is not a dramatic increase. There are probably two or three more staff members than there were when I came.
How do you prioritize the placement or what is the process to have a planner designated for an area to develop a strategic plan?
Deputy Director has a point. Were you talking about the community 492 Operating Budget - 3/9/05 planning staff that works directly with Council members to develop plans?
35 is the whole agency. That's strategic planners who work on capital budget and urban designers who --
11. We had 11, and that is one down from our high of 12; whereas, you know, we've divided the City into planning analysis sections. And at one point we had hoped to have one planner per P.A.S.
I was going to 493 Operating Budget - 3/9/05 change my line of questioning, because if you had 35 --
-- I was going to ask, you why do I have to get in line to get a plan done for Eastern Lower Tioga. So it's only 11.
Well, the Deputy Executive Director earns his salary today by --
My earlier question. What's the process to determine what areas should be designated to develop a Strategic plan? Is it driven by the elected official? Is it driven by need? Or is it driven by community group? Or is it driven by a development strategy? I mean...
The universe right now is still being driven by the original N.T.I. planning that was done, I guess, three-and-a-half years ago. We had initially proposed, I believe, 13 N.T.I. plans. And then there were consultations with Council members that 494 Operating Budget - 3/9/05 in addition to City planning, the N.T.I. Office and Housing Office took a part in. As a result of that, the turned 5 into 37, is it? 34 in this report. 34 6 plans. We are still working through those 34 7 plans, in addition to the fact that 8 foundations have granted C.D.C.s and other 9 community-based organization funds to do 10 their own planning. 11 They're going to do them with or 12 without us. We have assumed it's probably 13 better to do them in league with the City, so that also gets folded into our basket. And then occasionally, where there are large-scale developments such as the Navy Yard Plan.
-- which, of course, was not an original N.T.I. plan, we have to devote some staff time to that as well.
Upon the completion of the plan, what happens? Do you hand it off to the group, to Council person other agencies, to determine -- 495 Operating Budget - 3/9/05
Let me finish. -- to determine a blueprint for implementation? Or do we just do a plan, do a book and say, okay, thank you very much, and go on to the next area? Is there any follow-up from the Planning Commission to some way get the appropriate parties to address the plan, and implement the plan in the Strategic way
yes. That's a very important question. And it's the question every planner asked because every planner wants the plan to be implemented. One of the things that we've done or two of the things that we've done to try to move that forward is, we involve the operating agencies through the planning process. As you know yourself, for instance, Strawberry Mansion Plan, we got folks from Housing and Commerce, et cetera, there talking with the folks along with us. In addition, the last page of the 496 Operating Budget - 3/9/05 plan is always a matrix. And that matrix lists the objective, what's needed to reach that objective, and who the -- what the agency is or sometimes if quasi public or private entity that's needed to effectuate that change. Then we continue to work with the agency to try to move those forward. However, recently the Chief of Staff convened a series of meetings -- and we were very pleased about this -- to say there needs to be a more formal linkage between the planning effort and implementation. And how are we going to... How are we going to do this? And Victor I can't Victoria over... How many plans did we send over, ten? VICTORIA: Yes.
About ten plans where we reached the stage... And we had sign off from Council members that we could move forward, to be the prototypes for this new way of doing things. And we're in draft form. I suspect that... And I don't want 497 Operating Budget - 3/9/05 to speak for the Chief of Staff, but I suspect one of things that's happening in this interim period, other than these hearings, which, of course, take up a lot of our time, is that there's going to be a changeover in the Managing Director. And it's the Managing Director and those agencies within the Managing Director's purview, for the most part -- not totally because, obviously, we have Commerce -- that are charged with implementation. I suspect that --
Managing Director's? What about the Redevelopment Authority and O.H.C.d.?
Those as well. And actually, we have perhaps a closer relationship with R.D.A. We work with them on an ongoing basis. And to some extent with O.H.C.D. as well. But all of those agencies, as well as, you know, recreation, and all of the other agencies that come under the purview of the 498 Operating Budget - 3/9/05 Managing Director have other mandates that they're trying to objective -- that they're trying to fulfill as well. So they're asking in a way the same question you ask: How should we prioritize this planning work in our work program? So, the first meetings around this was actually sort of parsing this through and using the... I think the empowerment zone process. And there was another --
There was another process that was used as a prototype, If I remember
Let me not misspeak. It was a specific sub-process within the Empowerment Zone process, which is planning implementation of the American Street Plan 499 Operating Budget - 3/9/05 which apparently people thought went well, at least in terms of the relationship between the plan and implementation by Streets and Recreation, and others, in Commerce and others.
Reason I'm asking this line of questioning, there seems to be to some degree -- And I hate to use the term disconnect, but I don't get a sense that if there's a development plan done for a particular neighborhood, that people in the agencies that oversee both the implementation, in terms of contracting with developers or interacting with developers, have a sense of what those plans are. And I'll use Strawberry Mansion as an example, that somebody calls and is interested in Strawberry Mansion; and they interact with the Redevelopment Authority about parcels of land that could potentially be available. It doesn't -- They may have a -- from their inventory sense, a sense of what's available. But they don't have a clue, in 500 Operating Budget - 3/9/05 terms of what the recommendations for the Planning Commission were for that area. And it ultimately ends up getting me involved in some level that, frankly speaking, I probably don't want to be in, being the arbiter between the developer who wants to do something, the R.D.A., and the plan that the community developed. And more often than not, they don't -- they don't have the same objectives.
And I'm just concerned that, you know, it's not a clearly -- It's a clearly thought-out process early on. But from the implementation it just doesn't seem to be a continuing process, working with both the community and the Planning Commission.
That's disappointing to hear because I know that Victoria has done several presentations to a consortium of agencies, not only distributed the plans but actually had ongoing conversations. Do you want to speak to that? 501 Operating Budget - 3/9/05
My name is Victoria Mason Alley, and I'm the Director for Community Planning at the Planning Commission. Yes, Councilman, given our interest and concern in making the appropriate linkages between our recommendations and the plans and implementation, we've spent a great deal of time reaching out to each of our colleagues, that... fellow agencies, to share with them, the component of each plan, recommendations being discussed, where we are identifying those agencies as being partners in the implementation process to get their buy in, in the hopes that -- Again, we not only get their buy in, but this in turn will filter down to other levels of staff within their agency.
You know, I think it's a work in progress. And it has taken time, 502 Operating Budget - 3/9/05 clearly. But we have made ourselves available, and continue to make ourselves available, to reach out to staff and to help enlighten the various departments that need further information or assistance from us.
Let me ask you this question on follow up because I know I've been way beyond my five-minute limit. And thank you, Council President, for allowing me to do so. Does it make sense to you in, an area where the Planning Commission does a plan, you know, utilizing all the resources of the community and other agencies, and then the City or the Redevelopment Authority kind of puts out a request for proposals to develop a master plan for purposes of development, as opposed to this kind of hodgepodge strategy that we use? Say, the Cecil B. Moore area as an example. We hired this firm to do a plan, right? And at the end of the plan, it's not clear to me who will ultimately take the 503 Operating Budget - 3/9/05 responsibility of implementing the plan, understanding the agencies and their inability, frankly speaking, would be on that -- to the level that you probably need to be, from an implementation standpoint. Would it make more sense to talk about selecting a master developer in some of these areas, you know? And they can have, you know, subcontracts or whatever or joint venture relationships with other developers to develop an area, as opposed to the current way? In a comprehensive way, as opposed to putting out an R.F.P. for houses here, 20 15 houses there. 16
That's an interesting 17 concept. And certainly conceptually that 18 could be a great way of working in certain 19 instances. 20 In other situations, however, where you want a wide range of competition, where things are being phased in a way that's very disparate in terms of time, it may not work. I mean, I certainly think that the idea of sensitive master development scenario 504 Operating Budget - 3/9/05 could be part of the tool kit of how we move forward on issues. And that's something that we would bring to Miss Wilkerson's sort of task force. But in addition, you know, I would not want to leave here with you not thinking that this is also a concern of the administration. I mean, you know, we are planners. So, we would love for our plans to be implemented in exactly the way we and the community and the elected officials have developed them. But it is not up -- You know, we're not the ones that called this implementation meeting together.
It was really the Mayor's Office who also saw this need to link things better, but to do it in a way that doesn't constrain, because a plan is a view into the future. And you don't want something that's so connected that it can't 505 Operating Budget - 3/9/05 respond to changes in the market, changes in demographics.
Changes in finance, et cetera. So exactly how you do that, and whether there's a protocol... Is there a checklist? Is there a document? Do you have to sign off? For instance, in New York, where both Victoria and I have worked, all they say is, once a plan is gone through, if an agency does something that's not in conformance with the plan, they have to explain why.
And that might be a useful idea, because in simply doing that, it force the agencies to look at the plan again and to think through, can we do it this way? No, and this is why. But there is this process. And I would, again, be happy to convey to the Mayor's Office that Council might be more interested in getting involved in how this is 506 Operating Budget - 3/9/05 being vetted through, and what the outcome is.
Well, okay. And I'm not looking for work. I have more than I need -- than I can handle at this point. But... And I appreciate your -- you know, your suggestion that we get more involved. I guess what I'm trying to do is to get a better sense of who ultimately is responsible for the implementation of these developments. And I just know too often in government it's very difficult to get one entity responsible because you've got this jurisdictional back and forth: Oh, I'm in control. This is my agency, this territorial thing. And if you had a master developer, right, for an area, and that master developer was charged with the implementation of a strategic plan, you know, understanding that they can, you know, utilize the resources of the government, that the likelihood -- that 507 Operating Budget - 3/9/05 that person's sole charge or that company's sole charge, then the likelihood that that would be done in a coordinated way I think is enhanced. And that's why --
It's definitely something to be discussed and looked into. It's an interesting idea.
All right. Okay. Thank you. I can take advantage of the five-minute rule further?
Might as well get this in while I can. In terms of your resources, i.e., your area of planners, and understanding that there's some limitations, is there a varying degree of ability to work in an area? I understand a full-blown plan takes a substantial amount of resources, but if I have an area -- and I think Miss Alley understands the area that I'm talking about.
That I need to start some level of process to get people engaged in understanding that there's going to be a planning process, and ultimately, somewhere down the line, when one of those planners are freed up, develop a full-blown strategy. Is there something that can be done in the interim?
I think, clearly, Councilman, if you were arranging a meeting in that community and wanted our presence and our assistance, we would be glad to accompany you and join you. I think with regard to the time frame for that planning process, you know, it would be important to be honest, that it might be a slightly longer time frame than you might initially hope.
Well, I mean, there is another... There is another approach. And I don't want to use this as a panacea, but there's a plus to the fact that Philadelphia has gotten a lot of fairly positive publicity about the work that we're 509 Operating Budget - 3/9/05 doing. And that is that we have been pretty successful in getting grants, not only from local entities and foundations, but also from some national foundations -- national organizations, from the N.E.A., for instance, and from the National Trust. As I was saying to the Councilwoman, one of the things we might be focused on is scoping out a proposal, especially if the project or the area plan had something unique or particularly interesting about it that could be replicable, for instance, in other communities or other cities like ours, and try to get some targeted monies. The CHPP program, the Community Heritage Planning Program, that we were able to do in Francisville, for instance, and that now the trust is working on, it will probably be one of the prototypes for the revolving loan program. That came as a result of a grant. We wouldn't have been able to do that otherwise. So, we're not saying we will not do 510 Operating Budget - 3/9/05 the work. That's our job. But with the understanding that we're doing 34 other plans... Victoria has, as a matter of fact, some specific funding sources in mind that's probably not appropriate to put on the record but that we would be happy to call you about.
One last question. And I will note to what degree City Planning will be involved. I mean, it's a question. I mean, we have right now going on in the City of Philadelphia to some degree somewhat of a phenomenon, in terms of the aggressive nature of market rate housing.
I'm, frankly speaking, amazed when I look in the Sunday paper, and I see a house on the 1800 block of Fairmount Avenue just sold for $759,000, which is a good thing. But there are some concerns in the adjacent community, in similar communities throughout the City, particularly around the perimeter of Center City, about what the 511 Operating Budget - 3/9/05 implications will be, as it relates to their ability to continue to stay in their neighborhoods because of rising real estate taxes. As you know, Francisville is a traditional working-class neighborhood. We've done a substantial amount of affordable housing in Francisville. But what's happening now is, people are strategically purchasing properties and lots. And they're starting to build market rate housing. And there's a real concern. In the work that you're doing, as it relates to the interaction with other agencies, do you all have some sense of what we can do? While we probably need to continue the aggressive market rate housing that's happening in our City, but there is a real concern about maintaining some levels of affordability for an overwhelming number of our citizens. Do you all -- Are you all involved in that?
Yeah, we have been 512 Operating Budget - 3/9/05 involved in a number of conversations. And as you know, there have been even some forums -- and you know, I will say the word -- on gentrification, where we've taken part in a supportive way, to Kevin Hannah, who's been sort of the point person on this issue, as the Housing Secretary. One of the classic ways of approaching this is economic integration, where you make sure that as market rate housing is being developed in a given area, you also have affordable housing and low income housing that not only begins to temper the rise of all of the housing, but it ensures that there is economic integration, and there are places to live in the neighborhood, to a certain extent for the people who are there now. The problem with that is two-fold. One... And this isn't in my view. This is not something you vetted through the commission, but perhaps my work at H.U.D. ...that you really need strong federal involvement and a strong federal urban policy 513 Operating Budget - 3/9/05 to accomplish that, because you need the funding, whether it be Section 8 or other kinds of funding, to establish this blended housing agenda. I think, in working with individual Council members, and with P.H.A. who's been excellent, I think, in this -- And Philadelphia is lucky in a way, that it's -- P.H.A. housing is, to a large extent, scatter site, and actually fits into communities. We've been trying to sort of, to the extent that Planning Commission is involved, mold this in --
I'm more concerned with the individual who already lives in the neighborhood. All right? Low, moderate income individual. And now this wave of market rate housing comes in and starts escalating values in the neighborhood. Now this person who's on the a fixed income or low income starts getting these 514 Operating Budget - 3/9/05 increased tax bills, and just simply can't keep pace with the rising values, i.e., the taxes. And that's where I'm trying to get a focus.
Right. And there perhaps some kind of subsidy would be useful. But understand, when I talk about the infusion of P.H.A. housing, I'm saying that that also begins to mitigate and dampen real estate values in a given area, to some degree.
That's what I thought. And I'm finding out that in these neighborhoods -- and I'll use Francisville as an example -- when we send out our appraisers, and our appraisers are getting comps, they're getting comps on the high end, and they're not taking into account that there was a substantial amount of low income housing done in that neighborhood. So, when these comps are coming back for acquisition, they're at the high end. And that --
But traditionally 515 Operating Budget - 3/9/05 that has been --
That has been one of the approaches. You know, again, I want to defer to some degree to Secretary Hannah, who's really our lead on this. And I don't... You know, I don't want to put everything off to another meeting at another time.
But I think this is such a big issue. It may be that Finance also needs to be in the loop in this. We've also had a question how much rental housing should we be providing in this mix, as well, if we're trying to keep, for instance, young people in the City. So, I think this is a broad question, and a question that we have to 516 Operating Budget - 3/9/05 debate, in the context of a federal government that is perhaps not particularly attuned to the needs of the City.
In all due respect, I'm not anticipating much help from the federal government --
-- on this issue at this point. In the future -- and I'll end with this question -- you've said here that there's been some discussion internally in the administration. Can you all include Council members to some degree in that discussion?
Because we have some real concerns, because we're, like, the front line of defense, as it relates to neighborhoods. And we really need to be a part of that discussion.
I will personally communicate to Secretary Hannah and see how 517 Operating Budget - 3/9/05 we can proceed with that.
Welcome. The Chair recognizes Councilwoman Miller.
Thank you, Madam President. I just wanted to piggyback on Councilman Clarke, just in reference to including Council members. Again, I know I said it earlier. But it's important that if you come up with -- at the end of your debate that this amount of rental housing is needed, we need to know that. We're out there meeting with neighbors and developers all the time. And we can help direct some of those activities that would address that need. But if we don't know that that's what you're talking about -- And perhaps there need to be recommendations. 518 Operating Budget - 3/9/05 And I just want to thank Victoria Mason -- I always call you Mason-Alley -- and the rest of your staff for doing, I think, such a fine job at our N.T.I. planning meetings.
Absolutely. And as far as I know, no conclusions have been reached. And these briefing sessions really came about because of requests -- public requests to speak on the issue, and just information being provided. But I think both you and the Councilman raised an issue. I mean, who would have thought that at this stage we would be speaking the way we are about the thrust of market rate housing? As a matter of fact, how many units... I know we've been asked to provide -- Rich and Tom came to me a couple of months ago, right after Christmas, I 519 Operating Budget - 3/9/05 guess, right at the holidays, with the fact that our office was being flooded, really, with requests and inquiries about, in some cases unassisted as-of-right housing going up everywhere.
Right. And I think that was one of the goals of N.T.I. And I'm really happy that we're having this kind of discussion in Philadelphia because it means we're starting to address those issues in neighborhoods.
Yes. And we have this term that we've been using for Center City Paul. And Paul Levy and I argue about who came up with it first, but managing success. And I think that's what... I mean, it's nice to have the problem, but the problem does need to be addressed.
Thank you. Are there any other questions from members of the committee? The Chair recognizes Councilman 520 Operating Budget - 3/9/05 Cohen. You're light is one. Did you want to be recognized? (No response.)
Very well. Are there any other questions from members of the committee? (No response.)
Seeing none, I thank you. And you're probably going to be in time for your other appointment.
Thank you. Our next witness. MR. McPHERSON: Sinking Fund Commission.
Mr. Jannetti, welcome again. I would ask you to summarize your testimony. The stenographer will be given a copy of the testimony that you have presented to us, and it will be transcribed in full.
Thank you, Madam President. 521 Operating Budget - 3/9/05 Good afternoon, Madam President, and members of Council. I am Vince Jannetti, Executive Director of the Sinking Fund Commission, here to testify on behalf of the Commission for our fiscal 2006 Operating Budget request. The Sinking Fund Commission's fiscal year 2006 budget request, all funds, totals $448.5 million. The General Fund portion of this request totals $166.1 million. The request from the Water Fund for fiscal 2006 totals $181.0 million, all Class 700. And the Aviation Fund request is $94.9 million, all Class 700. In addition, the Commission's 2006 request of $6.5 million from the car rental tax fund is for lease payments on the new sports stadiums. This concludes the written portion of my testimony. I'd be happy to answer any questions that Council may have relative to our 2006 Operating Budget. 522 Operating Budget - 3/9/05
Thank you, Mr. Jannetti. What are the projected payments in FY'06 for new borrowings?
On new borrowings in FY'06, the Airport has gone out with a new issue. Those bonds will have capitalized interest, so there won't be any payments in fiscal '06 for those bonds. For the Water Fund, which is also going out with new money, the projection we have in the budget is for debt service -- new debt service payments of... Can't see this. I think I might have that reversed. There's no -- In the Water Fund there is no 17 debt service payments also in fiscal 2006. That's all capitalized interest.
Okay. So are you saying we have no projected payments in FY'06 for new borrowings? (No response.)
I'm sorry. Yes, 523 Operating Budget - 3/9/05 ma'am. On the tran, which would be in the General Fund, we are projecting $380 million at approximately three percent interest. The debt service on that would be around $11.1 million.
Not projected, no, ma'am. The only other thing is, on N.T.I. we did the final traunch of N.T.I. this year. And so, the debt service will be up to the full $20 million a year.
The debt service on the N.T.I. bonds will encompass the full $20 million that's in the budget.
20? Okay. Mr Jannetti, do you have funds budgeted in FY'06 for guarantees by the General Fund on the Parking Authority bonds?
And what are you doing to reduce and/or eliminate these payments?
On the Parking Authority series 99 and 99-a bonds, we have approximately $2.4 million in the budget for our guarantees. On the -- On the bond for the facility, the proposed facility at 19th and Walnut, we have asked the Parking Authority to take the remainder of the project funds that are unspent, and feed the bonds they have, a portion of the bonds they have outstanding. We've also asked that they sell the 525 Operating Budget - 3/9/05 property and use that money to take out the rest of the bonds.
Well, you've asked. Have they responded? Do you know what they're doing?
That was about two months ago. There was -- The Commerce Director has done that.
So I assume the Commerce Director will be following up on this?
What refunding swaps, et cetera, are you planning to do in FY'06?
Right now I don't have any refundings or swaps in FY'06. We are working on two right now which will be completed in this fiscal year, one for Water and one for Airport.
What are 526 Operating Budget - 3/9/05 the projected savings?
These are -- These are swaps due to swaptions. So, the projected savings was taken up when we did the swaption originally. So, when they executed the swaptions, we took in cash which was the savings.
Okay. Thank you. The Chair recognizes Councilwoman Tasco.
Yes. My question is... Find my question. Good morning. In your testimony you discussed the City's issuance of tax revenue anticipation notes which are trans in July of 2005. However, under one of the proposals by the Tax Reform Commission, the Commission proposed that the City should allow for quarterly real estate tax payment. If this proposal was adopted, would it not reduce the need for trans? We had a discussion last year about the quarterly 527 Operating Budget - 3/9/05 report.
I'm not real up on real estate taxes, Councilwoman, but I think that would hurt us, in that the tax -- We collected real estate taxes in the beginning of the year?
So we collected them in quarters throughout the year. I think -- I'm not sure. I've never analyzed that, but I don't think that would help us. But that's... I'll look at that.
I want to go to Wi-Fi. You're aware that the administration 528 Operating Budget - 3/9/05 wants to create a non-profit or have a non-profit created, and bonds would be floated in the area of $10 million. What would be your involvement and the City's involvement if this was created, to create this wireless network?
I'm not sure what entity would be issuing those bonds, Councilman.
Let's say the non-profit that was created did that. Would we have some... What would our involvement be? Would we have to guarantee? I mean, I don't know a lot about bonds, so I'm asking you as the expert to tell me, if it were -- if they're floated by the non-profit, what would be the commitment that the City would have to make? Give me every scenario possible. The administration's thrown this out there, that it was going to be funded by bonds. So, I'd like to know how we're going to do that.
Every scenario possible. We could do G.O. bonds for that. 529 Operating Budget - 3/9/05 We would pay for it out of the General Fund. We could do Authority bonds with a service agreement. We could do... They had a non-profit. They could issue their own bonds, and which would be on our debt. They could issue their own bonds which we could guarantee. I mean, you know, it could be all over the place.
What scenario would we... What scenario we wouldn't be on the hook at all?
If they -- If they had a non-profit who did their own bonds and we didn't guarantee them.
Would anybody buy bonds that weren't guaranteed, that a non-profit would throw out there?
It depends on... I don't know an answer to that, Councilman.
Thank you. Thanks. You're always straight with us. That's what I appreciate.
You're welcome. Are there any other questions from members of the committee? (No response.)
Thank you. Seeing none, the committee will stand in recess until 1:30 at which time we will hear from the Board of Pensions and Retirement, and then the Procurement Department. Thank you. (Public hearing recessed at 12:25 p.m.) (Public hearing reconvened at 2:15 p.m.)
Good afternoon, everyone. Welcome. 531 Operating Budget - 3/9/05 I do apologize for the delay. At this time I will ask Mr. McPherson to announce the next group. MR. McPHERSON: Board of Pensions and Retirement.
Good afternoon. Please identify yourself for the record and proceed with your testimony.
Good afternoon, President Verna and members of City Council. My name is Gwendolyn Bell. I'm the Executive Director of the Board of Pensions and Retirement. And with me today is Anthony Johnson, our Chief Investment Officer.
The Board of Pensions and Retirement is requesting for fiscal year 2006 $7,728,000. Part of the budget amount includes contractual increases for the unions that just went through, as well as the fringe benefit cost. 532 Operating Budget - 3/9/05 We have 77 positions in our office. We've added a counselor and a clerk typist to reduce the number of weeks that it took for retirement -- post-retirement interviews. We were approximately eight weeks out from a separation to give an interview, and we're now down to four. Once the counselors are trained, we do anticipate that there will be a reduction in the overtime. We've had extensive overtime because of catching up with the checking of the DROP payments for these people that entered DROP initially. During the fiscal year 2005, we had an additional 416 people leaving DROP, and we anticipate that 680 more will leave as a result of DROP next -- this coming year. We're in the middle of a very large project with our technology unit. Actually, we transferred our technology unit to MOIS, incorporated them into MOIS. And we recently replaced our tech consultant because we had a very aggressive program that we wanted to complete to 533 Operating Budget - 3/9/05 automate our system. So, we worked in conjunction with MOIS, and we hired Information Consulting Services last year. We have about 60 projects on a list of things that we need to do or would like to do in Pensions, to make the system work more effectively and to automate those things, like we're just recently began using E-Works, and we're using an automated separation paper. We have expanded the number of retirement workshops that we have by two a year. We can accommodate an additional 250 persons. We have a larger seminar room, and we are filling those sessions each week. There's also an additional 12 sessions offered by the Deferred Comp area, and those are well attended as well. Association We've increased the number of people that are coming in for pre-retirement, and we are asking that you favorably accept our budget proposal.
Thank you. You mention that there are 3400 employees enrolled in the DROP program.
If you can -- Not today; I would like it in writing -- I'd like you to give us a breakdown by fiscal year, by fund, and by department of the 3400 employees.
Thank you. 535 Operating Budget - 3/9/05 How many money managers does the Board of Pensions have?
The Board of Pensions currently employs a total number of 72 investment managers. That includes both those managers who are managing public securities, normal stocks and bonds, and also our private equity limited partnerships.
Can you tell us how the money managers are selected?
Can you tell us how the money managers are selected?
Sure. For the... For most of the managers -- and I'll describe the majority of the portfolio and then the opportunity fund second. For the main fund, a consultant would be hired to conduct a search through databases and through meetings, to consolidate a list of semi-finalists for the Board to review. The Board then looks at both qualitative and quantitative information, 536 Operating Budget - 3/9/05 issues a report. They will select the finalists who will come in and present to them. And based on those presentations, they will then select who will manage money for the Pension Fund.
If a manager under performs, can you tell us what actions are taken?
Every quarter the investment staff presents the results of the managers to the Board, along with the consultants. And every quarter the investment staff comes up with a rating for each manager. Our ratings: Are satisfactory is the best. Watch. There are two levels of watch. Two levels of probation, and then termination. Quarter we determine whether there has been an organizational change or a change in the process. We also evaluate how well they've done versus a standard benchmark and versus a universe of their peers. And based on those criteria, we will 537 Operating Budget - 3/9/05 then determine whether we should increase their ratings or decrease their ratings. And we do make termination recommendations to the Board.
So, at what point do you terminate a manager for poor performance?
Once we've examined the phenomena that's going on in the market, we understand the construction of the index, and what's happening inside the index against which they are compared, and then we compare their performance against those in the market and the index, we then will then downgrade them and then terminate them. If a manager has under performed for us, we look at either the magnitude of the loss within a short period of time or the accumulation of multiple periods of under performance over perhaps a two-year period or more. And then we will recommend termination, typically.
For the record, can you tell: How are the managers, 538 Operating Budget - 3/9/05 money managers, paid and what are their fees?
The money managers are paid out of the Pension Fund itself. There's a special account called the Operating Fund, in which we will hold cash, cash that is liquidated from the money managers themselves, in order to pay the fees. The total fee that we've paid in fiscal year 2004 for the money managers was approximately $8.8 million. Overall total fees paid out for the Pension Fund, including money managers and consultants equals approximately $11.55 million which represents about .22 percent of the total fund.
All right. I would like you to provide us with a listing of your money managers, the amount they manage, and the fees they have been paid for the last three years.
Thank you. I have other questions, but at this time the Chair recognizes Councilman Kenney. 539 Operating Budget - 3/9/05
Thank you, Madam President. Good afternoon. As you know, our pension responsibilities are probably one of the largest segments of our governmental outlay, so to speak. And the fact that the Pension Fund is underfunded, probably I would guess severely is a pretty fair assessment of its underfunded status, that it continues to cost the City through the General Fund a lot of money we could be using to provide other services. How do we analyze and review the investment strategies of the money managers? Do we sit -- Do we just go based on their performance or do we listen to what it is they feel the market is going to do in the short term, in the mid term, in the long term? And how do we analyze their opinions?
Both the consultant and staff will do independent research into the performance of the market. For example, we will find out what's 540 Operating Budget - 3/9/05 going on in the large company market, the mid company -- mid cap size, and small cap and international separately. Then we compare how the managers performed in those markets. We then interview those managers independently in our offices. And if there are major issues that come up, we will then bring them in to present to the Board to explain their under performance.
When we took that big hit, as everyone in the country took that big hit at the beginning of the decade, what have we... How have we planned to either take advantage of what some people believe will be an end of a decade run again in some of the high tech and bio tech areas? And how do we prepare to protect from that tech bubble bursting again? Because I understand that really did set us back tremendously in our fund's performance.
You're correct about setting us back pretty far, and you're also 541 Operating Budget - 3/9/05 correct that it affected not just us but other public and private pension plans. With our new consultant, we have approved a new asset allocation to both protect us from downside performance, and to hopefully enhance the return of the Pension Fund. Specifically, we are reintroducing the real estate portfolio to the Pension Fund. Up until 1999, that allocation had dwindled down to less than a percentage point. It is now -- has been approved to invest up to five percent. And that planning will take about three years to completely fund that. We've also increased our allocation to private equity. And as risky as that may sound, private equity offers a tremendous opportunity to offer higher returns for the Pension Fund over a long period of time. In addition to that, we've also introduced hedge funds, again, another controversial investment in the media, but 542 Operating Budget - 3/9/05 hedge funds have been shown, when diversified properly, to lower risk and to enhance return. And those are the three areas that we're hoping will add value and reduce return to the portfolio.
Some analysts are indicating that they believe that real estate will slow tremendously over the next three to five years, and that real estate generally doesn't... Its performance is not as expansive as some other areas of the economy. Why would we be moving towards a larger real estate portfolio at this point in time?
As we look to enhance the returns in our equity portfolio, and by increasing our private equity allocation, we need to take steps to reduce the risk in the portfolio. Real estate has been shown to offer a risk reduction in a portfolio. What we're doing within the real estate portfolio, we 543 Operating Budget - 3/9/05 hope, as we move forward is, one, poor assets, poor buildings are typically where you'll find where the market might be topping out; whereas there is opportunity in real estate are in the more opportunistic or what they call brown field investments, where you're building from the ground up, where there's a need in an area. Those are where you might find a little more risk but a lot more return than just moving and buying a building and taking over the management of that building.
On the residential side, do you have an idea as to what the type of housing and the price range of the investments we're making?
I do not have an idea of the pricing, but we are focused on -- We will focus on apartments, multi-family units in that area. 544 Operating Budget - 3/9/05
Because, again, analysts are indicating that on the high end, more expensive homes, that they may be taking a major hit.
True. Those are the areas that we would likely avoid. We're looking at the single family loans. We're looking at multi-family complexes in areas that are growing, and really based on population demographics and economic growth in areas.
Does that also include the resort locations and summer residence type of investments?
That's a good question. That's probably a more detailed segment of the market that we specifically may or may not focus on. The funds in which we invest may have an allocation to those areas, but on the top level, an allocation level, we have not discussed exactly if we're going to move into that significantly.
Is the Pension 545 Operating Budget - 3/9/05 Fund precluded from any specific types of investments or is anything available, as long as it can be rationalized?
As long as it's rational, we will invest in most investments, as long as it's vetted out. Historically, we have avoided investing in short sales or futures and options. With the turn of the market and the introduction of hedge funds, that has changed, and we are introducing those securities into the portfolio.
Are you familiar with a book recently published called the next new -- the Next New Bubble? I think it's Harry Dent.
No? I would recommend it to you. There's apparently analysis that says, after the tech bubble burst, that there was a major shake-out or continuing a major shake-out of under performing companies, and that those that are remaining are poised to 546 Operating Budget - 3/9/05 really explode again in a positive direction towards the end of the decade. And then at the end of this decade, going into the next, we're going to experience a severe downturn in the stock market, and in the economy generally. I just recommend you take a look at it. It's an intriguing insight. Apparently he was -- he was quite correct in predicting the 2000, 2001 debacle. So, I would recommend that to you. Let me just go back to the issue of consultants. How many consultants do we have and how are they chosen?
I'll answer the second part first. The consultants are chosen in the same manner in which we hire our investment managers. We develop a list of candidates and present them to the Board, and the Board then selects who they want to consult on different asset classes. For the number of consultants, we have one for the General Fund. We have one for our private equity portfolio. We also 547 Operating Budget - 3/9/05 have one for our hedge fund portfolio. Again, trying to focus on those consultants who are expertise in the particular areas of interest. We also have two consultants, slash, manager -- managers who manage the Opportunity Fund, our emerging manager program.
I've been with the Pension Board for five years. I've been CIO since four -- almost four years.
During the course of that five years, have there been any termination of money managers?
I have the list. I just don't have it with me, but I will furnish that.
More than five. We 548 Operating Budget - 3/9/05 have terminated... I would be comfortable in guessing at least ten.
Okay. Have there ever been recommendations for termination that were not followed through? Have there ever been staff recommendations for termination that have not been carried out?
When I first started, there was a recommendation on the table that was delayed for some time, but it was prior to my appointment as CIO.
Okay. I'm sorry. The book's called The Next Great Bubble Boom. So, if you have some extra time, want to do some reading. Thank you, Madam President.
You're welcome. 549 Operating Budget - 3/9/05 You know, I'm just looking at -- You were mentioning about consultants. I'm looking at the testimony. Have two new consultants that have been hired to enhance the pre-retirement program which has been expanded to include an emphasis on psychology of aging. Can you explain that to me, please?
Those consultants are part of our pre-retirement sessions. We have two day sessions for groups of people that are about 40 people that come in. And we have speakers that come in from the Pension Board, from Social Security, from the I.R.S., and we have consultants that come in and spend an hour on the psychology of aging and retirement, as well as --
They range in all different price ranges. Some of them are a 550 Operating Budget - 3/9/05 couple of hundred dollars. I'll ask Dave Fagan to help me out here. 500 is the average.
$500 is average. I think the highest person we have that we pay on a monthly basis is about 850.
For one person, yes. But some of them are charging $300, some are five, and I think...
Yes. They come in once a month. They're part of our pre-retirement program, which is a two-day workshop. The average length of time that they speak is approximately an hour, some two hours. So we've added two new people to the 551 Operating Budget - 3/9/05 roster of the pre-retirement sessions. We're trying to cover all aspects of retirement. We do the financial planning session. We do the Social Security part. We do our pension. And we have a special session just for DROP that we do in-house. So, we try to bring in a different variety of people to speak on some of the things people have to think of just prior to retirement, you know, what they're going to do. A lot of people come in for their pre-retirement interviews, and they have no 14 idea of what they're going to receive. They have no idea of what they're going to do at retirement. So, we're trying to encompass all of those things into our pre-retirement sessions.
Do you send out annually what an employee is eligible for at retirement?
We send out annual reports. Fortunately, the annual reports, we're trying to... Part of the new 552 Operating Budget - 3/9/05 assignment with the new tech consultants is to incorporate purchase of previous time because that's currently not in what we do. But most of the more than 30,000 booklets that are sent out are pretty accurate. We have... We have to be able to include military service and prior purchase of pension service. So, we're working on that.
I know that on a yearly basis employees get notified by mail how much their pension would be.
That's based on present salary. So, the pre-retirement sessions are geared to people that are eligible for retirement at this point. And when they come in they get individualized calculations that show them if they were to retire now, what they would --
Would it 553 Operating Budget - 3/9/05 would be?
Yes. So there's a difference in what we project in those annual reports because it's based on current salaries. So, if a person's not eligible to retire for ten years, it's based on his current salary. The pre-retirement sessions are... We invite in people that are currently eligible for retirement.
Understood. Thank you. The Chair recognizes Councilwoman Blackwell.
Thank you, Madam President. I understand that the Board of Pensions makes the investment decisions that really affect our whole Pension Board. Am I correct?
So, you are in charge of the investment decisions which 554 Operating Budget - 3/9/05 are some of the most important decisions that govern our City. The five-year plan shows that pension costs are $800 million higher. The five-year plan says that the fund has failed to meet its nine percent goal the past four years, losing six percent in '01 and another 5.2 percent in '02. What is being done to assure that the pension plan meets its nine percent goal? In other words, what is your investment strategy?
For the years 2001 and 2002, the City of Philadelphia, like many other pension plans, did suffer when the tech bubble burst, which consequently affected our funding ratio. In subsequent calendar years and in subsequent fiscal years, we have recovered a lot of those investment losses as the market has recovered. Going forward, we have moved our allocation to... tilted a little bit more towards public equities, which equities 555 Operating Budget - 3/9/05 should hopefully do much better in the coming years. We've also introduced new asset classes to the Pension Fund, three of which are real estate, which is supposed to act as a risk reducer but also return enhancement. We've introduced a new strategy called portable alpha, which I can explain if you want to hear the explanation for that.
I didn't hear you. What was the second one you said?
Portable alpha. Would you like to hear explanation of portable alpha?
Portable alpha allows to us buy an index fund like the S & P 500, which are the top 500 stocks in America, at a very cheap price. Let's say, for example, you have a hundred dollars to invest. You'll take five dollars and buy the S & P 500 futures market. You take the rest of the money and you buy 556 Operating Budget - 3/9/05 other types of securities. In our case, we're looking to buy currencies. We're trading currencies, foreign currencies. The enhancement to this is that, one, you receive the return of the index; and on top of that, you receive an additional return for us, if we're looking for an additional three percentage points above the index, to enhance the return of our equity portfolio. We are also introducing or increasing our allocation to private equity as well. We have moved from five percent three years ago to seven and a half percent two years ago, and now we are rejecting projecting about 11 percent in private equity going forward.
You're welcome. The Chair recognizes Councilman Nutter. 557 Operating Budget - 3/9/05
Thank you, Madam Chair. Good afternoon, Miss Bell and Mr. Johnson. Mr. Johnson, I want to go back to an area, I think, based on some questions that the Council President asked. The money manager fees -- And I may have missed the beginning of this. How many money managers do we have?
We have 72 money managers in the Pension Fund. That includes those managers that are in the Opportunity Fund, and it also includes the private equity limited partnerships.
Correct. We have 45 public market money managers. We have 45 private equity partnerships. 558 Operating Budget - 3/9/05
90 investment fund. I apologize. There are 72 money managers. We have multiple products with single managers. I apologize.
I... I don't have the total number of money managers broken out that way, but I will provide it for you. But in total we have 72 money managers. But I will break that out for you.
By public equity market managers and by private equity, limited partnerships.
Okay. And I'm going to assume that the Council President asked you for a list of all the money managers?
She asked for a list of the money managers and the fees paid to 559 Operating Budget - 3/9/05 those money managers.
If I could enhance that request, if you could provide that information for the past five years.
Okay. And how many money managers did we have last year?
We have increased the number of money managers in the Pension Fund. 560 Operating Budget - 3/9/05
I'll have to get you that number. That number I don't have offhand.
We've added new asset classes to the fund, and we are constantly searching for private equity limited partnerships. It will be a natural increase, at least of the private equity portfolio. But in the public equity side or public market side, we added two additional asset classes in which we've increased the number of managers in the fund.
Do you know what the amount of fees that we paid last year were?
I do. Fiscal year 2003 we paid money management fees totaling approximately $6.8 million.
So in FY'03 it 561 Operating Budget - 3/9/05 was 6.8, and FY'04 it was 8.8.
It was approximately 7.9. We had just completed a round of some terminations. We were in between manager selections and increasing the number of asset classes in the Pension Fund.
Okay. Do you have any performance data that is comparative between the Philadelphia Pension Fund and other large cities, as well as states, from a performance standpoint?
I do. Yes, I do. I have it going back for... until 1996, comparing our fund to other public pension funds of over a billion dollars.
Fiscal year '04, we ranked 45th in that universe. Fiscal year '03...
45th percentile, the first percentile being the highest, the hundredth percentile being the lowest. We were 45th.
Correct. It was a universe of 29. It's a different universe used. 563 Operating Budget - 3/9/05
Well, how can you be 87th if there are only 29 people in the universe?
87th percentile among 29. If you ranked them one to a hundred in percentile ranking, we were 87th percentile.
I have our returns, but I... Oh, no, I don't have the number of observations but I do have our ranks within the universe. For FY'02 we were ranked 42nd, 42nd percentile.
I don't have that on my list, but I can try to get that data for you.
Okay. Do you have a sense of why we are... I mean, FY'03 seems to be a bit of an anomaly, but for the other two years we seem to be, you know, 564 Operating Budget - 3/9/05 somewhat consistently in the low to mid 40s. Do you have a sense of why that is?
I know in the early -- or in the later '90s, our allocation to equities was a little bit lower than the allocation to equities to other public pension plans. Put us a little below them. When the market started to suffer, you would have expected us to do a little bit better. We didn't. We still were around the average, at 51 percentile for '01, 42nd percentile for '02. I couldn't exactly say why, without interviewing the other public plans, to figure out what their allocations were, what types of asset classes they had included in their funds that were different than ours.
Well, I mean, does it concern you, as the Chief Investment Officer, that we find ourselves somewhat consistently in this position?
If you look at universe comparisons... typically are only relevant when you're looking at pension funds 565 Operating Budget - 3/9/05 that have a very similar allocation to us. But broadly speaking, if you look at our allocation versus other pension funds and how well they do, it then tells you the success of the allocation that we've set up. The allocations that we have established are designed to help us meet that nine percent actuarial target. Whether we've met it or not is another matter, but it's designed based on the consultants forecasting of the equity markets and the fixed income markets, and the amount of risk that we're willing to take in the markets to try to achieve that return. Some pension plans are a little bit more aggressive, and some are more conservative.
Well, I understand that you would necessarily want to compare your -- We'd want to compare ourselves to other entities that are similarly situated. But I would, only for discussion purposes, suggest that rather than solely 566 Operating Budget - 3/9/05 looking at where we are and possibly trying to justify that existence, maybe we would actually like to explore where other people are, and figure out if we should be doing something different.
Oh, I agree. And we do... We do those exercises often. We attend conferences. I have just -- I have talked to other CIO's to discuss where they are investing, what their consultants are thinking, to come up with a plan of action going forward. And I think the plan of action we have today will help us do much better in the future.
Okay. You have a report that you'd be able to share or forward to the Council President, from which you were reading in the percentiles and everything?
Okay. And do you have other data somewhere else that shows 567 Operating Budget - 3/9/05 what cities were in these different pools?
I will do my best to get information. It's from an outside source. And I'll see if they can pull that information out of their universe database.
Has there been a comprehensive analysis of the Pension Fund, either over the past few years or the current situation, that would essentially ask the question: Given what our unfounded liability is, given what our performance return goal is, given what other cities or states are doing by way of their investments, is our asset allocation mix appropriate for the fair amount of ground that we need to catch up?
Every three years we have a formal review of our asset allocation policy. Typically, markets... you review your market outlook every three years formally. Every year informally we will take a look at the asset class assumptions, and figure out if we need to change our allocation at that time. 568 Operating Budget - 3/9/05 But more formally, it's every three years we make our projections out, where we think the markets are going to go.
Okay. I'll come back to that question another day. Give us some context for now 72 money managers. 72 sounds like it could be a big number. Maybe it's a small number. Maybe it's a huge number. Based on your either experience or discussions with your colleagues, other comparably sized funds or cities, do they have as many money managers as we do?
There are other funds, larger state funds, that have many more money managers who have... Well, they are larger than we are. The reason our number is so large at 72, if you break out the private equity partnerships -- and let's just focus on -- let's just assume it's 40 money managers in the public markets portfolio. We try to diversify every asset class with different styles of managers. For example, within large cap growth, we have two 569 Operating Budget - 3/9/05 managers who have varying styles, so they will complement each other different within different market cycles. You move that across to large cap growth, to large cap value, mid cap growth, mid cap value, small cap value, small cap value, the numbers tend to add up. But the effect is that we will have a much better diversified portfolio that will hopefully protect us when markets are shifting.
Well, is it at least equally possible that with so many different people running around doing so many different things, that we might actually miss out on some opportunities? Because, I mean, in essence it sounds like you have a bit of a push-pull effect by having people so... sounds like almost symmetrically matched up, that one entity is doing one style of management, another entity is doing another style of management. And the goal sounds like protection of value, as opposed to slightly more aggressive growth. 570 Operating Budget - 3/9/05 I mean, I guess the question is: Are we trying -- Is our primary goal to not lose money? Or is our goal to make money? I mean, are we on defense or are we on offense?
Our primary goal -- And to put it in a football analogy -- is to move ten yards at a time forward. We are looking to preserve the assets that we have as best we can, but at the same time we're looking to move forward in a very prudent manner. When you discuss the push and pull of two different styles, our goal is to beat a benchmark. Let's say for the equity portfolio the benchmark is the S & P 500. What we'll do is --
I will tell you. Hold on. The S & P was 10.9 percent for the year, 2004.
Oh, no. I was using it as an example, as a simplified example. There are no managers that we use compared to the S & P. I was using it starting off with a simplified example of how we pick our managers or how we try to beat a benchmark. For the large cap portfolio, our --
But now you're telling me that nobody is compared to the S & P.
Oh, it's one of the more well-known benchmarks. I thought I'd use it as a simplified answer -- explanation. But our benchmark for the --
Well, I at least want to assure you that I've heard of the S & P 500.
Oh, that's fine. Oh, that's why I used it. The Russell 1000 is our benchmark for the equity portfolio.
Okay. And what 572 Operating Budget - 3/9/05 was the Russell 1000 performance last year?
What I have in front of me does not give me that number, but I will furnish it to you.
All right. Well, why don't I ask this question: How did our managers perform against their respective indices?
Do you want to know the individual managers or as a group how well they performed?
Well, since we have 72 of them, I think I don't want to know them individually. You can send that to the Council President. I mean, I'd just like to get a sense... Are we performing at the market? Are we under the market? Are we over the market? Just give me a...
For fiscal year 2004, the total equity portfolio, which includes domestic and international managers, returned 24.7 percent versus a benchmark of 24.0 percent. 573 Operating Budget - 3/9/05
That is correct. For the fixed income portfolio, our managers returned 1.5 percent for fiscal year '04 versus a benchmark of 0.9 percent for the year.
Okay. You'll send us the rest. Part of the point of this is, I'm trying to figure out overall the value of what sounds like -- I'm assuming these are all active money managers?
They are primarily active managers. We have a few passive managers in there.
I'm trying to figure out the value of the $8.8 million in fees last year from active money management, as opposed to... I mean, why don't we just buy the market? And then make some other investments to hedge on the other side for protection? I mean, if we're either trying to 574 Operating Budget - 3/9/05 preserve what we have or grow a little bit, and we know that there's always a need for downside protection, then why don't we just buy the market?
I do believe that over time active management will outperform the passive market. The selections that have been made in the fund --
What's been the performance based on that theory -- How has that worked out over the last few years?
Okay. Have you thought about bringing money management inside? Are there some large pension systems that manage their own funds? 575 Operating Budget - 3/9/05
There are, but they are staffed much more. They are better staffed, and their compensation is a lot higher. It's a different -- What you're doing is you're building an internal money management company. And you need to compensate and staff it appropriate with the proper tools.
I understand that. Do you think it cost more than eight and a half million dollars for us?
Okay. All right. Madam Chair, you've been tremendously patient with me, as usual. I'll come back.
Thank you. And Mr. Johnson, along with a copy of the analysis that the Councilman asked for, would you also send us a copy of your asset allocation? 576 Operating Budget - 3/9/05
Thank you. Mr. Johnson, the administration has testified that at some point they would like the City to go to a defined contribution plan. If that were to occur, what changes would that have on your operation?
I don't believe there would be a large change. We simply... We would still select the same managers. In a defined contribution plan, I think that the City is proposing the employees who make their contributions into their own accounts, as if it were a 401-K. But someone still has to make the selections and monitor the managers in that program. And our staff would continue to do that.
It would be -- The allocation decisions would be made by the individuals or the employees, but the selection of the funds in that plan would 577 Operating Budget - 3/9/05 still be selected by the City or the Board of Pensions.
Well, would you detail the impact this would have on the investment side of your operation?
If we were to go to a defined contribution plan, would you detail the impact this would have on the investment side of your operation? How would you pick the investment bankers? I mean, give us the money managers.
Same process. Let's equate that to the Deferred Compensation Program. It is incumbent upon the Board to make sure that we select those mutual funds in that plan. For a DC plan -- For a conversion from a DB plan to a DC plan, the Board still would have to make the same diligent thorough selection of money managers.
Well, if we weren't be saving money, why would we be 578 Operating Budget - 3/9/05 going in that direction?
It would decrease the City's contribution. In a defined benefit program, it is incumbent upon the City to primarily provide that benefit. In a DC plan, it is a shared expense between the employer and the employee.
There are costs in the transition. I just don't have a sense of what the cost would be. The transition costs would be there, but ongoing in the future you'll find that the City's contribution would be much less going forward, and the employees' contribution would increase.
Do you have an actuary report on showing that, please? Do you have an actuary report on that? 579 Operating Budget - 3/9/05
The answer is, we are waiting for that report. We just don't have it.
So, actually this is something that may... may happen in the distant future.
We are nowhere near coming to some conclusion on this.
Thank you. I think there are other Council members that want to be recognized. The Chair recognizes Councilman Nutter. 580 Operating Budget - 3/9/05
Thank you, Madam Chair. I'm not used to my turn coming back up so quickly. Just a few last questions. Miss Bell, could you explain? In the testimony it says that your technology unit moved to MOIS, M-O-I-S, during July of 2004. And then if I'm reading this correctly, it appears that you then hired a technology firm?
No. We replaced -- We had a technology firm that was working with us in conjunction with the four staff persons and our tech unit. We replaced them. We replaced them last summer.
We replaced them. We did not hire -- We did not hire a new -- We hired new consultants, but it was to replace the current tech -- tech consultant that we had been using for a number of years.
What I'm trying to understand, though, you had a technology unit.
Yes, we did. We had four people. We had a manager, we had two programmers and a P.C. person.
Okay. So, why did you take the employees, transfer them to M-O-I-S, and then...
Part of the reason was, with going to M-O-I-S, there were -- especially for the programmers, there was an 582 Operating Budget - 3/9/05 opportunity for them to learn more programming, so we wouldn't have to depend on the limited number of people we had. One of the persons actually was not well, and so was not there all the time. So, moving to M-O-I-S was part of the cluster theory. It also gave us other resources. So, our programmers are working in conjunction with other MOIS employees, that we actually have two people that come over to visit with us and have staff meetings on a weekly basis from MOIS that are looking at some of the issues we had. We have a list of 60 projects we're working on. And the staff at MOIS has given us additional resources. And we've moved through approximately 10 of those, with their expertise. And I think we had... honestly, we had a manager that didn't know how to program. So, I think we've -- the merger with MOIS has benefited us tremendously.
Okay. Well, 583 Operating Budget - 3/9/05 yeah, that could be a problem.
Mr. Johnson, just a couple few last questions. Presently what is our unfunded liability for the Pension System?
Based on the estimated report from the actuary, we are about 50... I think it's 60 percent funded.
The ultimate goal is to be fully funded, which is 100 percent.
I guess our goal would be about 70, 75 percent. Higher would allow us to pay out the Pension Adjustment Fund.
That would be the next question. We received -- I received a document not too long ago. And there are 584 Operating Budget - 3/9/05 provisions in the bill that created the Pension Adjustment Fund. You're familiar with that?
And I believe the way we wrote that, if there's any 18-month period during which there is no 9 distribution from the Pension Adjustment Fund, the Board is to notify Council in writing and explain why no distribution has been made, and provide a full financial report of the current balance in the Pension Adjustment Fund. To my knowledge -- I don't know about other members -- I don't recall receiving such a report. And I know that we've not had a distribution in some time. Are you familiar with that provision?
A letter was sent to the -- to the City Council several months ago. And I don't know if -- I don't believe a report accompanied the letter. But we did send an explanation, based on information we received from the 585 Operating Budget - 3/9/05 actuary, explaining that we were not at the 76.7 percent funded ratio, and we would not be making cost of living payments. We are now at 59.8 percent.
And that letter did come over. I don't know what documentation should have accompanied it, but the letter did come over.
Could you do me a big favor and possibly re-send it to all members? I don't recall receiving such a letter, but I appreciate your efforts in that regard.
We've had a sudden increase in payments from the General Fund for the pension costs. What are those increases over the past couple years?
I'm sorry. Do you want the dollar increases? Do you want an explanation for why the increase has occurred?
We'll get to that. Just me the dollar increase at the 586 Operating Budget - 3/9/05 moment.
Based on the preliminary report from the actuary, the payments for fiscal year ending '06 will be 305 million. Fiscal year '07, 348 million. Fiscal year '08, 379 million. Fiscal year '09, 390 million. And fiscal year 2010, 400 million. And those are based off of the minimum municipal obligation schedule.
Okay. And maintaining that schedule, and I think you went up through... Did you go up through '09 or '10.
and what would you anticipate the funded, unfunded liability ratio to be at that point?
That would depend on the investment returns of the Pension Fund. If we can meet that nine percent actuarial target, then this schedule will hold true and we will -- and the funding will improve, but it really depends on the returns, primarily.
Okay. Are there 587 Operating Budget - 3/9/05 any other thoughts or plans for... I mean, this is obviously an extraordinary growth in payments over the past few years. I mean, how does... What's the Pension Board's outlook on how to deal with that?
Well, part of the payments -- The reason the payments are increasing relates primarily to our past performance. Although the Pension Fund has done well in the past two years, we're still counting three years prior to the past year. So, a five-year smoothing. The earlier three years are still holding back the Pension Fund. If we continue to do well... Last year we had 11.8 percent. Today we are about 7 or 8 percent return. If we continue to do a little bit better at the end of the year...
Why don't we do this: Tell me, from your perspective, let's say we just meet our nine percent target. You have the payment schedule that you have just on minimum municipal obligation. 588 Operating Budget - 3/9/05
At the end of five years, if we meet our targets, what will the funded, unfunded ratio be?
Hold on one second. The numbers I have are outdated. I will try to get you the more recent numbers as quickly as possible.
You asked for how well -- where our funding ratio would be in five years out?
The numbers that I have here are outdated. I have to try to supply you with better numbers.
Okay. Last question. How much are the payments regarding the pension obligation bond from a couple years ago? Probably more than a couple years ago.
The payments for the 589 Operating Budget - 3/9/05 pension obligation bond do not come out of the Pension Fund. I don't have that information.
Okay. So is there a plan, other than trying to meet the nine percent goal, for increasing our level of funded or decrease in the level of unfunded liability, and getting our pension payments under control?
Allocating assets to what we call alpha-producing strategies or return enhancements like portable alpha, like hedge funds, like private equity is our plan to increase the return of the fund. In addition, it's the long-term allocation that we've set that we hope will also enhance the return of the fund. We recently did the allocation study in July --
I know these are the tools that you're going to utilize. 590 Operating Budget - 3/9/05 I mean, is there an actual plan developed in the utilization of these tools and options that is leading toward a particular goal?
The Board approved an asset allocation study in July of '04. We are now in the process of hiring managers in the new asset classes and moving assets to the other asset classes, accordingly. There is a plan to do so.
Okay. Lastly, I know the Council President asked about the 72 money managers, but you also made reference to consultants. Now, they work with the managers or the managers by class or something like that?
Those consultants work with the Board on those particular asset classes, correct.
If you could provide us with a list of the consultants, their fees, how long they've been working with the Board, and what their area of expertise may be, as well as who the 591 Operating Budget - 3/9/05 principals of the various firms are, that would be helpful.
Thank you very much. Are there any other questions of our witnesses? (No response.)
We will now hear from Procurement. Good afternoon. Thank you so much for your patience. Please identify yourself for the record and proceed with your testimony.
Good afternoon, Council President Verna and members of City Council.
I am William Gamble, 592 Operating Budget - 3/9/05 Commissioner of the Procurement Department. With me today are Deputy Commissioners Mergis Funkie and Sandra Early. I am presenting for your consideration the Procurement Departments --
Mr. Gamble, I don't mean to interrupt you, but if you would summarize your testimony, I will give a copy of your testimony to the stenographer. It will be transcribed in full.
So... In order to save some time. I'd appreciate it. Thank you.
Okay. The Procurement Department is requesting a total appropriation of all funds of $4,460,891, of which $4,347,847 is in the General Fund. General Fund budget for fiscal year 2006 provides $2,814,617 for Class 100 expenses. Supporting Class 300 and 400 supplies and equipment. 593 Operating Budget - 3/9/05 This budget represents an overall decrease of $142,875 from fiscal year 2005 projected obligation of $4,490,722. The grant revenue fund budget provides $50,000 for Class 200 purchases of services, and the Water Fund budget provides $63,044 for Class 100 expenditures for two employees. This concludes my testimony.
Thank you very much, sir. Mr. Gamble, you indicate the mission of your department is to obtain quality goods, services and construction in a timely, cost effective and professional manner through a competitive, fair and socially responsible process, in accordance with the law. Can you tell us the socially responsible process you use. I don't understand that one.
Well, the social process that we use is to make sure that we... to make it very competitive, that we 594 Operating Budget - 3/9/05 open the process. It's an open process we want everyone to use. And that when we go out, we make sure that it does coincide with or does allow everyone to bid on our projects or our commodities.
Okay. Mr. Gamble, please explain what interaction your agency has with MBEC.
What we do on a regular basis, every bid that we put out, we make sure that MBEC has either determined that the arrangements are there or they are not there. So... And we make sure that if MBEC says that a company is not responsible, then we make -- then we do not award the contract to them. So, we work in partnership with them, in trying to make sure that we increase the number of participants in the Minority 595 Operating Budget - 3/9/05 Business Enterprise Council.
Thank you. Also in your testimony, you state, quote, the Public Works Division processes capital projects and concession bids, administers the city-wide advertising program and coordinates the inspection and disposal of City property. Would you please explain what the City-wide advertising program is, and who administers it.
Well, we're responsible for advertising or putting in the paper -- putting advertising in the newspapers.
Couple examples? A couple examples may be where City Council has decided they wanted -- they will have a public hearing, and to notify. They will submit to us the... what the advertising is, 596 Operating Budget - 3/9/05 and we will place it in the newspapers for them. All of the election... All of the election notices for the City comes through us as well. Each department, if they have anything that needs to be advertised in the newspapers, they will come through us. So, we're the central location or central depository.
But Mr. Gamble, I'm a little confused. I thought that the Chief Clerk's Office sent notices offer public hearings directly to the newspapers. I mean, they send it to your office?
Oh. I thought it went directly to the various newspapers.
No. We in turn -- We're the ones who would send it out to the actually to the newspapers.
Okay. Very well. 597 Operating Budget - 3/9/05 Thank you. The Chair recognizes Councilwoman Blackwell.
Thank you, Madam President. Certainly we want to thank the Commissioner for always being responsive whenever we call.
By piggybacking on the state computer contract, has this given us much of a savings in the City computer maintenance costs?
Councilwoman Blackwell, this... We're just in the beginning stages of it.
So, I cannot give you a cost savings at this juncture because the cost savings is anticipated.
I understand. Let me ask just one more question, in terms of minority vendors. Given the 598 Operating Budget - 3/9/05 Mayor's Executive Order -- and I see here that you're able to use many more minority vendors with your purchase offer -- your purchase procedures that were revised.
Does the Mayor's Executive Order somehow impact or give you the ability to increase minority vending?
What we do is that, Councilwoman, we meet on a regular basis with MBEC, and we determine -- Actually, the ranges are determined by MBEC for a particular project or commodity. So, we... That really won't impact us doing it. We've always done that. So this is not something new that we're doing. 599 Operating Budget - 3/9/05 We have been doing it for years.
You're welcome. The Chair recognizes Councilman Nutter.
I'm sure you might find this hard to believe, but I may be without a question. But I'll press on. Commissioner Gamble...
...in a budget hearing not to ask you at least one question.
Just tell me a little bit for the record, with regard to professional services contracts or often referred to as no-bid contracts, presently the role of the Procurement Commissioner is what? 600 Operating Budget - 3/9/05
There is no role, professional services for the Procurement Commissioner. Professional service contracts are actually handled by each department. So, each department head or commissioner will be responsible his or her own professional services.
Okay. Do you get any notification that a contract is available or that there's an opportunity for a contract?
Okay. Is there a standard procedure for notifying people of the availability of those kinds of contracts?
Anywhere within the government? (No response.) 601 Operating Budget - 3/9/05
There's no... Are there... To your knowledge, are there any rules for how professional services contracts are either advertised, notification how they're awarded? Is there anything written anywhere?
Excuse me, Councilman. I'm corrected. It seems that some of the professional services contracts are posted on the web sites.
Is that required? Is there a requirement to post professional services contracts?
Okay. And again, based on your experience and knowledge, if a department had a professional 602 Operating Budget - 3/9/05 services contract, how do they get people to respond to the opportunity?
Well, it varies, actually, from department to department. Some departments will actually go out and solicit from companies that they have done business with in the past and received proposals from that. Some may entertain proposals that were not solicited but were unsolicited proposals.
And some departments probably will deal with people that they have been doing it for a while, that they know.
Well, for example, if you're a company that hasn't had the pleasure of the experience of working with the City over some time -- you're a new company or you have a new product or service or you've decided younger person, older person, whatever, that entrepreneurism is the way you want to spend your life -- if you're not in that network, then how do you find out that these opportunities exist? 603 Operating Budget - 3/9/05
What we attempt to do, when we go out and do an outreach, meetings, or whatever, we let... well, professionals know that there is an opportunity, but it's incumbent upon them to contact the departments in which they want to do business with. So, that way they -- informally they know that those -- the opportunities may exist. And... But it's up to them to actually go out and solicit ads.
You have experience beyond Philadelphia, obviously, and I'm sure you talked to counterparts in other cities. Are there other ways of getting information out, so as to in a broad fashion expand the range of opportunity to let more people know that these situations exist? And, in fact, we might actually be able to increase the participation by either Philadelphia firms or minority, female, disabled, disadvantaged business firms, and the like, by having more information out in a 604 Operating Budget - 3/9/05 wider variety of places? Would you agree with that premise?
Yes, Councilman, that's true. We're in the process of actually going out and doing more outreaching in the community, to actually inform vendors or contractors of the opportunities. And also, we are looking at the Procurement Department being the depository of notices of opportunities, so that when we go out, we will have a listing of different opportunities that are available that individuals may be able to contact the departments with opportunities. So, we are trying to broaden the horizon so that the opportunity that does exist, looking for small companies, minority companies and other companies.
Okay. Last question is, do you have any sense that by either broader advertising opportunity, making more people aware, as well as the... some, I guess, standards of 605 Operating Budget - 3/9/05 either selection criteria or negotiation, do you think there are some opportunities where the City might actually be able to save money by promoting additional forms of competition among people pursuing professional services or no-bid contracts?
There are probably opportunities. I would -- I would -- I would say that there are probably opportunities that are... that will be probably enhanced if we advertised more. I think that the key is to advertise more so that people are aware of the opportunities.
Right. And I mean, some form of overall coordination of... throughout the government. I mean, it is a little surprising, I guess, as I've spent a little time working in this area, to understand that there is no one centralized place for information to flow through, with regard to professional services contracts.
That, you know, 606 Operating Budget - 3/9/05 ten operating departments and probably a couple other entities -- I mean, there could be upwards of different units of the 5 government at any particular point in time. 6 While you were sitting here 7 answering these questions, where you probably 8 would rather be just about anywhere else than 9 sitting at that table, there are people 10 potentially actively engaged in professional 11 service contract activities. 12 And as Procurement Commissioner... 13 Not doing your job. But no opportunity for 14 the information to all flow through a central 15 place so that everyone knows what's going on, that is... I'd be a little concerned about that.
Well, we are concerned. And that's why we're taking steps, to make sure that... We try to make sure that the information is available.
I understand. Been on the web site, and I know there have been some enhancements, so...
I was just given some information. I wasn't sure if it was appropriate or not.
Decision was, we're in the process. As I said earlier, we're in the process of taking the lead in making sure that we do this.
Thank you, Councilman Nutter. Councilwoman Blondell Reynolds Brown.
Surely. Good afternoon, everyone. Hello. VOICES: Good afternoon.
On the last page of your testimony you state, and I quote, at pre-bid meetings, vendors are encouraged to seek minority participation and are introduced to minority businesses. We know we can't require them, so how do you encourage them that that's the right thing to do?
Well, we tell them it's the right thing to do, because the City has a chance to make sure that everyone gets an opportunity to take part in the process. And we encourage everyone, regardless if there's minority companies or majority companies, that they should, in a good conscience, go out and solicit other vendors and help them along the way. One of the things that we try to encourage is that it's incumbent upon all of us, when we include everyone into that process, rather than excluding them, in that the bottom line is that we may get better prices by exclusion rather than --
We may get 609 Operating Budget - 3/9/05 better what?
So, we try to encourage it. And we'd let them know that we'd like for them to participate in it. And we hold them accountable when there are ranges that are set. In most cases they have to comply with it.
And in those ranges, they... We make sure that... Well, MBEC makes sure; we don't. MBEC makes sure that they're in compliance.
And if they're not in compliance, then we do not do business with them.
Okay. And that is... How is that officially communicated? Is it a document or a letter that comes from Procurement or is that a letter document that comes from MBEC? I'm speaking as one who's still learning, trying to get my arms around the relationship and the support piece that happens between Procurement and MBEC. So who officially informs them?
Well, what happens is that when the bid comes in... Well, when a bid comes in, when it goes -- getting ready to -- When we're preparing to go out on the street, MBEC will determine the goals or ranges for those particular contracts or bidding opportunities. They will -- Then we will send them out. And then when the bids are returned, we send them their information, their documentation, which MBEC looks at to 611 Operating Budget - 3/9/05 determine whether or not a company is in compliance or not.
They will notify us in writing with the determination of whether or not the company is responsible or not.
If they're not responsible, then we in most cases do not award them the contracts. And when I say "most cases," there may be extenuating circumstances where there may be a gap of, let's say, a hundred million -- well, not a hundred million -- a lot of -- substantial amount of money that the City will lose as a result of it. So then we make a determination of whether or not it's in the best interests of the City to proceed with that bidder or go to the next bidder or rebid it.
Okay. All right. The following sentence here says, Procurement will continue to partner with 612 Operating Budget - 3/9/05 MBEC and training programs. How does this happen, to educate minority vendors about the bidding process?
That we attend with them with MBEC. And we go and explain the process to minority vendors and majority vendors.
So that they understand the process, and what the opportunities are, and how you can do business with the City.
Over the next year, can you just forward to the Chair those dates? I'd be interested in coming to one, to learn and to be more useful and helpful to MBE's and WBE's that come to me with questions about how government operates in their interests, when it comes to doing business.
Okay. 613 Operating Budget - 3/9/05 My final question is, earlier in your tenure we passed the... what's called the Cooperative Purchasing Agreement Bill and referendum that allows us to take advantage of contracts negotiated by other government agencies. And I may very well be answering my question, because you talk about strategic sourcing, and the contract you have with the state around the Dell contract you have with the state. Correct?
So, it's clear that you've taken advantage of this agreement. In addition to the one stipulated here in your testimony, are there other examples which indicate that the City has saved money as a result of the Cooperative Purchasing Agreement Bill?
Well, we're in the process, Councilwoman Brown, looking at the office supplies contract with the U. S. 614 Operating Budget - 3/9/05 communities, to determine whether or not that contract will save us money, compared to our current contract we have. We have -- We have been -- It's been a slow process, from the standpoint that there is --
Is it principally because it's a new phenomenon and you will --
It's new, but also we're having discussions with the Law Department, and their interpretation of what competitive bid means versus what we think competitive means.
Because what happens, for instance, with U.S. communities, they send out bids or send out quotations. And then at the end of the day, what they do is that they take the lowest bid. And then they negotiate it downward so that they get a better price. Our Law Department feels that that's not according to our City Charter, that we 615 Operating Budget - 3/9/05 can take advantage of that. So, we're in the -- in discussions with them to try to resolve that issue, so that we'll be allowed to utilize those contracts that have what they consider to be negotiated contracts.
Interesting. Is that happening -- the Cooperative Agreement happening across City departments at all yet?
Okay. So would the School District be another, since it's not "the City" in the pure sense of the word?
Right. That's -- That's -- That's possible, that the School District could -- we could utilize the prices that the School Board or the School District get, if they're better than our prices.
Any opportunity 616 Operating Budget - 3/9/05 yet where that's happening? Have you had any dialogue or discussion with the --
And she and I are exploring opportunities where we can do so.
Okay. Well, I and others will look, I'm sure, with interest to see how far along or what progress you've made a year from now with that. Because there's some in government -- And I agree. I believe it was... Could be mistaken... Phil Goldsmith or maybe is predecessor, who saw the value in doing this, when it comes to saving or looking for creative ways to save money.
And so if it is an opportunity that works, then it behooves us to seize the moment and work it out with other governments like the School District.
That's what we're in the process of doing. 617 Operating Budget - 3/9/05
Thank you, Madam Am president. Good afternoon, Commissioners, Deputy Commissioners.
Commissioner, as you know, the Water Department has been holding up on the letting process for about seven months. And that has probably caused a problem with a lot of the contractors who do business with the City. In fact, a lot of their employees who really depend upon this type of work are out of work because of the budgetary constraints that led to this problem. Now, I understand -- I had a meeting with the Water Commissioner today. And he is finally -- They finally approved the budget 618 Operating Budget - 3/9/05 for him and the appropriation necessary to get this on track. Now, to me it's up to the Procurement Department now to expedite those bids for that type of activity to go out. And I would like to know if I can encourage you to expedite those bids, that letting process. I think it's important. I also want your opinion. One of the recommendations that I received from the Commissioner is that the lettings be increased from seven to ten. Is that possible? Would you be willing to sit down with the Water Commissioner and his people to see if we can do that? This will expedite a lot of work out in a timely fashion. And I think that one of the things that's going to do is going to keep people on the payroll that you don't have today.
Yes, Councilman, we will work with the Water Department, Water Commissioner, in making sure that takes place. 619 Operating Budget - 3/9/05
Does that make sense to you, that an increase from seven to ten would be something that you would look at?
And it would be possible to do that? Because I think that's very critical to the people that are working on our streets today. Not only that, but it will make it a heck of a lot safer because of the infrastructure of the Water Department throughout Philadelphia. I think we're going to have a lot of -- We need this work done, and we need it done as soon as possible. So if you could do that, that would be work with the Water Department and the Water Commissioner, to do this, I think would be a win situation for everyone concerned.
Now, another problem that I have -- and you touched upon it with Councilwoman Brown and Councilman 620 Operating Budget - 3/9/05 Nutter. I'd like to know who's responsible for investigating the legitimacy of minority vendors? Is it you or is it MBEC or what?
I'm sorry. Would you mind coming up to the witness table so that you could respond to the Councilman's question, please. Mr. Gamble, you could stay there. I know you're anxious to leave. (Laughter.)
Good afternoon, Madam President. Good afternoon, Councilman. Good afternoon, Councilwoman.
Please identify yourself. 621 Operating Budget - 3/9/05
Michael Williams, Deputy Finance Director, Director of Minority Business Enterprise Council.
Candace Hitchcock, Deputy Director for Operations, Minority Business Enterprise Council.
Mr. Williams, I have a question. Of course, in my other life I was in the procurement business. I was a buyer for probably one of the largest electrical manufacturers of electrical equipment for the transmission and protection of electrical energy probably in the country. But being in that position, we were always under the gun because we had federal contracts, and we had guidelines to go with. They were always interested in getting minority contracts. There was a percentage of contracts that we had to give out to minorities. And as a buyer, you're instructed to do whatever you could to increase that or to at least make up our quota. 622 Operating Budget - 3/9/05 Now, I have had people in my office who come in, and they have either a woman or two women or they come in with an African American or two. And they're saying these are the... This is the owner; this is the president of the corporation or whatever. And really, the work is being done by the contractor's been doing it all along. And that's probably a white male dominated contractor. And they do it. They set up these little... private little firms, if you might say. They incorporate. They do a lot of things around just to qualify as being a minority; where, in all -- in every sense of the word, they're not. They're just a middle man. Now, this has been going on for years. And it's going on today. If you pick up the paper, and you can see someone being investigated today is a woman. It was a black woman who set up a company and is being nothing more than a middle man. She sends in invoices that are 623 Operating Budget - 3/9/05 probably 30, 40, 50 percent higher than what she should have been receiving for the work involved. And this is the problem that we're facing, that not only do we pay more, but it's not going to minority companies at all. I have a friend of mine who has a company in North Philadelphia. Now, he's not a minority, but yet he has hired -- he has hired over 100, 150 minority people to work in this company. And he pays them very well. And they get full medical benefits. And they are no longer on welfare. They're being productive people in this City. These are the people, in my opinion, we should be really looking to give City business to. He doesn't do any business with the City, but that's beside the point. Who is responsible? Are you responsible for investigating to make sure these are truly minority companies?
Do you have the 624 Operating Budget - 3/9/05 arm? Do you have the resources to do that? Do you have the people to do that?
Well, Councilman, we have the authority to do that. Frankly, we don't have, I think, enough folks to do that. But we are working through the City's hiring process to get more.
See, that's the problem, Mr. Williams, as I see it. We always pass these laws. We always do this or do that. And we're always being one-upped. We're always getting somebody that looks around, and they can find a way to get -- to get the contract, to get more money. And they pay off some people, and we're back to square one.
We're not really helping the minority communities by doing that. I think we really have to investigate, to make sure they're really qualified to do it; they're not just a front 625 Operating Budget - 3/9/05 for some other business. That's my problem.
It's going on. It's been going on. And it's still going on evidently, from reading the newspapers. And I don't know... I'm putting you at, I guess, a disadvantage here.
Oh, no, not at all. I completely agree with you. That is just a horrible misuse of this program under any of the Executive Orders that have been passed throughout, to monitor -- to create MBEC and to monitor this. We have a continuous fight for companies who get smarter and get more wilier. And they understand that, at least before I came in and created the enforcement unit, that MBEC did not have enough folks. Currently we have a deputy of enforcement, compliance and monitoring and two compliance officers. Their plates from the day they walked in are filled. We are -- will be asking in the next 626 Operating Budget - 3/9/05 budget year for another compliance officer, and asking our folks who are there working now, to do more investigations. It just takes a lot of time. And we just don't have enough folks to cover everything that we'd like to cover.
What percentage would you say is being investigated of any certain type?
We get investigations after we hear a complaint. So we monitor -- After we go through the clarification process, we vet the companies. But if we hear a report after that, because people -- You know, we look at -- Candace, can you run through the certification process, just very quickly?
Yes. The applicants apply to the City for a certification as minority, woman or disabled business. They submit an application, and they submit supporting documents that all support the fact that they are, in fact, the person who holds themselves out as the minority or 627 Operating Budget - 3/9/05 woman business owner and has control of the company, either by share ownership or outright hundred percent ownership, depending upon the company structure. We review all of these documents. We review their financial information. And all of this, in fact, supports a recommendation that the person is, in fact, a bona fide minority, woman or disabled business. That's basically the process.
So we start that vetting process at the beginning. But if we receive a complaint that a company is actually a front, after we've done an investigation, we will go back and do more investigating, with that complaint in hand, to see if this is true, that there was something that we were misled the first time. And if we do find that there is someone that actually did mislead us through our initial investigation and certification process, we'll hand that over to the District Attorney's Office.
Yeah. But who 628 Operating Budget - 3/9/05 would do the complaining?
And as far as the ownership, I could understand; but do you do a little deeper... deeper investigation to see how many minorities that are actually working there or...
Okay. That's what I wanted to know. Thank you, Madam President.
Thank you. I just wanted to ask a question. MBEC is presently doing the certification?
Okay. 629 Operating Budget - 3/9/05 Because I think last year they were looking at another process.
Well, last year, Madam President, we were looking at many processes when I fist walked in the door. After I got here, realized that out sourcing it would be probably cost prohibitive to the City, particularly in its budget straits, and that were we to simplify our process, truncate it and streamline it, it would be a lot easier for not only the vendors but for our --
-- department as well. And right now we have an application and a policy that's in a lot of our department being vetted. We would hope that we can move that along in the Law Department as quickly as possible, so that we can come out within a month or two of having a new certification process. 630 Operating Budget - 3/9/05
Thank you. How long does it take for one to be certified?
It actually depends. We would like to get folks at... Currently, for about maybe 90 days. However --
We would like to have -- For 90 days. That's our standard. However, that standard comes in the face of we being understaffed, very much understaffed, and that the application process comes back and forth. For example, someone sends an application, and they don't have all the documents. Well, we have to send it back to them and request documents. And that goes back and forth and back and forth. Then we have to do an on site visit with them and try to schedule that. So sometimes certifications will lag because of that. And we're also two certifying units. 631 Operating Budget - 3/9/05 We do certifications for the City and for the Unified Certification Program which is the statewide entity we talked about yesterday, the federal program.
Have you made your need known to the administration for additional personnel?
And so far we are still trying to fill in the folks that were budgeted for last year. We have maybe five more folks to hire?
About five more folks to hire. The hiring process in the City, I think, can use some tinkering itself. Like I said yesterday, we had approval to hire all these folks in July, but we're still going through the hiring process to get them -- to get them on our payroll.
So you will be hiring at least five more people. 632 Operating Budget - 3/9/05
And they will be helping you out with the investigations?
Thank you. Okay. Are there any other questions from members of the committee? (No response.)
The committee will stand in recess until Tuesday, March the 15th, at 10:00 a.m. Thank you all very much. (Public hearing concluded at 3:58 p.m.) 633 CERTIFICATE I HEREBY CERTIFY that the proceedings and evidence are contained fully and accurately in the stenographic notes taken by me upon the public hearing of The Philadelphia City Council, taken on March 9, 2005, and that this is a true and correct transcript of same. _____________________________ DAVID A. DEIK, RPR and Commissioner of Deeds (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)