You know, I mean, access to capital, I -- I -- there are a few challenges. I think when you're thinking on the venture capital level, which is a level in terms that would fuel something like a dot com business, I think a part of it are relationships and having access to those relationships. I think, secondly, you know, having some of that early seed money to really finance it. You know, to get a dot com business up, the latest statistics say that it costs about roughly between 8 to 10 million, to successfully launch a venture. And the reason why it's important to have that successful early-stage money is that you can build a foundation to compete. One of the success of getting money is having enough money to really build something to actually finance. And one of the challenges, I think, with African-American businesses is, a lot of them are undercapitalized. You know, you can't compete in an industry structure if you don't have the fuel to really get that going. I think that's one of the challenges in terms of capital.
When you talk about 98 /00 LABOR, CIVIL SVC. - BILL 2 relationships, you mean the ability to network? I mean --
I think it's networking. A lot of the early-stage money comes from private annual investors, which are a group of, quote/unquote, high-network individuals. You know, a lot of that is having relationships with peers or individuals that that can finance that. I think that's a critical component. And to be perfectly honest with you, it's not just an African-American issue. I think it's a woman's issue, I think it's an Asian a minority issue. I mean, I think it's a minority issue, and I think one it's one that is critical to be addressed if we're really going to create business that reflect a true community, which is a diverse one.
Okay, thank you. Thank you very much. We are now going to bring up a panel, Panel 1: John Sorrell, Jim Baker, John Carpenter, Mike Colazzo (ph.). Are those individuals here? John? And Mr. Baker is gone? (Witnesses come forward.) 99 /00 LABOR, CIVIL SVC. - BILL 2
Good afternoon, gentlemen. Would you please state your name for the record.
Yes, my name is John Sorrell, and I'm the CEO of Broadband MultiMedia Technologies. Even though we're not a dot com company, we are a part of the new economy. We prepare the infrastructure for a lot of the dot com companies. I'm also the Co-Chair of the Mayor's new Economy Commission and, you know, our task force has looked at a lot of the issues concerning the new economy, how the new economy would have an impact on the City of Philadelphia. And the thing I'm concerned about is -- excuse me. Robert, you changed the presentation. It was the other one I'm sorry. Yeah, mm-hmm. The thing I'm a little concerned about, you know, sitting here, I know our committee spent a lot of time looking at all the issues concerning the new economy -- you know, what were the assets and liabilities of the City of Philadelphia, what kind of concepts, projects, and approaches could be used to really invigorate the economy in the 100 /00 LABOR, CIVIL SVC. - BILL 2 City of Philadelphia. But what I'm listening to here in the room and what I've seen is, you know, a lot of the solutions are really low-tech to this high-tech problem, you know, a lot of things that the City of Philadelphia has to do in order to prepare itself for an influx of new-economy companies. One of the things I wanted to bring up here, and this is really the thesis of my presentation. I'd like to have the City Council provide support for making a positive move, you know, getting beyond the rhetoric and actually making a positive move to invest in the future of this city by utilizing land. You know, we've talked a lot about blight, we've talked about the impact of blight on the City of Philadelphia. Harold Hambrose talked about the quality of life here in the City. I think that we have the opportunity here to be able to leverage the enormous amount of land that we have to not only forge regionalism, because if we take a look at the region, the region is suffering from misuse of land, mismanaged land, and quality- of-life problems. And we have the opportunity 101 /00 LABOR, CIVIL SVC. - BILL 2 here, by utilizing the land we have available in the City of Philadelphia, to kind of turn that whole situation around to a positive advantage. But we have to invest in it. " You look at the K-to-12 problem, you look at the blight problem which we were just talking about, and taxes. These are economic development problems, and they can solved by an economic development approach. And this project that I'm asking the City to invest in, the project really is to move beyond the rhetoric and to begin spending money on producing a real project that's going to have an impact across the City, that will have an impact on neighborhoods, as well as being able to use the amenities that Center City has and the tourism based in Center City that Philadelphia has. What I'm really discussing here in the slide is really related to starting this project now. And what the project is, we have a limited amount of retro-based land, you know spaces in 102 /00 LABOR, CIVIL SVC. - BILL 2 Center City, spaces that are close to the action, that are close to tourism, that are close to -- you know, the kind of place that people want to be near. And we have a lot of land across the City. But we need to start now really planning to capitalize on that resource because it's going to take about a year and a half before any of that non-performing land -- you know, this land, you know, isn't really bearing any taxes, you know, so it's going to take about a year and a half before that land really can be turned into something. So an investment has to be made now to assemble the land, be able to put together a program that actually prepares the land for investment. If you go to the suburbs, there's a track of land that's set up for a company to come in and be able to begin building on that land. We need the same thing to be done here in the City. And I have a couple of experts with me that will echo these sentiments.
If we take a look at the drivers in the new economy, it's really synergism between entrepreneurship and innovation and ecosystem. You know, there really can be no real new economy 103 /00 LABOR, CIVIL SVC. - BILL 2 without all three. Now, if we look through the history, entrepreneurship innovation has been around a long time. " What I'm proposing really is to put a structure in place that allows the main players that have been -- the main players and the new economies that have occurred across the country and across the world to be utilized here. And basically, those players are universities, entrepreneurs, and business -- with government sitting in the center of that. And I'd like to add to that community, which -- by adding community to it, we can have a major impact across the City of Philadelphia. The City of Philadelphia is a city of communities. And we don't want economic development to only be in Center City and in the tourist area. It really has to permeate the whole city and by using land, as we talked before, and also using the tourist areas, the amenities of the tourist areas, just like the suburbs have used that to be able to attract people from all over the country and the 104 /00 LABOR, CIVIL SVC. - BILL 2 world, 'cause they don't know where Chester County is, but they know where Philadelphia is. We can do the same thing here in parts of the City, but the problem is, folks don't have imagination. You know, if you drive through North Philadelphia, if you drive through Grays Ferry, if you drive down Roosevelt Boulevard, you know, nobody would want to move there, you know. So we need to be able to build some models that can begin to show how you can recreate a community. There was a gentleman here speaking earlier that talked about critical mass. I'm not talking about critical mass in a building; I'm talking about critical mass in actually building a community. We have enough vacant space to be able to build communities -- we can call them "new- economy communities" -- in parts of the City that have really been ravished by years of neglect. The government's role in this is to become a catalyst, to be able to bring players to the tables, create partnerships with agencies and mature firms, universities, community leaders, and also to create incentive packages. You know, we're not saying the government should get out of 105 /00 LABOR, CIVIL SVC. - BILL 2 the way totally. I mean, we've said that in some of the -- that's kind of the essence of some of the committee reports that we put out, but government really has to put an ecosystem in place that promotes free enterprise. And where there are problems in the system -- to give you an example, the young lady was here taking about the digital divide. The problem why the digital divide occurs in minority sections of the City is because its driven by a profit and loss. A company that's going to invest in putting broad-band technology, they're going to go where the customers are. I mean, that's just the way that works. So that's where government can have a role -- to begin to lean on some of these companies to be able to provide broadband communications, which is essential -- not only to a family who's trying to get on the Internet, but it's also essential to new-economy-based companies. So these kind of facilities have to be thought through, and government can play a role in negotiating with these kinds of companies through 106 /00 LABOR, CIVIL SVC. - BILL 2 the power of it's open auspices and contracting to be able to provide support in some areas where it's not being provided. This is an example of a Keystone Zone, but the kind of thing we're talking about really could be in all sections of the City. But when we talk about tax advantages, being able to put together a tax program that says, Okay, you want zero wage tax or something equivalent to zero, you know, a significant reduction in wage tax, as well as the gross-receipts tax.
Now, if we take a look at the gross-receipts tax, the gross-receipts tax is a real problem for an Internet company, you know, because you have to pay a tax off the top. So it's very difficult to get an Internet company to move into the City with that kind of tax on the books. A wage tax could be a large disincentive to a biotech company. And Fred Murphy from Temple will probably be talking to some of these issues, so I won't dwell on them. But, you know, you really need to take a look at the tax and the market you're going after to target market, to put together an incentive program for that market. 107 /00 LABOR, CIVIL SVC. - BILL 2 The kind of thing we're talking about here in terms of putting together a new-economy community, the anchor for that kind of community would be the university, and it could be physical or virtual -- the university doesn't physically have to be there, but we have enough universities in the City to be able to handle a lot of different communities across the City. The entrepreneurs should be housed in that facility, too. There was a gentleman speaking earlier that talked about people of like mind and have similar technologies and they'd like to be together. So it's important there be a theme, you know, to these facilities to put together so you have -- you're growing people in the area that can cross-fertilize. Also, there should be large businesses. And this is where, you know, companies like an IBM or a Compaq or AT&T, they should be part and parcel, but the companies you want in the facility should be the big brothers of the theme companies that you're trying to grow. Now, this whole process flow shows from an economic standpoint how through balance of 108 /00 LABOR, CIVIL SVC. - BILL 2 payments. Now, what balance of payments we're talking about here is, you really have to consider the net investment. So in dealing with a lot of smaller companies, they begin to interact and you're beginning to build the economy bottom-up as opposed to one big company coming in and having a huge impact. So this little model here begins to talk about the net payment or the balance of payment that could be derived, as well as other benefits to the community that could be derived from setting up an economic -- one of these economic development, um. . Now, if we look at on the left-hand side, we have start-up growth and maturity. So here what we're talking about basically are -- when you're starting up this whole process, what is the impact? Now, if you're starting a process like this, there's going to be a reason to have more inflow of capital and more support in the beginning, obviously, than it would be when you get into a growth from maturity stage. But the process should begin to pay for itself. So entrepreneurs, if you take a look at 109 /00 LABOR, CIVIL SVC. - BILL 2 the City of Philadelphia, the City of Philadelphia does a lot of contracting. Well, these small companies that you're trying to grow, they should be partnered with the City of Philadelphia to be able to have some early contracts coming in, to be able to buoy those companies, to be able to get 'em down the road to be self-sufficient. The mentors benefit. Now, by "mentors," we're talking about two mentors: The university would be a mentor, and these businesses, large companies that are coming to the area, would be mentors. The university would benefit because there's training involved in this, and people pay for training. In a start-up situation, the community would benefit because you begin to have people that are coming into the community to buy homes. Now, it's going to take time before you can completely turn that situation around because we talked about the condition of the K-to-12 schools. But one of the things we have in this process we're looking at, we have the universities and the large businesses, as well as the small entrepreneurs actually adopting schools in the 110 /00 LABOR, CIVIL SVC. - BILL 2 neighborhood.
And actually, you know, because they have new economy skills and new economy methodologies, they can begin to teach the students in the schools how to perform as a new-economy employee or an entrepreneur. Now, obviously, local business -- I'm not going to go through the whole thing, I'm going to do one side. Local businesses benefit from this because you have more critical mass in the area, you have folks to be able to buy products in the stores. Now, coming out of this whole cycle, you know, when we end this up, what we're trying to accomplish with this is to have more people paying taxes. You know, you need more ratables. You need more ratables and you need, you know, more folks that are actually paying taxes. So this process that we go through from start-up to growth to maturity is a process that's building this tax base. Now, if we take a look in history, we don't have to go very far back, but there hasn't been a whole lot of critical-mass private investment. There's been a lot of subsidized 111 /00 LABOR, CIVIL SVC. - BILL 2 housing, but there really hasn't been a lot of critical-mass private investors. Yorktown is the last one in my memory -- I could be wrong, it could have been another, but that was a 153-acre plot. The thing that we're talking about is something very similar to this. Yorktown was very successful, and the houses are still there and the people are happy. But we're talking about not only putting houses in; we're talking about putting in a community that's driven by high-tech technology so that the people have a place to work. Another statistic is, there have been less than 150 homes built since 1960. And the houses were built also were subsidized and they were dense, you know. So because there's been a sharp reduction in the population of the City of Philadelphia, with a lot of folks going to the suburbs and other places, we have more land. So if we're going to put housing in, the housing should be on a suburban scale, you know, so we can be competitive. We want to be able to have mixed-income communities, you know, where we have 112 /00 LABOR, CIVIL SVC. - BILL 2 different socioeconomic groups and different income groups all mixed into the same community. But each one wants a different scale of house. So what I'm saying in essence is, as we begin to look at this land, there has to be a plan put in place or we're going to end up like the suburbs. You know, the thing that's occurred in the suburbs with the suburban sprawl has occurred because it was unplanned. A company comes in and they want to build a house, they put a house in. Or if they want to build a campus environment for their company they build that, and it could be anywhere. You know, we need to think through how we really use this valuable asset before we step off and begin letting people use the property that is available for the wrong kind of purpose. Now, as I said in the beginning when I first started, in order to balance a regional economy -- on the left-hand side, the region has sprawl and quality-of-life problems, we have land transportation, retro neighborhoods, and amenities. We have to use 'em, we have to plan that use, to say it again. That's the ecosystem we're talking about. The ecosystem really is a 113 /00 LABOR, CIVIL SVC. - BILL 2 structure that's put in place and is a planning process that begins to utilize these resources. You know, when we started, we also talked about the assets and liabilities. We can eliminate the liabilities by using the assets from an economic development venue. This is just a summary of a lot of what we were just talking about. We need to assemble critical mass land banks. The blight committee looked at this in length and can speak more eloquently than I can about it, but it needs to be there. We need to reduce builders' costs, and Michael can speak to that too.
You know, the land is non-performing, so we need to either give the land to builders or greatly reduce the price of the land, you know, so that there's an incentive for folks to come in and begin building on this vacant land. We need to also increase the purchasing power of both tenants, in the case of small companies moving in, and also in the case of homeowners. Now, we have a graying of our population, it's a major problem. If you look at the homeowners across the City, you know, a lot of 114 /00 LABOR, CIVIL SVC. - BILL 2 them are getting older. So we're going to have more and more deterioration of these neighborhoods, and we need to figure out a way to be able to get younger people into the process, but they also have to have an income and a nice place to work. So we're beginning to solve a lot of problems by priming the pump and beginning to kick off a project that looks at an entire community. You can't do it house by house, nobody wants to be a pioneer. Who's going to be the first one that's going to move into an area that's blighted? Okay, why don't we stop here because I want to allow -- I've said enough about this and would like to allow the other two presenters to chime in.
Good afternoon. My name is John Carpenter. I'm a community builder with the United States Department of Housing and Urban Development, and I have, hopefully, a short and simple message to deliver. When I leave, I'll hand over a small briefing paper on the topic, but essentially, one of the things that's been sort of a consistent 115 /00 LABOR, CIVIL SVC. - BILL 2 theme through the entire morning has been the discussion of speed, speed of decision-making, speed of doing business in the e-business world. And one of the places where we as a city are most poorly prepared to meet that need for speed is in our ability to assemble and deliver land for development. It is a sort of grungy, kind of low-tech part of the business, but every business, even the e-businesses need a place in which to house their workers and conduct their operations. So what I have worked on for the last number of months, both with the Mayor's Transaction Committee on Blight, and before that, with a number of other smaller task forces, is a proposal to consolidate the various fragmented authorities of the City into one central location, where we can accumulate all of the abandoned land and property in the City -- estimated at between 30 and 60,000 parcels -- and begin to deliver them in much more speedy and consolidated fashion to potential developers, including developers of e-commerce businesses. So what I'd just like to leave you with today is the fact that we are simply not prepared, 116 /00 LABOR, CIVIL SVC. - BILL 2 given the number of abandoned properties that are still in private hands, to deliver property to future businesses in a timely manner. If three months, as I heard earlier, is equivalent to a year of regular business, then our normal business cycle for delivering land to people who want it, which is two to three years, sounds like nearly a decade's worth of waiting. So what I recommend is that we move with all due speed and thoroughness toward a system where we can deliver property as quickly and as affordably as possible in a consolidated manner to future users so that it's available and put back on the tax rolls and becomes an asset to this community instead of a liability. Thank you.
My name is Michael Colazzo of Mitco Corporation (ph.). I'm a builder-developer in Christian Street in Philadelphia. And one of the things that I want to reiterate what's been going on today is to see the land issues and the mix of what we're doing in the City. This city has spent a tremendous amount of 117 /00 LABOR, CIVIL SVC. - BILL 2 money of its federal grants in developing many parts of the City, especially for low-income residents, and I think it's an admirable thing to do, and we must continue to do that. But the problem is that the rate that we're delivering this product, we're only delivering one mix -- of lower socioeconomic groups. We're not addressing the higher end in the middle of the group, that Councilman Kenney alluded to before and some of the issues that Councilman DiCicco is working on, I know, in South Philadelphia to address the middle of the road. The high-end market in Philadelphia is going to take off no matter what anybody does, the high, high end. No matter what City Council does, what the private industry does, it's going the take off. The low end is going to be there, we have to continue to fund those programs and we have to work with the community groups to do that. It's the middle of the road where we need to save our city, that's going to help our schools, that's going to try to get people to back into the City, and need to deliver that middle-of-the-road 118 /00 LABOR, CIVIL SVC. - BILL 2 product. And it's very difficult to do that under a lot of the guidelines that we're doing now. Land costs are an issue. The land may be cheap in itself, but all of the details in developing and acquiring ground in some of these neighborhoods, of replotting ground -- I mean, many of you have found out in your neighborhoods that are just totally blighted and you've got 250 owners and it's worthless land until you try and buy it, and then it's a $2 million parcel. And a lot of these parcels for years were on the tax rolls, but taxes were not being paid. It's only been in the last few years that the City's taken aggressive posture to try and accumulate this land. And we need to plant these seeds for the future and we definitely have to economically stratify the City. We cannot concentrate on the higher end or the lower end. If we build 500 units in the low end, we have to somehow get the middle of the road built. A good example is John Westin's (ph.) job, which is one of the first jobs that's 119 /00 LABOR, CIVIL SVC. - BILL 2 completely private, out near Spring Lane in Councilman Nutter's district. I think they have homes for around $200,000, and they sold out, they're waiting in line for those type of homes. That's the middle of the road, and there's a tremendous need for it. There is no product like that available in the City, and I know that Councilman DiCicco has been working hard on that. But we need to work on policies to provide the middle of the road, because this new economy won't take off. Not everybody's going to be making a million dollars. There's going to be that middle of the road, to hit that income of 30 to $70,000. And those people are not entitled to any benefits that are in the City programs, the low-income housing tax credits. They don't get any of that, and so they can't afford to live in the City, they can't afford to raise their families. And I think that's where City Council and this government needs to work as partners with government in trying to take some examples from other cities. And one example would be to make land available. If you have to use federal monies, use 120 /00 LABOR, CIVIL SVC. - BILL 2 it in the acquisition in the blight elimination, and take out the old foundations and turn over the land that's buildable property, without the oil tanks and everything else that I just found this week in one of my sites, unfortunately. I wish it wasn't there, but it's there. That's all I have to say, but thank you for your time, Council.
I'd just like to make one comment. You know, I introduced a bill, and it was passed by City Council last year, to extend the three-year real-estate abatement on new residential real estate construction up to ten years. The prior administration was not too supportive of a flat ten-year abatement; they wanted it on a sliding scale, so that became a compromise. Subsequently, the bill was vetoed by then-Mayor Ed Rendell because of some technical issues, and I reintroduced it. I just about an hour ago received a call that the State Senate passed the ten-year abatement for Philadelphia, which would give us 121 /00 LABOR, CIVIL SVC. - BILL 2 the authorization at a flat rate, which I will be re-introducing that bill on this Thursday. So I don't know what's going to happen at the House yet in Harrisburg, but we were waiting for that, and that's the signal, I think, for us to move forward here. And I will introduce the new bill this coming Thursday for the ten-year flat abatement on new residential real estate construction. So I thought you might be very interested in knowing that.
Thank you gentlemen, thank you very much. Next we have Carole Smith, David Shevron, Maria Roberts, Bernie McNogle, and James Ingraham. (Witnesses come forward.)
Good afternoon. Would you all please state your name for the record.
Good afternoon. My name is Carole Smith. Good afternoon. Thank you for allowing me the opportunity to testify today. My name is Carole Smith, and I 122 /00 LABOR, CIVIL SVC. " And I'm the founder and Executive Director of the Workforce 2000 Advisory Council. I also serve as a member of Mayor Street's Information Technology Transition Team, which recommended that Philadelphia take steps immediately to move toward e-government. It gives me great pleasure to be here today. I stood in this same spot almost five years ago to the day, in April 1995, as co- convener of the public hearings on the impact of telecommunications technology on the City of Philadelphia economic, social, and psychological. As a result of those hearings, in June of 1996, former Mayor Rendell established the Mayor's Telecommunications Policy Advisory Commission (TPAC) to advise the Mayor and City Council on policies and actions related to the use or impact of telecommunications technology in the City of Philadelphia and the region. Among the duties and powers of the Commission are to research and report on any 123 /00 LABOR, CIVIL SVC. - BILL 2 telecommunications-related issues deemed appropriate to: 1. Maintain and expand the tax base by promoting the City's unique position as home to major multinational telecommunications companies and other companies, which are at the leading edge of the telecommunications industry. 2. Advocate the private creation of telecommunications businesses that promote job opportunities and/or expand the wage and property tax base. 3. And recommend ways that the City can support the growth of telecommunications relying on businesses. Today, four years after the passage of the 1996 Telecommunications Act, it is clear that telecommunications technology has taken us further in a few short years than many of us ever dreamed of. And I appreciate the opportunity to testify today on the importance of encouraging Internet and other e-commerce-related businesses to locate in the City of Philadelphia. When I suggested that the City look at e-commerce a couple of years ago, it fell on deaf ears. 124 /00 LABOR, CIVIL SVC. - BILL 2 So what are some of the things that need to be done to attract IT and related business? How should the City handle e-commerce? These are the challenges as I see them. One is image, two is technical workforce development, and three is reducing the cost of doing business in Philadelphia and tax reform. Let's take e-commerce first. The Pennsylvania Electronic Transaction Act, passed last year, became effective January 15th of this year. The passage of this law gave clear legal authority for the use of electronic processes in conducting commercial and governmental affairs. Electronic signatures and contracts are now just as enforceable as if they were on paper. It will, therefore, be important that as the City develops a capacity for e-commerce, it implement systems that safeguard individual privacy and provide services in a timely, cost-effective, and efficient manner through re-engineering existing systems. This is particularly true in the area of procurement. A recent study showed that 70 125 /00 LABOR, CIVIL SVC. - BILL 2 percent of all government purchases fall within the category of supplies. The savings and increased processing speed associated with this change could be dramatic. It is also true for service delivery. The availability of Web-based services to citizens has the potential to delivering a timely process with cost reductions. Now to image. Although home to a plethora of educational and research institutions, not to mention the number of information technology and telecommunications companies in the region, Philadelphia is not known as an East Coast technology or knowledge center. To change this image, we need to assess our assets and market them. We must create an image of the type of city we wish to be in the future, showcasing our competitive advantage.
Because competitive we must be as we think about e-commerce. The growth of e-commerce has significant impact on local communities, particularly with regard to their roles in restructuring of the economic system. These impacts are several and have financial, legal, human, and societal implications. First, increasingly, economic 126 /00 LABOR, CIVIL SVC. - BILL 2 development decisions are no longer made at local, State, or even national levels, but on a worldwide steal. Second, capital necessary to support new economic development can move free from locality to locality, and can be quickly withdrawn from nations with weaknesses in their economies and financial structures. This can exacerbate problems for nations and localities, particularly those without a strong economy. This means for local governments is that competition for scarce financial resources makes them more vulnerable to withdraw of capital investments if their economy is weakened or they are perceived as not managing their assets in a professional manner. But the picture looks good for us. Philadelphia, the Philadelphia region, placed 11th in venture fund investments and high-tech companies nationally. And a record 475 million in venture capital was invested in Philadelphia-area companies last year, a 50 percent increase from 1998. This area also ranks tenth in money that businesses spend on information technology. This is an important factor for business deciding where 127 /00 LABOR, CIVIL SVC. - BILL 2 to place new information technology service firms. According to the Daily News, what Philadelphia lacks is brand name recognition. As we identify current and future opportunities and challenges, we need to move on them and quickly. Such is the case with workforce development. We know that the quality of the workforce is of primary importance to today's employers and a key to business attraction. Technology is driving the economy, and this economy requires a higher skilled workforce. What can we do to improve the skill levels of our City's workforce? How can we showcase what we are doing so that businesses will come to Philadelphia? How can we best keep our best and brightest, our college graduates? How can we assist our budding entrepreneurs? And how can we create opportunities for those who feel left out, the so-called have-nots? I suggest that we take a hard look at the breadth and scope of the industry in our region, identify industry clusters, and design training around these clusters in partnership with industry. This should be done at the middle and 128 /00 LABOR, CIVIL SVC. - BILL 2 high school levels as well as at our community and four-year colleges and universities. We need to grow our own workforce, not import it. Rethinking education will, by necessity, require curriculum structure and development and incorporating base technical competencies to be achieved at designated levels. It will mean a change in thinking, a change in attitude, but it will be worth it. TPAC is working with the City's new Secretary of Education, Debra Kahn, to address these issues in the Philadelphia school system, and our colleges and universities are increasingly providing certificate courses to produce skilled workers responding to employer needs for shorter-term training programs. Developing a skilled workforce will increase the earning power of our citizenry. It will also improve our image and the quality of life in our city. Studies show that communities with higher percentages of educated citizens will receive proportionately more than those with under-educated citizens, particularly in respect to the income tax base. 129 /00 LABOR, CIVIL SVC.
- BILL 2 Instead of importing workers from foreign countries, technology companies must be encouraged to direct resources to make technical training and opportunity available to the Philadelphia community, many of whom are African-American and Hispanic groups, from which the Department of Commerce reports that between 1994 and '98, the gap in home and work Internet access widened as compared to whites and Asians by approximately 6 percent, while the education income between those with the most and least resources grew 29 percent during the same period. Workforce 2000 and TPAC have launched a demonstration project in conjunction with the Philadelphia Workforce Development corporation to begin to reduce this gap, by providing technical training to prepare participants for MOU certification -- that's a Microsoft Office Users application. A community-based program, it is being implemented in conjunction with Mount Carmel Baptist Church. Another group that needs to be targeted for retraining is downsized individuals and those who have been re-engineered out of their jobs. 130 /00 LABOR, CIVIL SVC. - BILL 2 This group is usually higher skilled and can be redirected and retrained to take on the newly- created and mid-level jobs this industry is spawning. There are several efforts underway in the City to address these needs, but for the most part, they are uncoordinated and have limited industry involvement. This is the area where TPAC can be instrumental in serving as a clearinghouse for information and resources utilizing the businesses represented on our commission -- all leaders in the industry. The TPAC Five Year Plan, Philadelphia Technology Campus, was approved by former Mayor Rendell, incorporated into our annual report, and distributed to City Council in 1999, in December. As a first step in implementing this plan, Mayor Rendell recommended that TPAC serve as technical adviser for the University City Science Center Court of Technology project spearheaded by the State and designed to entice and support high-tech ventures that locate in Philadelphia. In support of this effort, he allocated $100,000 to support the project. As we study this industry, we must 131 /00 LABOR, CIVIL SVC. - BILL 2 also identify opportunities in economic development such as this within Philadelphia City proper. S. Department of Commerce -- reports that Internet access is growing rapidly among people in all demographic groups and geographic locations. Dot com companies are springing up everywhere, and Philadelphia is no exception. An estimated 18,000 dot com companies have developed in the Philadelphia region in recent years, but the City does not seem to be benefitting from this growth. State Representative W. Curtis Thomas, Co-Chair of the House Subcommittee on Information Technology is working in this regard, looking for ways to attract technology companies to north central Philadelphia. In looking at the City and the availability of tracts of land which can be packaged for development by companies such as SAP, SAIC, or Oracle for back-office operations, the 181st District and other areas of north central Philadelphia are prime examples where land can be packaged and marketed. Marred by blocks of empty factories and dilapidated buildings, opportunities 132 /00 LABOR, CIVIL SVC. - BILL 2 for revitalization abound. To this end, he is convening a brain trust to help him develop a feasibility study on how technology can be harnessed to revitalize north central Philadelphia. Efforts such as his and Senator Fumo's, who has developed a technology incubator in the American Street Corridor need to be replicated throughout the City. Now to the hard part -- reducing the cost of business in Philadelphia and tax reform.
I'll leave those to this august body -- it's too sticky for me and one that TPAC has yet to address, but rest assured, our commissioners have made a commitment to help the City to successfully compete in the 21st century economy in whatever way they can. We look forward to working with you to this end. Thank you.
Hello. David Shevron, Global Technologies. I'm honored to be here. I'm actually a last-minute fill-in for my boss, Herb 133 /00 LABOR, CIVIL SVC. - BILL 2 Gross, the CEO of my company, but he is in Europe on business, so hopefully, I could fill his shoes.
You may get a promotion like the other gentleman earlier in the testimony. (Laughter.)
Right, right. Just as way of background, who is Global Technologies? We are a publicly-traded Philadelphia-based company. In 1999, we had three employees in Philadelphia -- that was Irv Gross, myself, and our secretary. , our 81 percent-owned subsidiary. Global Technologies is a technology incubator that invests in, develops, and manages emerging growth companies focused on Internet networking solutions, telecommunications, and gaming. Today, I'd like to take a few minutes and just frame a picture of the situation as it relates to the Internet, use New York as a case history, talk a little bit more about what Philadelphia has to offer -- so some of it will be 134 /00 LABOR, CIVIL SVC. - BILL 2 redundant -- and then some of t public policy implications on how to forge a partnership between the City and State to create an e-commerce center in this area. Now, this is not new to most people, but more and more companies are getting VC backing, but technology and Internet companies are by far the biggest recipient. The Internet is here and here to stay. 5 billion of venture capital funding 13 went to Internet companies. In three years, that 14 number has increased more than tenfold, and today, 15 Internet companies get more than half of VC 16 dollars. 17 Now, when most people think of the 18 Internet, they think of Silicon Valley. Well, 19 there is life outside of Silicon Valley. 8 billion. Unfortunately, here in Philadelphia, we do not have a deal among the top 50. Now I'd like to take a little bit of a 135 /00 LABOR, CIVIL SVC. - BILL 2 look at New York Silicon Alley, a real-world success story and what they've done in the three years, going from a bit player to number 2 in the marketplace, and let's look at some of the key metrics for the City. Certainly, we're concerned about employment. Employment in the, quote/unquote, new media has increased at a compounded annual rate of 40 percent over the last three years. Today, in New York Silicon Alley, there are 250,000 positions related to this new media. 3 billion, there are 8500 companies participating in this new media economy, with gross revenues of $17 billion. And, certainly, entrepreneurs predominate the number of companies. Seventy percent of those companies have revenues of less than a million dollars, and the number of companies focused on e-commerce has tripled in three years. Now, we certainly know that all jobs are not created equal, and these jobs that are going to New York are high-tech jobs, and high-tech jobs on average pay $30,000 more than 136 /00 LABOR, CIVIL SVC. - BILL 2 their non-IT counterparts. New York has not only seen a growth in employment, but a growth in high-paying jobs. Now, why has New York been successful? Well, New York was fortunate to have certain things in place that made it ripe for success: a technology infrastructure; access to customers; a moderate price base, though we'll see that's going away; proximity certainly to industry drivers -- the advertising world, the media world, and capital both of a venture nature and investment banking. But this story isn't as rosy today in some respects. When surveyed, executives complained -- 62 percent of the executives complained that the overall cost of doing business in New York is very high. Affordable facilities was a thing of three, four years ago. Getting affordable space today in Manhattan is at an all-time low. And, of course, people complain about taxes, both State and local, and trying to get good-talent people is becoming harder and harder. New York problems are opportunities for Philadelphia. 137 /00 LABOR, CIVIL SVC. - BILL 2 Now, what do we have to offer here in Philadelphia? " Location, location, location. Philadelphia is well-situated on the East Coast, between the financial capital and the political capital. The cost-of-living advantages are significant here over New York, Washington, Boston -- in a sense, our competitor cities.
And we have a fantastic ability to access our trains and our air travel. I know a lot has been talked today about out super universities -- the University of Pennsylvania, Temple, Drexel, the art schools among them. Great minds are unfortunately here but passing through the City and staying only for two to seven years. This is a great source of human capital that we have that leaves the City. And then we have leading companies in certain fields -- certainly pharmaceutical, health care, and biotech fields. And we have certain models of success in the Philadelphia area -- Safeguard Scientific, Internet Capital Group, and Verticalnet. Now, how can the local and State governments help to create an e-friendly 138 /00 LABOR, CIVIL SVC. - BILL 2 Philadelphia region? And some of these things have been talked about. Assisting the creation of real estate space and providing incentives for the creation of incubators, and this could include seed money, low-cost base for incubators and residential space, and a big one, I think, is cooperative efforts with universities. The universities, as I said, are a great resource, both in terms of faculty and students, but students study here and then leave. The City needs to get them and get them early. Go to the classrooms, capture this brain power, make it attractive for these smart individuals to stay and thrive in this city. A lot has been said today about the tax burden. Reduce the general taxes that have an acute impact on entrepreneurs. Tax policies need to encourage entrepreneurial-based business and certainly reduce the wage tax. Get technology shows to come to Philadelphia. Help put Philadelphia on the technology radar screen. Get people to start associating Philadelphia and technology. And sort of wrapping up -- promote 139 /00 LABOR, CIVIL SVC. - BILL 2 thyself. I mean, this is a great city, but I don't think a lot of people outside the City know that. As I said, compared to New York, Boston, Washington, this area is much more affordable. I'm actually a native New Yorker and I still read the New York Times and read about the New York sports teams. But I had a choice and I've chosen to live down here and work in Philadelphia. So, there are people out there like me who you can pull down to this city. This city has shown itself to be a great tourist destination. For some of those same reasons, the City should be a business destination. And as I mentioned earlier, you know, as far as travel, we're an hour and a half, hour and fifteen minutes from New York, two hours from Washington, easy access to the airport, reasonable commutes -- these are things that help make Philadelphia great. And we have a tremendous talent pool. As I mentioned earlier, the universities need to be tapped into. And what the City also needs to do is show a willingness to help attract and support businesses. 140 /00 LABOR, CIVIL SVC. - BILL 2 These are the things that Philadelphia should do to promote itself -- and not just domestically but internationally as well. And the time for coordinated action is now -- both between Philadelphia government, the business and university community. And by capturing our fair share of the new e-business world, the economic benefits to the Philadelphia region will be huge. I thank you.
Hi. My name is Maria Frizelle Roberts, and I want to thank you, Councilman Clarke and Councilman DiCicco, for inviting me to be here. I am the President, CEO, and owner of a firm located on Chestnut, 128 Chestnut Street, in Philadelphia. The name of the firm is MFR & Associates. I've been in business for eleven years, and I've found that over the last, I guess, five years, due to an increase in demand, I've had to spend more and more of my company's resources focusing on integrating marketing and IT solutions for my clients. 141 /00 LABOR, CIVIL SVC. - BILL 2 Just in the past two years alone, I've seen the technology needs of companies that I do business with grow tenfold. Presently, almost 70 percent of my company's business is generated soley for an IT purpose for my clients. In fact, I'm going to even give you a little more recent history. In the past two fiscal quarters, my company has had an enormous increase in the numbers of projects that have been technology- related -- notably, those that have involved Web design and application development. This is due to the huge demand that all these companies -- companies -- not just -- companies in this region and across the country have for Internet e-commerce and e-government-related services. And I want to stress e-government because I think we've sort of danced around that issue today, and it really needs to be focused on. I had the pleasure of sitting on the Mayor's Technology Transition Team, and I was also a part of the Mayor's Transition Team for Small Business and Economic Development, so I got quite involved in a lot of issues, and I am booming with 142 /00 LABOR, CIVIL SVC. - BILL 2 ideas, and hopefully, some of the things that came out of the those committees will be implemented. I have worked for many years with private industries and local governments. My most recent experiences, I must say, with the City of Philadelphia, doing business have been positive. I know you won't hear that from everybody, but they have been positive. I consider Philadelphia to be in a prime position to capture the technology boom that's going on. Philadelphia is situated between New York and Washington. We have ten of the top universities right here in the Philadelphia area. My company for the last, I guess, eight years has been involved in the co-op program at Drexel University, and I've had a number of students who've come to work for us during the co-ops and have worked for us continually during the year. We've had a number of students who've come from Temple University, from St. Joe's, and we've had a wonderful experience with them. I also took part in a program that Drexel University had, having students come from overseas. I had a number of French students come 143 /00 LABOR, CIVIL SVC. - BILL 2 for our company for a year at a time, and we've had a wonderful exchange of business ideas and concepts. And, in fact, at this time, we are presently developing a business plan to set up a company in France. Our IT specialist is here, and she has been working on that plan for the last, I guess, month or. So we hopefully will be doing that before the summer's over. I can't tell you how tough it is to do business in Philadelphia -- not from -- not because there's no business here, 'cause there's plenty of business here in Philadelphia. The difficulty is in the networking. The difficulty is that there are many businesses that are here, and we don't communicate with each other. The fact is that many people have no idea that I have been in business for eleven years and that we do technology and we do Web design. I heard from the businesses that were here and I was shocked to find out some of the services that they offer and some of the networking that could happen for us to do some larger business deals together. The -- I guess for me, the biggest problem that I have in looking at e-government is 144 /00 LABOR, CIVIL SVC. - BILL 2 the fact that I do do business with the City.
I live in the City, I own a home in Center City. I'll give you an example. I'm in the process of having my home redesigned, and I've hired a contractor to come in, and I have an architect. And anybody who's ever had an architect, you know that the increase in your house almost doubles. But I had to have the architect go down to L&I to get zoning permits. He sat there for three and a half hours. That was my money that I had to pay this architect to sit there, okay? There's no reason why I should not be able to go on line and fill out zoning permit applications. This should be a communication between me or my architect and my contractor and Licenses and Inspections. It does not exist. I happen to know McLaughlin, and I have had dialogues with him, but 99 percent of the population of Philadelphia doesn't know him, doesn't know anybody in L&I. Another example is the Parking Authority. We all get tickets -- I get tickets, you get tickets. I should be able to go on line, pay my tickets, or even contest a ticket, protest 145 /00 LABOR, CIVIL SVC. - BILL 2 a ticket if I want to. I can't do that. I have to take off from my job to go down to Ninth and Filbert and sit there like everybody else for three hours, and I have a company to run. People who work for me, if that happens, they have to take off from work and go there and sit, or they wind up -- most of them just wind up paying the ticket just 'cause they don't want to be bothered. But it's frustrating. I don't mind paying taxes to a certain extent, but I do mind paying taxes when I don't see much of a benefit or a return on my investment to the City. We pay the BP, the business privilege tax, and I think that in order to make it a little more palatable, as a business person, I think that the City should say, Okay, for those of you who are part of this business culture and who invest in Philadelphia, who pay City wage taxes, who do all these things and you pay this business-privilege tax -- Oh, I also use and occupancy tax, and I'm also now paying a tax now to have the front of my street sweeped, the business that I own swept. So I'm paying taxes on top of taxes, but no one -- 146 /00 LABOR, CIVIL SVC. - BILL 2 not once have I ever gotten a 15-minute grace on my meter. I also think, wouldn't it be nice for the City to say for business people, there are things that the City wants to do for you. The taxes exist. The taxes exist, but there's no 8 reason why there isn't some dialogue or some relationship or some benefit that I see that I get for that. I stay here in Philadelphia. You've heard today that any of our companies could go anywhere. I could go to Camden -- I chose not to go to Camden. I could go to Montgomery County, I could anywhere in the country to do the kind of technology business that we do, but I love Philadelphia, it's a great city. I have fond memories of this place. And it also is cost-effective in many ways to do business here. I can get real estate rates, cost-per-square-foot rates -- for the type of office space that I have here, if I were in Manhattan, I don't know what I'd be paying, but I have fabulous office space here. I walk to my office. I own a home on Front Street, and my office is on Second and Chestnut, and I walk. My car stays in my garage. 147 /00 LABOR, CIVIL SVC. - BILL 2 There's a quality of life here that I don't want to give up. My staff -- I have ten employees. Ninety percent of my staff live and work here in Philadelphia. On Friday nights, they all go out for drinks to the restaurants, they socialize, you name it. All this money comes back to the City in revenue. If I move out of the City, most of them will probably move 'cause most of them -- some of them have apartments, condominiums, and they'll probably move. If companies like mine leave, these people are going to leave. I'm continuing to do work with the universities because I want to make sure that I have a constant pool of people. Right now, I must have ten job applications.
At anyplace we even think of, I have a job application posted. Anybody looking for a job, call MFR & Associates, we're interviewing, you know, like crazy, okay? Darrell, I don't think you need a job, okay?. )
Trust me, I'm a ward leader and I know people that need jobs. 148 /00 LABOR, CIVIL SVC. - BILL 2
Oh, okay. The other thing is -- I guess for me, the problem has to do with the fact that there is a very different -- there's a very difficult exchange between the technology businesses like mine that are in Philadelphia and government, the ability to do business with the government to make my life easier. And I know that I talked about L&I and I talked about the Parking Authority, and those are personal issues. But, for example, I mean, I own a business and I often look for RFPs. I should be able to go own line and get any RFP that's out there in the City. I should not have to call the departments and see what's out there and what's available. I should go do that. When I was on the Small-Business Committee, I was asked to look at some legislation. I couldn't get the legislation. I had to send it somebody over to Council to pick up legislation. It should be on the 'Net. These are -- there should be a way -- you know, I guess my thing is to make sure that we are -- that the City sees itself as being on line 149 /00 LABOR, CIVIL SVC. - BILL 2 and not having its residents in line all the time, and taking up time and burning revenue, that an in-line city is a virtual city and where this city needs to go. And our company is one of the companies that is primed to help the City get there. It's just that the City has not be very supportive of those kinds of idea, and hopefully they will. I would like to say that there is -- we did as part of this Technology Transition Team, we developed a fantastic report. I don't know if any of you have seen it. Have you seen it? There's a number of recommendations we had in that report, and some of the them is elevating the director position to a CIO position, a cabinet position, having a budget that's usable, centralizing the City's technology into one central department. And most of these things are things that will bring a focus to technology into Philadelphia. And also we also suggest a change in the name from "MOIS" to "the Department of Information Technology." It focuses the department in looking more at technology not at information systems, okay? 150 /00 LABOR, CIVIL SVC. - BILL 2 I want to thank you for asking me to come. I sort of got off track, and I didn't really follow my message, but my message is reflective of everyone else who has been here before me, all the business owners that were here before me. I'm planning on staying in Philadelphia, and I look for, hopefully, the next year to come back and report that we have opened our office in Europe and that we wind up being "MFR International." And it's because of the fact that Philadelphia did make it somewhat easier for me to start a business here, because I could not have not done it in New York, I could not have done it in Washington, Chicago, or Atlanta. Thank you very much for taking the time and inviting me to come.
Thank you. Your message was received loud and clear. Councilman?
All right. And I voted for you, too. 151 /00 LABOR, CIVIL SVC. - BILL 2
Never mind. I just wanted you to know for your information, and you may be aware of this, some time ago, back in 1991, actually, I was on the then-Mayor Rendell's Transition Team, and I chose to be on the L&I Committee because of the some of the frustrations. And we haven't really gone very far since 1991, although about six months or so ago, I met with Commissioner McLaughlin and -- just the other name escapes me at the moment, and they're looking to get about $2 million into their productivity bank for some of the issues that you raised about being able to take certain types of applications on line. You should be able to do that without having to come into Center City and going to the Municipal Services Building.
You can't do all of those things because some things are much more technical and require a lot more time and expertise, but for what we've referred to as the "over-the-counter permit," I see no reason why we 152 /00 LABOR, CIVIL SVC. - BILL 2 shouldn't be able to do that. It's always a question of money, and I'm going to be speaking to the Chamber of Commerce -- they're having some breakfast meeting -- and I'm going to make some suggestions that maybe the business community ante up some of the money in advance to establish the amount of money we need in the productivity bank and kind of escrow that money against future accounts.
And against future applications that those folks who would put the money up going, you know, up front and draw down on that going forward, because time is money in every business. And in particular, in the construction business, it's even more money, and a lot of time is wasted and money's wasted. So some of the things we were working on, and I do appreciate the fact that you had a lot of positive things to offer today.
It's a great city and I know that a lot of negative things were said, but it's a great city, and it's primed to be the technology force -- one of the top technology 153 /00 LABOR, CIVIL SVC. - BILL 2 forces on the East Coast, with support from people like you and Darrell. And I want to thank you guys for having this hearing, and to try to get the momentum started so that we can move forward. That productivity bank rejected their money. I don't know if you know that, but --
They rejected it. It came back. So maybe you can pull a few coattails.
Well, that's why I need to go over to the Chamber and see if I can convince them.
Well, I'm going to leave it, I'm going to let the gentleman speak. There's -- obviously, we all have a lot to say.
I understand. Bernard McNagle (sic)? 154 /00 LABOR, CIVIL SVC. - BILL 2
Bernard McMonagle. Hi. Thanks for the opportunity. My name's Bernie McMonagle, and I'm with the Bell Atlantic Corporation. And studies indicate that the base components to successful high-tech areas are: infrastructure, good technological infrastructure; research universities, big universities; skilled workforce; interdependent firms -- they were the technology clusters for another term, but firms that depend on one another for business; and, of course, tax incentives. And as far as the infrastructure's concerned, to give a little Bell Atlantic commercial, with respect to the expenditures that we make on a yearly basis, in '99, we spent $100 billion just in the State of Pennsylvania, upgrading that infrastructure. We've deployed over 91,000 miles of fiber optic in the areas we serve. And without adding any more fiber optic cable, we could quadruple that bandwidth simply by adding technology like dense wavelength to vision multiplexing and other technologies. We employ 19,000 people in 350 locations in 200 155 /00 LABOR, CIVIL SVC. - BILL 2 municipalities just in the State of Pennsylvania. So as far as the infrastructure is concerned, I can speak for Bell Atlantic, and many of our competitors and partners have similar technologies that can be deployed and provide the kind of bandwidth that companies need. Big universities, we keep saying them over and over -- Drexel, Temple, LaSalle, Villanova -- they're all here, they all do a great job. Just in the e-commerce in the business-to-business e-commerce -- e-commerce, there was over 300 million in transactions in e-commerce last year. Now, that's expected to rise into the trillions. That's an awful lot to development that has to take place in order to enable that kind of e-commerce throughout the country. Bell Atlantic recently ran an ad for Web developers, e-commerce development managers, and senior project manager for call center development. And the center for Bell Atlantic's development for business to business e-commerce is located in Philadelphia right at 1717 Arch Street. 156 /00 LABOR, CIVIL SVC. - BILL 2 We've got excellent health-care institutions. People come from ail over the world for health care in the City of Philadelphia. The interdependent firms and related industries, the biotechs that collaborate with our health-care institutions and the universities that educate the best and brightest work in these interdependent organizations. I think one of the things that is missing in that area, from my experience, is the collaboration. " as opposed to looking for the win-win. So that's probably an area that could be worked on. Finally, there's the human element. People with high-tech skills have choices. Philadelphia needs to be that choice. And people who make those kinds of decisions on where to work look at the taxes, the schools, the housing, the transportation, and the newness of the area. I'd say that Philadelphia has most, if not all, of the components, but it's the critical mass that starts by pulling all of those together. 157 /00 LABOR, CIVIL SVC. - BILL 2 Now, one of the points that I want to make, having been on several committees, committees in the Philadelphia area, not just Philadelphia, but in the Philadelphia area, tend to become oversight committees as opposed to committees that help facilitate the development of this critical mass. I think that's an important point. I have firsthand experience on that. And even back to the resolution -- I'll just quote it. " It appears from that statement -- one would read that and say that we're just getting started. I think that the image that was mentioned several times before, that Philadelphians don't have the image of being the high-tech areas or high-tech people, that absolutely has to change because we are. The people that work for me that design, price and sell voice data and video systems to large business customers, solutions 158 /00 LABOR, CIVIL SVC.
- BILL 2 that enable some of the biggest industries in this area to be able to be successful, are probably the best in the country. And I don't think we do enough in marketing that kind of talent. There's plenty of talent that you've already seen today. We need to do a better job of marketing that, leveraging that, building with that, supporting that to build a critical mass. But we're not starting from scratch, and that's the important point. We are way ahead of a lot of other areas. I think it's slightly fragmented and it needs to be pulled together with an organization that can facilitate and not dictate. And one of things that the Silicon Valley network is doing, and that is basically their network to do exactly what this committee is trying to do. So they have a Web site dedicated entirely to bringing businesses to Silicon Valley. You think they already had that nailed down, but they're working on what they've already developed, building on that, and making it even better. I don't think we need to start from scratch; I think we need to jump on that 159 /00 LABOR, CIVIL SVC. - BILL 2 foundation that's been built and build it and start doing a better job of marketing. Thank you.
My names is James Ingraham, and I'm with Compaq Computer Corporation. And I'm also one of the co-chairs on the Mayor's Information Technology Task Force, or Transition Team, I should say. To that end, it's my desire to bring the best value that I can to Philadelphia to help it to become that great city, which it could be. So to that end, what I've done is, I've asked a gentleman from Compaq to come in to join me to talk to you around e-commerce e-government and hopefully build on some of those the gentleman from Bell Atlantic referenced so that we can move forward in a very dramatic way to make this city the best city in the nation. And to that end, here's Joe Perez.
Thank you for that introduction. Good afternoon. My name is Joe 160 /00 LABOR, CIVIL SVC. - BILL 2 Perez. I'm with Compaq Computer Corporation. I am the Director of Professional Services for North America for our public-sector business throughout the country. And, again, I thank you very much for having me here this morning. I've heard quite a bit and I come from a background where I've had a fair amount of experience in urban development, city municipal government, economic and community development in some rather large cities, Boston being one, Jersey City, New Jersey. So I'm sensitive to the discussions that have been going on today. I also want to acknowledge that I think there's a lot of passion in this room that has stepped forward today to offer some ideas, some resource, some talent, and I think the makings of putting together a sound plan to move ahead with making Philadelphia the number-one e-commerce business development community, particularly in this corridor. I think the makings are certainly in place. C. There's an enormous amount of resource right here in the 161 /00 LABOR, CIVIL SVC. - BILL 2 neighborhood. It bears repeating. You have a large university market, some of the major schools in the area, a lot of resource talent. Boston is running out of real estate. " The companies that already exist and the ability of those companies, as well as the fathers of this city to market and sell the strategy of how good Philadelphia is and can continue to be and nurture that business that is thriving today, I think is going to be significant. Let me tell that you e-commerce on the Internet and the businesses not only that are responsible for the infrastructure and the building of applications that support that e-commerce business, but all business from a retail and from a manufacturing business that do business-to-business transactions and need to do business with government, that business is going to migrate and transition very quickly to the 162 /00 LABOR, CIVIL SVC. - BILL 2 Internet. The gentleman from Bell Atlantic mentioned the dollar volume of transactions that are going to occur on the Internet. 3 trillion in the next two or three years -- that's right around the corner. How many people are using the Internet? And there is this element of the digital divide, which needs to be addressed. I think all of the technology vendors are sensitive and have acknowledged and are trying to work towards how to disperse and eliminate that problem. But with the advent of the invention of the radio, it took 30 years to get 50 million people to become listeners of the radio. It took 13 years for the advent of the television to get it up to the ramp of 50 million users. It took four years to get that same amount of population using the Internet and the Web today. And, again, the significance in terms of the number and the amount of business that's going to transpire over the Internet is quite significant. The business of how does the government, how does the City of Philadelphia 163 /00 LABOR, CIVIL SVC. - BILL 2 better service not only its residents, its business owners, but the customers, the outlying customers, several businesses mentioned inviting their clients, inviting their customers into the City of Philadelphia. That's another secondary resource -- not only an image that we want to maintain and enhance, because it's those visitors that are spending retail and capital dollars with the businesses that reside in Philadelphia, but there's nothing to say that we can't attract those businesses in opening up operations and annexes, etc. right within the confines of this city. To that end, my local example is, I live on a small street, there's seven houses. By 8 o'clock every morning, the mother and father are gone, they're off to work. , regardless, they're out working.
They don't have the time to do other things over the course of the business working hours that are required for every -- most individuals in this room and out on the street. Those are buying goods and services for our own household, those are doing activities and business services that 164 /00 LABOR, CIVIL SVC. - BILL 2 are required for us with our neighboring governments. So how do we make that a little bit easier? The strategy and my experience as I travel around the country, state agencies as well as municipalities are moving at light speed as quickly as they can. How can we offer services by 7 hours 10 a day. My colleague to the right of me mentioned 11 some of those examples -- paying parking tickets, 12 paying utility bills, finding out information 13 about the municipal and city services. I need to 14 get that information accessible to me at different 15 hours of the day other than the normal 8-to-5 16 business entity that government typically 17 operates. So the agencies and municipalities need 18 to accelerate their plans and how they can figure 19 out a way to provide those services not only to 20 the residents and constituencies of this city, but 21 how do they provide those services to the business 22 as well. , that financial mechanism that 165 /00 LABOR, CIVIL SVC. - BILL 2 a municipality and banking community may be able to offer, businesses are feeling that they can do business easier and the government services are more accessible to them without the pain of traveling and having to access those services only on a face-to-face capacity make individuals who own businesses and who work as employees of those businesses make them feel better about the community that they live and work in. There are really three points to the triangle that I think of have been talked about today a lot, and that is: government as a user of the Internet; government itself and how they transact business amongst themselves, agencies or departments within the municipality; municipalities and state government, municipalities and federal government and how information is collected and disseminated amongst those and done in a more efficient manner. And the technologies are very capable today in terms of network infrastructure, software applications, and computer products to make that a very painless proposition. The other element is really one of your 166 /00 LABOR, CIVIL SVC. - BILL 2 constituency and residents. , to access and improve the way those services are provided and interchanged between those instances. S. Postal Service. They've, in effect, had to reinvent themselves. Most of us today open up our mailboxes and we get a lot of junk mail and we get out bills, but people don't send letters anymore, people don't send personal material. The electronic mail age has taken over and the postal services really need to reinvent, figure out ways to value, not only, you know, for the 32-cent postage stamps, but what are the other things we can do to better service other constituency, our post users, and they have, in effect, created an online postal office. And there's a lot of details behind 167 /00 LABOR, CIVIL SVC. - BILL 2 that, but the message is, they themselves -- if you look at a very labor-intensive operation, a very, I'll say, person-to-person, you know, letter carrier to the door, that is very quickly changing to a small percentage of their business, and how do they work with business entities for the most part to provide additional value, new value to rationalize the value of the money that they're receiving for the postage revenue that they generate for the federal government. Compaq, as well as many other companies throughout this country, have had a lot of success in providing solutions to municipalities, state agencies, federal government.
It doesn't take very much time to do the research to look at some of the examples that exist in the marketplace that have made life a little bit easier, not only from a government agency and how it operates its business, but more importantly, how it services its residential and business community. And there are an enormous amount of examples in the transportation space, in the professional licensing space, in the motor vehicle area in terms of car registrations and vehicle 168 /00 LABOR, CIVIL SVC. , etc. And even in the educational space where technologies are now being made available to the K-through-12 space, university space, where it used to be a significant challenge to collect statistical information on even how a school district was doing, technology is being deployed today where a parent can get on the Internet and check on the status on how his student is doing. A classroom teacher can check on the performance of the population of that classroom, a principal can check on the progress of its teachers and the school in its entirety and scale all the way on up through a school district as well as a statewide implementation. The availability of that technology is here today, other than the ramifications of, you 169 /00 LABOR, CIVIL SVC. - BILL 2 know, where does a municipality leverage the resource to purchase the applications to make those applications and available so people can run their activities on a more efficient basis. That's another area that is also being challenged. And when I say "challenged," business, universities, and government are kicking the tires on creative ways to afford that technology outside of the traditional "we need to make this capital investment," "we need to issue bonds," "we need to lay out millions of dollars to buy this thing" -- whether it be technology, whether it be land, etc. And I know in the technology venue, strategies are being worked out now to purchase things on a transaction basis, purchase technology in exchange for marketing and advertising that, you know, probably some of even the local community is already involved with. So there are many initiatives that are underway. I have knowledge of some of them in the Pennsylvania-Philadelphia area, but throughout the country that are easily accessible. It's very easy in terms of accessing these resources to gain 170 /00 LABOR, CIVIL SVC. - BILL 2 further knowledge on them. And, you know, I -- to wrap up quickly, again, what I've heard this morning is an enormous amount of dedication, an enormous amount of interest in making Philadelphia and maintaining Philadelphia as a key area for high technology growth, which is going to allow for business growth, which is going to allow for, you know, residential and community satisfaction, and the resources through the facilitation of Council like yourself and some of the other players in the municipality can make some of that happen, I think, relatively painlessly. Thank you.
Okay, thank you. Just to sort of summarize, the bottom line that the City of Philadelphia, by moving into an e-government environment will better serve its citizens, businesses, and etc. New businesses will want to locate here because of the easy-to-do business and will hire the college grads who would otherwise leave to find jobs in other areas. This translates into new revenues, an improved city, an 171 /00 LABOR, CIVIL SVC. - BILL 2 exciting place to live and work, and a more technology-aware educational workforce with a feeder pull from both high school, community colleges, and etc. There's a tremendous amount of monies that's out there today that's available to the City of Philadelphia that I don't see us pursuing. I truly feel that if we take the time to really look at things, and I think that you have a lot of good things in place. As a matter of fact, there's a study that was conducted not long ago by Syracuse University. They took a look at the top 35 cities in the country. Philadelphia came within the top 3, as a matter of fact. There are only two other cities that ranked higher than the City of Philadelphia. So there's a tremendous amount of respect that's given to Philadelphia and the things that they've done up to this point. I think that without any question, there's room for improvement. And to that end, I think if we take a look at some of the people who have spoken today and some of the ideas that they have, certainly those things, when taken into consideration, will 172 /00 LABOR, CIVIL SVC. - BILL 2 be able to drive Philadelphia to be that superior city beyond anything else that's out there. To that end, I thank you very much.
Thank you very much. Any questions? (No further questions.)
I want to thank you very much. Thank you for your time. All right. I want to ask the A-team, members of the Administration to please step forward and all its quasi-government entities. (Government witnesses come forward.)
We're going to really try to take you through this fast, okay?
You need to identify yourself for the record, please.
My name is Mjenzi Traylor, and I'm the Acting Director of the Commerce Department. And we're very anxious for City Council to understand the amount of activity that is 173 /00 LABOR, CIVIL SVC. - BILL 2 already in place, and so we have a tremendous amount of information that we wanted to present around that end. We will give you, of course, copies of the full testimony, but considering the lateness of the hour, we're going to try to go through this as quickly as possible. We have Malow Kyoom (ph) who's here, as well as Bonnie Grant and Peter Iaccavone from our Mayor's Business Action Team, and Fernando Gallard (ph.) had to leave, but they are important parts of the team that is in place for dealing with a lot of these issues that we're talking about today.
If I can interrupt you for one second, Mr. Traylor. Today's hearings were, by and large, for individuals who belong in the industry. As a follow-up, I'm sure that Councilmembers and this particular committee will have more extensive discussions with members of the Administration in terms of how to implement these issues, so if you can get all your testimony in today, clearly understand we will talk again.
Thank you, Councilman. Unfortunately, one of the members of 174 /00 LABOR, CIVIL SVC. - BILL 2 our private sector paid the price by being identified with the public team today, and that's Mr. Kirby Smith from PRWT Services, Incorporated. And so what we're going to do is, we're going to start off with him, even though originally, he was sort of like a big exclamation point for what we had to present.
But in the interest of his being able to get back to business, we'd like to start with Mr. Kirby Smith.
As you heard, my name is Kirby Smith. I'm with PRWT Services. Our corporate offices are here in Philadelphia. We also have offices everywhere from Boston to San Francisco, New York and Los Angeles. When I started with the company, we had roughly about 176 employees, and at this point in time, we're over 1,000 employees, just five years later. A lot of that has been driven by technology. I myself and the chief information officer and vice president of systems for the company, and it's fallen on my shoulders to drive this technology and growth within the company. 175 /00 LABOR, CIVIL SVC. - BILL 2 That means, especially given the way things are today, that I am in a sense an HR person. I am in a sense a consultant within my own company, as well as the person responsible for the hardware and software that's going into the system. As a business, we have to sit back in Philadelphia and say, Okay, we can either sit back and complain about everything or get up and do something about it. There are certain issues that are identified very clearly to me that cause me to do this, and I can start by just looking at it from a personal level. I had a young lady that I wanted to bring onto my staff because of her particular skills, and at the time she had a job offer outside in the suburbs. When I first sat down to speak to her, the first thing she said was, If I leave and go to the suburbs, automatically, if I stay with the same salary, I get a 10 percent increase. We all know that, we all hear that, so the question is, Okay, what do you do to keep people here? That's just the cost that I have to 176 /00 LABOR, CIVIL SVC. - BILL 2 bear. As the CIO, I realize that. I joined certain organizations or started certain organizations to try to fight to bring the taxes down, but it's just the cost of doing business. If I had to look at the single thing that I would say is stopping me the most in terms of sales, 'cause that's what drives everything, it is perception that Philadelphia is not a technology center, that the technology companies are not located in the City, they are located out in the suburbs, and that we don't have the know-how to get large technology processes done. I have as clients American express, AT&T, Bell Atlantic, as well as several City organizations. They are often surprised by what we're able to deliver, and that's not just PRWT, that is the companies that we work with. I also represent a second that's organization -- that's e-Philadelphia. And when the Hambroses spoke, they were one of the founding members of this group. We -- it was a little over a year ago -- had a discussion about the fact that it seems like technology organizations are ignored in the City, and if we're going to do something, 177 /00 LABOR, CIVIL SVC. - BILL 2 we need to do it fast. So we formed the group and then put out a call to see how many businesses would show up for a meeting to discuss the formation of e-Philadelphia. At the very first meeting, we had between 30 and 40 separate technology businesses that appeared as well as other government organizations. What we found was that all of those groups were very dedicated to improving the City and improving the economic situation and improving things for their personnel. Within a year, we've been able to enact the e-speed loan wherein we can give loans to small businesses that are starting up. We've been able to enact BEST, which is a movement I let, which is "Businesses Educating Student in Technology," where we take young students five days a week out of the high school during school hours from 1;00 to 4:00, place them on a business and have a businessmen mentor them in learning technology and business, so that by the time these kids are done at the end of high school, if they choose not to pursue further education, they have a viable source of income that they can turn to 178 /00 LABOR, CIVIL SVC. - BILL 2 immediately.
In other words, we're hoping to get them certified at the end of their high school period in either Microsoft, Cisco, or another certified type of program. The bottom line in all of this is that businesses have managed to drive these programs, to get these things done. And I think one of the problems we're facing right now is, too many people are turning to government and saying the government has to do it, wherein the problem that government has right now is you can't move but so fast. And for us, three months, as you've heard, is a long period of time. And if we spend a couple of years getting there, we're sort of lost in the soup ten years from now. Looking at my group that works for me, forget the fact that they're not from Philadelphia, most of them are not from America. Out of all of my programmers, I have one American programmer. The rest are all from India and Russian. That concerns me. Other ones that come here, they have this belief that Philadelphia is a dangerous place to be, so they locate out of the City. Out of my staff, I'm the only one that 179 /00 LABOR, CIVIL SVC. - BILL 2 lives within the City, and that's my commitment to show the other people that they can do it. My concern as a business person is that I can't find Philadelphia people to work for me, and it's not because they aren't out there; it's because the field has gotten competitive. We're going to be publishing within the next couple of weeks a couple of figures, but when we did a plodding of where the companies are located that are members in our organization, they came in very heavily, squarely in Center City. The concern is, though, that in private-sector employment, we went from a high of 316,000 in 1998 to 273,000 in 1999. Ten years ago, the City made the commitment to become a tourist attraction. No one exactly knew how to do it but everyone worked together, and we drove that. At that point in time, looking at roughly 1996, 47 percent of the people employed in Philadelphia were in the service area, and that would include technology. The fastest growing sector during that period was in computer-related jobs, and they were growing at a rate of 637 percent. 180 /00 LABOR, CIVIL SVC. - BILL 2 If we look at 1998 and '99 at where the growth has been and where it has been lost, we see that in the hospitality industry, we've increased jobs by 31 percent but we've seen a drop of 6 percent in that service industry. That's a 7 problem. That's the technology industry, that's 8 everyone moving out. 9 It is good that we have increased jobs 10 in terms of the entertainment and tourist 11 industry, but the jobs that we have created are 12 waiters, waitresses, and bartenders. There's 13 nothing wrong with that except for the fact that their income does not equal the average income of the people I have working for me that are at $68,000 a year an average. If I have a $90,000-a-year and we lose him, that's equal to about four of those service industry people in the hospitality industry. So the bottom line of what I want to say is, I need to attract those people here who have that kind of talent. What you can do is very easy, starting from today, is that Philadelphia has to walk the walk and talk the talk and that we need to start promoting these groups. 181 /00 LABOR, CIVIL SVC. - BILL 2 E-Philadelphia is a new organization, it is a technology alliance that was just formed last year, but if you take e-Philadelphia, the Eastern Technology Council, other groups, and you say to them, Okay, identify to us who these organizations are so we can get out there and start talking about it, that's a tremendous step right there. That's something very easy to back up. We have the organizations here, let's push them and grow this.
Thank you very much, Mr. Smith. I failed to introduce earlier Mr. Curtis Jones, who is CEO of the Philadelphia Commercial Development Corporation, and Mr. Jim Flug, who is Senior Vice President from PIDC. That is the Commerce Department team. But then there are other members of the Administration who are present, and this is Michelle Davis, from the Mayor's Office of Community Services and Sharon Pinkenson from the Philadelphia Film Office. Let me just right away point out some 182 /00 LABOR, CIVIL SVC. - BILL 2 things that I think we need to keep in mind because people have done an adequate job of talking about the significance of the growth in the IT and e-commerce industry. But let me just say that the trend is for the majority of IT workers to live in the cities with IT activity. The city benefits not only by creating jobs, but also by adding to the City's population. As an example, a prominent IT company, which testified here earlier today, from Old City, was successful in attracting high-tech 13 employees from outside of the region, even as far 14 as England and Switzerland in the last year. All 15 of these people are now residents of Philadelphia. As Philadelphia continues to lose its base of local CEOs from such long-established Philadelphia industries like banking and insurance, we lose a substantial amount of civic and entrepreneurial leadership. The growth of the IT sector gives us an opportunity to introduce new leadership to the City. These new IT leaders are an essential link to the new economy of our future. Now, some of the specific things that 183 /00 LABOR, CIVIL SVC. - BILL 2 have been going on, because if you read media reports and listen to many public discussions, it would lead many of us to believe that there is no 5 information technology or e-commerce growth in our city. Philadelphians need more awareness of this sector's growth that is already occurring here. A look at category 737, that's the standard industry SIC code 737 for calendar year 1997, it shows that the Philadelphia Revenue Department received payments from 460 accounts. Now, this SIC code describes companies in computer and in computer-related industries, and we've given you a whole list of these SIC codes so that you would be able to refer to them going forward. million. million to the City's wage taxes. These wage tax accounts include Philadelphia residents employed at suburban companies. 2 million, with 477 accounts reporting. In calendar year 1999, 184 /00 LABOR, CIVIL SVC. - BILL 2 the number of companies making wage tax payments in creased to 641. 2 million. So that gives us some feeling for the growth taking place within some of these SIC codes. The Mayor's Business Action Team has itself successfully assisted information 9 technology businesses to locate in the City. 10 These 17 companies project 1700 jobs over the next 11 3 years, with average salaries of $55,000 per 12 year. As an example of how fast this industry 13 moves, as this report was being prepared, Know It 14 All, one of the 17 companies, called MBAT to 15 inform them that they were expanding by an 16 additional 50 employees. 17 Now, as far as future projects are concerned, the firms that are close to signing leases that MBAT is working with could contribute over 1,000 City jobs within the next three years. Included within this group are companies located in the south and west United States, which are seeking a presence in the Northeast and are choosing Philadelphia over other cities. An innovative company headquartered in 185 /00 LABOR, CIVIL SVC. - BILL 2 Florida is considering opening a northeast office in Philadelphia. MBAT is working with real-estate brokers to locate a site for this company. And one firm recently signed a lease and MBAT continues to assist them with financing and employee recruitment training issues. There are other businesses located in Philadelphia that have been so successful that they are now expanding.
MBAT is currently working with three companies that want to expand, and these companies project to have over 750 jobs in the next three years. And, again, we have offered you attachments that list those companies. It's important that we understand -- one of the entities that was mentioned a while ago was e-Philadelphia and the Technology Alliance, but we want Philadelphians to understand that there is a whole network that has come together that has helped support our growth in this field. We have a vibrant technology community that fosters an environment of shared knowledge and synergy, and through this community, companies are assisted with business networking and employment attraction and retention efforts. 186 /00 LABOR, CIVIL SVC. - BILL 2 And in addition to e-Philadelphia, there's the Eastern Technology Council, PMA (the Philadelphia-area new media association), the Avenue of Technology, the Science Center Report of Technology Incubator, the Mayor' e-commerce Commission, and the Student Retention Committee. A study conducted at Wharton's field application project, entitled "The Mayor's Business Action Team and the New Media Industry," identified the creation of a local technology association as a top priority for the City of Philadelphia, and we have succeeded in that goal. And the reason I mention that is because it's important that we understand that this is such a fast-growing sector here. And many of the recommendations made by the transition team that has been in place is also -- there are efforts that are already going on to carry out some of the -- or to realize some of the recommendations that have been made in their report. Let me jump now to the schools. The Philadelphia region has over 80 colleges in Philadelphia, and Philadelphia is home to 25 degree-granting institutions of higher learning. 187 /00 LABOR, CIVIL SVC. - BILL 2 This enables Philadelphia to retain a supply of talented workers for the new economy. Universities and colleges have changed their curricula to incorporate courses in Internet and e-commerce. In September of '99, Temple University offered a degree in e-commerce. Other schools with new e-commerce departments and degree programs are LaSalle University's e-commerce Institute, Drexel University's Safeguard Scientific Center for e-commerce Management, and the University of Pennsylvania's Wharton Forum on Electronic Commerce. Academic institutions recognize the need to make business education relevant to the new economy environment, and they are responding. Again, this is important to understand because a lot of the companies coming here in the future will be doing it based upon these kinds of support systems that they see in place. In addition to e-commerce curricula, entrepreneur development centers are being created within the universities to address the business start-up needs of students and graduates. These 188 /00 LABOR, CIVIL SVC. - BILL 2 centers provide counseling about business plans, venture capital opportunities and infrastructure. Examples include the Drexel University Entrepreneurial Development Center, Temple University's Fox School of Small Business Development Center, and the Institute for Entrepreneurship and Innovation, and the Wharton Snyder Entrepreneurial Research Center. Now, you've heard comments earlier today about the need to try to keep students who are graduating from out-of-Philadelphia-area institutions in Philadelphia. Now, surely as we speak, many of these students are leaving. But the Philadelphia College Student Retention Committee of the Department of Commerce has been working with area universities and colleges to promote Philadelphia and expose all students to local business opportunities, thereby encouraging them to remain, live, and work in the City. The challenge has been to keep our 250,000 students who study at the area's college in the City after graduation. Now, how have they done this?
The Student Retention Committee and Temple 189 /00 LABOR, CIVIL SVC. ) Center. This event was first held last year at Drexel University and had 130 students from colleges in attendance, with 12 8 business plan submissions. And there's more 9 information in our testimony about that program. 10 Just a little bit more about the 11 carrier hotels and multi-tenant information 12 technology office space. Philadelphia's large 13 supply of older industrial and warehouse building 14 and Class C office buildings meet the criteria for 15 telecommunications facilities with large 16 floor-bearing capacities, high ceilings, and large 17 freight elevators. Information technology 18 companies locate their facilities along major rail 19 right-of-way's such as the infrastructure which 20 exists along North Broad Street. Landlords are 21 wiring buildings to accommodate information 22 technology businesses. 5 million square feet of carrier IT office space in the City of Philadelphia, and some of these buildings are: 190 /00 LABOR, CIVIL SVC. - BILL 2 401 North Broad Street, and this is Philadelphia's first carrier hotel. 2 million square feet has been successfully leased. Its successes has led to the development of a carrier hotel industry in Philadelphia. 440 North Broad. , will become another carrier IT office facility. You heard discussed here earlier 1500 Spring Garden, so I won't tell you any more about that. And also, at 46th and Market Street, the West Philadelphia Enterprise Center, which was the former WHYY building, now houses small minority and women-owned businesses, many that focus on e-commerce activity. There are other buildings that are being wired to accommodate information technology businesses, and they include: 833 Chestnut Street, 2401 Locust Street, 22nd and Arch, 1309 Noble Street, 801 Arch Street, and 3535 Market Street. So there are plenty of buildings that are poised and ready to be put into use for the type 191 /00 LABOR, CIVIL SVC. - BILL 2 of activity that we're discussing today. We've already the discussed Port of Technology, so I don't have to go into that any further. Now, for businesses that are coming into the City, financing is available through our standard loan programs that are administered by PIDC and PCDC. In addition, the Ben Franklin Technology Partners have a new loan guarantee fund which will also provide a very important service for young IT company, funds to guarantee loans from participating banks, such as Commerce Bank. Now, PIDC in a minute is going to discuss the peculiarities of applying these programs to this new economy industry because there are some real problems in connection with that. We've talked about the Keystone Opportunity Zone. And then the e-Philadelphia Technology Alliance has created a loan program designed to fulfill one of the industry's greatest financing needs, short-term working capital. The e-speed loan program was financed by $1 million from the 192 /00 LABOR, CIVIL SVC. - BILL 2 Delaware Valley Regional Economic Development Fund, and loans will range from 20,000 to $100,000. Creative financing programs for young entrepreneurs are being developed at the university level to encourage advancement of business plans. And, again, we have offered opportunities about those programs. The Ben Franklin Technology Partners has created the Young Entrepreneur Challenge Fund, and Drexel -- awarding matching grants to Drexel University and Temple University to allow resources to be available for the students and graduates of the respective universities to seek funding from their alma maters. Now, again, some information has been discussed in terms of venture capital funds. Let me just say that Safeguard Scientifics, Inc. and the Internet Capital Group are venture capital companies that invest heavily in Philadelphia-based companies. Comcast Corporation started a multi-million-dollar venture capital fund focused on the Internet-related technology field. 193 /00 LABOR, CIVIL SVC.
- BILL 2 There are investing companies involved in providing the infrastructure for the Internet and developing tools that promote Internet use, and we have referred attachments to this report, a whole list of venture fund capital companies, members of the Greater Philadelphia Venture Group. Now, it's important that you know about that group. It's housed in the Greater Philadelphia Chamber of Commerce, and GP provides networking opportunities for venture capitalists and entrepreneurs. We have put together some plans for marketing all of this activity in a way that will hopefully find Philadelphia's media focusing in on some of this activity in a more positive way than has been done in the past. I think at this point, let me just skip to what we need to do to add to the support system. The laws that govern the use of the Internet are still ill-defined, and in some cases, nonexistent. To compound the problem, electronic commerce and general information technology move much faster than any traditional models of business growth that we are used to. The laws 194 /00 LABOR, CIVIL SVC. - BILL 2 that work for traditional businesses may not work for online commerce. We need to evaluate which regulations are e-commerce-friendly and which ones need to be revised. Some laws may impose barriers to the growth of e-commerce and may impede e-commerce expansion. I mention that at this time because this is an area of work that we have to devote some serious new attention to, because we have not been dealing with it sufficiently. Now, much has been said about the digital divide, but the digital divide that exists in our public schools should also be addressed, and we should take advantage of our relationships with the IT businesses and encourage them to provide an opportunity where our students can learn and experience new technology. " It encourages members of e-Philadelphia to provide internships to public school students, and we think that this is going to be an important pilot for other similar kinds of activities. I think now I will go to Curtis Jones, 195 /00 LABOR, CIVIL SVC. - BILL 2 who has been addressing some of our needs in the commercial corridors. And this is an important area that we need to look at.
Mr. Traylor, before you proceed, Councilman Nutter, you had a question?
Thank you. Mr. Traylor, just a couple quick questions and then we have to get to Mr. Jones. Has the Commerce Department or the Administration made any determination about such issues as the impact of our tax structure and how it either encourages or potentially discourages these types of businesses from either staying in Philadelphia or coming to Philadelphia? Has there been any determination made about that?
No. The way we have been planning on coming to that issue is through the transition process. We know that there are a number of specific recommendations that have been made, and we will be presenting some testimony next week, when the Mayor makes his transition report. But I think for the most part, 196 /00 LABOR, CIVIL SVC. - BILL 2 Councilman, what we're going to be seeing is the need to establish a special task force that will be able to really zero in on these recommendations. I know that one of the concerns that the Mayor has is that of offering certain breaks or incentives in a disproportion way. In other words, the whole issue of offering these breaks to IT and e-commerce-related businesses where we have not done that in other business groupings. And so this is one of the issues I know that we're going to have to look at more carefully.
Okay. And I know that you had referred on a number of occasions in your testimony -- do we have -- are there copies of the testimony that you were reading from? You made reference on a couple occasions either to a transition committee or to transition team recommendations. Are they out yet? Has anybody seen them?
Do you know to who or where or -- 197 /00 LABOR, CIVIL SVC. - BILL 2
Yeah. I haven't seen anything, so. . . All right, so the response on the tax issue, whether it's broad or even the more narrow issue, for instance, there's been a lot of concern and complaint about the impact of the gross-receipts tax, for instance, on these particular businesses. The concern is proportionality and fairness, singling out one industry versus another. And do you know if the same is being looked at with regard to -- I think an issue has been raised about wage tax on stock options?
Yes. All of those issues have been raised in the transition reports, and I 198 /00 LABOR, CIVIL SVC. - BILL 2 think that -- I really think that what we're going to be looking at from the Administration side is a task force that is comprised of the Commerce Department as well as Revenue and the Budget Office. And then we certainly need to talk about what such a task force needs to look like for the rest of the government input as well as the private sector. So that those discussions can move forward.
Okay. I took, though, from your testimony that from the Commerce Department's perspective, there is not only a lot going on in this industry in Philadelphia, but a lot of opportunity, but maybe people don't know about it, or are there still other things that we need to do from a competitive standpoint? I mean, we love our region but we also have a city and we're a city and a county to be responsible for. And, again, I'm not an expert in this particular area, but one would get the impression that there is more going on in this particular sector of the business community in the areas outside of Philadelphia, and I'm assuming that's happening for a particular reason. 199 /00 LABOR, CIVIL SVC. - BILL 2 Have we made any determination as to why people are out in, what is it, the 202 corridor as opposed to, you know, Broad and Callowhill?
Well, yeah. And I think that a lot of that has come out today. I mean, you know, taxes, as you've mentioned, are obviously a problem, but then there are quality-of-life issues, and those have been raised. I think the media, by the way, Councilman, has done a very good job of raising all of the reasons for there not being a certain level of growth here in Philadelphia. I think what we're anxious to do is show why there are some, you know, some very positive things here that should enable us to do a better job of attracting these businesses into the City. It's only recently, for instance, that you've heard talk about the fact that, you know, that so much of this activity is being carried out by young folks. And so -- and it's the City that is attractive to young people, but you never read about much of that aspect of this until very 200 /00 LABOR, CIVIL SVC. - BILL 2 recently. So that's something that we're stepping up our activities around so that we are getting to more of a those young people, because they are the ones who are the new CEO class that we need to be catering to. And I think also -- I have a theory, and we've been discussing it internally in the Commerce Department, that we have not done a sufficient job of interviewing those businesses that have made decisions to come into the City to see exactly what has been involved in those decisions and to see whether are not within those decisions there's some stuff that is salable, that can help us draw others. In other words, despite the wage tax, they have chosen to locate here. And so we just need to be clearer about what some of the thinking is that has gone into those decisions.
There's been a lot of discussion and a lot of it has been very 201 /00 LABOR, CIVIL SVC. - BILL 2 similar in nature. There have been a number of people who testified today who speak to the issue of young people being more attracted to the City, but on the negative side, some of those same folks were saying that people have chosen to relocate out to the suburbs or will go out to the suburbs to do business because immediately upon leaving the City, you get an increase in your salary by virtue of the fact that you save on the wage tax. You save 5 percent, 10 percent, whatever it is. I think it's a little bit under 5 percent. You don't hear many people talk about the fact that there's been a five-year plan and there's a five-year plan going forward that will reduce the wage tax. You don't hear much discussion about the fact that, yes, we understand that we are one of the highest taxed cities in the nation, but we are making efforts to bring those taxes down, although maybe not as quickly as we would all like it to be, but it is happening. I get into this debate with my friends to have moved to Washington Township, South Jersey, day in and day out. They have a lot of different reasons for moving and some of them I 202 /00 LABOR, CIVIL SVC. - BILL 2 just won't repeat because I think it's just too ridiculous for those folks to have their head buried in the sand about what life is really all about and what the real world is all about in terms of classes of people and colors and shapes of eyes and everything else that chase people away. But no one ever really discusses with them until they find themselves out there in the suburbs or out in South Jersey that although you may save on the wage tax side, although a lot of those people don't even do that 'cause they still continue to work here. The fact of the matter is, when you move out of the City, the convenience of living in the City where you don't even need to own a car doubles once you move outside the City boundaries 'cause now you need two cars -- one for you and your wife. And if you have a teenage son or daughter, now you need three cars. It's like the Chinese menu, you know, you get column A and column B. And I always use that as example. If you compare column A, which is suburbia versus column B, which may be city life, at the end of that column, when you factor 203 /00 LABOR, CIVIL SVC. m. And I don't know if that's your job, I don't know if that's your job. I think it's more our job, that we have to start some public relations to say to people, Yep, you got a wage tax, you're right, but you don't need the two cars and you don't need this and you don't need that. And if you save some of that money and you're really fed up with the public school system and you waive some of the savings in the real-estate taxes, in the cost of the vehicles, and every time you need a quarter pound of ham, you got to drive 204 /00 LABOR, CIVIL SVC. - BILL 2 ten minutes some 7-Eleven that's going to charge you eight bucks for the same quarter-pound of ham you can buy in the City for four bucks, that maybe you can put your son or daughter in a private or parochial school if you really choose not to send them to public schools, because it is more advantageous to live here. 'Cause I also think the other social side of this is, when you're children are raised in a city, with all of its faults, they're raised in a real-world environment and they're more prepared than these people who come in from the outside. It's kind of like a social statement I'm making here because I keep hearing this. And we're working to get it down, but we offer more advantages for those people who want to do business in the City and live in the City aside from all those other issues. And I think cumulatively, when you look at the package, it makes more sense. My friend is going out of his mind who's out there not even six months. He can't afford it anymore.
He had a nice house in South Philadelphia, $800 a year in real-estate taxes -- he's now paying 3300. And he 205 /00 LABOR, CIVIL SVC. - BILL 2 had one car and he's now up to two, and he's working on three. So, I mean, those are the things that I think when we do maybe a report and we talk to people, we also want to talk about the living conditions and the cost of living, the financial cost of living in the City versus suburbia. And, again, that's more of a statement, I guess, 'cause I get frustrated when I keep hearing it. It's bad, but I don't think it's as bad as we all make it to be.
Well, Councilman, you certainly would have been a good addition to our internal discussion that we held while we were preparing for this report, because so many of the points that you made were points that different ones of us were trying to make. But to answer the question of, do we have responsibility for getting that word out? The answer is yes. We have -- the Commerce Department sees as a part of its job to try to find ways to effectively market that information that you were just going over and to find unique ways, in fact, to get people's attention to these 206 /00 LABOR, CIVIL SVC. - BILL 2 differences that exist. The old nesters, for instance, out in suburbia seem to have gotten the message.
You know, I often -- and I was speaking to one of the reporters outside and I talk to my friends. You know, I had these conversations. They don't invite me to their houses anymore because they're so tired of hearing me. But, you know, I remember years ago when you were traveling west on the Schuylkill Expressway, there used to be a sign out near Conshohocken somewhere, and it said, "If you lived here, you'd be home by now" or "if you lived here, you'd be home by now."
Well, I think we should start reversing that because I listen to KYW in the morning -- and this is not a plug for KYW, I happen to listen to it, but -- and this 207 /00 LABOR, CIVIL SVC. - BILL 2 friend of mine that I keep referring to, when he moved out there, I told him I was buying him a cell phone for a house-warming gift. And he wanted to know what the purpose of that was, and I said, "Well, at o'clock in the morning, while 7 I'm shaving, I can keep you company on the cell 8 phone while you're stuck on 42." (Laughter.)
So I really think that we might look to invest some money in really public advertising about not only is it a great city to visit and come to the cultural institutions and be a tourist, but it also is a great city in which to live. And I think that when we repopulate, the additional tax revenues enables us -- gives us the tools to start talking about other types of reductions in taxes. And it kind of goes -- I think one has to go with the other. You just can't do one without considering the repopulation side of it. I think they have to go simultaneously. And maybe we need to look to put some billboard signs on existing billboards on either side of the Ben Franklin and Walt Whitman Bridge that says, you 208 /00 LABOR, CIVIL SVC. - BILL 2 know, "If you lived in Philadelphia, you'd be at work already" and vice versa on the way home. And that may sound crazy to some people, but I know that most of my friends who moved there are living in denial. They just won't say "you're right" yet. Thank you.
Good afternoon. My name is Curtis Jones, Jr. I'm President and CEO of the Philadelphia Commercial Development Corporation. Councilman Clarke, I'd like to first applaud you on your brilliance in moving the Commerce cluster to the end of the testimony as opposed to the beginning, and to say to you that by doing so, we heard a lot of good testimony. And by doing so, we kind of heard things that we probably would not have heard otherwise. So your strategic move of us to the back was brilliant.
He was being threatened by the other folks. 209 /00 LABOR, CIVIL SVC. - BILL 2
But in all honesty, a lot of you all work for government and you had to stay here.
My role -- and I will attempt to be very brief -- is to say that today I heard a lot about new attractions of new businesses. My role will be to also try to counterbalance that with the retention of some businesses that need to be aware of the e-commerce issue as well. First of all, I'd like to thank John Sorrell, who is still with us today, for knocking on my door and bringing me into the new economy's committee to hear about some of the works that they've done which preceded this hearing. And it was fascinating to find out then as we went over to Temple to meet with the Fox School of Business, and I know Temple is going to be here testifying today about some of the things that are going on. As a result of those meetings, I had an opportunity to go down to hear about the digital divide issue in Wilmington. They did an all-day 210 /00 LABOR, CIVIL SVC. - BILL 2 conference. And then to go up to hear the briefing that Temple put on for the legislators and the Commonwealth of Pennsylvania, anticipating what this e-commerce thing was going to mean. And it was wakening to hear that the prediction is that e-commerce will dominate the legislative agenda for the next ten years. We're talking about a lawless situation currently that we have not put our arms around by way of how to govern this thing and this phenomenon. And what I sense out of all of the digital divide research that has been done is that the mom-and-pop shops that are in existence on our corridors, and we have 300-plus commercial corridors in the City of Philadelphia, of which maybe 50 percent of them even have a computer, and then of which maybe 10 percent of them are on line. And of that 10 percent, maybe 2 percent do e-commerce -- actually buy, trade, sell, have a Web presence where you can plug in and get something from them on line. And that statistic is frightening. It is frightening, Council panel, because if you think about it today -- not in the future, today 211 /00 LABOR, CIVIL SVC. - BILL 2 -- if you're not on e-commerce, you cannot do business with the government, the federal government right now. All of the procurement opportunities that come out of the commerce business daily right now, small businesses can't take advantage of. Today, the Commonwealth of Pennsylvania is moving in that direction so that if you are a pencil, stationary distributor in one of our commercial corridors and want to respond to a bid, you cannot. The University of Pennsylvania today will not deal with businesses that are not on line and do not have e-commerce capability. So we're not talking about some faraway, futuristic kind of digital divide that are impacting small business; we're talking about today. We feel that -- I had a company come in, and Councilman Nutter has left and it's in his district, but he is very aware of the company that is a -- and I won't use their name. They are a small card and gift shop that have been around since I shopped in that card and gift shop as a little boy. Finally, this is the third generation 212 /00 LABOR, CIVIL SVC. - BILL 2 of this family-owned business, they have final found way to get African artifacts imported to their facility, and they have some beautiful figurines that from come from the mother country. Yet because of the changing demographics, a lot of the successful people that have moved away on 42 that you talked about so eloquently won't come back to the neighborhood to look and find that they have some treasures right in the old neighborhood. Well, the simple answer for his dilemma is a locationless business, to find a way to get onto e-commerce, to be able to tap into those people out in Jersey so that they can still shop from the old neighborhood. And I will I would replicate that example by people that are on Passyunk Avenue, which is another one of our commercial corridors. There's some things in Philly that you can't get anywhere else.
And all you have to be is a college student and move away to Utah and go to school, and you will start to miss things like cheese steaks and home. But with the Web, with the Internet, there is a way that we can do that. 213 /00 LABOR, CIVIL SVC. - BILL 2 I have another business, and I won't name the name, but they're into hair-care products. And the elder in that business is in a dilemma of secession planning. His grew up and they wanted to be investment bankers as opposed to developing the hair-care products that have made them successful. Well, he's, in the morning, actually pumping out hair-car products, actually putting it in a jar and casing them and then making the calls at noon and then making the deliveries in the evening. Well, there's some bright folks in Temple and other universities right here that could package his product, put it in a way that he could be on the 'Net the next day and be overwhelmed, inundated with business that he would use UPS to drop-ship that to a consumer the next day. But the connections, Councilman, aren't being made there. " Well, something old are those companies that have existed through the hard times in Philadelphia and are about to turn the corner into 214 /00 LABOR, CIVIL SVC. - BILL 2 the new millennium and possibly find an entrance ramp onto the Internet. Something borrowed is some of this technology and some of the resources that are from Temple and the universities there. Something blue can be the blue sky if we put this thing together and kind of make the universities work with the existing businesses and get some of that young talent together to make Web pages, to make e-commerce a reality for some of these old businesses. And I'm saying to you that as we move forward to attract some of these new clients to the Philacon Valley, as they say, we need to find the entrance ramps to the Internet for some of the older businesses or we're going to lose them. And one of the things that we have done -- and I'd like you to bear with me for another minute while we bring up some charts, and I used old technology because I didn't want to use any of the new stuff. I used some boards. But if you bear with me, and John's going to work with me on doing the light show stuff currently. Currently, if you note, we have 215 /00 LABOR, CIVIL SVC. - BILL 2 commercial area specialists that service the 40 corridors that we're contracted to use, but in this case, we're still using inefficient means to contact our businesses. If I sent a person out, at best, they're going to meet five or ten business persons and help them to improve their bottom line. And they leave PCDC, they drive, they waste more time -- you talked about the cell phone scenario. Well, they go out to Passyunk Avenue and they meet with five or six business people that wanted to get involved and wanted to do some things to expand their business. Next board. What we'd like to do is to provide the Internet access in an efficient manner to people in the neighborhood corridors. What we would like to do is work with Vista and organizations that are taking old computers that are from the federal government, rebooting them, rebuilding them, and on a very low cost or even give them to the merchants on our corridor to enable them to develop Web pages and Web sites to be able to get some valuable information -- procurement opportunities, distance learning, e-mail, payroll. We would like to buy and license 216 /00 LABOR, CIVIL SVC. - BILL 2 some of the software, whether you're talking about Quick Books and others, to be able to afford to have that at the mom-and-pop merchant level. Well, we can batch that technology to pull and push technology and make it affordable to them. And what that does is allows a mom-and-pop shop right here in Philadelphia, on Passyunk Avenue or Germantown Avenue, to be able to compete with the big firms and to offer a bid just like a Fortune 500 company anywhere in the world.
And if we want to make companies competitive, then we better find some entrance ramps onto this Internet highway. And I'd like to give you an analogy that what this Internet thing is, is like at the turn of the century, when we were connecting cities to railways by railroads. It is just that exciting, just that impactful, that for the first time, a small home-based company can compete with a large firm, and on the Internet, he or she is just as big as the big dogs. So I'd like us, as we think about what our strategies are, to not forget the mom-and-pop companies and not to forget the businesses that 217 /00 LABOR, CIVIL SVC. - BILL 2 have been paying the taxes over the years as we attract the new e-commerce firms. And our strategy at PCDC is going to be to try to accommodate them. Thank you.
Good afternoon. My name's Jim Flug and I'm Executive Vice President of PICD, in charge of the lending program, and I was asked to be the "cold water" in this presentation and tell you about some of the problems that e-commerce companies present in terms of our traditional lending programs. Mr. Hankowsky -- first of all, let me say that Mr. Hankowsky extends his regrets that he couldn't be here. He's in Washington on business. com Internet, or "companies of the new economy," as they are called, present unique challenges to fixed-asset lenders such as PIDC and the banks. And actually, only one of the presenters earlier today talked about access to capital as being a significant problem, and that was the young woman from Black Cyberspace. I 218 /00 LABOR, CIVIL SVC. - BILL 2 believe she was the only one that really addressed access to capital. However, we consider it a significant issue. The e-commerce companies present a unique challenge, as I said, because they seldom fit the requirements of our existing loan programs, which are generally provided by State and local government funding. An e-commerce company, for example, is generally a start-up or a relatively young company or at least many times is. It has little or no collateral. They lease many things, including equipment. They lease the space that they occupy in many cases. And they're growing rapidly, their revenues are growing rapidly, but they show no net profit. And finally, it may not seem like a problem, but it is in terms of at least the federal funding is that they add primarily high-tech, high-paying jobs. When you have federal funding that seeks to create low- and moderate-income jobs, it does become problematic. Characteristics -- as I mentioned -- these are all characteristics, which, as I mentioned, create problems for our traditional 219 /00 LABOR, CIVIL SVC. - BILL 2 loan programs. For example, in 1999, in terms of our two most significant loan programs -- when I say "most significant," I'm talking about in terms of the dollars of loans generated or the Pennsylvania Industrial Authority's state-funded program, known as PITA, in which we did loans 8 for $18,645,000. Also the HUD 108 Loan Program, 9 where we did 6 loans -- this is a federal-funded 10 program -- for $9,540,000. E-commerce companies 11 could not have been funded using either of these 12 two sources. 13 In the case of PITA, they generally 14 fund a company which is owner-occupied and cannot 15 lease, which, again, eliminates many of the 16 e-commerce companies, they look at manufacturers, 17 not high-tech commercial companies, and they look 18 for companies that have been in business showing a 19 profit for at least three years. And, again, this 20 excludes many of the e-commerce companies. 21 They also look for adequate collateral. 22 And, again, given the fact that they lease many of 23 the assets they use, this also excludes many of the e-commerce companies. The HUD 108 Program is subject to the 220 /00 LABOR, CIVIL SVC. - BILL 2 CDBG regulations and the public benefit test, which requires that at least 51 percent of the jobs that are created be low- and moderate-income jobs. As I mentioned, the jobs that are very often created on -- the good note is that by the e-commerce companies, there are high-tech, high-paying jobs. But for purposes of CDBG funding, that's not the kind of jobs that government is looking to create. Also, in terms of the HUD 108 Program, they look for specific loan-to-value ratios for collateral. As I mentioned, collateral is generally a problem with e-commerce companies. They also look for owner-users. The program is geared to owner-users of real estate and equipment, as I said, generally not e-commerce companies.
In the final analysis, low-interest loans to such companies with millions of dollars of venture capital readily available may not be the most meaningful thing government can do, and we heard things this morning about things like tax policy, wiring buildings with fiber optics and high-speed Internet access, and getting out the 221 /00 LABOR, CIVIL SVC. - BILL 2 Philadelphia message. However, we are working with the Commerce Department on looking at sources of funding for seed money for Internet or e-commerce companies. And toward that end, we've had a number of meetings with the Science Center, and we think a partnership with the Science Center would be an appropriate one, certainly since they already have existing relationships with the major universities who are dealing with the technology that we're talking about here. And that's the end of my limited remarks.
Good afternoon, City Councilmembers, colleagues, members of the business community, and fellow citizens OF Philadelphia. My name is Michelle Davis. I am the Project Manager of the Community Services Network. The Community Services Network is an Internet-based project of the Mayor's Office of 222 /00 LABOR, CIVIL SVC. - BILL 2 Community Services. It is also supported by the Mayor's Office of Information Services, and we also receive technical support and assistance from Lincoln University Urban Center and Temple University Center for Social Policy and Community Development. The major funding source for this initiative is not the City of Philadelphia, but was the United States Department of Commerce's Telecommunications Infrastructure Assistance Program, which awarded the Mayor's Office of Community Services a grant of approximately $600,000 in 1997. The award was granted to the City to develop, test, and evaluate a health and human services information network designed to benefit consumers and providers of health and human services in North Philadelphia. Since that time, the Community Services Network has established itself as a premiere Web site for information about health and human services in the City of Philadelphia. CSN is the only site of its kind that makes its on-line content wholly available in English and Spanish. The kind of information that can be accessed on 223 /00 LABOR, CIVIL SVC. - BILL 2 our network ranges from day care, after-school programs, job training and vocational programs, substance-abuse programs, college scholarships, first-time home-buyer programs, and home improvement loans, just to name a few. There are over 140 categories of information listed alphabetically and by type. CSN provides information on the agencies, programs, services, and benefits available in Philadelphia, regardless of their parent organizations. City, State, federal, regional, nonprofit, and community-based resources may all be accessed through the network. In addition to providing an Internet-based information infrastructure with high-quality service and benefit content, CSN has also developed an interactive forum to allow providers of services to communicate on line through instant messaging, chat rooms, message boards, free e-mail, and public and private calendars. In today's almost dizzyingly fast-paced high-tech environment, it truly pays to be a visionary, forward-thinking, progressive, and 224 /00 LABOR, CIVIL SVC. - BILL 2 proactive. It pays for consumers and businesses, it pays for students and educators, it pays for parents and children, and it pays for citizens and government. It pays to be adaptive and proactive. To swim with the tide of technology is to get somewhere fast. To swim against it is to go nowhere and possibly drown. Time and experience has proven that yesterday's experimental technologies are today's state of the art, and today's state of the art is tomorrow's standard. Tomorrow's standard might be in next week's recycling bin. The pace and magnitude of change brought on by today's exponentially advancing information technology industry is building unprecedented wealth, progress, and opportunity to communities in our region and across the nation. My hope and optimism as a native Philadelphian, a dedicated City resident, an employee of the Mayor's Office of Community Services, the lead anti-poverty agency in the City of Philadelphia, is that Philadelphia participate fully and cooperatively in the social and economic 225 /00 LABOR, CIVIL SVC. - BILL 2 opportunity to ensure that the City has its fair share in the growth, wealth, and progress provided by this industry and this movement.
Aside from addressing the potential economic impact IT hold in terms of jobs and economic growth for Philadelphia, my primary goal in providing testimony to you today is to illustrate the critical importance and impact information technology, especially the impact Internet-based technology will have and is having on the health and human services industry, as we know it. This trend is impacting providers in both Philadelphia and across the United States. " My testimony will cover three major IT initiatives that would have, in my opinion, the most promising and profound impact on consumers and providers of social services in Philadelphia. By bridging the digital divide and riding the wave of the technology tide, the potential is especially promising for those services directly administered by the City of Philadelphia, such as those services offered by the Department of Human 226 /00 LABOR, CIVIL SVC. - BILL 2 Services, the Department of Public Health, the School District of Philadelphia, the Department of Recreation, Office of Emergency Shelter and Services, Police, Prisons, Family Court, just to name a few. The three major areas of IT initiatives I will discuss are: 1. Internet, Intranet and Extranet application development add and work flow integration; 2. Data warehousing and decision support systems; and 3. Internet access and online content development. First, Internet Intranet, and Extranet application development. It is a commonly accepted assumption in government that improved coordination of social services to children and families in the City of Philadelphia will result in improved outcomes for children and families. It is also believed that improved coordination will provide a sound infrastructure to fiscally benefit the City by reforming system policies which govern the administration of services by providing program linkages, decreasing gaps in service, and reducing service duplication and fragmentation. 227 /00 LABOR, CIVIL SVC. - BILL 2 Streamlining systems, coordinating and consolidating core business functions are areas that could potentially reduce service duplication, foster more effective transactions, improve customer satisfaction, and result in a higher return on investment of City dollars. The City has shown interest in utilizing information technology as a vehicle to increase the level of services to citizens and as a public information forum. " As a starting point, the Street Administration introduced Philadelphia to "Fun, Fit and Free," a public-domain Website implemented by the City of Philadelphia. Both the public and the media embraced the Web site. Government Internet presence has proven to be an effective tool for citizen service, outreach, and proactive public relations. It would be beneficial for the City to build upon the early success of Fun, Fit and Free by dedicating resources to further support digital government in the City of Philadelphia. There are 228 /00 LABOR, CIVIL SVC. - BILL 2 three existing major Internet initiatives that are ripe for further development and coordination. They include the City of Philadelphia Web site, the Community Services Network, and the Fun, Fit and free Web site. In addition, there are other disparate Internet-based, City-affiliated social-service initiatives that might be coordinated with the existing major initiatives, such as the Department of Recreation Web site, the various DHS Web sites, the Safe and Sound Program, America's Promise, the Service Utilization Monitoring System, a project of the City's data policy group, the Homeless Information System, just to name a few. We strongly recommend the City seriously consider the value of these existing initiatives and dedicate resources toward furthering and coordinating their program goals. Each day, the Internet is proven to be a lucrative for bringing people and ideas together in a productive and cost-effective manner.
The City's growth through development on the Internet must reflect the government's goals to achieve a seamless system for citizen services. 229 /00 LABOR, CIVIL SVC. - BILL 2 Consolidating the three major Internet initiatives and coordinating them with other Web-based projects would result in the launch of a cohesive Internet information infrastructure for citizen services. Initiating this strategy would further the City's agenda for a more fiscally healthy city and physically and socially healthy residents. The programmatic possibilities for consolidation and coordination and the available framework for utilizing Web-based business solutions offers an unprecedented opportunity for system reform. In many cases, the core business functions that are commonly duplicated across the City's various health and human services providers, such as outreach, intake, application for services, case management, discharge, these functions could be consolidated across departments, thereby preventing the cases we hear about in the media, such as families with five and six different case workers, five and six different application procedures, five and six different agencies and systems to navigate. In addition, it is possible to begin to 230 /00 LABOR, CIVIL SVC. - BILL 2 uniformly measure outcomes across departments. The Mayor's Office of Community Services, as part of their results-oriented management and accountability system, uses a scale across programs to measure the effectiveness of a variety of services provided to MOCS customers. A similar scale could be implemented to standardize reporting across systems and departments. Today, there is no common or standardized set of measurement tools to determine the effectiveness of services within and across the City's health and human services providers. Although technology cannot be the driving force behind social-service system reform, the methods by which systems are reformed and the possibilities for innovation are dramatically increased by new technologies. Through effective implementation of Internet solutions, digital government in Philadelphia has the potential to virtually transform a fragmented system for health and human services into a coherent, coordinated and proactive model for services. The second issue I wish to address is data warehousing and decision-support systems. 231 /00 LABOR, CIVIL SVC. - BILL 2 Some of the City's health and human service providers have highly-developed internal information systems. Others have operating Web sites and yet others utilize no computer-based information technology whatsoever. There are no existing systems that coordinate information such as individual family or even aggregate data across departments for the purpose of coordinating services, providing public information, or offering a strategic view of what the experiences are of children and families receiving services from the City of Philadelphia. We are currently unable to assess outcomes, monitor performance, and evaluate the needs of a social service system in its entirety under the current system infrastructure and lack thereof. There are a variety of IT solutions, such as data warehousing, that the Managing Director's Office or select groups of departments might implement to begin to better assess the performance of the current system. A well- designed and developed data warehouse and decision support system could equip the City with the tools to collect longitudinal, individual, and aggregate 232 /00 LABOR, CIVIL SVC. - BILL 2 data. We could evaluate data geographically, by service, age and more. It is possible to evaluate both the successes and failings of the current system by measuring where we are achieving our goals and where the need for modifications and improvement are. We could detect trends early on and proactively take preventative measures.
The concept is similar to the geographic criminal activity mapping tools now utilized by the Police Department for detecting and preventing crime. Envision for a moment a health and human service system that recognizes a region and a city in which a higher-than-average rate of low-birth-weight infants are born. Or imagine being able to detect a school or block in which a high rate of lead poisoning occurs. Picture looking back over time at a graduating class from the Philadelphia public high schools and determining who in that class has encountered our prison systems, DHS, or the Coordinating Office of Drug and Alcohol Programs. Imagine looking back at students who graduated from our magnet schools, how many went on to college. How many of the 233 /00 LABOR, CIVIL SVC. - BILL 2 children in our immunization programs stayed healthy. This concept may sound a little overwhelming, futuristic, Big Brother-ish even. However, the goal is not to breach customer confidentiality or make government bigger or more intrusive. The goal is to have a smarter, more responsible, and more responsive government that is able to make well-informed, strategic decisions. The third issue I wish to address is Internet access and content development, on-line content development.
Excuse me. Miss Davis, how much more do you have? The reason I ask you is 'cause the stenographer has been here since 9 o'clock a.m., and we are taxing her.
Did you submit your testimony for the record. I promised her an hour ago that we were almost done.
Okay. Well, in conclusion, I'd like to say that City, State, and federal government can either choose to be innovators and trailblazers by riding the tide of technology, by supporting IT-friendly policies, procedures, incentives, workforce development, public school curriculum modifications, updated civil service rankings, employee and citizen access, and much more. Or our government can choose to swim against the tide of technology. Thank you.
Thank you very much, and we'll make sure it's in the record.
Thank you very much. I will be very brief. I just wanted to make a couple of points that I believe may not have been made today. Although I heard a lot of the testimony, I did not hear all of it. I think talking about the new company versus the old economy, and we know 235 /00 LABOR, CIVIL SVC. - BILL 2 the old economy. We know the old economy in Philadelphia very clearly was manufacturing, it was shipbuilding, it was steel, it was making clothing. Those economies do not exist anymore, and we need to recognize that the new economy is about also about jobs, but it's about different kind of job creation, and that job creation has to do with not just Internet technology but the kinds of businesses that forge Internet technology. And I don't want to leave out what's very important to me is the manufacturer of the entertainment business, which, I believe, has become an important industry in Philadelphia and one which I encourage for the future. You will have the new economy develop in this city with or without the help of City Council. It will be on certain different levels, depending on what you do to encourage, whether it's lowering taxes, whether it's providing free property for a year for new businesses -- which I think is a wonderful idea -- or lowering of business privilege taxes, gross-receipts taxes. All of those things are critical. 236 /00 LABOR, CIVIL SVC. - BILL 2 But what must be recognized -- and I think that this is really important -- is the inherent talent of Philadelphians who come here and some of whom go away and some of whom want to come back and make a real mark in Philadelphia. We can encourage them to the extent that they come here and they spend a little bit of time and they do a little bit of business and they're discouraged by the ability to then really realize their dreams and create something that they can put their name behind for the future and then go away. We need to help them with their plans. And some of these people are, for example, Will Smith. It's an enormous opportunity for this city to have a great talent like Will Smith, just as we own the idea of having Bill 18 Cosby, and now we will own the idea of having a great writer, director, Night Shyamalan. These are people -- just as people in the music industry have been very important, and also add to this new economy of our city, because from Marian Anderson all the way up through Mario Lanza and finally through to groups like the Roots and Boyz II Men, who have -- actually, the Roots, you've read 237 /00 LABOR, CIVIL SVC. - BILL 2 recently in the paper, they are coming -- people in the hip-hop and blues and music industry are coming back to Philadelphia from California. We need to help those people to want to stay here, not to come here and make a record, not to just come here and make a movie but to build their businesses here and to be able to put their names behind it. They're interested not in just what I think is really critical, which is taking old buildings and making them Internet-ready, but bringing businesses will go there, that's very important, but others are interested in building brand-new ventures that will be landmarks in our city. Very shortly, I believe on Thursday, you'll be introduced to the program at -- hopefully at Broad and Washington that Will Smith is planning. We hope that you will look at those kinds of opportunities for the City and recognize that that will attract other businesses. I know that the Mayor's Business Action Team is working with a company in New Jersey that's coming here that works in this Internet 238 /00 LABOR, CIVIL SVC. - BILL 2 industry and in technology and would like to be located in place like that were it built now. The sooner that these things get built, the more that we draw those kinds of businesses from the suburbs to come, from other cities, to come and center in Philadelphia with its great geographical location in the center of the East Coast.
And so the other aspect of it, which I think is really critical, is the education aspect, because in a program like this, not only are we going to be doing television, film, music, and all of the technology from the development of these projects through the post-production of these projects, so that all of these workers come here and work here and pay their taxes to whatever level they happen to be at at that time, but we will also be teaching them. And there is a program that is what I think is really critical, where we will be working with the High School for Creative and Performing Arts, the University of the Arts, Temple University, which is one of the top five film schools in the country, Drexel University, which is about to hire as its new dean of the Nesbith 239 /00 LABOR, CIVIL SVC. - BILL 2 College of Design somebody from the film industry in California, which is an enormous opportunity for us. And then in these kinds of programs, we will actually be physically doing the training of these college, university, and high school students from all over the City in this location to learn that technology, to be trained on the site at a location like this, and then to be encouraged to stay because they will be hired. Because what this is all about is about jobs in Philadelphia. Thank you.
Thank you. You're correct in speaking of the industry. I understand Bruce Willis is coming back?
Unbelievable, it's unbelievable. He has actually -- it's unbelievable, he's coming back.
He'll be in town called 240 /00 LABOR, CIVIL SVC. - BILL 2 "Unbreakable" that reunites him with Night Shyamalan, who wrote and directed "The Sixth Sense," which is the tenth highest-grossing film in history. He's coming back to make a film with Bruce Willis, which is called "Unbreakable," with Bruce Willis, Samuel L. Jackson, and Robin Wright-Penn. And if we nurture this kind of talent, there will be more.
All right. And it's going to be filmed in Councilman DiCicco's district?
Where it's all happening -- on the east side. I just want to thank you for all of your time and effort and energy you put into the -- into putting Philadelphia basically on the map with regard to the film industry. Your reference to a possible TIF that will be introduced on Thursday, there's some -- we're still having some problems with some of the financing aspects of that. I'm not certain if that will be introduced, but don't let that discourage you. There are some things that we still have not been able to satisfy in terms of 241 /00 LABOR, CIVIL SVC. - BILL 2 some of financings that are being brought to the table by the developer. We are still going to make every effort. I mean, I want it to happen. I've been working with this for the better part of the year. We still have about 48 hours to go but, you know, you know, if it doesn't happen Thursday, don't think that that means that it's a dead deal. It's just that something that may be temporarily set us back, but. . .
Not to get into all the details 'cause I'm really not prepared to do that but, you know, we had something that we wanted to see happen on Market Street, and Disney would have brought a lot of technology with the DisneyQuest. But as I'm learning more and more every day, development is a very iffy thing at best. There are some things that we have done. I think we've done a lot of things to try to make Eighth and Market work and still today, nothing is happening, although I'm a little bit more optimistic this week than I was two weeks ago that 242 /00 LABOR, CIVIL SVC. - BILL 2 we might still be able to salvage that deal.
Well, just the one comment that I wanted to make is that timing is of the essence for this project because we have a tenant that drives the project and we will lose this tenant.
Fox, Fox. Yep, I'm well aware of that. Thank you, thank you.
Thank you all. Thank you very much. We have one last witness on our list. Fredrick Murphy, from Temple university. (Witness comes forward.)
It's a pleasure to be the guy with the broom that follows the horses in the parade. Basically what I want to talk about is not the Internet or what we currently call "the new economy," but how do you create the new economy? And the Internet is just one of many waves of technology. And really what is high-tech? It's the latest good idea that has the power to change the 243 /00 LABOR, CIVIL SVC. - BILL 2 way we do business and/or live our lives. And I've listed a whole series of examples here, and these are all high-tech, and I want to illustrate one of those examples. It's right here. I'm probably one of the very few people that draw a pistol.
It's real, but it's not legally a pistol anymore, because it's a --
Now, what makes this interesting is that this was produced by the first person to use interchangeable parts. That revolutionized manufacturing, okay? And I've listed a whole set of others. Railroads revolutionized the way people got together. Manufacturing methods revolutionized the way things were put together and lowered the cost. Electric power has changed our lives. And the automobile assembly line has given us even cheaper products. Now, if you turn the page, you'll see 244 /00 LABOR, CIVIL SVC. - BILL 2 where these things were done. Interchangeable parts - (unintelligible) Valley, Connecticut. Railroads - Baltimore and Philadelphia. Electric power - New Jersey. Manufacturing methods - Philadelphia. Automobile assembly line - Detroit. Now, notice that two out of these five innovations that I've listed, or new technology events, came from Philadelphia proper. And if you've ever seen the book The City of Firsts, A Complete History of the City of Philadelphia, from 1925, you know, this is a city where the action was. So it's possible to bring the action back. Now, why is Philadelphia not a high-tech center now? Well, there have been individual failures. Baldwin Locomotive is a classic of not recognizing the technology change and then being left behind. Other companies just missed the way in which corporations reorganized and operated, and they missed the consolidation of things like the food industry. Changing economics. This was the largest city at the time of the American Revolution. The Erie Canal gave the midwest market to New York City. Railroads helped 245 /00 LABOR, CIVIL SVC. - BILL 2 Philadelphia come back and made this a light- manufacturing center. Highways have caused people and businesses to move out of the city. We have structural problems structural, and the structural problems our taxes, schools, and the labor environment. Now, how do you get in a situation where you can catch the next high-tech wave? Basically, chasing the Internet is something we have to do, but it also is the case that we're always going to be second to Silicon Valley. So how do you become first on the next wave? You look at the two important innovations that are creating the technology waves of today. First, research that creates new industries has coalesced around universities and government lands. Stanford is the cause of Silicon Valley. MIT is what made the stuff happen in Boston. The next critical ingredient was venture capital. This has really developed as a formalized industry only very recently, and this is what continuously spins off the new businesses. Now, with university-centered research, why does it move there? First, federal and 246 /00 LABOR, CIVIL SVC. - BILL 2 corporate dollars go there. Second, it's a low-cost and low-risk environment to try ideas. Third, it's efficient in information structures. If you've got a weird technology question, you can walk down the hall or to another building and get the answer. And there's still another factor. Corporate research labs aren't the same thing. Corporate research labs develop new products in the corporate product line; they don't come up with the new innovations that are transformational anymore. Okay, what has Philadelphia done to develop this? Instead of going for government labs, we've gone for funding of shipyards and deeper channels, rather than things that will lead to the high-tech future. And it's failed to manage the universities as economic-development assets. With the private universities, the trustees, to a great extent, were treated as noblesse oblige and didn't focus on what these universities were about. The State universities are treated as teaching factories by the politicians, not as economic-development agents. 247 /00 LABOR, CIVIL SVC. - BILL 2 And we need to change that. And, lastly, our largest foundation spins on a lot of half-baked idea around the country rather than developing the human capital for the ideas they supposedly prize in Philadelphia, okay?
Now, the venture capital markets. Consequences of venture capital are that now the value of ideas goes to the inventor and the venture capitalists, not to the existing corporations. Before if you came up with an idea, you typically had to go to a company that made a product similar to that and sell the idea to them, okay? New businesses can now knock off old businesses much more readily. C. revolution and those two companies had the assets to do it. Another factor is it leaves a constant turmoil. What led to the revival of high-tech in Boston, starting in the 1960s, was computing. It's dead. There's now virtually nothing going on there. DEC, Digital Equipment Corporation no 248 /00 LABOR, CIVIL SVC. - BILL 2 longer exists. The inventor of the mini computer is Apollo. Sun ripped off Apollo's name, and Apollo no longer exists, it's now a division of Hewlett Packard. But biotech has replaced all of those lost jobs. And, again, it's this whole process of the connection between the research going on in the universities, the venture capitalists, and this whole communication network structure that leads to this new activity. Another feature is, stale businesses die sooner. I suspect that Philadelphia has been generating new jobs as fast in the 1990s as in the past, it's just that the stale businesses have been shrinking faster because of the venture capitalists, etc. And the other fact that has common on is that this is now a cost-driven economy. Companies no longer have locks on markets; they have to be totally concerned about their costs. So, again, what has Philadelphia done? It's provided the worst value in government services, highest city taxes with weak services. And if you think about it, from a quality 249 /00 LABOR, CIVIL SVC. - BILL 2 perspective, there's a lot of things that get done twice. Center City businesses pay extra taxes for their clean streets. I live in Center City, I contribute to the Center City Residents Association so that I get my sidewalks cleaned occasionally. The public schools are paid for -- you know, people pay for schools twice. They pay for the public schools and they pay for the ones where they send their kids. And the City is investing in declining industries. Again, the shipyard and the channel deepening. The channel deepening will basically eliminate one tug and barge unit for lighter and crude oil. That's jobs. That's supposed to 16 explode into 50,000 jobs like the prospectus 17 says? That's bad arithmetic, okay? 18 And the City let's L&I function as a 19 stumbling block to new businesses. You know, 20 we're tenth in venture capital while we're 4th in 21 population. So what are the things to do? Focus on a general business environment, not specific industries. Make the City a better value. It's a combination of cost and benefit. And bring in 250 /00 LABOR, CIVIL SVC. - BILL 2 outside dollars for research, and continue to bring in human capital, okay? Why focus on a general business environment? Okay, think about how the Internet is changing. B to C, business to commerce, was the big thing a year ago. When we were preparing our report, B to B was the big thing. If you read the Wall Street Journal yesterday, Safeguard Scientific said "B to B's on hold. " No political entity can keep up with that kind of change. You have to focus on the environment, not the technology or the specific business. So it's really the brew of money and talent that you need to have, and the right business environment to have the next new wave, okay? The other thing -- next is, make the city a better value. Cut taxes by category, not by company. The tax cutting or the tax deals have basically been an insider game. It hasn't been bringing in new people. And revamp the Tax Code to reflect the modern economy. The Tax Code was designed around 251 /00 LABOR, CIVIL SVC. - BILL 2 a manufacturing economy.
And the difference between a manufacturing economy and the modern economy is that in a manufacturing economy, people serve the machines. In the modern economy, the new economy, the machines are adjuncts to people, computers are adjuncts to people. Now, what does this mean? The gross-receipts tax, the portion you pay is based on the fraction of sales in the City -- and correct me if I'm wrong on this, but also the fraction of capital equipment and the fraction of employees in this city. So what's happened is not only do you have the whammy of the wage tax, but you have the double whammy of having your gross-receipts tax also factored in on your City employment. That's a bad deal and it's a compounding factor. And, again, if you just focus on company-to-company deals, you lock out the new players. And Internet start-up is not big enough to catch the attention of the City agencies, and they move out before they're too big. And TIFs are the wrong way to reduce taxes because basically it's the wage and 252 /00 LABOR, CIVIL SVC. - BILL 2 gross-receipts tax that are the problem. And real-estate tax cuts are reducing the real-estate taxes, but it looks like the main revenues are coming from wage tax and gross receipts, but really, those TIFs should be counted as reductions in the wage and gross-receipts tax as opposed to the real-estate taxes. There's misaccounting in terms of the way those numbers are worked out. And real estate is a derivative industry. You have a lot of growth, you have a lot of business, the real estate's worth a lot. And in North Dakota, the real estate's not worth a lot not because there's not a lot of growth, not a lot of business. So what you want is the growth in the business, not the real-estate deals.
You understand the TIF tax program is, the taxes increase over the current value. It's not a reduction in the existing tax.
Right. It's a credit, it's a tax credit mechanism. But the value of the credit is a reduction in your real-estate taxes is the way you look at it.
The real-estate tax stays what it is before the initial investment.
And at the end of the TIF, whatever the value the development and the land are then becomes the increased value of the real estate.
And correct me if I'm wrong, I mean, it is what it is.
But you view it as a real-estate activity and what you really want to do is focus on wage and gross-receipts tax.
I agree with that, but it's just that your reference to the TIF was incorrect.
Right, okay. I'm not a tax expert in this city, but this is the way that I've seen it described. 254 /00 LABOR, CIVIL SVC. - BILL 2 And, you know, the other question is looking at, how do you cut the taxes? It's not on the list, but how do you cut the taxes in a way that most benefits the City. As has been said earlier, the gross-receipts tax is what's critical for the Internet start-ups that don't make profits. Notice that there are biotech research centers owned by corporations in the City. And the reason for that is that's driven by the wage tax, because though researchers are high-tax people who are -- and the companies have to compete in the national market for those people, which means that they've got to pay a premium on the wage tax to get them in the City. If they locate outside the City, they avoid having to pay that premium and that flows directly to the bottom line of the company. So in looking at this stuff, you have to look at the incidence, who really pays the wage tax. And when it's expensive people in a national job market, the companies pay the wage tax. When it's laborers in a local job market, they pay the wage tax. For example, the union contract on 255 /00 LABOR, CIVIL SVC. - BILL 2 truckers is uniform throughout the region. Those workers pay the wage tax, not companies, okay? And then the other is improved services. That's not antithetical to tax cuts. Improving services can be done just by standard looking at how to create efficiencies. I teach operations management, and I use my experiences with City agencies as an example of how not to run an operation. You can achieve in some areas 50 percent productivity improvement just by looking at how the job is done, okay? Now, bring in dollars and human capital. Focus on bringing in those federal dollars that will draw the people and create the ideas locally that will create the next wave of the new technology. Again, it's wave after wave, and you don't want to chase the current wave only. You want to create the environment so that you're surfing ahead on the newest wave, okay? Examples of that. Bring in a federal research institute like has generated so many jobs in North Carolina around the EPA Research Lab. The Department of Energy National the Laboratories have done a lot in terms of job creation around 256 /00 LABOR, CIVIL SVC. - BILL 2 them. And biotech is big in Washington not because they have any medical schools but the National Institute of Health is in Bethesda. That's what's driving it. And then convince the State government to use a portion of the tobacco money to endow professorships in medical schools to do medical research. You don't know what's going to come out of it, but if states like George are willing to put up behind a new faculty member at Georgia Tech on the order of $10 million per faculty member to have them there to generate those ideas that create the new businesses, they're making a smart move. And then recruit venture capitalists but not specific industries. Focus on those core changes in the way the economy operates that has led to Silicon Valley and Boston being ahead of curve now, okay? That's it.
Thank you, sir. 257 /00 LABOR, CIVIL SVC. - BILL 2 Thank you very much.
Okay. We have come to the end of our testimony. I want to thank everybody very much. Thank you, Councilman DiCicco, for hanging in here with me. There will be a report issued on Resolution 000113. If anybody will be interested in it, please call our office and we'll get a copy to you. This meeting is adjourned. Thank you. (Adjourned at 3:22 p.m.) - - - 258 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Tuesday, April 11, 2000, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE ON LABOR AND CIVIL SERVICE RESOLUTION NO. 000113 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter