You're on the were; I'm on the were not, because I don't have to worry about the were anymore. I want to know about the were not. So where's the were not part?
You're talking about like underwriters, how are we going to select underwriters?
We are going to have a competitive process that will, I guess, get us to where we need to go. We need to, you know --
Even for 47 3/1/06 - Whole - Bill 06003, etc. you, Mr. Jannetti, you are being unusually evasive.
And will counsel be covered by that as well, counsel as in legal counsel?
Bond counsel, underwriters' counsel, all the other professionals in the --
Yeah, we have been having major discussions on whether or not underwriters' counsel is covered. That discussion would be two or three or four days.
Really? 48 3/1/06 - Whole - Bill 06003, etc. The conclusion was?
The conclusion was I forget on underwriters' counsel. Bond counsel, obviously the answer is obvious.
Okay. Now, second question: What is the nature of the finance director's relationship to the City treasurer?
City treasurer is a person who reports to the finance director. City treasurer's office is in the finance cluster of departments. So the City treasurer reports to the finance director.
City treasurer reports to the finance director, okay. City treasurer is responsible for payroll? 49 3/1/06 - Whole - Bill 06003, etc.
Well, the formulation of the payroll is a payroll division which is a subset of accounting in finance. The City treasurer's office gets the checks. The checks are printed. The treasurer's signature is printed on the checks and they disburse them, but the checks, the actual formulation of the checks, is done in finance with information from all of the departments.
Okay. And then what's the City controller's role in the whole payroll process?
The City controller approves the payroll before it is actually disbursed, as he does all disbursement checks in the City.
If the controller decides not to process a group of checks or a check, then it cannot be disbursed? 50 3/1/06 - Whole - Bill 06003, etc.
I would think so. That has never happened on a payroll check, but I would think yes.
Do you have any authority to stop a check from being paid or issued?
I think probably yes. The people who formulate the checks are under me, so I could --
So if you told them not to process someone's check, they would not do it?
Yes, but he question is in my mind would that be proper for me to do that, depending on the circumstances, you know.
What kind of circumstances do you think would be appropriate?
I'm not really sure. I haven't really thought about it. If you have an employee who hasn't worked and you found he has falsified his time sheets or time data or whatever, you know, he really doesn't deserve a paycheck.
Because 52 3/1/06 - Whole - Bill 06003, etc. they falsified their time sheet?
How about in a situation where a person has violated some other provision of the Home Rule Charter?
If we knew about that and -- let me -- we have the ability to hold a check if there is cause, and the City controller obviously also has that ability.
So whether it is falsifying a time sheet or violating some other provision of the Home Rule Charter, you have the authority to hold a check. So in a specific matter where a person has falsified their residency, a clear violation of the Home Rule Charter, they have admitted that they violated the Home Rule Charter, do you think that is an appropriate circumstance to hold that person's paycheck? 53 3/1/06 - Whole - Bill 06003, etc.
I'd have to get -- I would truly get an opinion from the solicitor on that one, on whether we should hold that or not.
You are the finance director. You are in a very unique position.
Well, my personal opinion as a gentleman who was born in this City who has always worked 54 3/1/06 - Whole - Bill 06003, etc. here and never lived outside the City, I think that if you come into the City and you -- this is my personal opinion --
So it's your personal opinion if a person has not established their residency as is required by the Home Rule Charter, they should not be paid by the citizens of the City?
I think there is something on the paystub -- on the paycheck when you sign that you are verifying that the information on the check is true. I have not seen a blue check in a long time, I must admit, but I think that, and I think that a regular check has your address on it. 55 3/1/06 - Whole - Bill 06003, etc.
You're welcome. Are there any other questions from members of committee? Seeing none, I thank you. Thank you. I would ask Mr. McPherson to please call the next department.
I am William Gamble, Commissioner of the Procurement Department. With me today are Deputy Commissioners Barbara Evans and Sandra Early. I'm presently for your consideration the Procurement Department's fiscal year 2007 budget request. The Procurement Department is 56 3/1/06 - Whole - Bill 06003, etc. requesting a total appropriation for all the funds of $5,456,489, of which $5,341,827 is the General Fund. The General Fund budget for the fiscal year 2007 provides $2,898,075 for Class 100 payroll expenses, supporting 64 employees $2,369,309 for Class 200 purchase of services and $74,443 for Class 300 and 400 supplies and equipment. This budget represents an overall increase of 368,458 from the fiscal year 2006 projected obligations of $4,973,369. The Grants Revenue Fund budget provides $50,000 for Class 200 purchase of services and the Water Fund budget provides 64,662 for Class 100 payroll expenses for two employees. The fiscal year 2007 Class 100 General Fund budget is increased by $83,458 from the FY '06 projected payroll expenses. The increase is due to the wage increase effective 7/1/06 and the increase in the projected lump sum 57 3/1/06 - Whole - Bill 06003, etc. separation payments. The Class 200 purchase of services budget is increased a total of $285,000 for new contracts. An increase of $87,000 is for a contract of Internet auction services for surplus supplies and equipment and 198,000 is for Webprocure maintenance. The mission of the Procurement Department is to obtain quality goods and services and construction in a timely, cost-effective and professional manner through a competitive, fair and socially responsible process in accordance with the law. The FY 2007 General Fund budget request will provide the resources necessary to accomplish this mission. The Procurement Department is comprised of three divisions. The Services, Supplies and Equipment Division centrally purchases products and services required by City departments to provide their services to the public, monitors the City's Class 300 inventory of 58 3/1/06 - Whole - Bill 06003, etc. supplies, accounts for personal property, and disseminates bid information to the public. The Public Works Division processes capital projects and concession bids, administers the Citywide advertising program and coordinates the inspection and disposal of City property. The Administrative Services Division provides the executive direction for procurement. Madam President, this concludes my testimony. I will be very happy to answer any questions that you or any member or Council may have regarding my testimony.
Thank you very much, Mr. Gamble. On of your testimony you indicate you are asking for an increase of $87,000 for a contract for Internet auction services. Would you explain exactly what that is please.
Yes. We are in 59 3/1/06 - Whole - Bill 06003, etc. the process of going through a pilot program to see whether it is cost effective to implement a program that will use the Internet in order to do our optional services. Currently we are going through a pilot project that will deal with surplus automobiles or vehicles to see how effective it is, and if it is as effective as we think it is going to be, it will save us money, and we are going to put it out for bid and make it a competitive bid so that we can utilize the services not only in equipment but overall auction services.
And yet you are asking for an increase of $87,000. How are we saving money?
The increase is based on -- this is what the auction services will cost us for those services. 60 3/1/06 - Whole - Bill 06003, etc. The company that we are using for this pilot, the services -- $87,000, that is what it will cost to use that service, but in order to use that service, we will be saving money.
So with the surplus automobiles, they would be put up for auction on the Internet? Is that what I understand you to say?
Yes. Basically, yes, we will be using the Internet as a way of auctioning surplus vehicles.
Would you buy an auto like that on the Internet?
Keep in mind we are talking about surplus equipment that we have discarded, so this is used equipment that we are trying to get something for. So we are not doing anything that is unique that other City governments are not doing. They are finding by doing this it has been very beneficial to them as well as cost 61 3/1/06 - Whole - Bill 06003, etc. effective.
You further indicate on that you expect to increase revenues due to this initiative by 30 percent. What is the amount of additional revenues you expect to receive? It is on of your testimony. Did you find it?
Yes, I did. That simply means what we are expecting -- again, this is a pilot project that we are trying to see. And what we are anticipating is if by using the Internet we will be actually showing our services and our equipment to more than just the Philadelphia region. It will be on the Internet nationally and internationally, and we anticipate with the additional coverage, that will increase -- that may increase the percentage by 30 percent. Again, this is a pilot, so --
I 62 3/1/06 - Whole - Bill 06003, etc. understand it's a pilot, but can you tell us where it is reflected in the revenue estimates? We should have some indication as to what the revenue estimates are going to be? And it's 30 percent exactly. 30 percent of what?
I'm sorry. Deputy Commissioner Sandra Early, Public Works. The surplus unit is in my division. We currently experience approximately $400,000 revenue per year for surplus vehicles and heavy equipment with our auction currently. That is the increase we expect to see, the 30 percent increase, based on the service suppliers, estimates of the general market now. And the revenue is offsetting -- the $87,000 that we are asking for to be put in the budget to pay for the services will be offset by the revenue 63 3/1/06 - Whole - Bill 06003, etc. collected.
We have looked and I don't know where that is shown, where the revenue estimates are shown.
So 64 3/1/06 - Whole - Bill 06003, etc. you are showing a hundred thousand dollar increase. That's a percent increase 4 and not the 30 percent increase as you 5 testified. 6
I say this is what 11 we're anticipating. This is not 12 necessarily what we guarantee, but it is 13 reflected in Line 54 of the Fleet budget. 14
I'm 15 not going to go there. 16 Let's go to of your testimony. You mention a new unit that you will be creating for market research and analysis. Can you tell us what this unit will do and how will it ensure that the City is getting the best price?
What this unit is going to basically do is identify best practices that's been utilized throughout the procurement by public agencies. We 65 3/1/06 - Whole - Bill 06003, etc. are going to make sure that we are going to utilize the corporate purchasing segment where we will be comparing prices, our contracts to what other contracts in other cities are using, and be able to -- if we find our contracts are not doing that with the best prices, then we will be able to pay back and use those commodities or those contracts.
Mr. Gamble, how many employees will you need for this new unit?
Basically what we are doing is we have a unit called a standards unit and we actually are renaming that unit the market research group, so it is not new employees or new staff; it is just staff doing different things than we had done in the past.
Very well. Thank you. The Chair recognizes Councilman Goode.
Thank you, 66 3/1/06 - Whole - Bill 06003, etc. Madam President. Good morning, Mr. Gamble.
Per Bill 7 050615 unanimously passed by City Council on December 1 and signed into law by the Mayor December 15, all City depositories are required to certify compliance with the Labor Disclosure Law created by Councilwoman Reynolds Brown by January 1 of each year. How many City depositories certified compliance with that section of the code?
Did you deem that one in compliance under provisions of that law that was passed?
And did you deem the other depositories not in compliance?
We didn't receive 67 3/1/06 - Whole - Bill 06003, etc. anything from them, so, yes, they are in noncompliance. We haven't received anything from them.
So you consider all of the other depositories to be in noncompliance?
How many City depositories are currently under contract with the City?
I don't know. I would have to get that for you. I wouldn't know.
The City treasurer is actually here. I know he is coming up next, but if he could actually come up for that one question?
Please identify yourself for the record. Did you hear the question?
Councilman, do you remind repeating? 68 3/1/06 - Whole - Bill 06003, etc.
Good morning, Mr. Nacchio. The question was how many City depositories are currently under contract for this fiscal year.
Of the nine depositories that are authorized -- the word "contract" is a difficult term to identify, but I would say that of the nine we do business primarily with four, so we have business --
My question really was not how many you do business with but how many are under contract. And, as you know, there are two separate sets of requirements for City depositories. Almost all of them are under your purview, but there is also requirements under the purview of the procurement commissioner, and the particular requirements that I'm referencing today apply to Bill 050615, which requires that all City depositories certify compliance by January of slavery disclosure. And essentially 69 3/1/06 - Whole - Bill 06003, etc. those letters go to the procurement commissioner rather than the City treasurer. So my question to the procurement commissioner was how many complied by January 1. His answer was one. My question was were they deemed to be in compliance per what they wrote and then, two, how many of those other City depositories are not in compliance, having not forwarded anything to the procurement commissioner. And based upon that my question then -- because that section of the code deals with prerequisites and execution of contracts, my question of the procurement commissioner was how many City depositories are actually under contract. So I'm asking a contract question.
Currently to my knowledge there are no contracts, only agreements.
Only? I'm sorry. 70 3/1/06 - Whole - Bill 06003, etc.
That answered my question. Thank you. I have other questions for the City treasurer when he comes back. I have a separate question for Mr. Gable though. Mr. Gamble, could you, in addition to requesting the legal opinion on the one City depository which did submit information in regard to Bill 13 050615, get a legal opinion on those that did not submit information and whether they are in compliance with that law?
Thank you. Are there any other questions of Mr. Gamble? Seeing none, I thank you all.
Good morning. Please identify yourself for the record and proceed with your testimony.
Sure. My name is John Nacchio, and I'm the City treasurer for Philadelphia. I was going to dispense with the written testimony and just have it enter into the record.
That would be fine with us. If you would just capsulize what you were going to say.
And we will make certain that the stenographer has a copy and it will be transcribed in full.
Sure. Just as a highlight, I wanted 72 3/1/06 - Whole - Bill 06003, etc. to talk about the increases in personnel to the treasurer's office to add additional administrative and analytical resources so that we can identify opportunities for maximizing investments on idle cash in accounts. And such abilities had been over time budgeted out of the department and now returning to that would give us an analytical capability to identify those opportunities, which may develop revenue streams of possibly $2 million or more a year with what we are doing. Also, I wanted to indicate that raising the bar on what is considered fraud or proactive activity and fraud is to protect the City's bank accounts. Certainly the questions and issues revolving around identity theft on a personal level is also something the City has to consider in protecting its assets and all of its bank accounts. Currently I estimate that we have over 300 to 400 bank accounts around 73 3/1/06 - Whole - Bill 06003, etc. the City of Philadelphia both under the City treasurer and under various departments, and raising that level of protection is very important in these times when theft electronically and also physically is a possibility.
Thank you. You mention on of your testimony that your department monitors over 30 investment portfolios, representing over $1.5 billion of investments. Please tell us what you mean by investment portfolio and also who manages these portfolios and how they are picked.
Currently the City has seven money managers. The accounts that they manage -- primarily six of the money managers manage funds that are kept in trust or kept by the fiscal agent in relation to bond issues. The single money manager that has to do with the City's consolidated 74 3/1/06 - Whole - Bill 06003, etc. cash account is the one that's outside those funding sources. They were selected in an RFP process that was conducted by the treasurer's office prior to my becoming City treasurer.
Would you indicate what the investment limitations of these portfolios are, please? What are the limitations, if any?
There is an investment policy, if you are speaking to that, which is part of the Philadelphia Code and further defined by the investment policy that the finance director and the City treasurer sit on an investment committee, refined it down another level, but primarily it is within the City code.
And when you talk about investments, each of the portfolios 75 3/1/06 - Whole - Bill 06003, etc. would have items like treasuries, corporate, commercial paper, and possibly money market funds.
Thank you. The Chair recognizes Councilman Goode.
Thank you, Madam President. Good morning again, Mr. Nacchio.
Per a resolution passed by this Council on December 1, we had called on the Office of the City Treasurer to commission annual studies of money disparities of our City depositories. Is the treasurer's office prepared to do that in the next budget year?
Under the current request in the budget for 2007 the City treasurer's office does not have budgeted funds for that item. 76 3/1/06 - Whole - Bill 06003, etc.
That was your response on February 16. I asked you by the time that you came to testify in the budget hearing whether that situation would be rectified. You said you would talk to the budget office about it.
Sir, in my preliminary preparation for this testimony I indicated that that resolution had passed and that there would be a need identified for that. I have not gotten confirmation whether there would be a change to my budget at any time.
Good morning, Miss Reed. The resolution that was passed, Resolution No. 051161, on December we understand to be nonbinding. It's 77 3/1/06 - Whole - Bill 06003, etc. similar to a resolution that I passed in February of 2000 regarding the Office of City Controller relating to small business lending. The controller's office has since that time complied with that request by Council through resolution that reduced annual studies of small business lending. Last year this Council actually authorized a more comprehensive study of not just small business lending but home loans and small business lending, a comprehensive study of lending disparities by our City depositories, and essentially contracted two years' worth of analysis, one for 2003 and 2004. And, just for the record, it is paying $35,000 per year of data. I don't see that as a major budgetary matter. And really I was wondering whether the treasurer's office can comply with this resolution, or is there some budget restriction that's going to keep the treasurer's office from commissioning an 78 3/1/06 - Whole - Bill 06003, etc. annual study that essentially is only costing us $35,000?
Thank you. Mr. Nacchio, the next question is: In our discussion of how many contracts we had with City depositories, your response was we have no contracts; we only have agreements. What's the difference between a contract and an agreement?
I have to be honest, that's a legal question that only the Law Department can answer, but they are very similar.
Actually, you used the word "agreement" and you meant something by it versus using the term "contract."
I have only seen paperwork that said "agreement" and the word "contract" was not included in that paperwork. 79 3/1/06 - Whole - Bill 06003, etc.
So the agreement could, in fact, be legally a contract?
I guess legally it could be. I would say that every bank account that we have is the formality of opening up a bank account, which does enter into a legal arrangement when you have a bank account. The other items of custody do require an agreement of a different type, which are presently now with two of the banks, which is separate from banking on an individual level by account. But each account itself is like entering into a contract of sorts.
I'm glad you raised the issue of the agreements related to custody. How is it decided which financial institutions get those agreements?
This is a typical answer. Of course, it has always been that way and that's the way it has 80 3/1/06 - Whole - Bill 06003, etc. evolved over time. The primary bank that we do business with has a succession of ownership under different bank names, which has been a relationship that continued, and, as they collapsed into one another, also into one banking institution; and an institution that can deal with the volume and type of customer that the City of Philadelphia is has developed over time.
Is there any requirement by the City charter, by any City ordinance, any executive order otherwise that suggests that that business cannot be opened to several businesses as opposed to giving it to the institution that has always had it? I mean is there any particular reason why one bank holds 80 percent of our custodial accounts? Is there any reason why if we had 1.6 billion in custody that one bank would be receiving 1.3 billion of it? Are other banks not qualified to receive that money? I mean 81 3/1/06 - Whole - Bill 06003, etc. essentially they are only holding it for the investment managers. They are not investing it themselves.
So can't any City depository that is authorized essentially hold that money that is simply there to be managers by other investment managers?
The depository banks have a commercial retail type of business. Not all of the depository banks have a trust component.
The others, when asked for information, did not acknowledge the fact that they had that type of capability or interest in that trust function.
That's sort 82 3/1/06 - Whole - Bill 06003, etc. of curious. I will just make a formal request. Could you, in fact, prequalify all of our City depositories in terms of whether they are able to hold those custodial accounts so that we know which ones are and which ones aren't rather than simply adhering to the practice that we always put our money there and therefore we have to put 1.3 billion there?
One of the questions that comes or arises in this is the definition of what a deposit is. A deposit is a deposit of cash. So primarily when we speak about depository banks, it has to do with the deposit of cash. When we talk about assets having to do with treasury bills and a portfolio, that's considered separate and apart from a deposit.
We can have this conversation by phone, Mr. Nacchio, so let me refine my request. 83 3/1/06 - Whole - Bill 06003, etc. City Council has the sole authority to authorize institutions that can hold money that is in the City treasury. There are no institutions authorized separate from those institutions authorized under 19201; is that correct?
Well, in the legacy of banking acquisitions the custodial group under Wachovia as of January 1 became a part of U.S. Bank and U.S. Bank is not a depository bank for the City of Philadelphia.
That wasn't my question. My question is: That section of the code deals with deposits and investments, and City Council -- my question is per the Home Rule Charter, City Council has sole authority of who is authorized to receive money from the City treasury; is that correct?
So of those institutions that are authorized by City 84 3/1/06 - Whole - Bill 06003, etc. Council to receive money from the City treasury -- we don't have to quibble if we are talking about deposits or investments or whatever -- can you then prequalify how many of those institutions that are authorized are able to hold these custodial accounts?
I'm asking you beyond to your knowledge; to send correspondence to those financial institutions that are authorized requesting the information and to prequalify how many of our authorized institutions can hold that $1.6 billion that comes out of City treasury, because it is not acceptable to me for you to say that one institution has always had it and gotten the business because of their predecessor institutions and that there are only two of the nine qualified to hold it, unless that's your opinion and you are willing to put that in writing, 85 3/1/06 - Whole - Bill 06003, etc. and I don't believe that to be true.
My guess is that there are other authorized institutions that can hold money from the City treasury that would want that $1.6 billion in business. And you need to one way or the other certify whether they are qualified to do so.
I have no problem with putting that request for information out. I will explain, though, the history of the custodial relationship is that banks typically do not consider custodial trusts a profitable part of their business. So not all of the banks do it to this degree or are willing to hold this much in assets. They may have some trust relationships that are small but nothing as large as the City of Philadelphia.
Let me ask a simple question then: Can that business 86 3/1/06 - Whole - Bill 06003, etc. be spread around?
In the case of the relationship that we have in the past year with Wachovia and now with U.S. Bank, those funds, which are primarily water, aviation, all resulted from bond issues which have relationships that were contained in the issues themselves that required for them to be the agents. So I wouldn't have a choice of where they are being held. I only have a --
Yes. The only choice that the City has is in who manages the portfolio.
And in terms of future monies that might be placed in custody, can that business be spread around?
If it is dictated in the bond issue itself, yes. The only money that is outside of that, as I 87 3/1/06 - Whole - Bill 06003, etc. mentioned earlier, is consolidated cash.
We are simply talking about the money that is in custody for our investment managers. That's all I'm talking about. And I'm talking about at this point what is over a billion and a half dollars. How much of that billion and a half dollars is restricted by bond issues, bond issue agreements?