For the 200? There is 3 million 2 I believe in principal and eleven five in interest.
Can you tell us how the proposed repayments 151 3/1/06 - Whole - Bill 06003, etc. will be structured, the level debt service payments and other structures?
There's usually two payments a year, one maybe in April and the other one in October, or depending on when these issues are done, it could be October and February, every six months basically.
Mr. Coin, can you tell us when the administration proposes to issue the $150 million borrowing for the arts and commercial corridors.
Surprise, surprise. Are there any questions from members of the committee? Thank you, Mr. Coin. You did very well. You were nervous for no 25 reason at all. 152 3/1/06 - Whole - Bill 06003, etc. Next?
Miss Bell, I would ask you if you would also abbreviate your testimony.
And the stenographer does, in fact, have a copy of your testimony, which will be transcribed in full.
Good afternoon, Council President Verna and members of City Council. My name is Gwendolyn Bell, executive director of the Board of Pensions and Retirement. Today with me here is Christopher McDonough, who is acting chief investment officer. The Board of Pensions and Retirement request for fiscal year 2007 $10,304,000. That's up from $7,783,000 153 3/1/06 - Whole - Bill 06003, etc. for fiscal year 2006, an increase of 2,521,000. The increase includes an increase in staffing, in fringe benefits, and monies to cover beginning of a proposal for a new technology application to process pension payments and interact with personnel, payroll, and risk management. Some of the savings we had for last year were in overtime, which was reduced by $40,000, and we anticipate that that will further drop this year due to permanent position to work in the DROP unit. We have increased our retirement seminars substantially over the last year to accommodate requests for employees from 12 to 20 for the regular retirement sessions and for 14 to 18 for those specialized retirement sessions offered by deferred compensation. The technology program is very aggressive. We are working with an 154 3/1/06 - Whole - Bill 06003, etc. application now that is more than ten years old. Actually, it has outlived what we thought would be the life of it. And in order to support our current program we have a list of more than 90 projects that we are trying to work through to get the current application to be more efficient. So we are looking to probably purchase an off-the-shelf package to replace our current pension processing program. We have budgeted $2 million to start that process.
During fiscal year 2005 the Pension Fund completed an asset allocation study that resulted in the implementation of several new asset classes including absolute return and real estate. Due to an average return of 3.2 percent over the past five years for the fund, the board voted to reduce the fund's actuary assumption rate on investments from 9 percent to 8.75 in February of 2006. 155 3/1/06 - Whole - Bill 06003, etc.
I'm sorry. I was distracted. Did you say what the benefit was to the Pension Fund of the change?
Okay. I heard you talk about going from 9 percent to 8.75. Okay. Sorry. I was distracted.
Thank you very much. The Chair recognizes Councilman Kenney.
Thank you, Madam President. It's a shame that the room is not more crowded than it is right now and there is not media attention here because I believe the current condition of the Pension Fund is probably the largest single looming fiscal crisis facing the City since probably 1991. 156 3/1/06 - Whole - Bill 06003, etc. What is the current unfunded liability of the Pension Fund?
And what does that represent in a percentage of unfunded liability.
And in the City of Chicago, in the County of Chicago, which deals with both Cook County's Pension Fund school districts and the City of Chicago, they have an unfunded liability of 70 percent. And the member of the Chicago Civic Federation, which was in the process of reviewing and taking a look at the Pension Fund in Cook County and in Chicago, was quoted as saying, "This was a looming crisis, and now we have moved 157 3/1/06 - Whole - Bill 06003, etc. beyond looming and are dealing with a full-blown crisis at 70 percent funded." We are at 59 percent. Do we have a crisis? The people in Chicago seem to think we do. They seem to think they do. What do we have going on?
The unfunded liability is very large. I think around 70 percent is average, so we are --
The goal in Chicago is 90 percent, so obviously that is a hard number to beat.
Yes; I think the average is around 70, so 90 percent is very good, but the average is around 70, so we are well below the average.
In the last 12 to 18 months we have implemented a number of strategies within the investment unit within the fund to try to augment returns and reduce risk including the use of absolute return strategies, real estate 158 3/1/06 - Whole - Bill 06003, etc. allocation, and an increase to our private equity fund.
But we all realize that is not going to solve the problem.
Let me go through what the five-year plan numbers are because there doesn't seem to be a specific plan to deal with it in any substantive way because right now the General Fund contribution is about -- for '07 is estimated to be $325 million. Is that accurate?
The '07 General Fund contribution to the Pension Fund is slated to be $325 million?
So the 159 3/1/06 - Whole - Bill 06003, etc. unfunded liabilities even with the $325 million payment continue to accrue?
In '08 we are looking at 350 million -- this is according to the five-year plan -- '09, 360 million; '10, 369 million; and '11, 371 million. And extrapolated out to 2015 with just the minimum payments allowed by state law, we are between 450 and $500 million out of the General Fund.
There are a number of other things that have happened. Over the last couple of years there have been several other changes that should help with what the fund is doing including replacing the pension consultant, investment consultant. 160 3/1/06 - Whole - Bill 06003, etc. The asset allocation change looks at other things, and I think Chris can answer this better than I, but to include the types of investments where international and real estate and other things were, this fund kind of missed the ball over the last couple years.
Not being invested in real estate I think for -- I'm not sure exactly how long real estate did well, but the fund had none.
The last consultant was replaced and we have a new consultant placed about a year and a half.
Yes. Chris can tell 161 3/1/06 - Whole - Bill 06003, etc. you who they are.
We have a general consultant. We have a consultant for private equity, and we have a separate consultant for absolute return.
Yes; we dismissed the general consultant and replaced them.
What process was undertaken to determine whether or not the new consultant -- who is that?
And what 162 3/1/06 - Whole - Bill 06003, etc. process did the Pension Board go through to determine -- did we do a search nationally?
I don't know that number. I would have to get back to you.
I don't recall. There was a short list. I think the interviews -- I can't remember exactly, but there were at least five firms that were interviewed.
Was there a rating system, or what happened once the short list was accomplished?
The Retirement Board went through an extensive search and interviews, scheduled second interviews for those people that were considered, 163 3/1/06 - Whole - Bill 06003, etc. looked at the recommendations by the firms and their experience, the education of the principals. The firm that was chosen, Miss Williams has a degree from Harvard and many years of experience in investment consulting.
But we all agree that even though we do better investments and more diversified investments and have a better return, we are not going to grow our way out of this problem; is that pretty fair?
It is going to be slowly -- we are going to be slowly digging our way out.
The problem is while we are slowing digging our way out of this, we are continuing to increase payments from the General Fund that could go for things like tax reform and enhanced services and the other kinds of things that we all debate about in here all the time. I mean the administration is 164 3/1/06 - Whole - Bill 06003, etc. extremely concerned over a pretty modest reduction in the business privilege tax but doesn't seem to be all that concerned about the amount of General Fund dollars going into our unfunded liabilities, and the trend across the country, both in the private sector and the public sector, has been not only the investment side, but the benefit side. Has there been any analysis as to the issue of benefits and what's happening with them and what's trending in other municipalities and states? I know Ford Motor Company just went through a huge restructuring of their benefit packages, and I'm not suggesting that we do it retroactively, but going forward has there been any consideration of doing something different on the benefits side?
The benefits, you have to remember, are negotiated by contract, so there is not a lot the Pension Board can do to control those costs. 165 3/1/06 - Whole - Bill 06003, etc.
Let me stop you there. Does the board at some point in time interface and advise the administration, "Hey, folks, you have like a huge problem over here"?
Yes. Actually, most recently the Retirement Board did send a letter to the administration advising that they would recommend that the City contribute the full recommended contribution that the actuary recommended rather than the --
For the last fiscal year the funding policy amount was 380 compared to the MMO, which was 306.
Minimum 166 3/1/06 - Whole - Bill 06003, etc. municipal obligations under Act 205.
I'm sorry. Hold on. My understanding for FY '07, $325 million is the recommendation of the administration in the budget?
And they have done that in a letter to the administration?
Yes. The amount that we are funding is the amount that the actuary agreed we could pay under the MMO.
I understand that. It is the minimum payment we could make. It is like having a huge credit card debt. It is like having $13,000 on your credit card and you pay 2360.
Madam President, could we ask Miss Reed to come to the table? We haven't been that rough, have we? Miss Bell, please finish your answer. I'm sorry. Maybe you can expound when she is through.
Because most cities are experiencing large liabilities with pension funds, the MMO was something that was acceptable and recommended so that 168 3/1/06 - Whole - Bill 06003, etc. the liability could be spread over a longer period of time. So most large cities have adopted this.
In the letter that you guys sent to the administration based on the actuary's recommendation, is it 325 or 380?
We have an agreement from the actuary who made estimates of what the payment would be based on our earnings rate that a 325 payment was acceptable for the minimum municipal payment.
The higher amount would be at the City's old funded policy level I think, which we are no longer pursuing because of the budgetary constraints we're under. 169 3/1/06 - Whole - Bill 06003, etc.
This is a budgetary constraint. It is a major obligation that we can't get out of, and because we are unwilling or you don't want to look at it and we just continue paying the monthly minimum payment or the annual minimum payment, we're continuing to eat into resources that could be used for things like services and tax reduction. It is almost like a crazy logic. What we are doing is we are saving money now so we can spend on things like debt service for additional borrowings that we are having for River Cities and arts and cultures. We are going to lock ourselves into 30 years of debt for that, which has to come out of the General Fund, and now we are -- this is like a silent killer. It is like it is looming there waiting. The actuaries are telling us that 325 probably isn't what we should do; it should be 380, but we are going to go with 325 because we 170 3/1/06 - Whole - Bill 06003, etc. have an agreement with them because this is what we can afford to pay. I don't see how we can afford to pay -- we should be able to pay what it is that is going to bail us out of this hole, not what will get us through the next two years and leave this bag of whatever for the next administration and the administration after that. I mean we took a huge hit back when the bubble burst and what did we -- we really didn't do anything to fix the problem.
Let me state for the record, pension people, I understand what your role is and I understand that the policy, even though it the board makes the decision, the money comes from the City, so what you are paying is what you are allowed to pay. I understand that. Miss Reed? 171 3/1/06 - Whole - Bill 06003, etc.
By going with a market rate, a rate closer to what the market is assuming for earnings, we are increasing the payment above what we originally planned in the MMO.
We originally were assuming that we would be earning 9 percent, so we were going to make a lower payment. So actually in '06 we are paying $28 million more than we would have paid under the higher earnings assumption. So that in fact we are accelerating our payment -- paying down the unfunded liability. Now, in fact, the unfunded liability is going to continue to increase until Fiscal '11 and then it is going to start to drop. And if we chose to --
Yes, because we are 172 3/1/06 - Whole - Bill 06003, etc. paying a little bit more, so it extends a little bit more. But the thing about this is if we were to be paying --
Let me just respectfully interrupt you for a second. What you're telling me is in fiscal '11, based on the minimum payments that are talked about in the five-year plan, we are going to begin to regress and reduce the unfunded liability?
You are linking this to earnings too? You are linking this to earnings after 2011, our condition?
I think that the 173 3/1/06 - Whole - Bill 06003, etc. payments are based on the earnings level we assume now and I think that just gets reviewed by the actuary every year and he does direct us -- his firm directs us to what our legal payment is.
I personally think, Councilman, we should get something in writing from the actuary so that -- and I don't know that you would have any objection to that?
And would you please get the necessary information and forward it to us?
Because, you know, from an actuary perspective you have not been able to, in my view anyway, tell us the benefit to the Pension Fund of the change in the earnings assumption from 9 percent to 8.75 percent.
I think the benefit has really accrued to the General Fund to 174 3/1/06 - Whole - Bill 06003, etc. the extent that we have not had to pay an additional $55 million, which would have meant in a zero sum kind of way that we would have had to cut other areas of spending in order to make that very high -- the higher policy payment that we had in effect until we changed to the MMO.
We are reviewing a budget and five-year plan now that is increasing spending. We are not talking about saving what we are spending, saving the amount of money and the level of services and spending level. We are borrowing more money. We're being recommended to borrow more money and spend more money. We are not cutting back anything. So how does that improve the General Fund situation? On one hand we have this looming debt that we are legally responsible for and there is no way to get out of it. The earnings, the additional investments, and ways we are 175 3/1/06 - Whole - Bill 06003, etc. investing are not going to bail us out of the problem. We are paying the yearly minimum amount. The General Fund is continually being hit as a result of it and we are going into more debt. How do you justify spending more money and going into more long-term debt when we have this long-term debt that we are facing that is to percent unfunded more 11 than -- unfunded less than other plans 12 throughout the country? I mean in Chicago if it is a 70 percent funded liability, it's a crisis for them. For us we are at 59 percent and we will borrow some more and spend some more. How do you justify it? This is the administration, this question.
Not according to the people in Chicago. They are scared to death. They say it is a crisis. Are they overstating it? 176 3/1/06 - Whole - Bill 06003, etc.
Well, that City seems to work pretty well so maybe they have something going on there.
I'm sorry I have taken so much time, Madam President, but I would like the record to be clear that this situation that we have -- and I'm sure that the professionals involved in this understand and they are probably not able to speak as freely as they like. This is probably the biggest fiscal issue facing the City since '91, since almost bankruptcy, and this is not sufficient for the future of City employees, for pensioners, for those people who are in public service now. I think there is some real serious danger to them and some serious danger to the long-term fiscal health of the City because we are not paying our bills in 177 3/1/06 - Whole - Bill 06003, etc. the appropriate fashion.
The thing about the unfunded liability is this would only become a risk if, in fact, a huge number of people were to retire ahead of what actuarially they are expected to retire. And the personnel department keeps pretty careful records on what the likely dates are, and this is what the actuary takes a look at. So there is not imminent danger.
I would actually like to get a list. Actually, Madam President, I would be interested in knowing how many people went through the DROP program and came back in some form or another. I mean we hear anecdotes all the time about people who have gone through three, four years of DROP and then get hired back as consultants or are brought back. So I would like to get a list of how many people we are talking about there. I mean my understanding of DROP 178 3/1/06 - Whole - Bill 06003, etc. was an effort to kind of weed out -- not weed out. That's not the right word because they are good employees -- trying to thin our higher level employment rolls by offering an incentive. I don't know what --
I appreciate it. But I think this situation is terrible for short-term and long-term future, and you guys have to do something about it because we can't do anything about it and I don't think they can do anything about it without providing the resources to fix the problem faster and better than we are fixing it now. Thank you.
Are there any other questions from members of the committee? Seeing none, I thank you.
The next 179 3/1/06 - Whole - Bill 06003, etc. department is the City Planning Commission.
We do have a copy of your testimony. I would ask you to be kind enough to abbreviate it. The copy has been given to the stenographer. It will be transcribed in full. So please identify yourself for the record and proceed with your testimony.
Good afternoon, Council President Verna and members of the City Council. My name is Thomas Chapman, acting executive director of the City Planning Commission. I would like to thank you for the opportunity to present our budget this afternoon. Our proposed budget for 2007 is $3,815,018. The budget has three components: General Fund request for 180 3/1/06 - Whole - Bill 06003, etc. $3,353,708, the Community Development Block Grant for $189,310 and a request for $272,000 in Federal Transportation Grant Funds. This year's General Fund request is $92,568 more than our FY 2006 estimated obligation level of $3,261,140. This increase in appropriations is entirely in Class 100, Personal Services, and provides funding for a 3 percent wage increase that will be effective on July 1 of this year. This year the commission was once again instrumental in obtaining four new Transportation and Community Development Initiative grants for the Delaware Valley Regional Planning Commission totaling $325,000. One thing that I would add, as you stated, Council President Verna, our testimony will become part of the record. I would be happy to answer any of your questions.
181 3/1/06 - Whole - Bill 06003, etc. That's fine. Mr. Chapman, on of your testimony you mention three planning grants dealing with transit-related issues. How will the impact of gaming be factored into these studies?
Well, certainly the impact of gaming is going to be a consideration for any transportation study that is done in the City in the next couple years because obviously gaming is going to have an impact on any of our public transportation lines that will serve as sites that are selected by the State Gaming Commission. We have been discussing the impacts of gaming, the impacts gaming will have on the public transportation system, and Delaware Valley Regional Planning Commission is also taking a look at that issue. We fully recognize that there will be impacts, that SEPTA will have to make some adjustments to accommodate 182 3/1/06 - Whole - Bill 06003, etc. people coming to and from the gaming locations, wherever they happen to be located.
Is the study taking place as we speak, or will it be effective next year?
There are studies in the works right now and there are also studies that are at the RFP stage.
But if we don't know the locations of the gaming parlors, how can you plan as far as or study the transportation issue?
While we don't know the locations of the gaming parlors, I think that we -- since four of the five locations that had been identified in the City are along the waterfront, we know that we are going to have at least one along the waterfront so that there will be some impacts along the Delaware River waterfront somewhere in the area between Reed Street and Lehigh Avenue. And that obviously is going to have impacts on 183 3/1/06 - Whole - Bill 06003, etc. lines such as the Market-Frankford elevated, the SEPTA lines that run along 2nd and 3rd Streets, as well as any SEPTA lines running along Spring Garden Street.
What studies are being undertaken with regards to parking along the Parkway as it relates to the central library renovations and the Barnes Museum? And can you tell us when it is expected these studies will be completed?
It seems like -- Councilman Kenney, I have to agree with you at times. This issue came up last year and we didn't have an answer and I don't know that we are going to have an answer this year either. See, once in a while I agree with you.
Madam President, I have asked for 15 years who gave the order to remove the broom and the shovel from the back of the trash truck. I asked the same question this 184 3/1/06 - Whole - Bill 06003, etc. year, and the broom and the shovel, I don't know who gave the order, but it is gone. And the poor sanitation guy who tries, after the bag breaks, to keep the street clean has to go out with his hands on knees to throw it in the back of the truck, but that's another story.
That is ridiculous. Well, when the Streets Department comes in...
My wife got a ticket today, by the way. She sweeps the street every day and bags the trash. She forgot to bring it in today. So the guy came by and gave us a $25 ticket for sweeping the street. She likes a clean street, so she was running out and she forgot to take the bag in the house, and the guy in the green uniform came and wrote her up. So she is never going to sweep the street again she said. Not only is she not sweeping the street anymore, she's not voting anymore either. 185 3/1/06 - Whole - Bill 06003, etc.
Can you respond to my question, please, Mr. Chapman?
Certainly, Madam President. I'm going to ask Gary Jastrzab to address that question.
I'm Gary Jastrzab, Director of the Strategic Planning and Policy Division at City Planning. Regarding the question on Parkway parking, there is a two-phase study that is currently underway. Phase I is -- I believe that there are preliminary recommendations that are being reviewed by the Commerce Department and with the participation of City Planning concerning parking for the expanded library and Barnes Museum. And those recommendations are being reviewed. The second phase of the study is underway now. It includes a larger number of Parkway institutions and also includes a circulation analysis of the 186 3/1/06 - Whole - Bill 06003, etc. Parkway as well. And that work is underway. I'm not sure exactly when recommendations would be available from that study.
I think we can say for sure there is definitely a parking deficit in that area. How we address that is still up in the air.
Is there any money in the budget or five-year plan to correct the problem that you just described plus the need for parking? We are definitely going to need parking.
No doubt, no 17 doubt. We are definitely going to need parking.
Is there money in the budget or the five-year plan for this purpose?
There is no 23 funding in the capital program for sure, but there are -- there have been some preliminary recommendations that certain 187 3/1/06 - Whole - Bill 06003, etc. on-street parking rules that are in effect now along the Parkway be changed to allow for a greater turnover in the parking spaces along the Parkway during the day. I believe that you can park now for like hours during the day there. 9 In other words, you can come in, park 10 your car, go to work and not worry about 11 getting a ticket. And if that were 12 changed, if there were some limitations placed on the amount of hours that you can park there, that would allow for a greater turnover of parking spaces.
I just have a question. Are you guys allowed to talk to the Parking Authority? It seems to me that if you have a parking -- if you are studying parking or looking at parking or talking about parking we have an authority in the City called the Parking Authority. Now, certainly the current hierarchy of the Parking Authority is not 188 3/1/06 - Whole - Bill 06003, etc. exactly accessible to the administration, but they are there and they do have some capabilities and they have systems and they have analysis and they have some money. Do we talk to them at all?
How about this 12-hour parking deal? You think Vince Fenerty wouldn't want to put some meters somewhere or signs that would keep people from parking for 12 hours? I find them -- and this may be sacrilege to say this, but when I call them up they normally respond to issues and questions that I have and it is a resource that is there. Even though we don't like the politics of it, perhaps we could work together with them and maybe do something productive.
Councilman, the issue that I started to talk about, it is not illegal to park there for 12 hours right now.
I 189 3/1/06 - Whole - Bill 06003, etc. understand, but we have agencies -- we have an agency and we have counsel that can address those things once we figure out what the research tells us. Do you guys talk to them or not?
Absolutely, absolutely. Joe Egan is an old friend. I know is not there anymore.
He's gone. He is not gone. He is in a different situation. He will be calling me up and telling me that he's gone. I find them pretty competent and cooperative. So you do have?
I've voted for Republicans in the past. I'm not that bad. I'm not like Councilman Cohen, God rest his soul. I don't think you are evil people, no. 22 But you guys do cooperate?
And they do have the capacity to do parking, to 190 3/1/06 - Whole - Bill 06003, etc. borrow money and to build garages and to acquire land, and to me all of that planning on the Parkway should be done in concert with them and then make a request to them to build a garage or to somewhere. Is that part of the plan?
They have been a part of the process. In fact, at the most recent meeting there were I believe at least two, if not three, representatives of the Parking Authority attending that meeting.
The other possibility is that there are a number of development proposals in that area that have not -- they are certainly not under construction. They are in the discussion stage right now. And it's possible that some or one of these proposals could include some parking that could be used to serve as the library and the Barnes Museum. 191 3/1/06 - Whole - Bill 06003, etc.
And we have no indication as to when the studies will be completed?
I think, as I mentioned, there are preliminary recommendations for the first phase which are being reviewed internally at this point, and some of those recommendations do include the idea of freeing up some of those on-street parking spaces by changing the number of hours.
But how many parking spaces are there along the Parkway?
I don't know off the top of my head, but there is a surprisingly large number of them and that as well as looking at Parking Authority and/or provision of parking by private developers is part of the overall calculus of these recommendations that are being reviewed now.
The Chair recognizes Councilman Rizzo. If 192 3/1/06 - Whole - Bill 06003, etc. you would like, I will take Councilman Nutter next, but he is on the phone too. They may be talking to each other.
Councilman Kenney, since you're paying attention --
I'm ready. Even when I'm talking on the phone I'm ready. Actually, Madam President, if there is someone -- I do have one question for the Planning Commission. It is only as it relates to the Parkway. I have a question for Miss Reed later whenever the Planning Commission is done, but speaking of the Parkway, can you tell me -- it's around 20th Street, 21st Street or so. Who put up the five yellow bollards? On the south side of the Parkway going east in the far outer lane there is an island. That strip of land between the far lane and kind of the main boulevard, roadway, there are five yellow bollards that were put up a bunch of 193 3/1/06 - Whole - Bill 06003, etc. years ago. They don't appear to be protecting anything other than the fact that it seems that somebody was running their vehicle up on the green part for a long period of time. Can you check that out --
-- as we are having part of the conversation about the Parkway? If we are going into the yellow bollard business, I'm not sure, but they seem oddly placed. It is around 20th or 21st Street on the south side.
Thank you. I just wondered who put them there. Councilman Kenney, I wanted to mention to you in light of your revelation earlier that we have a number of initiatives here in the government. We have had Operation Safe Streets. We have had Operation Safer Streets.
Operation 194 3/1/06 - Whole - Bill 06003, etc. Smooth Streets.
Operation Smooth Streets, so you may want to pursue Operation Clean Streets as a result of the situation with your wife.
She is not cooperating. She is not going to do it. She is done sweeping and voting.