COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING BEFORE THE COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, May 27, 1998 9:50 a.m. - - - BILL 980238 - Approving the plan, estimated costs, and proposed method of charges of the Old City Special Services District of Philadelphia. BILL 980301 - Ordinance creating the Cecil B. Moore Avenue Tax Increment Financing District. BILL 980304 - Ordinance amending an ordinance approved 7/5/97, which created the City Hall Annex Tax Increment Financing District BILL 980305 - Ordinance amending an ordinance 11 approved 7/5/97, which created the PSFS Tax Increment Financing District. BILL 980306 - An ordinance creating the Penn's Landing Tax Increment Financing District. BILL 980307 - Ordinance amending an ordinance approved 7/5/97, which created Reading Terminal Head House Tax Increment Financing District. PRESENT: PRESIDENT JOHN F. STREET, Chairman COUNCILWOMAN AUGUSTA A. CLARK COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DAVID COHEN COUNCILWOMAN ANNA CIBOTTA VERNA COUNCILMAN JAMES F. KENNEY COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILWOMAN HAPPY FERNANDEZ COUNCILWOMAN MARIAN B. TASCO COUNCILMAN FRANK DICICCO COUNCILMAN RICHARD T. MARIANO COUNCILMAN FRANK RIZZO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 COMMITTEE OF THE WHOLE I N D E X TIF Bills William Hankowsky, President. . . . . . . . . Philadelphia Industrial Development Corporation 6 Dominic Sabattini . . . . . . . . . . . . . . 62 7 Penn's Landing Corporation 8 Melvin Simon, Cochairman. . . . . . . . . . . 78 Simon DeBartolo Group 9 Kathy Shields, Vice President . . . . . . . . 110 10 Simon DeBartolo Group 11 George Cahill, Resident of Pier III . . . . . 138 and Democratic Committeeman for the 5th Ward 12 Peter Saligman, Resident of Pier III. . . . . 139 Richard Orth, Principal. . . . . . . . . . . 156 Orth Rogers & Associates Doris Casper, Society Hill Towers Resident. . 158 Richard Zwick, Architect. . . . . . . . . . . 166 Z Texture, P.C. Robert Fina, PIDC . . . . . . . . . . . . . . 174 Jonathon Rubin. . . . . . . . . . . . . . . . 175 R.J. Cousins Contracting Vice President of the Contractors and Small Business Association David Rodgers, President. . . . . . . . . . . 176 Contractors and Small Businesses Association - - - COMMITTEE OF THE WHOLE (Index, cont'd.) Living Wage Bill 5 Bertha Barksdale, ACORN . . . . . . . . . . . 162 - - - Bill No. 980238 Joshua Grimes, Executive Director . . . . . . 122 Old City Special Services District John Taxin, Pres. - Old Original Bookbinders 122 Chairman, Special Services District. Rick Snyderman. . . . . . . . . . . . . . . . 122 Executive Committee, Old City Special Services District, business person in Old City Chris Sayer, Executive Community Member . . . 122 Old City District 4 COMMITTEE OF THE WHOLE - TIF BILLS P R O C E E D I N G S
Good morning, ladies and gentlemen. This is a hearing of the Council Committee of the Whole listed for Wednesday, May 27, 1998, at or about o'clock a.m. in room 400 7 of City Hall. 8 Today we have several things before 9 us. We have Bill No. 980238, which is an ordinance approving the plan, estimated costs, and proposed method of charges of the Old City Special Services District of Philadelphia. Also have Bill No. 980301, which is an ordinance creating the Cecil B. Moore Avenue Tax Increment Financing District. We have Bill No. 980304, an ordinance 17 amending an ordinance approved 7/5/97, which created the City Hall Annex Tax Increment Financing District. We have Bill No. 980305, an ordinance 21 amending an ordinance approved 7/5/97, which created the PSFS Tax Increment Financing District. We also have Bill No. 980306, which is an ordinance creating the Penn's Landing Tax Increment Financing District. 5 COMMITTEE OF THE WHOLE - TIF BILLS And we have Bill No. 980307, which is an ordinance amending an ordinance approved 7/5/97, which created the Reading Terminal Head House Tax Increment Financing District. All of these matters are before the Council Committee of the Whole. It is our intention today, time permitting, to have a public hearing on each and every one of these ordinances, at the end of which we hope to have a public meeting, at which time the committee will take action on these ordinances. We have a number of people who are scheduled to testify here today. I'd like to ask people who want to testify and whose names may not be on the list to see Miss Diaz over at the bar of the chamber, to my left. You can check to see if your name is on the list. If it's not, we will be very happy to add you to the list. Our first witness today will be Mr. William Hankowsky. And what we would like to do as a matter of process, with the committee's permission, is to hear Mr. Hankowsky's testimony on all of the proposed Tax Increment Districts. And if we can, then what I'd like to do is open 6 COMMITTEE OF THE WHOLE - TIF BILLS the floor for questioning on any of the districts that are proposed. Is this anyone who has any objection to see that procedure? (No response.)
And then I think we can have a nice discussion on all of them. If not, Councilman DiCicco, would like to make a brief opening statement regarding at least one of the bills so that Councilmembers will be in a position, prior to Mr. Hankowsky's testimony, to understand what actions were taken as it relates to one of proposed districts. The Chair recognizes Councilman DiCicco.
Thank you, Mr. President and good morning. And thank you for this opportunity to speak on the Penn's Landing TIF. I would like to explain to my colleagues in Council exactly what has been taking place for the last approximately one year. I think it was in June of '97 when the Mayor, along with Mel Simon from the Simon DeBartolo Group, 7 COMMITTEE OF THE WHOLE - TIF BILLS made the announcement that the Penn's Landing site would be the site for the new Philadelphia Entertainment Center. The night prior to that announcement, I had the pleasure of meeting with Mr. Simon and several members of his organization along with a number of Councilpersons, including Councilman Kenney and Councilman Nutter. And I'm not certain who else was there from Council, but there were several Councilmembers present at that dinner meeting, along with a number of representatives from the various City agencies -- the Parking Authority, Penn's Landing Corporation, just to name a few. During the course of the dinner, I sat next to Mr. Simon, and we discussed what Mr. Simon's vision for the Penn's Landing site was in relationship to the Entertainment Center. And since I represent the district where the Entertainment Center will be built, it was important for me to get at least a sense of what his vision was and how he was going to go about developing this site. A couple of the issues that I had at 8 COMMITTEE OF THE WHOLE - TIF BILLS that time were community involvement, where would we go with the project, and how could I play a role in moving this project forward. And I explained to Mr. Simon that before I would even begin to entertain supporting the project, that I wanted to be made certain that I would have -- be in a position to conduct meetings with the various civic associations that would be immediately impacted by the development along Columbus Boulevard; and that during the course of the development stages, that the community would be directly involved in the process. Mr. Simon said that he was supportive of that and would really rather not have it any other way. Subsequent to that dinner meeting, I convened a meeting made up of ten civic associations who are immediately impacted by the proposed development. And, just for the record, I'd like to state the associations that were a part of this working committee: Pier III Homeowners Association, Pier V Homeowners Association, Historic East Market Street, Old City Civic, Society Hill Towers Owners Association, Society Hill Civic Association, Queen 9 COMMITTEE OF THE WHOLE - TIF BILLS Village Neighbors Association, South Street Neighbors Association, South Street Head House District, and the waterfront Business Association. It was at my suggestion that a minimum of two people from each of these associations attend the meeting that I convened sometime in late June of '97. At that meeting were representatives of the Penn's Landing Corporation and representatives of the Simon DeBartolo Group. And we discussed preliminary designs and preliminary issues as to what the project would be, what it would represent in terms of size and scope and number of jobs that this project, when completed, would create for the City of Philadelphia. We had, I believe, five subsequent meetings to that initial meeting. In addition to those meetings with the "Working Committee," as I refer to it, presentations were made at the request of several of the associations I mentioned in their communities with the general membership of that neighborhood. Approximately 6 to 700 people from the various civil groups were given a 10 COMMITTEE OF THE WHOLE - TIF BILLS presentation by the Mel Simon Group, Penn's Landing Corporation, and PIDC. One of the other issues that I discussed with Mr.
Simon at the time of our initial meeting was that we would do what we could to preserve the public space down at Penn's Landing because public space is a very significant issue, and some of you may know there has been an ongoing debate to the future development of a Hyatt Hotel along Columbus Boulevard. And one of the major issues of major concern for the community was the elimination of the some of the public space. It was agreed at that meeting that the public space that was down at Penn's Landing would be preserved. And, in fact, when you see the presentation later on this morning, you will see that there has actually been an increase of public space. In addition, there were several other meetings that had taken place with myself and Penn's Landing Corporation and SEPTA, which has been brought into the group to deal with issues concerning traffic and movement of people in and 11 COMMITTEE OF THE WHOLE - TIF BILLS around the historical district down to the proposed Penn's Landing site. The Philadelphia Department of Streets traffic engineers have been a part of this whole process. What I'm suggesting here is that whether you hear today people who are supportive of this proposed entertainment or people who are opposed to it, no one can say, in my opinion, that they have not been a part of the process. And I, as the elected Councilperson who represents of 1st District, made certain of that. I have been up front with this project from day one, I have told the community groups that I supported this project, and I will continue to support it with the one caveat that there was community involvement. Going forward, we have now created a Traffic Study Committee along with the traffic consultant Orth Rogers to deal with the issues of traffic and parking as the project proceeds, and after its completion, to deal with any issues that may come about as a result of the increase of traffic that will be obviously felt when this project is complete. 12 COMMITTEE OF THE WHOLE - TIF BILLS The bottom line for me was development of the waterfront and the creation of 1350 jobs at a minimum. And I thought that was important to the economic development of this city, and I know that there's some people who think that maybe, because I represent the district, that I should not be supporting this, but I think -- I look at the bigger picture. I think in order for this city to move forward, this will be a great economic boon for this city, it will create the jobs, and it will continue to make Philadelphia the great tourist destination that it could be and will be sometime in the future. Thank you, Mr. President, for this opportunity.
Thank you very much. Is there any other member of Council who would like to give any opening remarks at this time? (No response.)
Good morning, President Street and members of City Council. My name is 13 COMMITTEE OF THE WHOLE - TIF BILLS William Hankowsky, and I'm the President of the Philadelphia Industrial Development Corporation and appearing today on behalf of the Philadelphia Authority for Industrial Development, or PAID. With me this morning are Bob Fina from PIDC, Dominic Sabattini and Jim Courato from Penn's Landing Corporation. I'm here today to testify in support of five bills -- 980301 for the Cecil B. Moore TIF, 980304 amending the City Hall Annex TIF, 980305 amending the PSFS TIF, 980306 creating Penn's Landing TIF, and 980307 amending the Reading Terminal Head House TIF. Today's hearing is required by the Pennsylvania Tax Increment Financing Act to create or amend a TIF District. Should the committee approve these five bills, the TIF Act would then require the Council wait three weeks until its meeting of June 18th for second reading and final approval of these ordinances. Since introduction of the five bills on April 23rd of this year, PIDC has met with City Council, Council staff, as well as Penn's Landing has met with City Council and Council staff, and 14 COMMITTEE OF THE WHOLE - TIF BILLS we have met with representatives of the School District to review the project plans. On Monday, May 11th, the School District approved by resolution to participate in all five of the districts and the amended districts that are before you today. For the remainder of my testimony, I'd like to describe each project briefly, review its benefit to the City and the School District, and summarize any changes that have occurred since the April 23rd submission. Let me start with Penn's Landing. Approval of the Penn's Landing TIF will enable the demolition of the existing improvements at Penn's Landing between Walnut and Market Street, including the Great Plaza, the scissor ramps, surface parking, and the viaduct, and the new construction of a Family Entertainment Center by the Simon DeBartolo Group. This organization is the largest retail real estate investment trust in the country and has extensive experience in these types of projects. The Family Entertainment Center is on a 13-acre site, between Market and Walnut, 15 COMMITTEE OF THE WHOLE - TIF BILLS Christopher Columbus Boulevard and Delaware Avenue. And it is anticipated to include up to 700,000 square feet of leasable entertainment and retail attractions, a 2200- to 2600-car parking garage, an outdoor theater to replace the Great Plaza. And I should note here that this theater will be better than the current Great Plaza. It will have permanent seating of 1500 temporary of 2500 and will really be geared to hold the festivals that Penn's Landing has had and tradition of public activity that Penn's Landing has had. There will be ice rinks, public spaces, and a possible aerial tram linking to Camden. This tram would be funded by DRPA. I should note we have a model of the project, which is in the front of the Council chambers today. 29 million will be repaid by incremental tax revenues authorized under this bill. The $62 million TIF note will be used to pay for these public improvements, principally the demolition and the reconstruction 16 COMMITTEE OF THE WHOLE - TIF BILLS of the ramps and viaduct, the construction of the outdoor theater, public spaces, and the parking garage. Let me note that this is unique in the TIFs that we have brought to City Council. We are doing all of these improvements without the use of the General Fund or the City Capital Budget. So, in effect, this project is paying for itself, and we will own a new ramp, a new viaduct, a new public space, a new plaza. PIDC expects that this project will create over 1350 permanent new jobs, 1,000 construction jobs, and should generate $80 million in tax revenues to the City, and 33 million to the School District over the 20-year life of the district.
Presently, this portion of Penn's Landing provides $114,000 per year to the City and not tax revenue to the School District. In addition to the TIF action you're taking, the Simon DeBartolo Group will enter into a development agreement and sublease with the Penn's Landing Corporation, which will provide an annual rental which will be the greater of 400,000 per year, or 4 percent of the process revenues of 17 COMMITTEE OF THE WHOLE - TIF BILLS the project, plus 10 percent of the gross parking revenues. Also to be included in this development and sublease agreement will be an MBE/WBE plan, which will be an attachment, and which we have been working through both with the Penn's Landing Corporation Simon DeBartolo and Council staff. As Councilman DiCicco just indicated, there have been a series of nine community-represented meetings with representatives of the community Penn's Landing Corporation, and PIDC to discuss this project and its impact on the neighborhood. With us this morning are representatives of the Simon DeBartolo Group, including Mel Simon, who are here to assist in answering any questions you might have. Let me close by pointing out that this is in fact a great project. We will have a $174 million investment in Philadelphia, 1350 new jobs, new taxes for the City and the School District, significant and better new public improvements, an economic rent that will accrue every year to the Penn's Landing Corporation. And all of this only 18 COMMITTEE OF THE WHOLE - TIF BILLS by the use of a TIF. Let me move now to the Cecil B. Moore Avenue TIF. This TIF will enable the demolition of certain existing improvements on the north and south sides of Cecil B. Moore Avenue between 16th and Sydenham Streets and the construction of new buildings on both sides, to accommodate a mixed-use retail office center. The center's anticipated to include a 20,000-square-foot outdoor plaza, a 15-car parking lot, 48,000 square feet of mixed retail and office space. Tenants are expected to include WHAT-Radio's corporate offices, a post office, various restaurants, and other offices. 2 million would be repaid by the incremental tax revenues authorized by this bill. I should note that this project will also include other public financing, a PIDC 108 loan, and an Empowerment Zone loan also. PIDC expects the project to create 64 new permanent jobs and 67 construction jobs. Since the project plan was filed, we've refined 19 COMMITTEE OF THE WHOLE - TIF BILLS the tax analysis to show additional taxes through the liquor tax to be generated by the project, which will benefit the School District. 1 million to 8 benefit the City, and 530,000 to the School 9 District. 10 The project plan has been amended and 11 restated to reflect these changes and has been on 12 file with the City Clerk. 13 Mr. Alfred Muronda of the Cecil B. 14 Moore CDC is also here this morning, again, should 15 you have any questions you would like to address 16 to him. 17 City Hall Annex. This TIF and next 18 three, if you might recall last year when we 19 approved these TIF Districts, Council amended the 20 ordinance to require that if certain changes occurred over certain percentage thresholds, that we needed to come back and seek Council's consent to those changes. And what's happening is the next three all result because some of those thresholds, in fact, have been exceeded. 20 COMMITTEE OF THE WHOLE - TIF BILLS The City Hall Annex TIF was originally approved on June 19th of last calendar year. Since that time, the demolition and abatement have been completed, and construction financing has been settled. As construction has progressed, several changes to the original project plan have arisen, which require Council approval. The room count has increased from 450 to 499 rooms. The formerly-stated number of employees has dropped from 162 to 155, the restaurant, which was originally to be leased out, will now be operated directly by the hotel, through Marriott International.
8 million, with all of the increase to be funded out of private debt or equity. We're not increasing any public funding of this project. 2 million during the term. The amendment allows for the use of the TIF revenues to repay a substitute loan if the initial TIF funding is refinanced, as long as that 21 COMMITTEE OF THE WHOLE - TIF BILLS substitute loan is equal or better for the City and provides that PAID not bring this project back to Council unless the project costs exceed 5 percent part of financing and so long as those 6 increases are funded out of, again, either debt or 7 equity -- no more public dollars. 8 We would move the effective date of the 9 TIF District from January 1, 1998 to July 1, 1998 10 to facilitate the TIF note. The amendatory 11 Exhibit B has been restated and is with the City 12 Clerk's office. And I should note, by the way, 13 that the City Hall Annex is a Marriott Courtyard 14 Hotel. 15 The PSFS project, again, was approved on June 19th. Since that time, ownership, project costs, and the financial structure have been revised. The original project anticipated that it be developed cooperatively between Loews Hotel and the Rubin organization. It will now be owned soley by Loews Hotel and developed by them through their designee. The project costs have increased by $10 million to $115 million. 25 million loan from the Economic Stimulus Fund -- that's a $1 million increase from what was shown to Council last year; and $30 million in Loews equity, which is a $4 million from last year. 6 million. The amendment allows, again, the TIF revenues for a substitute loan -- this would be if there was a refinancing during the 20-year term. And, again, we would bring back the project, if the project costs exceed 15% prior to financing and so long as the increases are funded out of private debt or equity. Again, we want to move the effective date from January 1, '98 to January 1, '99 to facilitate the changes and the delays that have been caused in the project. Again, the amendatory exhibit is on file with Council. The Reading Terminal Head House also 23 COMMITTEE OF THE WHOLE - TIF BILLS was approved on June 19th of last year. Since that time, the public space has been completed and opened, the Hard Rock Cafe has opened, construction financing on the hotel portion has settled. Construction has progressed, and several changes, again, has arisen, which require Council action. First, the complex has been separated into three condominium and units -- a retail portion, a public space portion, and a hotel portion. Initially, the plan anticipated that the complex would be owned and operated as a single unit by an affiliate of Host Marriott. Now the public area and the retail condominiums will be owned by an affiliate of the Redevelopment Authority and managed by its designee. The hotel condominium will be owned by an affiliate of Host Marriott Corporation and operated as an expansion of our existing Convention Center hotel, Marriott International. The hotel has been redesigned and will now have 210 versus 213 rooms. million in the public area and retail spaces. million TIF note and a loan of 986,000 from the Stimulus Program. Twenty-eight million of the private debt may be placed in first position, ahead of the TIF note since the bill was introduced on April 23rd. Host Marriott has decided to fund the TIF note out of its own resources rather than use the proposed HUD 108 loan. This decision will free up that HUD 108 loan resources for other projects that we may want to undertake in the City. The new TIF note will be funded by Host Marriott based on market conditions. This privately-funded TIF note will require an additional 4 million in repayments over the district term. 9 million in public grants for the public space. The TIF note will be funded from a HUD 108 loan, as originally 25 COMMITTEE OF THE WHOLE - TIF BILLS anticipated. And, again, we propose technical changes to facilitate the funding of the notes.
We now split the TIF between the two owners, the Redevelopment Authority and Marriott. The TIF note made by the hotel owner/operator will allow that if there's a shortfall in TIF revenues, they will fund it and then could be reimbursed from future TIF revenues to the extent available. Again, we allow for a refinancing substitute loan. Again, we would come back to Council should we hit the percent point. And, again, the 14 amendatory exhibit is on file. 15 In conclusion, I would like to note for the record that the analysis of the TIF Districts that PAID has proposed indicates that both the School District and the City will receive more money during the TIF term for these various projects than if they are not approved. In essence, the City and the School District are generating more than enough tax revenues needed for the TIF notes and stimulating development of underutilized land that would not occur but for these TIF approvals. COMMITTEE OF THE WHOLE - TIF BILLS I would ask for your approval of the two new and the three amendatory TIF bills. And, again, I remind Council that we would wait three weeks for final passage and second reading on June 18th. I might close by noting just that though these are not before Council today, that on two other prior TIFs that we've worked on, both the PNC Bank Operation Center, they have in fact, if you recall that project, ordered their second expansion and will be adding 500 more jobs to that project. And the SmithKline TIF which we did, they have now ordered two additional floors to that office building and will be adding 200 additional jobs. So I think the concept that these stimulate future development is in fact in reality playing out, and I would anticipate the same with these projects. Thank you.
Thank you very much. Mr. Hankowsky, I would like to refer you to a statement in your testimony on under the "Reading Terminal Head House," and ask 27 COMMITTEE OF THE WHOLE - TIF BILLS you to go into a little more detail in explaining to us what you mean by "three condominium units comprised of a retail public area and hotel portions." And you say, "Now that the public area and retail condominiums are owned by the affiliate of the RDA, and will be managed by its designee. . ." What does that mean?
What we've done, as I indicated in my testimony, originally we thought that we would, quote, sell the entire building to Marriott. They decided that they didn't want to be in the retail business or the public space business and wanted to stay in the hotel business. So they are taking the top of the building, floors 2 and up. The Redevelopment Authority has created a partnership which they now control for the retail and public space. This building, I think, as we all know, is a national historic landmark. And as a result, this project creates the potential to use federal historic tax credits. The Redevelopment Authority has entered into an agreement to sell those tax credits via First Union. What that would require then is 28 COMMITTEE OF THE WHOLE - TIF BILLS First Union will have a limited partner ownership interest within the partnership to get the tax credit benefit, tax credits by buying them. That becomes part of that equity that I noted later in my testimony that is financing the project. We've divided it between the retail and the public space. The retail space, obviously, could be managed -- the Redevelopment Authority might hire a retail manager to manage that space. The public space, obviously, we the public want to control between the Redevelopment Authority and the Convention Center Authority as the front door to the new Convention Center. So the designee is this partnership that has been created to --
At the moment, it's just the Redevelopment Authority and then First Union will become the limited partner when they close on the tax credit equity.
So when you say, "Now the public area and retail condominiums are owned by an affiliate of the RDA" -- 29 COMMITTEE OF THE WHOLE - TIF BILLS
No. It has been formed so that as the work is being done, you don't lose -- as soon as you start the work, if you haven't created the partnership, you would lose the tax credits. The partnership has been formed, the Redevelopment Authority is the general partner --
-- in the development of this new this space which Host Marriott is no longer interested in developing. 30 COMMITTEE OF THE WHOLE - TIF BILLS
And that becomes the designee entity of the Redevelopment Authority. The Redevelopment Authority is the general partner and has control of the partnership. First Union is the limited partner.
So what are we doing by way of -- can you just take me back and tell me now, what we are doing by way of amending the Reading Terminal Head House TIF?
In the -- originally, we had indicated that the owner and developer would be Marriott. In the ordinance that Council amended last year, we were to come back if there was a change in ownership. The change in ownership is that Marriott will only own the hotel portion and that the Redevelopment Authority's partnership will own the retail public space portion. That's the first change. The second change is the room count 31 COMMITTEE OF THE WHOLE - TIF BILLS from 210 to 213. The third change is the increase in the project costs -- I'm sorry, I'm sorry -- is the project costs. And then we are also -- originally, when we had a single ownership, we had a single TIF note because there was only one financing structure. The TIF note is now broken apart. A portion is applied to the hotel and a portion is applied to the retail. We're not increasing the amount of the TIF note.
The Redevelopment Authority will own it via this partnership to get the tax credits for that space. And then the Convention Center Authority will operate it; will clean it and light it and maintain it as their front door.
That's a little strange to me. Can you be more specific about what the retail component is? I mean, how much space are we talking about, and what's the plan for leasing it up and fitting it out and doing all 32 COMMITTEE OF THE WHOLE - TIF BILLS of that?
All right. The retail space is the first floor of the Reading Head House. And it consists of, if you can visualize looking at it from Market Street, you go through the front door, that's the public space, the escalators take you up. On the left we have Hard Rock Cafe. There will be retail space on the right, another place on the right. As you go through the Head House, there's a space to the rear so it's across the street, across Filbert Street from the Reading Terminal Market and behind the escalators that you take up to the Convention Center. This area now is all a part of the staging area during construction that will be available as retail space. And, in fact, therefore, you have a U-shaped retail area with the public space in the center of the U going up. It's a total of 48,000 square feet of retail space. The Redevelopment Authority would be the party that would lease it out. They have the lease in place with Hard Rock Cafe and are pursuing other tenants for the other space. 33 COMMITTEE OF THE WHOLE - TIF BILLS The space really isn't available in a leasing sense until the hotel construction is done above, because it's the staging area for construction. So the sequence of events will be that the hotel will get finished, the construction workers will go away from that, and then the fit-out will be done for the retail space, and those tenants will move into that space.
Can you explain just briefly how the Redevelopment Authority gets the syndicate tax credits in this? I don't understand that.
As I indicated, the building is a national historic land mark and, therefore, if you do work on it, that work is eligible under the federal tax code for tax credits. In order to do that, the Redevelopment Authority set up a partnership, made themselves the general partner in order to bring in a limited partner in order to sell the tax credits. The limited partner is buying the tax credits, which, obviously, have an advantage when they pay taxes 34 COMMITTEE OF THE WHOLE - TIF BILLS and are paying cash for that. That cash is going into the cost of construction as equity into the project. I don't know if the Council President remembers a long time ago when we tried to -- we were trying to see if we could do a tax credit project even in using the train shed --
Yeah. That didn't work at the time. But when we looked at the Head House as a project by itself, we were able to come up with this structure in order to get the advantage. If we didn't use the tax credits, we'd just have to borrow the money, you'd have more debt on the project. So this is a way to get equity into --
I always thought that private parties syndicated these tax credits. I didn't know that public agencies like the Redevelopment Authority could do that.
They can do it by setting up the partnership. And then First Union, in fact, will sell the credits. You're exactly right. 35 COMMITTEE OF THE WHOLE - TIF BILLS
All right. Thank you very much. The Chair recognizes Councilman Nutter.
Thank you, Mr. President. Mr. Hankowsky, I'd like to stay in the same area. You've referred on two or three occasions to this partnership by which the Redevelopment Authority will control this public area and retail space; is that correct?
The Redevelopment Authority is the 1-percent general partner; and then the 99-percent limited partner is a designee of First Union, First Union Bank -- I guess it's probably the parent First Union and financial group -- who will then sell the tax credits.
I'm sorry. Take me back through that again. A designee of First Union?
I'm sorry if I -- you'll have a limited partnership. 36 COMMITTEE OF THE WHOLE - TIF BILLS
This is the absolute standard structure when you set up a transaction like this. So if you looked at how the City Hall Annex has been done --
-- or all these projects that we've done where tax credits were used --
What you do is you set up the partnership. You have a general partner, the general partner has a 1-percent ownership interest of the partnership, that's the Redevelopment Authority. 37 COMMITTEE OF THE WHOLE - TIF BILLS
But as general partner, they make the management decisions on behalf of the partnership.
They will provide -- they will buy -- write a check and buy the tax credits.
It's, um -- I just want to make sure I get the right number. It's 4.4 million in the retail space. There's also tax credits, obviously, in the hotel that Marriott's using to get their equity.
There are also tax 38 COMMITTEE OF THE WHOLE - TIF BILLS credits at the top --
Okay. So it's $4.4 million in tax credits. They're going to buy --
They write a check to the Redevelopment Authority, take that cash, and pay for that portion of the construction.
First Union, through their financing corporation, will then find people who need tax credits.
They're not going to keep them in their own portfolio.
They may keep them, they may sell; that would be their election. 39 COMMITTEE OF THE WHOLE - TIF BILLS
Okay. And what they got out of this is the difference between what they bought the tax credit for and what they sell them for.
And then, I think in answer to the previous question, the entity that's actually going to manage the space is the Convention Center Authority?
Well, there's two types of space. The Convention Center Authority will be managing the public space, the front door, the walkway corridor, the escalators, because it's their environment. Obviously it's the front door to the Convention Center.
The retail space will be managed by the Redevelopment Authority, or they may hire, you know, firm to manage it on their behalf, but they will be responsible.
Does the 40 COMMITTEE OF THE WHOLE - TIF BILLS Redevelopment Authority have previous experience in managing retail spaces?
Well, the Redevelopment Authority has previous experience in structure -- not in exact structure, but we all might recall that, in fact, the Gallery -- I think I have this right. The shell of the Gallery is owned by the Redevelopment Authority and then leased to, in that case, the Rouse Corporation out of Maryland who operate the space. So you have -- the Redevelopment Authority's active in the retail activity on Market Street.
Right, but they'll hire somebody to manage this retail space.
Okay. Now, maybe I missed this earlier, and I apologize, but the amendment on this Exhibit B for the Reading Terminal Head House has the project costs going up by 14 and a half million dollars, and the total number of hotel rooms decreases from 213 to 210.
Why did the cost go 41 COMMITTEE OF THE WHOLE - TIF BILLS up by and a half million dollars? 3
The costs have 4 fundamentally gone up because in all three of 5 these, you'll note that -- 6
Oh, okay. In all three 14 of the projects -- the Annex, PSFS, and the Head House, the costs went up. When we were here in June of last calendar year, we were coming in on the basis of, at that point, architects' drawings and cost estimates. People said, We think it's going to cost this much based on what we think we're going to do.
In every instance, people have now progressed in the project. They've progressed in either going from what's generally called schematic design to construction 42 COMMITTEE OF THE WHOLE - TIF BILLS documents. In both the Annex and the Head House, they have started construction, so they have actually bid out work, awarded it, and now know what it costs. And in the Head House, they've awarded massive amounts of contracts and know what it costs. So now what are reflecting are the real costs that the contractor marketplace is telling us it's costing to do it. This is a -- the Head House is a complicated project because we have -- we have done it in phases so as the construction work is transpiring -- for example, today, they are working -- they are literally building the hotel, but they're maintaining access to the public space, to Hard Rock Cafe, there's been extensive scaffolding gone up. And part of is you're doing historic renovation to earn the tax credits. And that's a fairly precise kind of construction work type to take.
Okay. And just for the record, since all these project costs have gone up, I mean, is it fairly common in these 43 COMMITTEE OF THE WHOLE - TIF BILLS kinds of projects that there are these kinds of 15, $10 million kind of off-the-mark differences between the estimate and reality?
Let me first -- the historic renovation projects I would put in a category. So if this were new construction, I would say to you it would be atypical.
When you're in historic renovation and you start, it is not unusual to have costs increase.
And in some cases, for example -- I'll take a simple example, asbestos removal. You think you know where the asbestos is and then you start opening up the walls and you find out there's twice as many pipes as you thought.
So whereas when you're building new, you do test boorings.
That's the only thing you don't know. And after that, you know.
All right. My last question on this is on the Reading Terminal project. You now indicate that the TIF note for the hotel condominium will not be funded from proceeds HUD Section 108 loan, but apparently Host Marriott is going to go out into the private market and get their money.
What caused them to make the decision to go from the HUD 108 loan?
When we entered into the formal negotiations on the actual 108 loan, as they looked at both the cost of that money, the commitments we were asking them to provide -- for example, we wanted Marriott to guarantee the loan 45 COMMITTEE OF THE WHOLE - TIF BILLS because it's a resource we believe we deserve to have the responsibility to, you know, get back here on behalf of the City. They came to the conclusion that they could do almost as well on their own in the marketplace and not have to enter into, for example, what would be known as "an intercreditor agreement" with us. You know, we would sort of want to be -- we would want certain rights if they were refinancing.
All right, so they didn't want to deal with us; they wanted to go to the private marketplace and do their own thing.
Okay. PSFS, did I read in the newspaper some time ago that the Rubin organization is out of this project?
This will be a one hundred percent Loews-Hotel-chain-developed, -owned, and -managed project. 46 COMMITTEE OF THE WHOLE - TIF BILLS
Okay. But the Exhibit B says, "The developer shall be designated by Loews Hotels, Inc. or its affiliate." Who is that?
They will have a single purpose as they do -- as everybody does in real estate. You create a single-purpose corporation to hold the building so you'll have Loews -- probably it will be exactly what I described earlier; it will probably be a general partnership. Loews will have a 1 percent interest, they'll sell the tax credits. That's what I mean by "an affiliate."
Right, okay. I'll take advantage of the president reading his papers. In the Penn's Landing project, in the project plan, in the materials that we received filed April 21, 1998, Part 1, Proposed Improvements, , just a couple items. You've got the Penn's Landing Corporation is going to sublease approximately 13 acres within the district to an affiliate of the Simon DeBartolo Group (SDG). 47 COMMITTEE OF THE WHOLE - TIF BILLS
To develop the Family Entertainment Center, also known as "The Project." Again, this term "affiliate," what exactly does at a mean?
Again, as in all real estate practice, the Simon DeBartolo Group creates a separate partnership entity that owns each of their projects. The parent, the real estate investment trust, is the general partner in those, and they may or may not, for example, have limited partners that might invest in the project, but they will be in control as the general partner.
Okay. On that same page, there are headings called "Entertainment and Retail Attractions," "Parking," "Replacement of Public Space for the Great Plaza," "Outdoor Ampitheater," "Aerial Tram" -- and I don't think we need to -- I don't need to talk about turn lanes. Who will own what components of this project? What is the term of their ownership, what relationship does it have to the City or any of our entities or Penn's Landing Corporation? 48 COMMITTEE OF THE WHOLE - TIF BILLS Can you walk through these different pieces.
And tell me who owns what and who's in control of what?
Sure. Let me start with where we are today 'cause that that's a piece of how you go from there.
Yeah. Penn's Landing is -- there are portions -- there's a real estate interest held by the City of Philadelphia, an interest held by the Commonwealth of Pennsylvania, 'cause there's repairing rights. If you think back, Penn's Landing was a set of piers. They were then demolished, we built the pad, we filled it in, and we create the space. Those real estate interests have all been collected together and are invested in the Redevelopment Authority who entered into a redevelopment agreement with Penn's Landing Corporation. Penn's Landing Corporation is the designated developer and leases it from the Redevelopment Authority. 49 COMMITTEE OF THE WHOLE - TIF BILLS So in each instance, as I now move forward, when I say "lease," it technically is a sublease.
The Simon DeBartolo Group will be leasing the area from Walnut Street, North Walnut Street being just in front of the Maritime Museum and the Seaport Museum.
North to Market Street, Market Street being where you take the ramp over from Market and you come to Penn's Landing.
Penn's Landing will be leasing that volume of space to the Simon DeBartolo Group allowing them via the sublease to develop the retail space, the parking garage up to a certain number of spaces and a certain square foot of retail. They can't come back in five years and build an apartment building -- I'm just -- you know, and add to it so. They're getting volume of space and development rights to that development space. 50 COMMITTEE OF THE WHOLE - TIF BILLS They will be doing all of the work here and are responsible to execute the project, so they'll do the demolition work, they will build the new viaduct, build the new ramp, build the new Great Plaza. The ramp, which will be new ramp that will run from Christopher Columbus Boulevard up to the new viaduct, and the new viaduct will be owned by the public, by PennDOT. It's part of Christopher Columbus and it connects between Christopher Columbus, Market and Chestnut. So these, though they will be built by Simon, per specs to be approved, and there's been meetings with the Streets Department and PennDOT, these will be owned by the public, PennDOT. The great -- the new Great Plaza -- and I don't know if in the end we'll give it a new name, but we'll use that for today -- the new ampitheater, will be owned by Penn's Landing Corporation. It will not be leased to Simon. So Penn's Landing Corporation will be, you know, can have the festivals there. They're directly responsible to use it --
Is it my understanding your initial your initial 51 COMMITTEE OF THE WHOLE - TIF BILLS explanation is that they will build it?
The public also retains -- I just want to be clear -- ownership, again, Penn's Landing of what we generally call the esplanade, the walkway along the edge of the waterfront from Market Street along the front. So that, again, the public will have a right to, you know, still get to the water. 52 COMMITTEE OF THE WHOLE - TIF BILLS
Simon can't put up a barricade, put up a gate or anything. That's the ownership structure.
I was asked a -- I will repeat what I just said. The new ampitheater or the new Great Plaza will continue to be owned, operated by Penn's Landing Corporation. So the festivals and who are the vendors there and all of that will be controlled by Penn's Landing Corporation as it is today. The walkway or what we call "the esplanade" that runs along the waterfront on the northern end and on the eastern end of the project, again, stays with Penn's Landing concentration. So if you want to jog or walk your dog or just sit at the waterfront and enjoy it, that's controlled by Penn's Landing Corporation, that remains public space. Now, there is some additional public space that will be control by Penn's Landing next to the new Great Plaza. You know, you could -- 53 COMMITTEE OF THE WHOLE - TIF BILLS you'll be on top of the parking garage, you'll be at roughly the level of the viaduct, a little bit higher, so you could sit up there and take in the skyline or take in the waterfront. And these will be available just like they are under current operating circumstances at Penn's Landing Corporation. I believe, Councilman, that was responsive to your question. I hope I --
-- where the unobstructed public spaces are. And I thought I heard you say that there would be additional public space.
Would you kindly show us that? Did you also say that there will be no 25 barriers that prevent the public from free access 54 COMMITTEE OF THE WHOLE - TIF BILLS to the public space?
That's right. That is correct, that is correct. Mr. Courato will be pulling out the drawings, Councilwoman. And as soon as he does that, I'd be happy to do it. (Drawings are displayed for Council.)
These are from the Simon DeBartolo Group, this is the rendering of the project, that is correct.
Why don't you just put the model on this table and point it out to us on the picture as well as on the model. And tell us what's on the model.
Bob, come here. Jim. Okay, in response to Councilwoman Clark's question, using the model, in fact, I think was a good suggestion. Let me just first 55 COMMITTEE OF THE WHOLE - TIF BILLS orient people. Delaware River, Christopher Columbus Boulevard, I-95, back into Center City, Market Street, Chestnut Street, Walnut Street. Today, the Independent Seaport Museum, Walnut Plaza, the Great Plaza that we use for the festivals is right about here. Here's that big parking lot where we put the skating facility every winter. So the project gets built from Walnut Street to Market Street, Christopher Columbus to Delaware Avenue. This entire area, as I move my finger, these public areas along the edge of the waterfront to the waterfront, from the edge of the buildings to the waterfront remain in control of Penn's Landing Corporation so that there is continued public access to the waterfront, as Penn's Landing currently provides it today. The Great Plaza is replaced, so to speak, by a new ampitheater, which is right here, which is as large -- and, in fact, in seating capacity, will be designed as a festival venue. I think, as all know today, the Great Plaza was really built as a park, and when we have festivals, we sit on steps, which is not 56 COMMITTEE OF THE WHOLE - TIF BILLS particularly comfortable. This will actually be designed as an ampitheater with 1500 permanent seats and 2500 temporary seats -- a just more attractive and pleasant environment for the festivals that we have. When I said "additional public space," that is this area here and here. So that in addition, you could come, and coming from the historic district, and you don't have to buy anything at the project; you can just come up on the roof, sit here, enjoy the waterfront, see the skyline from the City. You can access this area off the Market Street ramp by a set of stairs here. This is also a public space along the edge here. You can access it by coming across the Chestnut Street viaduct. And here's the set of stairs that bring you up so that there are access points. In addition, you can access it from inside the project. This large space here is an open courtyard area. I would analogize it to the interior of Liberty Place, you know, just sort of 57 COMMITTEE OF THE WHOLE - TIF BILLS this wide rotunda, much bigger. It is not climate-controlled so it's an open space, but would it would have a cover. And there's a set -- a grand set of staircases there so you could be in the project, you could come out of the theaters and you could come up and sit there after a movie or wait there before. So it's an integrated public-private project. And Penn's Landing -- back to Councilman Nutter's question -- maintains ownership of these public spaces and public venues. They are not being leased to the developer. The developer is leasing the area to develop the retail, the parking garage. We will have permanent ice-skating rinks also here, which will be operated by the developer, so won't have that seasonal effect of where we put it together and take it down; it will be here year-round.
(Off mike, not completely audible to stenographer.) Could you point out the. . . of where that may happen. . . 58 COMMITTEE OF THE WHOLE - TIF BILLS
Yes. Councilman DiCicco is raising the issue. There have been discussions, extensive discussions, between the Simon Group and the Please Touch Museum. I think -- I know I, as a parent, we all treasure the Please Touch Museum, we've all been there. It is in pretty cramped space. So the Please Touch Museum anyhow was thinking about how could they expand, how could they deal with the increased demands on their space. When this project came along, they considered the opportunity to put the Please Touch Museum on the waterfront and solve both the need for them to have more space and put them in a very attractive family-entertainment-oriented environment. In order to do that, they've had discussions with the Simon DeBartolo Group of the potential of integrating a new Please Touch Museum in the project. If that occurred, it would occur on top of the project. In effect, we'd get a third floor. This -- the project now is two stories high, basically. You'd get a third level, which would be on the same level as the new Great Plaza 59 COMMITTEE OF THE WHOLE - TIF BILLS and the skating rinks and would have dramatic views of the City, provide them with new space and be integrated in the project. That's not a done deal, discussions are going on, but it's a real possibility.
Has there been any consideration given to assuring that there will be mixed economic use. I don't wish to see our waterfront become a place for very wealthy people that poor people can't afford to do anything except watch the rich people. Has there been any thought given to an integrated economic use of the land?
Councilwoman, I want to make it extremely clear -- you can get to the public space, quote/unquote, without going through the private project. So Penn's Landing Corporation is committed to -- I shouldn't speak for them, Tom and Jim are here. But they're committed to their mission to do the large festivals -- we just had one this past weekend -- to do the ethnic festivals, so that there continues to be an exciting public space that we all enjoy in 60 COMMITTEE OF THE WHOLE - TIF BILLS different ways, both programmed and just there for passive use throughout the year. And this is project will not affect that. That remains with Penn's Landing Corporation. They have the capacity to do it, they have control to do it, and they're committed to do it. In terms of the kinds of uses in the retail project, they will range from restaurants, theaters, entertainment venues, retail space that -- and the direction that -- I don't know if the Simon people would like to respond -- is that this, in fact, be oriented as a family entertainment complex. In other words, that there is something for children, for teenagers, for adults that you would feel comfortable bringing your family and there's lots of things to do and see and enjoy.
And to tap into all the entire diverse population of the area.
But, Mr. Hankowsky, stay with my concern. Because Disney World is a family venue 61 COMMITTEE OF THE WHOLE - TIF BILLS but it's very expensive. So I'm talking about a purposeful plan that includes people of all economic strata. For instance, have you looked at how San Antonio handled its river walk? Right beside very, very expensive restaurants, you may stand and buy a taco at a taco stand. I don't wish to see us make this a wealthy person's playground that poor people come and watch wealthy people play. I'm still saying, is there some planned purposeful aim at involving all economic levels in the use of this space?
Councilwoman, let me first -- this -- I think the Disney Land analogy is a good one. There is not a price of admission to go to this project.
This project is free. And when I mean the project is -- obviously, the public space is free and available by Penn's Landing and will be programmed by Penn's Landing. But you can also go into the Simon Project. There's a large campo. We're hopeful there will be some fairly exciting free things that people will be able to enjoy in that large 62 COMMITTEE OF THE WHOLE - TIF BILLS public area that are currently being worked on. And you can go through it, and you don't -- there's not a price of admission, so to speak.
And in that large campo area, for example, we're looking at the potential for something we've, for the moment, called "The American Experience" where we might have large video screens and other high-tech activity that would relate to history so that this project would echo Philadelphia's great tourism roots, which is, in fact, its historic base. And you would be able to enjoy that free. You could buy a coke, sit there, and you don't have to -- and still go to the place and say, This was fun to do something.
That's the kind of plan that I'm asking about, and that's exactly what I want to see happen.
Mr. Hankowsky, it might be appropriate at this time for Mr. Sabattini to answer Councilwoman Clark's specific question, because my understanding is that the testimony has been that Penn's Landing Corporation 63 COMMITTEE OF THE WHOLE - TIF BILLS will retain control of all of the public areas. And I think he might be able to shed some light on it. And while doing so, Mr. Sabattini, can you just comment on the gated events that currently sometimes take place in the public area down there that has sometimes caused some frustration on the part of families who have gone down and found out that couldn't really -- they could use the public area, but they couldn't really actually get into some of the festivals because they are gated. So could you comment on all of that?
Sure. And thank you, Council President. Yes, as Bill mentioned, in part of the project itself, there will be free entertainment provided by the developer, such things as The American Experience. But in addition to that, all of the public spaces that are planned for it will continue to have free admission, I'd say, at least 90 percent of the time. And also, the concessionaires that we will be selecting for that festival that we do now 64 COMMITTEE OF THE WHOLE - TIF BILLS will be in a reasonable price range, at prices we can control. So we can assure you that it will be accessible to all people of all economic levels. With regard to the programming for gated events, presently, we do for down there. All of them are generally below-market in terms of what the rate is. That's a reflection of today's economics to be able to produce entertainment at a high level. We think that we can reasonably assure you that there will not be more than four of them, with maybe even less, because with the new facility, it should reduce our operating costs, and we're anxious to move forward in that direction and provide a better-quality product and continually do it below market rates. So we're excited about that. I would also mention that whenever we do a gated event, we assure everyone that at least a half of the site will be free, such as this past weekend where we did "Jam on the River," which had an admission charge. There was a visiting ship on the south end of Penn's Landing. We do also some street theater and other children's events down 65 COMMITTEE OF THE WHOLE - TIF BILLS south in the non-gated events. So we'll always have something free down at Penn's Landing.
This is interesting. Councilman Nutter is -- he doesn't feel put upon, I'm sure. The Chair recognizes Councilwoman Fernandez.
Thank you, Mr. President. Following up on your discussion of the model and all of the access by the public, all the different ways the public can access it. I can't tell from the model or from any of the drawings about essentially the esthetic and maybe safety issues around pedestrian access. And I'm thinking that as you walk by the Convention Center particularly in the front, it's very welcoming, it's very friendly, you feel very safe because of the way it's designed. Yet, there are other places that you can think of where if you walk by, particularly for a long stretch 66 COMMITTEE OF THE WHOLE - TIF BILLS along a concrete wall, you feel -- you know, it feels both ugly and often can feel unsafe if it's not properly designed. Could you discuss the design, particularly where the pedestrian walkway along the riverfront? Also, what kind of interface that has with the private development?
Yes. If I, again, can take the liberty, it might be easier if I go back up and do that.
I will apologize to the Councilpeople on my -- somewhere I have to put my back, I'm sorry. The -- quiet candidly, Councilwoman, I think if we think today about Penn's Landing, we have a very enjoyable public space at Walnut Plaza which we did just a couple years ago. We created a pedestrian-only bridge access point, which is not on this model, but I'll just remind people, we also created a pedestrian-only bridge from South Street, roughly about here. So we want to clearly enhance pedestrian access to the waterfront. And 67 COMMITTEE OF THE WHOLE - TIF BILLS understanding that the majority of the tourists at some point in their Philadelphia experience are up here at Independence Mall and that they want to feel welcomed down to the waterfront, as well as, obviously, our own resident who will use it all the time. Currently, there's a project underway that was in the City's Capital Budget that Council approved. And you can see the construction if go down to Penn's Landing on Market Street. There will be a similar project on Chestnut Street to really do exactly what you're saying, which is to make it pedestrian-friendly. If you recall, these were ramps that we stuck sidewalks on, to be blunt.
They weren't friendly, they didn't feel safe. These now are going to be comparable in their amenity level to the Walnut Street Bridge -- wider sidewalk, a more lively experience, a more inviting experience. That same theme will be continued as you get into the project. So again, today, you come across and we 68 COMMITTEE OF THE WHOLE - TIF BILLS have the viaduct. It's actually kind of interesting. You can be up in the air and get a great view, but you sort of feel like you're on a highway ramp on a sidewalk. Instead now, we're going to have the viaduct -- the new viaduct will be the front door to this project. There will be a big lay-by lane so that if, for example, a handicapped person wants to come to the project or whatever, you can drop off and then you can get into the garage -- and this is very interesting on this project. You'll be able to enter the garage off the viaduct, so off Market and Chestnut; or you can enter the garage off Christopher Columbus Boulevard below. And if you're in the garage, no 17 matter which way you came in, you can leave the other way if you want. So the garage system all interconnects. So this will all be a much friendlier pedestrian environment. Again, if we think about Penn's Landing today, what is it from the Great Plaza north? It is a big open parking lot. It's not -- it's not particularly, again, pedestrian-friendly, warm, 69 COMMITTEE OF THE WHOLE - TIF BILLS and inviting. So instead now, we will have this large project lit, exciting, alive, more people, which I think is always a function of safety. It's just an active place where lot of things are going on. You'll have retail frontage along the edges so that --
There will be windows, there will be, you know, openings to stores. You may even have a situation where you could go into the store on this side and come out the other side, depending on which retail tenants go in which space. This large open area is a large public space that's analogized to the campos that you see in Italy in very large plazas, piazzas. There will be a large opening arch in front of it. For those who have ever been to Boston, there's Rose Wharf where the ferry goes to the airport, and it's kind of that arch experience. And so when you're in this project -- 70 COMMITTEE OF THE WHOLE - TIF BILLS in fact, when you come in this way and walk through the corridor, you will in effect see through the arch, and this will be drawn to the river as you move through. And these are really balcony levels that cross the arch point. The whole top of this will -- it will feel as if we have a park, underneath of which we've slid a garage. So you may notice here this tree-lined area. It will all be, you know, pavers -- it will look -- thank you, Jim. It will like that kind of space. So here's the ampitheater and events going on, but you don't have to do that. You could just enjoy the space, sit on a bench, be in landscaped area, be looking out over the waterfront. So this will be lit, heavily lit. So this is, in my personal opinion, going to be a dramatic improvement over our current experience on the waterfront. And everybody has that goal. It's to the developer's self-interest to have that kind of space, it's to the public's interest. And, as Councilman DiCicco's indicated, in working with the community, we also want to 71 COMMITTEE OF THE WHOLE - TIF BILLS make sure it's a space that remains part of the fabric of Old City, Society Hill, Queen's Village, etc.
So as far as you know, there are no sort of big concrete walls and canyons that people have to walk through?
No. This is a lively, active kind of space. This is a garage, so there's been an attempt to -- to make the garage not feel like a garage, to have an interesting kind look. These shed-type structures or buildings actually are sort of trying to play architecturally off of the fact that this is the historic waterfront. So we had pier buildings, so this will read, so to speak, as if it -- architecturally, as if it harkens back to the historic architecture of the waterfront. This will -- you will see and visualize, in terms of lighting and seeing this, if you're coming over the Ben Franklin Bridge, if you're coming on 95, if you happen to be at Wiggins Park, I mean, this will be sort of a glowing jewel on the waterfront. 72 COMMITTEE OF THE WHOLE - TIF BILLS You'll see it, if you're looking down Market Street or down Chestnut -- think of down Chestnut Street. You're at Independence Mall and you will be looking down. There will be an architectural feature that will create sort of a signature. There it is right there, and you can go down towards it.
At this time, I would like to make a recommendation to the committee, and that is that we continue to discuss the TIFs until approximately 12 o'clock; and that at 12 o'clock, we take testimony on Bill No. 15 980238 so as to be able to provide some certainty for those people who are here on the ordinance -- actually, I guess, it's establishing the Old City Special Services District. And that way, those people will be able to -- I'm sure they're interested in all of this, but they may not be interested in all of it for all of the day. So if we could do that, I think we will be respecting the interests of people who have other items of business other than the Tax 73 COMMITTEE OF THE WHOLE - TIF BILLS Increments Financing Districts. Is there any member of Council who any has objection to that? (No response.)
If you don't, then what we will do is, we will continue with our general discussion. After that discussion, at 9 o'clock, wherever we are, we will break. We won't 10 take a recess, but we will just proceed to 11 consider Bill No. 980238, which probably won't be 12 -- take quite as much time, and then we can go back and stay until we finish. If that's all right with the committee. At this time, the Chair recognizes Councilman Cohen.
Mr. Hankowsky, how much of what is now public space will be lost as public space?
None. You will have more public space in square feet after this project is done than you have today -- improved public space.
Is that -- when you say there will be more, is that because you're 74 COMMITTEE OF THE WHOLE - TIF BILLS going to convert space that you regard now as not friendly space?
No. Between the Great Plaza area today, improved public space, the esplanade area today, add those together and that's the public space. The rest of this site is a parking lot. So those two added together, the new public space -- the esplanade, ampitheater on the roof, public area on the roof -- is more square feet than what we have today.
Does the City have any advisors other than the regular staff employees? Say, when you deal with the DeBartolo Group -- who are experts in their field, I assume, they've been in it for a long time -- do we have a consulting service that we consider? How does the City -- in other words, how does the City evaluate something like this? I assume most of the entertainment ideas are presented by the DeBartolo Group 'cause that's their field. How do we evaluate it? Do we have any special talent that considers it?
Yeah. We've done a 75 COMMITTEE OF THE WHOLE - TIF BILLS variety of things in terms of looking at this project. Penn's Landing Corporation, a few years back, engaged MRA Associates, which is a Philadelphia-based firm and one of the nationally recognized consultants in the entertainment industry. They did a demographic study, they looked at what size project could make sense in this region, given population, buying power, etc., which laid the foundation for what kind of project might be achievable and might we want someone to do. We engaged the environmental consultants to take a look at this site. We engaged an engineering firm to review, for example, the Simon cost estimates. You know, were they building a ramp more expensively than we would build a ramp, etc. And, in fact, their costs are reasonable and look to be even somewhat lower than it would be if we had done it through our own means. So we verified all of their cost estimate numbers. There have been parking and traffic 76 COMMITTEE OF THE WHOLE - TIF BILLS studies by Richard Orth, who's a Philadelphia- based firm, done a lot of the traffic work over the years, that we've looked at. Penn's Landing Corporation has engaged the Ecstet (ph.), I think, is the right name of the architectural firm who, for example, has been involved in Battery Park Cities to look at the design of the public space, what's needed, how it could be a better ampitheater, serve their needs better. So, yes, we've used a variety of consultants to look at various aspects of the project.
And with respect to the financial aspects, do we have consultants and advisers?
No. We have not used, quote/unquote, consultants on the financial side. We did, though, PIDC, we looked at the retail rents, costs of places like Liberty Place, what's happened -- what's happening at the Gallery so that we could calibrate, for example, are their estimates on revenues reasonable, are there estimates on our costs reasonable. 77 COMMITTEE OF THE WHOLE - TIF BILLS We did hire an appraiser. Penn's Landing Corporation did. So that when we discussed what the rent should be, that that was that was based on a fair-market appraisal, and it is, that 4 percent of the gross of the retail space and percent of the gross of the parking 8 is based on that appraisal. 9 So, yes, we did verify at various 10 points either --
Well, how about with respect to the aspects, like a partnership in which the decision-maker owns only 1 percent and there's a 99 percent limited partnership. My understanding is that a limited partner does not make the decisions.
And I'm a little concerned about the tail wagging the dog. I heard you say this is traditional. It may be, but it's something that sound strange when you hear it.
Right. Well, Councilman, I can say that, for example, PIDC, we've been in business 40 years and have done 5,000 transactions, and I've seen this structure 78 COMMITTEE OF THE WHOLE - TIF BILLS 4,000 or 5,000 times. I think I can say that almost without researching it. We have -- Penn's Landing does have independent counsel, legal advice, real estate lawyers, who have been at our side as we've gone through the sublease, etc., so we do use that outside expertise. But this is a very classic structure and is analogous to almost all the other transactions that you have approved and we have done.
Who is the general partner in what involves the Simon DeBartolo Group, whatever their involvement is?
Right, but they will have, as you indicated, all the management and 79 COMMITTEE OF THE WHOLE - TIF BILLS operation rights. I don't know if you'd like them to respond to it. UNIDENTIFIED WITNESS: Thank you for coming this morning. My name is --
Please identify yourself for the record and just state who you are and --
I'm Melvin Simon. I'm Cochairman of Simon DeBartolo. This project was -- I first looked at this project about eight years ago when I came over here and looked at this and I said, No way ever be done under the circumstances that existed. The last year, we've been working because we really feel that this city will do an unbelievable job with an entertainment quality-of-life-type shopping center similar to what we're building down in Miami at the Sunset Shops. I've worked with the Penn's Landing people, I've worked with the Mayor, I've worked with some of the Councilmen. I think this will be 80 COMMITTEE OF THE WHOLE - TIF BILLS an unbelievable project. But it's more what this project will do. And it will increase the possibility -- and I believe firmly that you will have a development ultimately from the Convention Center right to the waterfront, which includes what we have now plus what will come later. But we are the only general partner. We are the only partner except for the interest that the Penn's Landing has 'cause we are leasing the land. We may take in equity partners with us, but we will be the general partner. We will not own 1 percent. Under our (unintelligible) status, we can't. We have to really develop it ourselves. So I think that the assurances -- what we give is a completion guarantee once we start construction. Now, we -- ultimately, the corporation will have assets of about $17 billion which, when the merger with this corporate property investors take place this July. So you're not getting a fly-by-night. You're getting experienced people who have done this before. We think this is an opportunity not 81 COMMITTEE OF THE WHOLE - TIF BILLS only for ourselves, but for the employees -- I think they mentioned 1300. I think that it will be more like 2,000 employees. I really -- I don't think -- I think they've underestimated it. But, you know, I'm not involved in the details, but I could tell you what we've done before. You can look at the quality of our work, and you can see who you're dealing with. You're not dealing with some entity with a 1 percent interest, 'cause we wouldn't do it, frankly, under those circumstances.
No, no, I'm just saying -- I'm being real -- they don't always -- in other words, the structure that they use may be different. We don't -- we're a real estate trust company listed on the New York Stock Exchange. We will be the developers, the general partners. We may have some equity partners, like we're talking to Donaldson Lovekin Janett (ph.) in their investment fund. And so I think that the guarantee of completion, once we get started is really what the 82 COMMITTEE OF THE WHOLE - TIF BILLS City was looking -- the City wants something that's -- and we're going to live up to the plan, we're going to make sure -- and I'm tickled to death, tickled to death to see all of these events take place here. We need those people. They can walk, they can browse, they can buy, they can do anything they want. There will be no admission in any event except maybe after we make the deal with the children's museum or with the polar ice, if you want to skate in the polar ice thing, that's theirs. But, basically, I just wanted to make sure that you understand that this is not a fly-by-night scheme. This is a scheme that's been thought out, and it took eight years before we were even interested due the progress of the City in that period of time. I think Philadelphia has a tremendous amount to offer. I think it's under -- under- -- what I call "stored." And I'm not using the right term, but it's underdeveloped, and I think it would be a great impetus for the balance of what will happen all the way to the Convention Center. 83 COMMITTEE OF THE WHOLE - TIF BILLS
Where will the revenue come from that makes it profitable?
We'll -- we'll -- we'll lease to AMC Theaters, for instance. We're going to build and lease to them. The Penn's Landing people who will participate -- it was a very similar deal we made at Caeser's Palace. We leased -- we leased the property from Caeser's Palace. We're not involved in gambling. In fact, our agreement precludes us from getting involved in gambling, nor would I want to be involved in gambling but we do lease at the Forum Shops, which is probably the most successful entertainment-oriented type of development in the United States. So I think that we're offering -- and, by the way, don't get me wrong, the City of Philadelphia is offering us a tremendous incentive because I think that your time has come, I think, 84 COMMITTEE OF THE WHOLE - TIF BILLS and I'm really excited about it. I don't do it for the money, I do it for the enjoyment, and I want you to know that we will give you a project that you will be very proud of. (Inaudible off-mike exchanges among panelists and Councilman DiCicco.)
And everything's got to be profitable, but we will not depend on the City; our profitability comes from leasing to the different tenants. I think the children's museum here would be unbelievable. I think in Indianapolis, we the best children's museum in the world. And we've asked the director of your group to come down and have a meeting with them. I can conceive of this plaza, of this ampitheater being converted to a haunted house during the month of October when it's not in use for the children of this area. I mean, there are tremendous ideas that we're working on with a number of people. And I think we can do a great job, 85 COMMITTEE OF THE WHOLE - TIF BILLS simply said.
Let me ask you another question. In your judgment -- suppose there were no tax increment financing?
Because, number 1, the cost of doing this thing on the water would be prohibitive, it would be economically unfeasible. This was worked out. And, you know, right now, in something I saw, the taxes are about $100,000, and taxes going to go way up and can be used to pay these bonds as well as the sales taxes. They can be used to pay off these bonds, but we can't do it otherwise. It would be just economically unfeasible.
I'll tell you what my concern is because it may be important for your project, but where do we stop? Why doesn't any 86 COMMITTEE OF THE WHOLE - TIF BILLS other business that, say, can finance something on its own, aren't they put into a position of saying the City makes available these tax increment financing arrangements. It will create more profit for us; therefore, we want to get it, even though the project may be feasible without it. I'm looking for some kind of guidance on -- is this going to be something that happens all the time or is it really needed?
If I could partially respond, Councilman. As I indicated in my testimony, there's something very unique happening in this project. We -- if we were doing this project and we said to the Simon organization, We will make sure that this site has no special costs related to being on the waterfront and we'll build the streets and we're going to build our own park and we're going to build our own public space and we'll build you a parking garage for the project, they could build the retail without us. What we're doing here is we're not going to go to the Capital Budget and ask you to take money out of the Capital Budget next year and 87 COMMITTEE OF THE WHOLE - TIF BILLS do any of this. We're not going to go to the General Fund and ask for money to do this. We're going to have all those things delivered, which normally would be public responsibility. They're going to be built by the Simon organization, they're going to guarantee completion, whether their numbers are right or wrong to deliver that product to us. And we are handing them a revenue stream. And they, in fact, are going to go find the cash and the debts to finance it, and they're going to build all that and hand us back a new viaduct, a new ramp, a new Great Plaza, a new public space. That's why we didn't have to do this --
Who takes the risk? You know, if everything goes hunky-dory --
Well, how do they 88 COMMITTEE OF THE WHOLE - TIF BILLS take the risk? Suppose they go back -- the City is going to borrow the money, isn't it?
No, absolutely incorrect. The City is not borrowing the money -- they are borrowing the money. If there's not enough tax-revenue streams, they owe; we don't owe. There is no City guarantee, nobody's guaranteeing it. All we're saying is, whatever real estate taxes are created, we'll hand them back to you. If you don't create them, that's a problem, it's your problem. And then they take that cash and they pay off the debt. They borrowed it, it's their name on the debt, not ours. That's this project.
Well, generally, is there going to be a separate corporation for this project? Generally, corporations so arrange it that if there's a failure in one spot, it doesn't affect any other developments they have anywhere else. So I assume that they're going to be using that same arrangement here.
But, as Mr. Simon said, Councilman, we have asked the corporate parent to 89 COMMITTEE OF THE WHOLE - TIF BILLS guarantee completion of the project, and they will guarantee the completion, the corporate parent, even though the ultimate owner will be a single-purpose entity of which --
No, no, no, we haven't. It's done, it's in the lease. We have a parent guarantee for completion.
It's in the lease that they will execute if you approve this deal.
And what's the name 90 COMMITTEE OF THE WHOLE - TIF BILLS of it first?
The Simon DeBartolo Group. (Inaudible off-mike exchanges among panelists and some Councilmembers.)
Ask him what? Oh, I'll yield to Councilwoman Clark on this question.
Councilwoman, I have some members who have had some lights on for a long, long time.
I will. To follow up on what Mr. Cohen was asking, it seems to be this gets clarified by your showing the language on which you relied that's in the agreement.
Oh, yeah, we have provided the Council staff the draft lease that will be executed.
Yeah, just give us a marked-up copy that answers this question, Bill.
Thank you, Mr. President. And thank you, Councilman Nutter.
Councilman Nutter, we'll be a long time getting back to you. You yielded, and when you yield around here, that was a big make.
Mr. Hankowsky, just generally, as I went through your testimony and listened to you give it, summarize and correct me if I'm wrong, of the five bills we're discussing today, we're talking more than $400 million in development value, more than 2,000 permanent jobs -- Mr. Simon indicates perhaps even more -- but, on the low side, 1800 to 2,000 construction jobs during the course of all the development not only of Penn's Landing but the hotels, and City taxes over the course of the life of the district, say about $90 million and School District taxes at about $35 million. 92 COMMITTEE OF THE WHOLE - TIF BILLS And none of this is doable, in your opinion, without TIFing these projects; is that correct?
Okay. And I've said before in this body and I'll say it again and I'll look for your confirmation. I don't view a TIF in any way, shape, or form publicly financing projects. I think publicly financing projects is taking money out of the General Fund and giving it to a developer, taking money out of the Capital Fund and giving it to a developer. And for the 11 years that I've been on the Board of Penn's Landing, a member of the Executive Committee, of the Design Review Committee, of the Lease Review Committee, every single project but this one came in the door with their hand out and said, We can create a crystal pavilion, we can create a large shopping center, we can create a -- but only if you give us money. We want you to give us 30, 40, 50 million dollars. This is the first project in my life on 93 COMMITTEE OF THE WHOLE - TIF BILLS this board and prior to my involvement Penn's Landing over years with the developers as large 4 and as well-known and as respected as this group 5 has come in and said, We will build this, we will 6 finance it and give it back to you and guarantee 7 its completion. 8 Mr. Hankowsky has made it very clear 9 during the course of his testimony that the TIF 10 dollars involved in this project are going 11 directly to public improvements that we would have 12 to provide under normal circumstances perhaps out 13 of the General Fund or out of the Capital Fund. 14 And that all those dollars in the TIF 15 issue are going to ramps and access and public 16 improvements and public access space and 17 everything else. S. Postal 19 Service, Marriott International, Loews all deserve 20 a word of thanks from us for their continued interest in Philadelphia. And some of them were involved in Philadelphia to begin with. But Simon DeBartolo -- and in an effort to, I guess, paraphrase Bill Cosby -- thank you for choosing us. Thank you for choosing 94 COMMITTEE OF THE WHOLE - TIF BILLS Philadelphia. Because this is the type of synergetic project that I think makes sense for Philadelphia, and Mr. Simon alluded to it because he talked about development from Convention Center to river. I think one of the most important functions or aspects of this project in its design is that it creates a pedestrian and natural access to the waterfront that we don't have. People will come to the Convention Center, to the Marriott, to our historic area, and they will walk our city. It will be a walkable city to the waterfront, with entrances at Market Street, Chestnut Street, and Walnut Street directly from surface level into this project. And I can't think of a more exciting development after, I guess, 30 years of projects being put on the table and put off the table, that would allow that kind of synergy to happen. If you go to Penn's Landing now, in the middle of February, at night, it's not exactly the most enticing and attractive place to be. There's nothing going on, it's dark, it's foreboding, and it sometimes can be scary, despite Mr. Sabattini's 95 COMMITTEE OF THE WHOLE - TIF BILLS efforts at security. If I envision what's going to happen in two years, in the middle of February, at night, it's going to be a totally different game, a totally different ballpark. And I can assure Councilmember Clark, and I think our questions are absolutely on point, when it comes to the work that the Board of Penn's Landing has done. We have had extensive discussions at the Board about continuing public events, ethnic festivals continuing to allow public access to people just to come and do nothing there for free. We've had discussions at the Design Review Committee, we've had discussions at the Lease Review Committee and at the Executive Board just about those issues, about what changes -- we have a very nice place now in the daytime, in the spring, in the summer. The Jam on the River was a wonderful event. Our ethnic festivals are wonderful events. And Mr.
Simon indicates that he would like those people to continue to come, hang out, spend money, browse, and do whatever it is they want to do. So from every aspect, its design, its 96 COMMITTEE OF THE WHOLE - TIF BILLS financing, and what it will do synergetically to this area, I think, is something that we should be applauding. And I think in the end, we will all applaud what's going on there. And, finally, my final comment. I want to compliment my colleague Councilman DiCicco. Through the course of a year, he took a very difficult issue, a very -- it could be a very scary issue for people who live in the community and live in the surrounding neighborhoods and finessed it and intelligently dealt with it and opened up the process where he could have taken to stances. He could have said, We're going to build this no matter what anybody thinks; or, We're not going to build it at all because it's going to affect some people in the community. But he's taken that process, he's opened it up, and I think gave the people a level of comfort that as move forward with this, the developers still have a level of comfort and the people in the community have a level of comfort. And that was a very, very difficult task that you undertook, and I want to compliment you and commend you on it. 97 COMMITTEE OF THE WHOLE - TIF BILLS
You're cocaine. And I will yield now to Councilman Nutter and just again thank Mr. Simon for being the developer. Thank you.
Please, please. I need to get Councilwoman Tasco here. She has not had an opportunity to speak, her light has been on for some time. And then I need to get Councilman Rizzo in and I think that gives -- and Councilwoman Blackwell. And I think everybody -- that gives everybody a first time and then we can go back.
I just have one question that somewhat follows up on Councilman Cohen's question to Mr. DeBartolo.
To Simon. What other projects have you done in other cities and what local support did you receive from these cities?
The city of Indianapolis spent 200 -- now, this is not TIF; this is the city itself over the -- we have been trying to 98 COMMITTEE OF THE WHOLE - TIF BILLS develop a downtown mall in Indianapolis for years. The city put $230 in parking and improvements -- not with a TIF but out of their own budget. And we have a very successful mall. I was just telling some people, we used to have one restaurant downtown that did over 5 million; now we have six. It brought people from all around the city downtown. By the way, there's one request I have of everybody -- the Council and everybody -- is to root for the Pacers tonight. (Laughter.)
Because we gave 16 the coach, Larry Brown. . . (laughs). And Bill 17 Kammer (ph.) is sitting back here who's an expert on TIF, and he says part of me wants to. . . But the city spent a lot of their own money to get the -- and by the way, Larry Brown is okay as long as he has his own psychiatrist with him. (Laughter.)
That was just a joke. I love Larry, he's a good guy. 99 COMMITTEE OF THE WHOLE - TIF BILLS But we've spent a lot of money to finally get it done the way we had to do it. The City had to subsidize Nordstrom to bring 'em into town, and that was a big out-of-pocket expense, and astronomical amount of money from my way of thinking. We have our own money in it. We have to of the best citizens like Eli Lillian 10 (ph.), who are also partners in the deal, but it 11 took 17 years. 12 We've done -- we're doing developments 13 in a lot of other cities right now. We've done 'em in Las Vegas, we've done the Mall of America in Minneapolis in Minnesota, so we own about 200 malls around the country. But there are only certain areas where downtown works. Philadelphia, we really think, properly done, will work.
You just want her to yield for like one little minute, right? 100 COMMITTEE OF THE WHOLE - TIF BILLS
I just want to follow up on a couple of the questions that were raised, in particular Councilman Cohen's concern for, Can this project be done without a TIF? Just to put this into some perspective, when this project was first announced about a year ago, a couple of developers who had been in the city for a number of years were complaining that the offer had not been made to them and that they had a similar development or developments that they could do without any public money, whether it's in the form of a TIF or money out of the General Fund or what have you; they can do this on their own. Well, I won't divulge the name of the persons that I spoke with yesterday, but they are one of the two developers. And I had a lunch meeting with them at 11 o'clock yesterday morning because they would still like to do a development along Columbus Boulevard, but they indicated to me that they needed to talk to PIDC about a TIF because they can't do it without a TIF. So I'm not a developer, I don't understand financing, but I think I understand 101 COMMITTEE OF THE WHOLE - TIF BILLS what this project would mean to the City of Philadelphia. And if the developers who are complaining about us affording Simon DeBartolo a TIF because they can do it without any money or any help, they're telling me as of yesterday that they need a TIF. And if they haven't called you yet, Bill, I expect you'll be getting a call between today and tomorrow, okay? So I mean I think that puts it in somewhat some perspective. Without the TIF, this thing will never happen. And I think the hotels -- we've already proven that with the development of hotels before I came to Council, what the TIFs have meant to hotel development and the creation of 4,000 jobs. Eighty percent of the jobs in the hotel industry in Philadelphia today are Philadelphia residents. And you know how I feel about Philadelphia residents getting jobs, 80 percent of them. Thank you, Mr. President. And thank you, Councilwoman.
Thank you very much. The Chair recognizes Councilman Rizzo.
Thank you, Mr. 102 COMMITTEE OF THE WHOLE - TIF BILLS President. My questions are both operational. I think I'll direct it to Penn's Landing Corp. How much does it presently cost to park a car at Penn's Landing today?
The normal daily rate is $5. It increases for special events at times.
In the area of parking accessible for people that want to use the public spaces, do you anticipate an increase in parking at Penn's Landing after the development?
An increase in the rates? No. In fact, we would expect a decrease in the rates. The developers expressed a concern about making sure that parking is even more than affordable for their purposes. So we would see the rates going down.
That's great. The last question that I have, and you know that I've expressed my concern about a commitment from the Administration in the area of policing at this new development. Has the Administration agreed to make additional police officers available for policing 103 COMMITTEE OF THE WHOLE - TIF BILLS this new facility?
We've initiated discussions. We expect them to take place shortly with the Police Department to kind of go over the plan itself. But included in the design of the plan is a facility for an on-site police facility. So we would expect that, whether it's a mini station or another form of police presence on the site, that will become an integral part of this development. And whether or not we get a commitment from the City specifically for Penn's Landing, we would anticipate they would at least do what they're doing now, which we think is substantial and even more so.
Mr. Hankowsky is not here. UNIDENTIFIED PERSON: He's here.
Mr. Hankowsky is here. 104 COMMITTEE OF THE WHOLE - TIF BILLS Mr. Hankowsky, I have one very general question I'd like to ask you just to make sure this record is clear. During the term of the TIF note what if any exposure at all does the City have in any way, shape, or form for the financing, development, repayment of any money of any kind in the whole Penn's Landing TIF?
None. The City has none. The developer will borrow the money.
I'm sorry, Council President. For the Simon project at Penn's Landing, there will probably be two borrowings to equal that $62 million because a portion, as we've discussed so much this morning, of what they are constructing are public improvements, they are able to borrow via a tax-exempt bond issue because these are public improvements. So there will be a tax-exempt piece and then a taxable note. But they will do the borrowing, they will owe the debt, we are handing them the revenue stream as it's created from these tax streams. If those tax streams are 105 COMMITTEE OF THE WHOLE - TIF BILLS insufficient, the obligation is theirs, not ours. So there is no City guarantee, no PAID guarantee, no General Fund commitment to those financings.
All right. Now, what if the revenue stream is in excess of what's necessary to pay back the TIF note?
What the Simon DeBartolo Group wants to do if it's in excess, is they want the capacity to take the excess and accelerate the payment of the debt, so that they would pay the debt quicker. As we all know, if you have a mortgage, you can put a little extra in the envelope and get it done sooner. You pay less interest. The result will be that the taxes coming to the City and the School District will -- we will get them sooner because the note will get retired sooner and we'll enjoy the benefit. In fact, our projections are that that note might even get retired in the sixteenth year, based on 106 COMMITTEE OF THE WHOLE - TIF BILLS current tax estimates. But we've been conservative in our presentation to you. As Mr. Simon said, we think there may be more jobs but I think I've been here enough to know that I want to give you an analysis where, when I come back, I can tell you what I promised you happened. So we've been conservative. But there is a very good chance that the School District will get more revenue out of this project than the City will sooner because if there are more taxes, it will pay the debt sooner.
Mr. Hankowsky, can you tell us about the -- you made reference to an MBE/WBE plan?
Which is not in front of us. Now, can you tell us what the status is --
The Simon DeBartolo Group has voluntarily agreed to include an MBE/WBE 107 COMMITTEE OF THE WHOLE - TIF BILLS plan as part of their project. We did provide a copy of that to Council's technical staff back when we submitted the TIF material in April. There have been a series of discussions between Council staff, Penn's Landing Corporation, PIDC, and the Simon Group with regard to that plan. They're working through revisions. That plan will be an attachment to the development agreement and sublease between Simon and Penn's Landing; therefore, it will be part of the legal documents to that agreement. And it covers the development aspect of the project design, construction, construction-worker employment, etc.
There is a sentence in your testimony on . It says, "In addition, Simon DeBartolo will enter into a development agreement and lease with the Penn's Landing Corporation which provides a rent of the greater of $400,000 per year or 4 percent of gross revenues plus 10 percent of gross parking revenues." 108 COMMITTEE OF THE WHOLE - TIF BILLS What happens to the other 90 percent of the other parking revenues?
Those go to the Simon organization. And it operates the garage. Understand, they have the 100 percent responsibility to pay the cost of operating the garage. We're not -- again, we're not taking on that obligation, either.
That was a tough negotiation; I didn't want to give it to him. (Laughter.)
Yes, we have. As I indicated when Councilman Cohen asked the questions about the use of experts on this, we've done a couple things. One, Penn's Landing Corporation hired an appraiser to take a look at what did we think was the economic value of this piece of ground given its condition, etc. And that Penn's Landing should get a rent, quote/unquote, of approximately 109 COMMITTEE OF THE WHOLE - TIF BILLS 800,000 a year. The Simon DeBartolo Group has provided us, and it's included within the TIF plan sort of the revenue estimates. Obviously, we have those revenue estimates to look at the stream. But if you take those same revenue estimates and multiply them times the business deal, it is anticipated that Penn's Landing Corporation would get, in the first year, about $900,000 in rent between the 4 percent gross rentals in the retail and the 10 percent of the parking. And that, obviously, that would increase over time as rents go up or parking rates go up. And I think one of the things that we can perhaps all think about that might give us comfort is that now that you have this revenue stream that will further enable Penn's Landing Corporation to do the festivals, put on more things, perhaps not, as Mr. Sabattini said earlier, you know, won't have to have as many gated shows because they can just afford to do it. So we actually think this is just a terrific deal. I mean, the economics on how this can work are just going to be terrific. 110 COMMITTEE OF THE WHOLE - TIF BILLS And back to Councilman Kenney who made a comment earlier, I mean, it is helpful to remember -- not to pick on old projects that never happened, but almost a decade ago in this chamber, we were considering a project at Penn's Landing that didn't happen, that would have required an annual subsidy. That was the deal at the time that was in front of us. So we have come a long way in a project where we're not doing anything like that today.
Thank you, Mr. Chairman. I would like to talk now a little bit now about the specifics of minority and women's program. You passed them out and I didn't read them. I was away. So kindly put upon this public record what we may expect of this project as it involves a more inclusive group of Philadelphians. What is your commitment publicly?
If you wouldn't mind, 111 COMMITTEE OF THE WHOLE - TIF BILLS Councilwoman, I would ask the project manager on behalf of the Simon organization, since it's their plan.
A member of the affected classes -- I'm so happy to see her.
My name is Kathy Shields. I'm a Vice President for the Simon development group. The economic opportunity plan which we have submitted and we are reviewing and working through with Marla Hamilton and with James Roundtree establishes goals for minority and female participation in the design, construction, and the permanent operation of the center. We are comfortable with living -- our plan is to achieve and, if at all possible, to exceed goals which would employment during construction a workforce of 30 percent minority participation and 5 percent women.
Excuse me. Did 112 COMMITTEE OF THE WHOLE - TIF BILLS you say 30 percent?
Yes, 30 percent minority. This would be for employment during the construction phase.
Okay. Again, to clarify, that would be the 30 percent minority and the 5 percent women. For contractors and professional consultants, it would be our goal to achieve 20 percent participation by minority-owned businesses, 10 percent by female-owned businesses, and 2 percent participation by businesses that are owned by disabled persons.
Now, is this a number and in dollars? 113 COMMITTEE OF THE WHOLE - TIF BILLS
Is this a number of contracts as well as dollars of the total?
This is based on what a percentage of what the total dollar value of what the contracts left would be.
Total value, correct, based on a budget that we have shared and will go over in greater detail with the Minority Business Enterprise Council and with Marla Hamilton on President Street's staff. We will also work with the City to develop a community outreach program to facilitate the hiring of Philadelphia residents for the permanent jobs in this program. We will also require our tenants to utilize local training and management training programs when they're interviewing for employees. I should state that the Simon DeBartolo Group has won several awards for community outreach and training programs that we've established with some of our other larger urban 114 COMMITTEE OF THE WHOLE - TIF BILLS projects. So we are very committed to working very closely with the City and with all of these programs. We are also working to create meaningful opportunities for minority-owned and female-owned opportunities to operate facilities within the retail center. We have a retail development program that is one of the best in the industry to create opportunities for start-up businesses and kiosks and carts. We will work to establish a percentage with Marla Hamilton that will be included in this program, and we are also working with her to study the strategy that has been successfully implemented at the airport to create opportunities for minorities and women to participate in the permanent retail opportunities that will be created. We actually have several entities that we're right now working with that would be potential permanent tenants.
What has your experience? Have you generally met and exceeded your goals, or have you missed them?
We have generally met and 115 COMMITTEE OF THE WHOLE - TIF BILLS exceeded the goals in any setting where we have had such a program. We are very committed to achieving them and we fully expect that we will be able to exceed them.
Would you name the places where your program has operated and the programs that are most successful that prove your point?
I know that programs where we have been most successful include the Arts Plaza in Chicago. I believe they include the Indianapolis project. And I'm being handed -- there was a project in St. Louis and in Jersey City, all of where we had very strong affirmative action programs and were able to exceed those goals.
So you've generally set 30 percent participation goals, and you've generally met or exceeded that 30 percent?
In the city of Chicago, the goals that were established, the goals were for percent MBEs and 5 percent WBEs. We did 24 exceed those goals, we came in closer to the 30 25 percent marks. 116 COMMITTEE OF THE WHOLE - TIF BILLS And we are, in essence, agreeing to set a higher benchmark in this case, based on our past ability to perform.
What happened to the Bloomington Mall in Minneapolis? You know, the Mall of America? You know, the biggest mall in the country? Isn't that what they say they are?
I am not specifically familiar with any program that we have at the Mall of America. My colleague Bill Kammer, who handles all of our TIF and public financing types of things says that at the Mall of America, there was no specific affirmative action program. Although, again, the RDP program, which we call the "Retail Development Program," it's probably the largest that we have in our portfolio where, again, you're providing opportunities for start-up businesses through carts and kiosks and temporary facilities.
Well, what was 117 COMMITTEE OF THE WHOLE - TIF BILLS your experience there even though you were voluntary and had no requirement to set goals? What was your actual experience?
Actually, I don't have that information. I can't tell you what the specific percentages are at the Mall of America. I could provide you with that information.
I was not involved directly with that project and I don't have that information but we could certainly get it to you.
Okay. You are coming to a particularly rich market where it will not be difficult for you to find minorities, women, and disadvantaged contractors who are experienced doing what you need to have done. So you won't have to invent them, you won't have to discover them; you will only have to let them participate in opportunity. I'm very pleased that we don't have to 118 COMMITTEE OF THE WHOLE - TIF BILLS beat you over the head, that you're so willing, because I'm looking forward to this being a win/win situation for everybody. I'm not interested in having some people watch some other people take the money to the bank, okay?
And we are working, again, with Council staff and James Roundtree who have identified to us all of those contractors and all of those design professionals that we plan work with.
On the question of the 30 percent, what percentage of the actual payroll would that 30 percent represent? 'Cause our experience has been that the great -- that the largest portion of that has always at the lowest-paying jobs. What percentage of the payroll would that 30 percentage of minority employment 119 COMMITTEE OF THE WHOLE - TIF BILLS represent? Do you have any figures on that? Would you --
Would it be possible on any of your projects to develop those figures?
We could. And it is -- let me say that it is the intent in creating these employment opportunities to spread them across all of the different realms, all of the different trades. So it is the goal and we get into greater specifics, again, in working with Marla Hamilton and with James Roundtree to identify opportunities in each of the trades so that it should be fairly evenly spread through the different --
That would be the goal, that you would get it across those trades and --
Well, could we have -- take your -- what you would regard as your most successful development, could we have an analysis of that?
We could go -- I don't 120 COMMITTEE OF THE WHOLE - TIF BILLS have those numbers available. But, again, we could look at that and we will look at that in working with the entities that we're working through this plan with.
Can I work with your language just a little bit, though? You say we want to work across all the trades, but what I think that Councilman Cohen is talking about is what we in the affirmative action are really used to calling "vertical involvement" so that you don't cluster all of your minority employment at the bottom of the rung, at the lowest level of employment. So that there would be participation at the manager and official level through professionals, through technicians, through clerical. Do you see that? It's what we used to 121 COMMITTEE OF THE WHOLE - TIF BILLS call an "EEO-1 spread sheet" where you look at each class of employment. If you don't have that, you will have the cling-to-the-bottom kind of problems. But if you come here and you are open, there are managers who can do what you're looking for. You're not just looking for entry-level employees. There are in this market the kinds of people that you need at every level of involvement. Don't just look at the entry level; although, of course, we do want entry-level jobs as well. We're more than willing to work with you and to expose you to a population that is well-known to us, which you might have difficulty locating, even including Marla Hamilton and Jim Roundtree. Of course, each of us has his or her own group of people that we know about who would have the kinds of skills that you would be interested in. This is a win/win situation. Nobody here is trying to kill it. At the same time, this is the appropriate time to raise the issues that we will be caring about throughout the life of the project. 122 COMMITTEE OF THE WHOLE - BILL NO. 980238
We understand your concerns, and we will address them specifically in work out the plan with the staff.
If I could have your attention, please. It is now o'clock or 9 thereabouts. What I would like to do, with the 10 permission of the Chair, is now turn to Bill No. 11 980238. 12 Mr. Hankowsky, if you and your staff could just -- you probably will have something to do for the next couple of minutes. And what I would like to do if we can get the witnesses on Bill No. 980238 at the witness stand. Can we have the witnesses on Bill No. 980238. Mr. Taxin, Mr. Sayer, Mr. Aristone, and Mr. Grimes, could I have all of you men at the witness table. (Bill 980238 witnesses come forward.)
I think these are the witnesses that are going to testify on the Old City District, is that correct? (Panelists respond in the affirmative.) 123 COMMITTEE OF THE WHOLE - BILL NO. 980238
If I could have your attention, please. If I could have your attention, please. This committee is still in session. If I could have your attention, please, the committee is still in session. Could I have the witnesses please identify yourselves for the record.
Good afternoon. I'm Joshua Grimes. I'm the Executive Director of the Old City Special Services District.
John Taxin, President of Old Original Bookbinders Restaurant and Chairman of the Special Services District.
Rick Snyderman, on the Executive Committee of the Old City Special Services District and a business person in Old City.
Chris Sayer, resident of Old City, former president of Old City Civic Association, and Executive Community Member of the 124 COMMITTEE OF THE WHOLE - BILL NO. 980238 Old City District.
Before we begin, if I may, we have several copies of our written testimony that, for the sake of time, we would pass up now.
Yeah, we're making -- we're having other copies made at this time. We actually have them unless you --
Yes, can we have those, have the Sergeant-at-Arms please pick up that testimony.
Thank you, Mr. President. I'd also like to point out that included is the testimony of Joseph Aristone, a Vice President of Prett Reuben (ph.) who could not come back now, so we've included his written comments here for the record.
Sir, I need you to speak much louder and much more directly into the microphone.
I'm sorry, Mr. President. I was saying that included are the written 125 COMMITTEE OF THE WHOLE - BILL NO. 980238 comments of Joseph Aristone, the Vice President of Prett Reuben who would have liked to have presented testimony today but had to leave. However, his written comments have been passed out.
I thank you. We will make them a part of the record. Who will be first?
John Taxin. The goal of the Old City Special Services District is to create a well-managed and desirable environment in which to live work, visit, do business, and shop in. This will not be an easy task, but we must start somewhere, and that's why we are here today. We will begin our effort with increased presence of uniformed workers that will concentrate initially on street-cleaning and graffiti removal. The next step in our plan is to have our Executive Director work on bringing a police mini station into our neighborhood. In the years to come, or plan is to include the addition of community service 126 COMMITTEE OF THE WHOLE - BILL NO. 980238 representatives who will work as sidewalk concierges directing tourists and keeping the neighborhood informed of what's happening. We also hope to add street signage to the streetscape. Why is this important and why do we need this now. When I was first asked to attend a meeting to discuss the possibility of forming a special services district in Old City, I was very interested in the idea because of the positive effects such a service has had in Center City. Also, as a business opener and a resident, I felt it was my responsibility to get involved in my community for such a great cause. As time has gone by, I have seen the Center City District make great improvements and have seen other areas, such as South Street, Germantown Avenue, and City Avenue get established. Today, the Old City District has a great opportunity to see its dream come to fruition with the assistance of City government and the people who live and work in Old City. Now is the time to stand up and start assuming 127 COMMITTEE OF THE WHOLE - BILL NO. 980238 responsibility for our neighborhood. Thank you very much.
Thank you very much. Please identify yourself for the record.
My name is Chris Sayer. And I live at South Bank Street in Old City. I thank you, Mr. President, for the opportunity to meet with you and to urge the passage of this ordinance. More than six years ago, representatives of Old City Civic Association and the Old City Arts Association began meeting to explore the formation of a special services district. Several years ago, we were joined in these efforts by Historic East Market and leaders of the hospitality industry. During these years, people have given thousands of hours to make the Old City District a reality. Much assistance was received from government officials -- most notably here Council Frank DiCicco, Senator Vince Fumo, and Representative Marie Lederer. Also, we couldn't have gotten here without help from Center City 128 COMMITTEE OF THE WHOLE - BILL NO. 980238 District -- Paul Levy, Paul Stanke (ph.), Tony Pepitone (ph.). Old City is a unique neighborhood. It is a living community within America's most historic square mile. It has a thriving arts community and it is quickly becoming one of the City's premiere hospitality districts. Like it or not, we have been discovered. Philadelphia Magazine termed Old City the City's hottest new neighborhood. Player Magazine recently devoted a major article. Last month, the Washington Post travel section provided pages of coverage of Philadelphia and Old City. Utne Reader, a small but influential magazine has named us one of the ten most liveable neighborhoods. In short, people are finding out what many of us have known for some time -- that Old City is a great place to live and to work. But this new attention brings opportunities and problems. Traffic and parking will become an issue. Security problems in what has been one of the City's safest neighborhoods will grow. We will soon face additional pressures 129 COMMITTEE OF THE WHOLE - BILL NO. 980238 as major developments take place; both to our west, in Independence Park, and to our east, at Penn's Landing. These changes can and should be managed by us rather than us being managed by them. The formation of this district, this Old City Special Services District, is the first step. It is only a first step, however. It will provide additional levels of cleanup and security for Old City. It will not, and it cannot, solve all of the problems. Many of us who live or work within the District will need to be back to meet with you further down the line as we go forward. We all need -- and I think we all agree that we need to protect what is the most historic district in the City and is, in fact, the home, the start of the birthplace of our city and our nation, while still bringing new jobs and new development. People come from all over the country to visit Philadelphia because of the district and the buildings enshrined that dot our area. And I look forward to meeting with each of you to guarantee the success of the Old City 130 COMMITTEE OF THE WHOLE - BILL NO. 980238 District and to guarantee the further success of Old City.
My name is Rick Snyderman. I'm a business person in Old City. I am also a founding member of the Old City Arts Association and was involved in the development of the South Street Community many years ago as well. I see this as a logical next step in the development of the Center City as an economic engine for the City. And in order to do that, we have to have a coordinated program. And having a special services district like this will give us the tools in which to organize those kinds of programs for the future development of not only Old City, but I see Old City as one of the players in a larger drama that involves making the center of the city an economic engine that works for the entire city as an economic development program. In 1970, there were something like 200 or 220 residents in Old City. At the present time, there are more than 2500. At the present time, there are more than 400 active businesses in this area, which employ roughly 2500 people. The growth potential. Both for jobs 131 COMMITTEE OF THE WHOLE - BILL NO. 980238 and economic activity, for tax revenues, for economic development in general, and for cultural development as a way of using this area are enormous. And in order to do that kind of planning, we need this kind of a structure. So we think that this is the appropriate moment because we now have the kinds of resources and we have the kind of personnel and the kind of involvement of those people in that community to bring all of this together. So we thank you for this opportunity to present this bill to you and, we hope you will favorably rule on it. Thank you.
Good afternoon Mr. President and members of the committee. I am Joshua Grimes, Interim Executive of the Old City Special Services District. You've already heard several statements this afternoon of support for the Old City District. These statements from a small business owner, the proprietor of a world-renowned restaurant, a civic association head, and an executive of a major property owner and civic 132 COMMITTEE OF THE WHOLE - BILL NO. 980238 leader, whose testimony was submitted in writing, demonstrate the broad support throughout Old City for the special services district and for the services that it will provide. In fact, the directors of the district are particularly pleased that 86 percent of the commercial property owners in Old City expressed their support for our efforts during the district's recent opt-out period mandated by State law. With the growth in Old City's popularity, the services of a special services district will provide are essential. Old City remains a diverse business community, with restaurants doing business alongside warehouses, and hotels welcoming guests next to office buildings. Despite this diversity, there are several facts that ring true throughout the district. One, Old City welcomes more and more visitors each year. Two, Old City is becoming a more popular place for all types of businesses. Three, more and more people call Old City home every month. And, four, the development at Penn's 133 COMMITTEE OF THE WHOLE - BILL NO. 980238 Landing will only increase Old City's popularity even more. In creating the special services district, business leaders in Old City considered these facts and sought to create an agency that will provide important services to improve the business climate within reasonable budgetary means. We sought to ensure that the most urgent needs common to most business owners are met while remaining flexible enough to provide additional services in future years should the district's needs so warrant. It should be noted that the Old City District has a built-in guarantee to ensure that it operates efficiently and provides only the most essential services. By direction of the Board of Directors, the district may only assess a surcharge equal to 5 percent of the taxes assessed by the City and the School District on Old City's taxable commercial properties. This 5 percent figure is significantly lower than the surcharge currently paid by businesses belonging to the Center City 134 COMMITTEE OF THE WHOLE - BILL NO. 980238 District, the South Street Head House District, and probably all other special services districts in Philadelphia. By capping the surcharge at the 5 percent level, the Board sought to ensure that Old City's property owners will not be overly burdened by the district's costs. The district cannot consider a higher surcharge until its reauthorization in five years. The Old City District will be headed by a full-time and permanent executive director. This individual, who has yet to be hired, will be experienced in community and economic development. He or she will be responsible for implementing the district's operations and programming as well as overseeing all contractors. The executive director will also be accountable to Old City's businesses for the smooth provision of the district's services. While our budget for this position is not grandiose by any means, the many candidates that have already expressed an interest in heading the district prove that we will engage an individual with superior qualifications and 135 COMMITTEE OF THE WHOLE - BILL NO. 980238 skills. With this background, I'd like to briefly highlight some of the services that the district will provide. First is sidewalk- cleaning. The special services district will maintain Old City sidewalks through a seven-day-per-week program of sidewalk-cleaning, landscaping, graffiti removal from sidewalk, furniture, and building facades, and light bulb replacement on pedestrian lighting fixtures.
These services will be provided to the district through an agreement with Center City District, our neighbor to the west. Given the Center City's superlative track record in its home territory, we expect that Old City's outward appearance will improve dramatically in the weeks following the district's start-up. Daily sidewalk-cleaning and other maintenance activities will ensure that Old City retains a spruced-up look. Next is the security program. Another integral part of the Old City District will be enhanced security. As Old City becomes more and more popular with tourists, residents, shoppers, 136 COMMITTEE OF THE WHOLE - BILL NO. 980238 and office workers, we anticipate a related increase in crime, especially car break-ins and other crimes against property. Such incidents seems to be an inevitable part of life in popular parts of the City. To provide a permanent improved security presence, the district will work to enhance the current efforts of both the Philadelphia Police Department and the National Park Service Police within our boundaries. By better coordinating coverage of both commercial and residential areas, we hope to make Old City safer without demanding large amounts of additional resources. Over the long term, we plan to work with the police to establish a mini station within the district. Security will also enhanced by the constant presence of the district's uniformed maintenance workers and supervisors performing their sidewalk-cleaning duties. Merely by placing these individuals on the streets for several hours each day, we expect a significantly deterred graffiti, car break-ins, and other nuisance crimes. 137 COMMITTEE OF THE WHOLE - BILL NO. 980238 In subsequent years, the district hopes to provide community service representatives to serve as our ears and our eyes on the street and assist residents and visitors alike. This CSR component will be added to our program as the district's budget allows. Finally, we have a planning and development program. To further our goal of creating a safer, more attractive public environment, the district will work with local businesses and residents as well as a variety of government, private, and civic organizations to enhance the image of Old City. We plan to establish new informational signage, banners, transit shelter maps, and posters to enhance the attractiveness of the streetscape. The district will also support an ongoing marketing and promotional campaign directed towards historic and cultural tourism, shopping, and increased occupancy of commercial and residential buildings. This, in a nutshell, is the initial plan of the district. It is admittedly somewhat 138 COMMITTEE OF THE WHOLE - BILL NO. 980238 limited both in fiscal resources and scope. However, by starting with the most basic objective of making Old City clean and safe and augmenting our programming, once the district's initial tasks are underway, we expect that the district will become an essential player in the effort to make Old City a great place to live, shop, and do business. Before concluding, I want to thank Council Frank DiCicco for his leadership in helping to make the district a reality. I also want to thank the many other Members of Council whose support for this bill and the previous ordinance creating the district has been so important in our efforts. Mr. President, I ask for a suspension of the rules in this matter. My colleagues and I would be pleased to answer any questions you or any other members of the committee might have at this time.
Thank you very much. Are there any questions of any members of the committee? Are there any questions? (No questions.) 139 COMMITTEE OF THE WHOLE - TIF BILLS
Thank you very much. There doesn't appear to be any questions.
With the permission of the committee, we will now go back to our other matters on our agenda. Is Mr. Peter Saligman in the room? Mr. Saligman? Mr. Cahill?
Mr. Cahill, would you please take the witness stand, please? (Mr. Cahill comes forward.)
I'm George Cahill. I'm a resident of Pier III. I'm also a businessman in the Penn's Landing area and I'm Democratic Committeeman for the 5th Ward.
I'm filling in for Peter Saligman, who stepped out for lunch. We didn't expect to be called this fast. So we're here to address concerns that we have related to the Penn's Landing project. 140 COMMITTEE OF THE WHOLE - TIF BILLS Specifically Pier III will be the most impacted by the planned project if approved. So we have concerns that we would like to address today to the developer and to Council to get on record. (Peter Saligman comes forward.)
This is Peter Saligman, my colleague, and also a resident of Pier III.
I'm going to let Peter talk about the issues first, and then I'll address the parking and the traffic issues.
That's fine. Mr. Saligman, please identify yourself for the record .
Okay. Thank you, Mr. President. My name is Peter Saligman, S-A-L-I-G-M-A-N. I'm a resident of Pier III and also head up the Pier III Committee which has been interacting with the Councilman and the DeBartolo Group. 141 COMMITTEE OF THE WHOLE - TIF BILLS As George said, I think Pier III is the most impacted by this development. As you can see on the model, we are in fact the only residential development shown on the model. Which shows you how close we are. I guess, just to summarize Pier III's concerns and what we would like to do, because we are the most directly impacted by this development, we would like to enter into and have discussed with the representatives of the DeBartolo Group -- enter into a developer's agreement whereby we actually put in writing some of the things that we've talked about: issues concerning traffic, noise, security, trash. And of also concern is the facade of the garage which will face Pier III. These are all issues that are of concern to Pier III. Also, I think Mr. Simon touched on this was -- of concern is that a future use of this site does not become a gambling casino. And I think Mr. Simon had indicated that it would not. You know, again, we're just looking for some assurances. And our hope is -- we've talked about a 142 COMMITTEE OF THE WHOLE - TIF BILLS developer's agreement throughout this yearlong process of all the meetings, and we've been told yes, yes, we'll do it, we'll enter into it. It's a year later, we're here before City Council, and preparing to vote, and we still have no 7 agreement. So I guess we would look to Council or to somebody to enforce that had and to say, Hey, will you guys really enter into this agreement to address some of these concerns of your closest neighbor?
My concern, in addition to Peter's, are the fact that -- and I would like to step up to the model for a minute to point this out to City Council, if I may.
This is Mr. Cahill for the record and for those Council Members who may not have been here.
My concerns are as you travel south on Columbus Boulevard to Market 143 COMMITTEE OF THE WHOLE - TIF BILLS Street, there's only one way to access Pier III and Pier V; and that is by making a U-turn at Market Street. If this project comes to pass, the traffic will be exiting out of this very intersection that I'm talking about. We will virtually -- when I say "we," residents of Pier III and Pier V, in my opinion, will be virtually land-locked out of our units, our homes because of traffic congestion entering and exiting into this project. My question to -- and we've talked about this in the past -- Councilman DiCicco is how will we be assured that we as residents of Pier III and Pier V will not be in essence land-locked from our homes? That's my question.
Thank you, Mr. President. I think we have discussed during the past year, and I think, for the record, it's important to note that in addition to the working 144 COMMITTEE OF THE WHOLE - TIF BILLS committee that is made up of the ten various civic associations, we had a separate subcommittee, of which there are two or three by now, to deal with the issues pertinent to the Pier III residents because they are, in fact, the most immediate neighbors. And someone from Penn's Landing or maybe Mr. Dick Orth could fill us in a little more on this. We have been talking about possibly sliding back the area of ingress and egress going from south -- from north to south on Columbus Boulevard where you now make that turn to make a U-turn or make a left-hand turn going east across Columbus Boulevard. I think preliminary plans call for sliding that further north, which will give the residents of Pier III and Pier V better access to your facilities, away from the project. And I'm not sure what the length of that is, but we already talked about that. And before Mr. Dick Orth does his presentation on the traffic control study and how it affects Pier III and Pier V, I think it's also important to understand, the reason we haven't 145 COMMITTEE OF THE WHOLE - TIF BILLS reduced all of this to writing is, this project, as you both know, has continually been changing -- the size and scope of it, the areas of ingress and egress. Although we are pretty certain they're going to be where they are, with the exception of the viaducts, this thing is constantly changing. And I don't think it would be fair to any of us to enter into an agreement until we have it nailed down specifically as to what the esthetics of the building are 'cause that is of great concern to you. One of my first comments to Mel Simon a year ago was, If I live in Pier III and I live at the southern side of Pier III and I look out my window, what do I see? This is important to you, and we've been sensitive to that. And you're a part of that separate committee that are going to deal with the issues of esthetics. We've even talked about, when we talk about trash, we even talked about what we will be able to do to maintain the area of waterway between the proposed project and Penn's Landing when trash may blow off the roof of this 146 COMMITTEE OF THE WHOLE - TIF BILLS entertainment center because people are up there having a soda, whatever. And who will maintain the waterway? We've talked about some of those things. And I think we're going to have some significant solutions to that and we're going to reduce all of that to writing at the proper time, and I think we're getting close to that. We have a Traffic Study Committee, which is another subcommittee that I created to deal with the issues related to traffic. And people from your -- I'm not sure if it was Mr. Cahill or Pete, one of you, I think, are on that committee. We had a meeting scheduled for the 10th of June. This will be ongoing during the construction phase of the project and even when the project is completed. I want to keep a committee in place as long, as I'm your Councilperson, that will deal with issues related to this project forever and a day concern. And I pledged that to you at the other meetings, and I'm on record today to continue to work with you. And I understand your concerns. I've 147 COMMITTEE OF THE WHOLE - TIF BILLS never tried to dismiss the concern that there will be an increase of traffic and there will be a need for additional parking, but we're working to accommodate some of those problems. For the record, in addition to the 7 to 2500 parking spaces on site, Penn's Landing is 8 now managing two additional parking venues -- one 9 to the north, which was the former police 10 impoundment lot, and the South Street pedestrian 11 bridge parking lot on Columbus Boulevard is now 12 under the control of Penn's Landing.
We were able 13 to get that parking lot down at South Street out 14 of the management control of the Parking Authority 15 and in the control of Penn's Landing. 16 And the reason for that, so my 17 colleagues and everyone understands, we were 18 trying to find additional off-site parking for the 19 project. And what this will mean to the project 20 is we will be able to create a shuttle system 21 along Columbus Boulevard to take people from the 22 other parking venues to and from the Penn's 23 Landing Entertainment Center, all in the effort to 24 eliminate some of the impact of vehicular traffic on a daily basis. 148 COMMITTEE OF THE WHOLE - TIF BILLS So my answer to you is, and I think, with the President's permission, Mr. Dick Orth, from Orth Rogers, the traffic consultant, could speak to the issue of you being possibly land-locked and the issue of the area of ingress. And I see my colleague Councilwoman Clark wants me to yield. I will yield.
One, because I have to go. And as much as I'd like to hear your presentation, I'm not going to be able to. I think that when reasonable efforts have been made to accommodate a community, that community is going to have to realize in the final analysis that it will not be the same community as before. There will --
I understand that. There are going to be some changes that everybody has to make in the interest of progress. Now, we're having these hearings to determine whether this is indeed progress. If it is, then all of us are going to be different. You, because you live closest, are going to 149 COMMITTEE OF THE WHOLE - TIF BILLS perhaps have to put up with more traffic. Now, there are some options available to you, okay. We hope you don't exercise them, all right? But part of going to what had to be an attractive area should also have put you on notice that one day you were going to get some more neighbors. And this is the one day. We owe you a sensitive hearing, we owe you the best reasonable efforts to minimize the disastrous impact on your life-style as you have come to know it. But it is unfair to you to paint you a pretty picture that's not real. No matter how many parking lots we put in, no matter how many over-the-street pedestrian bridges, you are going to deal with additional parking, additional traffic, additional smog, additional noise. It is, quote, the price of progress.
I think I'm speaking for myself as a resident of Pier III. I just want to be able to get into my home.
You know, I have concerns 150 COMMITTEE OF THE WHOLE - TIF BILLS about all the other issues, but I want to be able to come home at night and get into my home.
And I think you have a right to do that, but I need to tell you that you will probably have to work a little harder. It will probably take you a little longer to get into your home at night. Now, if you're willing to take that as a fair representation of a government that cares about you, we've got the basis of an agreement. But if you think that we can paint you a Pollyanna picture that says, Yeah, this is good and we want it but it's not going to change your life-style, that's not fair. I want it to be on record as having told you that that's not real.
The other issue I wanted to address before Mr. Dick Orth gives his presentation is that we have already worked out an agreement -- I have already worked out an agreement. It's not in writing, but it will be 151 COMMITTEE OF THE WHOLE - TIF BILLS part of a written agreement with Penn's Landing Corporation. We'll assume the maintenance responsibility for the common or public area of going from the north end of the project all the way down as far north as Pier III to maintain the sidewalk and keep that clean. That will be a part of the regular daily maintenance in addition to what they will be doing at their facilities that exist today and the future facility of Penn's Landing. Thank you.
I understand what you're saying and I agree with you that it is the price of progress and the price of change. And I guess what we at Pier III are simply looking for is a written agreement, as has been indicated to us, that we could enter into -- that they would enter with us between the Pier III Homeowners Association and the Simon DeBartolo Group, which would be separate from any written lease that exists between the two parties, that simply puts in writing a lot of things that these committees and subcommittees are discussing. 152 COMMITTEE OF THE WHOLE - TIF BILLS Because we leave the committee meetings and we all feel pretty good that here's how we'll deal with the trash, here's how we'll deal with this and that, understanding that there will be an increase. We just want to make sure that on a going-forward basis that people will change -- you know, everybody will be different parties here but that what we were promised and what we were told is documented and is of record and will happen that way. And that's -- and it's not that we -- if I could live with only the players that are involved today, that would be fine. But as time moves on, this is a permanent thing. That's the concern of Pier III, that we just want to make sure that everything is and stays as it's proposed.
Well, it is very difficult to reduce to writing a proposed project. And when you do, you build in a problem. Why don't -- essentially, this project works only because of faith. Now, I ain't big on faith; you've heard me say what I think about 153 COMMITTEE OF THE WHOLE - TIF BILLS faith. But to have this project have to work around a written promise to you this early in it would be to shackle it to the point that the promise wouldn't be worth very much. What you have to commit yourself to is constantly watching and monitoring it. And even if you had it in writing, still have to constantly monitor and watch it. But I would encourage my colleague not to commit to writing something that is as tenuous as this must be at this time. You have our commitment on this public record that we have heard your concerns, that we are not your enemies; we are trying to accommodate them. But I don't think that it's clearly understood well enough to put it in writing, and I would be against putting it in writing at this time beyond what we've said.
Right. At this time, I can understand that and certainly agree with that, but I guess we would look to at some point, once some of these committees work through and finalize how some one these issues will be dealt with, and once we sit down and agree on it after the process, at that point, do you think it would be 154 COMMITTEE OF THE WHOLE - TIF BILLS appropriate to reduce it to writing?
I think that at some point, there will be a written document. But as the Councilwoman indicated, because this is all new to us and things will constantly be changing, eventual change, what I would like to see is some early announcement as to a major event that may be taking place, where the community is made aware of that 30 days before, similar to what we do at the stadium, when the Eagles and the hockey team -- the Flyers and maybe another event is taking place, people down at the stadium, who live in the stadium area, are given advance notice so that we can prepare for what will be expected will happen. But I don't have the answer to those today. I can only tell you that certain things will be in writing. And that's why I want to keep a working committee in place at all times, to deal with issues as they come about. And you have my commitment on that. And, again, I think from Day One, you know I supported the project, there was never any hidden agenda on my part. Even though there's a lot of disagreement from the community about whether this 155 COMMITTEE OF THE WHOLE - TIF BILLS thing should happen or not, I've committed to one thing and I will live up to that commitment, you know, going forward, that you will always be a part of the process -- at least as long as I represent the district.
I should just add, for the record, that the Councilman has been very up-front. I mean, I really applaud the way that he has handled the whole thing. He brought all the community groups in from the very beginning and has kept us involved, and I applaud and commend that. I think that's been a great thing. Even though we don't sometimes see eye to eye on how it should happen, he's --
I think, Mr. President, Mr. Orth, who's been the consultant on the traffic study, might be able to answer their specific questions related to --
Mr. Orth, please 156 COMMITTEE OF THE WHOLE - TIF BILLS identify yourself for the record and proceed.
Yes. My name is Richard Orth. I'm a principal of Orth Rogers & Associates. We're traffic engineers and transportation planners, with offices --
I understand, sir. I was going to do that. I think -- and I'm not sure I've got it right. I think Mr. Cahill has raised the point that currently the residents of Pier III coming southbound on Columbus Boulevard now use the traffic signal at Market Street to be able to make a U-turn to travel back northbound and then to turn into Pier III. As Councilman DiCicco has pointed out, it's the intent of the plan to shift that intersection a little further north -- the exact distance, we're not certain of, but it goes somewhat further north, but the movement -- there 157 COMMITTEE OF THE WHOLE - TIF BILLS is no reason that I know of that that movement, the U-turn movement, could still not be permitted in the future. There will be more traffic making the move because there will be more traffic turning into the garage. But also, at this point, I don't see any reason why that U-turn movement that takes place today would not still be permitted in the future. And that's something, again, that can certainly continue to be worked out. It's a valid question. Councilman DiCicco's comment about the ongoing traffic committee is the kind of thing we will certainly keep at the top of the list. And, again, at this point, I see no 17 reason why that movement couldn't be maintained.
Isn't it fair to say, though, that in addition to Pier III and Pier V residents, there may be some other commercial establishments that have an interest in people being able to go south and then come north?
There may be some 158 COMMITTEE OF THE WHOLE - TIF BILLS other -- I only say that to point out -- actually, I'm familiar with that turn, and it -- it just -- I think it underlines Councilman DiCicco's point that there really is work to be done on some of these problems, and it's not an unimportant detail that you are interested in and that the committee will certainly follow and we will, of course, support the District Councilperson. It's primarily his responsibility. But I think you have made your point here, and we appreciate your coming. And, you know, we will be mindful of the need to consider your specific problems in all of this.
Doris Casper, Miss Casper? She's here. I see her -- I see someone who, I believe, has identified herself as being 159 COMMITTEE OF THE WHOLE - TIF BILLS Miss Casper.
My name is Doris Casper. And I live at Society Hill Towers, north building I formerly had a townhouse in Queen Village, which, unfortunately, I had to get out of because I couldn't walk the stairs anymore. I am very happy living at the Towers; I am unhappy with what's going on at Penn's Landing. Number one, I am against the hotel because of the traffic it's going to bring and because I object to $10 million of HUD money required for it. And my idea was that the hotel belonged at Market Street, where the DeBartolo project is now being proposed. And at first, I was against it, but I went to the town meeting with the Old City Civic Center. And there, they expressed their very great displeasure with the proposed restaurants 20 that were going to be in the DeBartolo project. By the time the DeBartolo people presented their presentation to the Society Hill Civic Association, which was held at Pennsylvania Hospital, they had decreased the 20 restaurants to 8, which they said would be very large 160 COMMITTEE OF THE WHOLE - TIF BILLS family-oriented restaurants, which sounded a lot better and seemed to be less competitive with the Old City restaurants. It seems to me that the DeBartolo people are accommodating themselves to community interests and so I've come to think that I probably support it. My only concern is that the Riverview is developing a family-oriented project. They're now we're going to have, I don't know, movies, and they're going to put something 12 across the road. 13 What upset me was, at the Society Hill 14 Civic Association, we were told that no City money 15 would go into DeBartolo. And then I see in the 16 paper that 60 million, or whatever it was, of City 17 money is going to go. 18 And so I came today to find out what that meant, and I discovered that TIF money is different than City money. And I presume that we'd get it back, if I understand it correctly. So, by and large, I think I am now for the DeBartolo. I just hope we don't have two family-oriented entertainment centers one mile apart Market Street and Riverview. 161 COMMITTEE OF THE WHOLE - TIF BILLS But I'm still very much against the hotel -- not because it's going to block my view, I don't have that view, but because it's going to make Dock Street a major thoroughfare. I don't care what the person who was in charge of the road projections says, cabs are going to go in and out of that hotel, straight up and down Dock Street, which is going to become a main street leading either to Walnut or to Spruce. And I think the amount of traffic it's going to bring to our community, on top of DeBartolo and on top of South Street, is going to be absolutely untenable. Thank you.
I just want you to know you're ahead of me. You apparently know the difference between City money and TIF money. But I must tell you that as of now, I do not know the difference, so you have some company. I'm hoping that this will become more clarified to me as --
It sounds to me like TIF money we get back. 162 COMMITTEE OF THE WHOLE - TIF BILLS
Ladies and gentlemen and Members of City Council, my name is Bertha Barksdale. I'm here on behalf of ACORN and the Living Wage Campaign. As many of you know, the Living Wage Campaign is a grass-roots effort of 50 organizations who believe that corporations should be accountable to the City of Philadelphia. Bill No. 970586 would require companies that want our tax dollars to pay a living wage with benefits, and I hope you will support the bill on June 3rd. I am a low-income person. And when I read about the amount of money these companies are getting, I was appalled, and I would have made preference of allocation of monies to schools, payment of health care, to hire more police, or to 163 COMMITTEE OF THE WHOLE - TIF BILLS get jobs for the neighborhood. Instead, we are here today because this money is going to corporations that claim they are bringing jobs to the City. And you, as Members of City Council, must decide if these companies are good for the City or not. My insight of the economic development plan for the City does not work. Let me say it again -- it does not work. Homelessness and joblessness are important issues that are evident. But, to my understanding, this project would supply X-amount of jobs. And I do commend them for this. As Members of Council, what I am asking from you is this: Before you say yes or no, demand to know from these companies what are they paying? Are they paying a living wage? Are you paying health care? There are already 165,000 jobs that pay below $7.50 an hour in Philadelphia. We don't need 100 more of them. Before my tax dollars go to another company, make sure this company is giving back to Philadelphia. Don't sell us out. It's our future. Make companies pay a living wage. 164 COMMITTEE OF THE WHOLE - TIF BILLS Thank you.
I would like the record to reflect that there was previously- scheduled a hearing of the Council's Committee on Commerce and Economic Development. Miss Barks was here for that hearing. And I would like for most of her testimony to be made available to the Council Committee on Commerce and Economic Development, which is hearing the bill that Miss Barksdale spoke to. We appreciate her coming here and her patience and would like to make sure that her testimony is a part of the appropriate record. At this time, the Chair recognizes Councilman Nutter who would like to make an announcement.
Thank you, Mr. President, and I will follow up as Committee Chair on Commerce and Economic Development on making sure that that testimony gets over to where it's supposed to be. Mr. President, there was an 165 COMMITTEE OF THE WHOLE - TIF BILLS announcement made earlier about a continuation of a previously-recessed hearing on Commerce and Economic Development regarding the bill that has generally been referred to as "the living wage bill." It had originally been recessed till today, at o'clock. There was an earlier 9 announcement that it was being recessed until June 10 3rd, at 2 o'clock. There has been a change. That bill and its hearing has now been recessed to the call of the Chair. The various parties have a fair amount of work to do on the bills, and we're going to take some time to make sure they get squared away properly. Thank you very much.
Thank you very much. The Chair recognizes Councilwoman Fernandez.
Thank you, Mr. President. We're going back to the --
We are now going back to the testimony on the various TIFs that are currently in front of the Council unless -- and I really would like to get Mr. Steven Zwick, an 166 COMMITTEE OF THE WHOLE - TIF BILLS architect. Could we get him? I think he's a member of the general public who wishes to testify.
I just had a couple of questions on the Penn's Landing one, which I wanted to get in.
We'll get Mr. Hankowsky and then we'll get right back to it.
Excuse me, Council President Street, I'm also a member of the AIA Urban Affairs Committee. Don't represent them, but I do take part in that organization. Now, I just want to say from the outset, I'm not against development; I'm against -- oh, I'm sorry. For the record, my name is Steven Zwick. I own my own practice which is called Z Texture P.C. and I formerly worked at a firm called J. Curilla (ph.) Architects, who currently is expanding the Riverview Complex. I did the original design for the Riverview Complex. In addition, I've designed a number of the more successful entertainment venues along riverfront, including the Maui Club, the Engine 46 167 COMMITTEE OF THE WHOLE - TIF BILLS Steak House. And I also currently do work for Electric Factory. I designed the Electric Factory and also the renovation of the TLA, which has just occurred. In addition, the Philly Rock at the airport. In that context, I've also worked in bringing an $80 million+ project to my home town of Evanston, which is a project that includes 130,000 square feet of retail and --
Okay. In that context, I think what Mr. Simon said is correct. Philadelphia is underdeveloped, and I'm glad that he's willing to come here and spend the money. I have some queries or questions about why he was the exclusive developer, thus giving away any negotiating power if there had been an RFP issue process. Consequently, I don't disagree with the TIF; I disagree with the amount of the TIF almost being 36 percent of the total cost of the project. 168 COMMITTEE OF THE WHOLE - TIF BILLS If there had been an RFP process, if it had been negotiated, I think the terms could have been more favorable. As for the specifics of the design of this project, I think the designer has missed a lot of the cues of what already exceeds at the riverfront. Specifically looking at the garage -- I mean, I wrote a short letter. And in this letter to my buddy, Ed, I cited these flaws with what I feel are design flaws of the project. First, 50 percent of the river frontage is the back of a parking garage. Second, the placement of the outdoor public space on the roof of the structure disconnects people from the river. As an analogy, compare a roof garden to sitting in Rittenhouse Square. Three, the promenade along the river is not developed. This quay is juxtaposed next to -- it's either a 35- or 55-foot wall that detracts from the pedestrian experience. Four, the elevations presented especially along the river are monotonous and are 169 COMMITTEE OF THE WHOLE - TIF BILLS scaled to be perceived from New Jersey and afar; they are not scaled for the pedestrian and, thus, will not be friendly. As are the existing peers are not scaled for the pedestrian, as walking down Chestnut or Walnut is scaled for the pedestrian. The campo is inward-looking. The retail follows a path to the quote/unquote, campo not to the river. , movies are already split among the existing theaters. Plus patrons want to go where the movie they want to see is being shown. Consequently, with the product split, there is no assurance that a movie theater at this location will be the draw anticipated. Furthermore, where would you go to a movie; one that offered free parking or one that you had to pay an additional $5 for parking? Again, the draw is the river. I don't think the designers who designed this project have spent enough time down there and understood what the actual draw is. 170 COMMITTEE OF THE WHOLE - TIF BILLS And, also, in terms of creating traffic from the promenade, you would want to design what I call "draws" at both ends of the promenade -- potentially a hotel at one side and an entertainment attraction at the other end. And that would create traffic to and from along the riverfront and create a strolling process. Consequently, my unfortunate conclusions as to what is being proposed with this design is that it is an approximation of a suburban mall placed in an urban location, that the users of this facility may not necessarily spill over into the nearby areas, and those nearby areas already are a draw in and of themselves and are successful. The concentration of exclusive retailers and restaurants that may locate in this facility may be detrimental to the fabric of the City where such retailers would be better placed on Chestnut, on Walnut, on Market Street. And, consequently, I don't think the project in its current form -- not that it can't be as successful as it potentially can be. And let me emphasize this. I think if there's a 171 COMMITTEE OF THE WHOLE - TIF BILLS little bit more thought -- well, actually, a lot more thought and input from people who live in this community or designers in this community interacting with the, you know, project's architect, that we can have a very successful project there. So, therefore, as opposed to my initial reaction, which Mr. DiCicco had to withstand, I am not against it; I am for it but, I want to say it developed properly.
And if this means opening up the design process or bringing in the likes of (unintelligible) a consultant to the City who worked with -- who's doing the project in Evanston as a consultant -- I think he has designed projects in Denver, Portland, in the Philippines, and several other locations that I can't call to mind right now. He's based in Berkley, California. So not only do I question the amount of the TIF money that's used, but I do have a lot of problems with the development and the amount of TIF money that's being proposed today. Thank you.
Thank you very much. 172 COMMITTEE OF THE WHOLE - TIF BILLS
The Chair recognizes -- reluctantly recognizes Councilman DiCicco.
Thank you. And you and I did have -- you attended the Queen's Village presentation last week.
I currently reside on South 16th Street, near Rittenhouse Square, but I don't think that in any way --
No, that's not my question. I just wanted to know where you reside. You had indicated -- Thursday evening, you showed me a number of projects that you had designed. And today you indicated -- described a few of those places -- Maui, Engine 56.
Correct, the original Riverview. 173 COMMITTEE OF THE WHOLE - TIF BILLS
Are they projects that are owned and developed by Mr. Blattstein (ph.)?
The Blattstein family. I do not -- I will currently not do any work for Bart because me and Bart do not get along, and I have no allegiance to Bart. And I am not here on Bart's behalf, if that's what your inference is.
No, I just wanted -- I was curious as to -- I noticed most of the pieces that you showed me, the developments you've showed me are --
And I know that Mr. Blattstein has had an interest in --
Mr. Zwick, Mr. Zwick, we don't -- 174 COMMITTEE OF THE WHOLE - TIF BILLS
This is a hearing on Penn's Landing development, nothing else.
Thank you, thank you very much. Are there any other members of the general public who are here who wish to testify on any of the bills that are in front of us, any member of the general public: I want to get the members of the general public on the record before we go back to Mr. Hankowsky and the professional staff.
Mr. President, I'm Robert Fina with PIDC, but I have testimony that was provided by E.F. Muronda on the Cecil B. Moore Avenue TIF. It's in writing, and there are a 175 COMMITTEE OF THE WHOLE - TIF BILLS number of copies, if I could just present that to you for the record.
Is there any other member of the general public that's here? Going once, going twice. Any member of the general public? I see a distinguished gentleman approaching the Chair and would appreciate if you would identify yourself for the record, sir. He is now about to be joined by another man who himself is dapperly dressed in a three-piece suit.
Yes, I'm Jonathon Rubin of R.J. Cousins Contracting and Vice President of the Contractors and Small Business Association. My company, R.J. Cousins, performs demolition work and is located at 1633 West Bristol Street, in Philadelphia. We currently employ 16 people, of which are minority. And without us, I feel they would be left out of the (unintelligible). We have only been in business for two years. One of my concerns and why I'm speaking 176 COMMITTEE OF THE WHOLE - TIF BILLS here is the contract and opportunities for Section 3 and small businesses in the City of Philadelphia. It is my understanding that whenever HUD money and the 108 is involved, that there is a federal mandate which requires 7 percent of the contracting dollars to go to 8 Section 3 City small businesses. Me, along with 9 Councilman Cohen, I'm still kind of unclear on the 10 TIF and exactly the 108 money in terms of the entertainment center. But, basically, I was here to voice my concern in terms of the PIDC administering the 108 funds and the lack thereof. And I just wanted to state for the record that Section 3 businesses were overlooked. I've heard my minority women, DBEs but nowhere have I heard Section 3 businesses mentioned throughout the whole course of the day.
My name is David Rodgers. And I am President of the Contractors and Small Businesses Association. And I am here in regards to that same matter. And it is to my understanding that PIDC 177 COMMITTEE OF THE WHOLE - TIF BILLS was to administer, but from the hearings that I've been listening to thus far, there will be no CDBG funds funded for the Penn's Landing project. However, PIDC has a poor track record in implementing requirements for utilization of City Section 3 small businesses controlled by lower-income persons. PIDC has no enforcement of federal requirements and no staff to enforce this rule or these rules. We recommend that the City should provide assurances that the City Section 3 small businesses shall receive appropriate shares of contracts. All bids and contract should include requirements to utilize City Section 3 small businesses and independent organization such as the Contractors and Small Businesses Association should monitor the bidding and contracts to ensure the implementation of the federal law and City Section 3 small businesses. And with that, we'd just like to also say that on behalf of our membership, we haven't heard anything in regards to this Section 3 mentioned here today, as Mr. Rubin had made mention of. There was mention of minority- and 178 COMMITTEE OF THE WHOLE - TIF BILLS women-owned businesses but nothing in regard to Section 3, and that's a major concern of ours that we need to address with the City of Philadelphia.
Thank you very much. I'm familiar -- maybe not quite as familiar as you are, but I'm familiar with the problem that's raised by the Section 3 Program. And I have asked Joyce Wilkerson and Marla Hamilton in my office to work with PIDC, developers, and other people to make sure your that your concerns are covered. As you know, the details of the minority participation in employment and contracting and the like are all being worked out. I would appreciate very much if you could be sure to leave -- be sure to leave your names and phone numbers with Miss Diaz here so that, you know, you can be among the groups that have an opportunity to participate, you know, in the economic development that's going on here and other places. Its refreshing to have you here. So often people who have an interest -- and you 179 COMMITTEE OF THE WHOLE - TIF BILLS certainly have a stake in all of this. Too often, we only hear from you long after a public hearing, long after things are done. But, hopefully, we can take care of your concerns. You have our commitment that we will look into it and make sure we can do what we can do.
Yes. We thank you very much, Council President. And your statement is very well received. And it is very true that these things have occurred long after the fact. However, we intend to make an abrupt change to that as we go along.
Is there anyone else here from the general public? (No response.)
Seeing no one, Mr. Hankowsky, I think it's time for you and your team. 180 COMMITTEE OF THE WHOLE - TIF BILLS The Chair recognizes Councilwoman Fernandez.
Thank you, Mr. President. I have two major questions. One was regarding the jobs that are estimated to be created. And the background information says there's an estimated 1300 -- no -- yeah, 1350 full-time equivalence. Could you explain what this "full-time equivalence" means?
Yes. As you know, in certain situations, some things may be staffed with part-time people. For example, the garage might be active -- more active on a Saturday night than it would be on a Wednesday morning. And, therefore, there may be people who would -- extra people who would be employed in that function during that time frame. So what we looked at was the equivalency of a full work week and how many full work weeks of jobs are created. And that's 1350. There well might be more people employed because some of those jobs might be part-time in nature. 181 COMMITTEE OF THE WHOLE - TIF BILLS A restaurant, for example, might have waiters on a Saturday night that aren't full-time because you're just busier then.
I believe I shared my comments at a separate hearing on that subject.
You know, certainly, this full-time equivalency does raise questions about what pay scales might be and benefits and stuff like that.
But I don't think that we want to go into that for five hours right now.
I think not. And I think it was seven since I was here the whole hearing.
One other thing I wanted to clarify. In the background materials, you talk about a lot of the other traffic improvements that would be made, and there's always cost involved. Could you, for the record, clarify if 182 COMMITTEE OF THE WHOLE - TIF BILLS there are any City capital dollars going into these traffic improvements?
There are none. You might excuse me, I apologize. In the project plan, you might note that the TIF district, in fact, is slightly larger than the area that Simon DeBartolo is going to actually lease, that actually goes out into the street to make use of the TIF dollars eligible. So, for example, the traffic lights, stop lights, etc., that were discussed just a moment ago with regard to Pier III and moving them and all of that is part of the cost of the project. It's termed in the budget "off-site." And it's funded from the TIF proceeds. And to be very specific to your question, we are using no City capital dollars. My only amendment to that is the project underway today that's dealing with the Market Street ramp, that was a previously-approved City capital project, that's happening. But the TIF project we've described today is not using City capital dollars.
And do you 183 COMMITTEE OF THE WHOLE - TIF BILLS have an estimate of the cost of these traffic improvements, even though they're covered by the TIF?
Yes, we do. The off-site improvements are $4.6 million, which includes the ramp that will take you from Christopher Columbus up to the viaduct, the new viaduct, the new traffic intersections.
So if someone were trying to make a favorable case for this TIF, you could argue then that not even City capital dollars are used for these traffic improvements, even though that would be customary with a lot of other projects.
And, lastly, I think we had in some of the briefing discussions issues about engaging SEPTA actively in dealing with some of the traffic potential and congestion down there, and I would just like the record to note that I hope there will be serious discussions about whether it is attractive, tourist trolleys going up and down Delaware Avenue and whatever. I 184 COMMITTEE OF THE WHOLE - TIF BILLS think dealing with traffic down there to try to reduce car congestion as much as possible would be great for the whole waterfront.
Yeah. I'll just note for the record, Councilwoman, that SEPTA has been involved in the planning process from the beginning. We've made allowances, for example, that in the new viaduct, that there would be pull-off lanes so that, for example, the buses can easily drop off people, the loop buses that work Center City, the Phlash, or should there be some subsequent modes. And I believe -- I'll do this simply because I believe the gentleman from SEPTA has left, but he had indicated that this was the most transit-accessible project he's seen in 15 years. And, as we know, we have the Market subway stop right at the end of Market Street, which would now come across this bridge and bring you right into the project.
When SEPTA was brought in, it was not just to deal specifically with Penn's Landing, but to deal with the entire area, as what we referred to as the "Historical 185 COMMITTEE OF THE WHOLE - TIF BILLS District," everything east of Market Street, maybe as far south as Washington Avenue, as far north as probably Vine Street or thereabouts, to talk about how we move people around, as we begin to continue to attract people to the City -- conventioneers and people to the Simon DeBartolo project, to the historical district, how to better utilize public transportation and move people in and about the area, to hopefully reduce some of impact that we would normally anticipate with visitors coming by car. Once they park their car, how do we get them to move from one venue to another? And that was part of what the agreement was with Mr. Simon and the Simon DeBartolo Group and Penn's Landing Corporation, that we needed to include public transportation, and SEPTA has been at all but one of the meetings, I think the first meeting that I convened in June. We didn't even think about it until some time thereafter. But at every other meeting, they've been present. They don't have a plan in place, but they are working with us to develop a plan. And the Streets Department traffic engineer people, they're a part of this 186 COMMITTEE OF THE WHOLE - TIF BILLS transportation committee to talk about what we may need to do in terms of the impact on neighboring communities in Society Hill, when you come off of Columbus Boulevard onto Spruce Street, Walnut Street, how to utilize the traffic signals. Do we need to change directions, do we need the increase? And Mr. Orth, Dick Orth, spoke at all of our meetings. We may even need to, just by simply changing some of the traffic devices, the timing on them to get people to move quicker through the area.
But I'm also thinking, like you say, once you get people there, say they're parked, my dream would be that there would be maybe built into the parking cost then a transit pass so that it would basically be free to keep moving around, 'cause my sense would be that the more people can move around without having to walk huge, long distances, they're more likely to move around to different things and spend money in a whole lot of different ways.
Well, that's part of the whole thing, incorporating shuttle 187 COMMITTEE OF THE WHOLE - TIF BILLS systems. And, you know, it's all in the designing stage right now. And at some point, I think we'll have something that will be really futuristic as far as what we're used to having in Philadelphia in moving people around.
I think, as we know, Penn's Landing does own a series of rubber-wheeled trolleys that now operate seasonally. But in this plan, long-term, they would operate year round. Because now, you're right, we would have this anchor that would bring people year-round and would move people be up and down the waterfront.
Those are now -- those are owned by Penn's Landing Corporation.
I think that's where we have to move. Because sometimes, say, if you have a family of five, and you say, Oh, you know, it's an extra five bucks. But if it's free, it's sometimes a real attraction. 188 COMMITTEE OF THE WHOLE - TIF BILLS
Right. The last question was in the -- when the feds passed the transportation bill last week, I noticed on the list was the money for the tram, the Philadelphia-to-Camden tram, and it's also mentioned in your proposal. From what you know of what you've been working on here and now that there's some federal dollars, what's your estimate of the financing and do you have a sense of a time line of when this tram might become a reality?
Right. The Delaware River Port Authority has engaged an engineering firm, Fredrick R. Harris. They've engaged them in a series of phases. They completed Phase I, which is an initial analysis of what might be doable now. They are now in Phase II, which was to do more detailed cost estimates of the physical construction costs, as well as the financial feasibility, what would you have to charge for the tram to make it pay for itself operationally. And they're to conclude that work 189 COMMITTEE OF THE WHOLE - TIF BILLS somewhere, I believe, in the next 30 days, fairly shortly. The indications are that the cost of constructing the tram on both sides of the river is probably somewhere in the order of magnitude of, say, to $25 million, somewhere in that 8 order of magnitude. That the Delaware River Port 9 Authority, actually when they approved the 10 Kvaerner transaction, also basically agreed that 11 they would look at putting in up to 15 million for 12 a tram. 13 If you add the 8 that you noticed in 14 the ISTE bill, you're at 23, which looks like, if 15 the numbers are in that 20-to-25 range, that there 16 is the funding resources that would equal the 17 cost. I can't sit here and tell you it's a done 18 deal, but it's clearly in striking distance. 19 The timing -- and there been a series 20 of meetings DRPA and the Simon DeBartolo organization, Penn's Landing looking at literally where would you land it, where would you drop columns so that it could be integrated with this project? I think the hope of everybody is that 190 COMMITTEE OF THE WHOLE - TIF BILLS you would be building both projects simultaneously, in part, because it would very difficult to come back later and add the tram. So you might see construction of the tram also occurring in calendar '99 as well as the construction of this project.
That would be one of the fastest projects. When I first heard of the tram I thought, Oh, my God, you know, I hope I live long enough.
I agree with that. It would be one of the fastest projects.
Mr. Hankowsky, how many years have you been coming to City Council on various projects?
Watch yourself, Mr. Hankowsky. The lawyer in him is coming out.
I can see it, I can see it. I've been coming to City Council 15 years. 191 COMMITTEE OF THE WHOLE - TIF BILLS
For years. You have seniority in presenting these programs. I have the general sense that if -- and I think I've been at many of these hearings, maybe most of them, maybe even all of them.
And I have a sense 9 that if I added up all the job projections of all 10 the various proposals you gave, which Council 11 approved, that Philadelphia would be bursting at 12 the seams with respect to population -- that's a 13 comment, you don't have to answer that one. 14 But have you ever made an analysis of 15 the programs that went ahead? I don't mean the programs, you know, that faltered along the way and never got built, like any number of them, but those that went ahead. Has there ever been any analysis by PIDC as to what the actual job production was?
There have been different analyses, to answer that question in part, and I do want to in fact comment on your comment.
Okay, very good. 192 COMMITTEE OF THE WHOLE - TIF BILLS
Because it is integrative. We all know that the City has lost thousands, tens of thousands of jobs.
Now, if we look back 30 years, hundreds of thousands. And I think we must all be cognizant of the fact that what is causing that to happen. And there are a variety of factors; some are corporate behavior, some are the cost of doing business here, the environment in certain areas, and whatever. And the City's economy is a vibrant, dynamic engine. So, in effect you're right. Last year, we gained 1300 jobs. That does not mean that every job stayed static and we added 1300 jobs. It may mean we lost 9,000 and gained 10,300. Every year, there's an addition and a subtraction. And over the years, for example, the programs where we're directly lending money, money that you have provided us or provided to us through the federal government to grant to the City, there are job reports that companies are required to file over a three-year period. 193 COMMITTEE OF THE WHOLE - TIF BILLS I can't tell you honestly I've kept track of the first deal we did 40 years ago, but we do keep track over somewhere between a three- and five-year period of projects have financed to see whether they have created the jobs they were supposed to or they did not. I don't have that information with me today, but I'd be happy to provide it. And what it shows us is that some companies didn't do what they said they were going to do. They went out of business, they made bad business decisions, their business went under. But overall, if you take the collection, the portfolio of transactions, we have exceeded the number of jobs we said would get created by those projects. There's also been particular studies. For example, the Convention Center, which was why I was here 15 years ago for the first time. You know, there's now been a look back that has been done by the Pennsylvania Economy League that, in fact, has looked at, Did the jobs come out of that project that we thought would come out of that project? And in attempt to 194 COMMITTEE OF THE WHOLE - TIF BILLS document, in fact, Did it make sense for us to do these things? And, overall, the answer is that by the net collection of what we do, we do meet these job projections. What would be most dramatic, of course, is if we could also make sure we don't lose any jobs because then they would all be a net gain. So the exercise has --
Well, I'm not asking you to be responsible for the job losses. All I would like to see is -- the latest thing I saw was -- maybe it was a year or maybe two years ago. It was a newspaper article that said that the -- it was either The Inquirer or The Daily News saying that they had made a study and kind of found no jobs, and that maybe was before they considered the Convention Center. But I'm just saying I think it would be good to come up with an answer.
Because it's so easy to come before us and say there are going to be these jobs. And I think by this time, there ought 195 COMMITTEE OF THE WHOLE - TIF BILLS to be a performance record. I'm not speaking against this particular proposal; I'm just saying that we don't really do our job if all that happens is folks come before us and say, We're going to give you 500 jobs or 300 or 50, whatever the number, and nobody watches what happens. We ought to have a performance record, and I would like to request that you prepare it or have your staff prepare it, send it to the President of City Council so we can circulate it and have something that can be used as a serious basis for discussion.
Now, from what you've been saying today, would it be fair to say that if you had to compare the Kvaerner project and this project, that this would be the biggest bargain imaginable? Because I've seen projections that have indicated that Kvaerner is costing anywhere between 100 to $400,000 to produce a job. I'm talking of total -- not just City money, but governmental money -- City, State and federal. 196 COMMITTEE OF THE WHOLE - TIF BILLS And from what you're saying, this is, by your definition of what is City money, this isn't costing anything. Is that about right?
Yes. I'm just talking about in terms of the Penn's Landing, just Penn's Landing.
That's right. We're not using the General Fund or Capital Budget. We are taking a piece of the future tax.
Which won't exist unless we do this project, and reinvesting them in the project. And I would agree with your characterization. This is a bargain in that sense.
Well, if your analysis is right in any sense, I would say. Because the Kvaerner from government money, I think there's something like $400 million involved in federal, State, and local monies.
That will produce, by Kvaerner's estimates, about a thousand jobs. Some people think it's a high figure, some people don't. But here, I gather, there are about 1500 jobs, we're being told, will be coming about, and that the money involved -- even if you use my definition of City money, meaning the TIF money -- it's 69 or 70 million, as against some 400 million. To me, that's a big bargain, you know if it holds. Let me go on to the question of why isn't this City money? You know, based upon what you just said, and that's my feeling. We're taking away tax money that will come later. Say, if this project could be developed without TIF money, when any project gets developed -- there were a lot of hotels in the City that got developed without TIF money, right?
When we look at 198 COMMITTEE OF THE WHOLE - TIF BILLS historically hotel projects, Franklin Plaza -- City-assisted. We bought the land, leased it to 'em and guaranteed that loan. And, in fact --
No. What's happened there is there was a default. The City had to make it up. But since then, we have actually gotten the City off that guarantee it had made to City Hall.
No, not anymore. It's not as if that project happened unassisted. That hotel was assisted. Sheraton Society Hill -- $6.5 million urban development action grant, UDAG, a soft loan. For years, we got no money back. And Omni -- UDAG.
We're getting some money back now on the Sheraton Society Hill?
We got some of it back. 199 COMMITTEE OF THE WHOLE - TIF BILLS As the economy turned around, we got some of it back. The Omni at Independence Mall, urban development action grant. The Belleview, when -- after the second time around -- I think we all know it's been through a number of lives. The second time around, same thing, we did a guarantee of a portion of the financing on that project to make that happen. So it is not the case that hotels have just happened, quote/unquote, on their own. We have, as the public, participated in a number of those transactions. And, of course, in the current environment, we've had lot of people come to us and say, help me do -- you know, can I get some of that TIF money or HUD money or whatever, and we've been saying no more than we have been saying yes.
Could you -- just with respect to the last comment. Would you be able to furnish us with some information as far as requests for TIF money?
That would contain the analysis of why you've rejected it.
If your response in the memorandum could indicate the kind of criteria you use, so that it does not seem to be that anybody who asks gets it. That would be --
Now, in the last analysis, nobody can ever guarantee the success or failure of a business propose, right? You know, 201 COMMITTEE OF THE WHOLE - TIF BILLS it depends on a lot of factors. It could be maybe the design was wrong or maybe the design was right, but the economic times prevent the success. But in a situation like this, we've been talking earlier today about minority employment, minority entrepreneurship, why isn't it also fair to talk about the kind of wages that are paid? I assume in the construction industry that most of the jobs, or maybe all of them, are union wages. And I expect that they will be above what anybody calls this so-called living wage, what the young woman referred to before. But why wouldn't it be appropriate that when we're giving some form of government assistance, some form, without identifying whether it's City or not City money, why wouldn't it be appropriate and good for the City of Philadelphia to talk in terms of what can we do to guarantee or at least make more likely that the jobs will be held by actual Philadelphia residents? What could be done to make certain that there's a certain minimum pay level? Which, in the bill before City Council on living wage, I 202 COMMITTEE OF THE WHOLE - TIF BILLS think, is $7.50, something on that --
Okay, $7.90. What would be wrong, if anything, with our indicating -- maybe we can't enforce it -- with our having a policy saying we would like to have wages paid that would enable the economy of not only the family, you know, to be stronger but the economy of the whole City to be stronger? Because when families gain economic strength, so does the City.
Right. I'll try to make it a short answer, though it's a very complicated question. And as I said before, I spoke a little bit at the living wage hearing. As a personal matter, I'm speaking personally at the moment, I don't think the issue is whether people should or shouldn't earn that amount of money or have benefits. I mean, I have a lot of empathy for those issues for a host of reasons. But the question is, how that is done in a way that makes the most sense for the City long-term overall. And if we take a single 203 COMMITTEE OF THE WHOLE - TIF BILLS project and say, Pay this for this project, and the rest of the world doesn't change their behavior, and now you're the Simon group, and you're attempting to attract a tenant to this project, and they say, Wait a minute, I can put my store at Fifth and Walnut, and I don't have to pay that, and I'm in a competitive disadvantage paying this because my competitors in Cherry Hill or Pennsauken or King of Prussia don't pay that. Then what you do is you don't -- I'm afraid what you do is, you don't actually create 1300 jobs paying a living wage. I think what happens is you don't create 1300 jobs.
Well, isn't that the same answer with respect to minorities? I mean, won't some employers say, 'cause they always have said --
No. 20 (Unintelligible - parties talking over each other.)
This is an economic issue. This is an economic issue and I don't agree. You know, I think the issue with regard 204 COMMITTEE OF THE WHOLE - TIF BILLS to minorities or female firms or disadvantaged firms is one of access. It's not one of pay them more to do the work; it's make sure they have an opportunity to get a piece of that work in a competitive environment. The issue of the living wage bill is whether the City should establish within its 125 square area of miles its own minimum wage in a situation where it's not done everywhere else.
What the bill does is says we're going to do it only where we touch the project.
Well, why isn't fair for government, which represents all the people, the poor as well as the rich, the people who are in the middle class, those desiring to work themselves up to the middle class, every element, the rich people, City government represents all of that. It is using one way or another the power of 205 COMMITTEE OF THE WHOLE - TIF BILLS all of the people to make this transaction economically feasible. What is wrong in the City proposing to say, Look, we'd like to take care of all of the people? Isn't it possible to work out some sort of system? Because I think that any economic analysis would show that the costs would be absolutely minimal. I mean, how many jobs could there be that they would hire that would pay less than $7.90 -- if that's the figure -- an hour? I'm just saying that I don't think the City is making the effort because I think, from what I gathered from Mr. Simon talking here, I get the sense that he has a pride in what the company does. And I think the City would expand the horizons of the companies that it does business with if it would begin raising this issue. Maybe don't need a law if the City were to have a policy, you know, that would move in that direction. Maybe others would decide it's good business because, you know, sometimes companies say that things that pay off for working people are good. Wasn't there that big ad the 206 COMMITTEE OF THE WHOLE - TIF BILLS other day in The Inquirer showing how many years people have worked with them? And said, Whatever The Inquirer has done, the main credit should go to this list of people, who are employees. I'm just suggesting, and I won't belabor this beyond this, Mr. President, I'm just suggesting that the City ought to rethink its approach and maybe begin to raise and maybe with this company, this whole question to see whether -- how close can you get to the 7.90 as a guarantee? What would it cost? I'd like to have an analysis. What would if cost these companies? I think they'd make a -- if it's successful, they'd make a very great profit paying the living wage. And they could get credit not only for a great entertainment complex, but for a great human entertainment complex. Thank you, Mr. President.
Thank you very much. Mr. Hankowsky, is there any way of knowing how many minimum-wage jobs are likely to be created in this proposed Penn's Landing entertainment development? 207 COMMITTEE OF THE WHOLE - TIF BILLS
Our estimate at this point would that be out of that 1350 jobs, about 75 percent would pay greater than the living wage defined, and percent might be less than -- the 6 living wage being the 7.90. 7
So about 25 percent 9 might be between minimum wage and living wage. 10 And 75 percent would be above. 11 That's an estimate. Obviously, it's 12 going to vary by how many tenants actually go in. 13
I understand. Thank 14 you very much. 15 Are there any other questions of any 16 other Councilmembers? 17 (No further questions at this time.) 18
Is there anyone else 19 who wishes to testify? Is there anyone present in 20 the chamber who wishes to testify? Is there 21 anyone who wishes to testify? 22 (No response.) 23
If not, we will 24 stand in recess until tomorrow morning, at 9 25 o'clock a.m. sharp, 9 o'clock a.m. sharp. 208 COMMITTEE OF THE WHOLE - TIF BILLS (Adjourned at 1:32 p.m.) - - - 209 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 Wednesday, May 27, 1998 were reported and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE OF THE WHOLE BILL NO.'S 980238, 980301, 980304, 980305, 980306, 980307 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter