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.