VOLUME II COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING BEFORE THE COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, December 11, 1997 9:35 a.m. - - - RES. 970801 - Approving the Execution of a Lease and a Master Agreement between the Commonwealth of PA, the Delaware River Port Authority, PAID, and Kvaerner, Inc., for the development by Kvaerner of a shipbuilding facility within the Philadelphia Naval Business Center Tax Increment Financing District. RES. 970806 - Approving an amendment to the Venture Agreement between the Philadelphia Facilities Management Corporation and QST Energy, Inc. - - - PRESENT: COUNCILMAN JOHN F. STREET, Chair COUNCILWOMAN ANNA C. VERNA, Vice-Chair COUNCILWOMAN HAPPY FERNANDEZ COUNCILMAN JAMES F. KENNEY COUNCILMAN W. THACHER LONGSTRETH COUNCILWOMAN AUGUSTA A. CLARK COUNCILMAN DAVID COHEN COUNCILMAN FRANK RIZZO COUNCILMAN ANGEL ORTIZ COUNCILMAN FRANK DiCICCO COUNCILWOMAN JANNIE L. BLACKWELL COUNCILMAN MICHAEL A. NUTTER COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN BRIAN J. O'NEILL - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center Plaza, Suite 600 Philadelphia, PA 19103 (215) 561-2220 162 I N D E X RESOLUTION 970801 PAGE William P. Hankowsky, President, PIDC--------- 164 Public Meeting--------------------------------- 224 RESOLUTION 970806 Stephanie Franklin-Suber, Solicitor, City of Philadelphia-------------------------------- 234 Ramon N. Sharbutt, Senior Vice President, Chief Financial Officer, Philadelphia Gas Works--- 252 James Hawes, President, PGW-------------------- 278 Public Meeting--------------------------------- 360 - - - 163 RESOLUTION 970801
Good morning, ladies and gentlemen. This is a recessed hearing of the Council Committee of the Whole. Today we will take further testimony on two resolutions: Resolution No. 970801, which is a resolution approving the execution of a Lease and Master Agreement between the Commonwealth of Pennsylvania, the Delaware River Port Authority, Philadelphia Authority for Industrial Development, and Kvaerner for the development of the naval shipyard. And we have not taken any testimony, but we have in front of us a Resolution No. 970806, approving an amendment to the Venture Agreement between Philadelphia Facilities Management Corporation and QST. At this time, we will go directly to the Kvaerner resolution. Mr. Hankowsky, I see, is here. We appreciate his presence, with members of his staff, and we will proceed with the questioning. The Chair recognizes Councilmember Nutter.
Thank you, 164 RESOLUTION 970801 Mr. President. Mr. Hankowsky, yesterday we were talking about the document put forward by the Mayor. And as I admitted that I didn't remember what the CoreStates plan was, you actually seemed to nod your head as if you might know what it is, but we never got around to that. Could you share with us, for the record, what the CoreStates Center plan is?
Yes. And I am going to do it from memory, but I think I have a pretty decent recollection of it.
It had the good-faith effort plan that was based on -- there was a component that dealt with the construction phase, set goals for subcontracting that were 20 percent MBE, 10 percent WBE. Set goals also in the construction phase -- these are the employment of the work force who would construct it -- which I believe were also 20 percent minority and 10 percent female. 165 RESOLUTION 970801 Then it had an operational phase that dealt with the concession operation -- whatever, that would be sort of the contracting outsourcing opportunities, vis-a-vis the facility, set goals there, which were lower than the others. I think 7 and 5, is my recollection. 8 And I don't believe there were any 9 employment goals for permanent jobs in terms of that 10 category.
You would be able to get us some documents on that, though?
To my office. Let me just ask you general questions about future operation of the Philadelphia Naval Business Center and the shipyard area generally. When the complete yard is turned over to the city, whenever the Navy, in their wisdom, gets finished messing around with that, the city will have full responsibility for the naval shipyard area, I guess, with the exception of a couple of buildings that the Navy will still operate, that maybe even in kind of secret, or you need security clearance or something to get in? 166 RESOLUTION 970801
When title is transferred, and to go to -- when it is all done, so now -- there will probably be two transfers. Transfer of the base, which is what we are working on now; and then a subsequent transfer of the shipyard. But assume both of those transpire. At that point, then, the Navy would own in fee title 187 acres, and roughly 1.8 million square feet of existing buildings. They would be federal property, will remain not a ratable for tax purposes. They will be responsible for everything; you know, maintenance, whatever. We will own the remainder.
No. It is actually 986, net of piering rights and real dirt. So about 700 acres, plus or minus.
Now, the "we," to be very precise, would be PAID, the Philadelphia Authority for Industrial Development, not the city. 167 RESOLUTION 970801 So in terms of sort of who is responsible for what, the city, because now in a sense it becomes part of the city, if there is a crime, the police are going to be responsible, the fire department.
Those are the types of questions I was going to ask you. Who is going to provide security service, trash service, all the other normal municipal services, if we are taking that over? Who is responsible for that?
The plan that we are currently proceeding on -- and it could change, so I will also add that disclaimer -- but the plan we are proceeding on would allocate the cost as follows: On the side of what is PAID responsible for -- and PAID would do this by charging to the tenants or owners common area maintenance charges, a fairly common technique in real estate. PAID would be responsible for fixing the roads, plowing the snow on those roads, cutting any common area grass or landscaping, or whatever. Security in the sense of, you know, 168 RESOLUTION 970801 there would be a gate, you would go in, and you are cleared, or you have a pass or decal on your car. Not crime prevention. Not, you know, what the police do, but security as you have in an office building or industrial park. Trash will be the responsibility of either the tenants or PAID, trash that's created by the common areas. On the city -- and also on the PAID side of the ledger are utilities. So we are in very active discussions with the Water Department, PECO -- maybe it might be somebody other than PECO; we will see what happens today -- phone companies. So we have the utilities. On the city side of responsibility would be, basically, police, fire, and like emergency medical response.
And we are also in active discussions, for example, with the fire department about whether they are going to cover from where they are at, whether they are going to station a fire truck down there.
All right. 169 RESOLUTION 970801 In light of all of that, that there is some city responsibility --
I'm sorry, Councilman. As you recall in the June TIF hearings, we talked about -- and it is included in the TIF project plan -- the capacity to use TIF proceeds for PAID to pay some of those costs. So I want to be clear about that.
And we did not -- and to the degree we want to do that, we bring you a budget. So there will clearly be a dialogue and a discussion about that. So I just want to be clear that it gets paid by PAID, that we might ask the consent of Council to do that by some TIF revenue.
So it sounds like there is clearly anticipated to be some City of Philadelphia responsibility --
Which means that 170 RESOLUTION 970801 some city workers, from time to time, may have to go to this site to do certain things?
In light of that, and in light of yesterday's discussion around this new section to be substituted, which primarily deals with construction, subcontracting, and the construction employment, you and I engaged in a little bit of discussion about operations and operations employment, the 953 workers. And we went through the --
-- the discussion of who could they be, who might they be, worst-case scenario and the like. Now, you shared with us yesterday the updated employment figures on when the shipyard was operating before.
And I have them as 75 percent white, 22 percent black, 2 percent Hispanic, percent other. 24
Is it not 171 1 RESOLUTION 970801 possible, then, to try to establish, as you have on the construction side and the firms, in that discussion is it not possible, based on what we know a little bit about the historical employment picture at the yard, couldn't you put together some kind of plan or proposal or at least, again, goals and good-faith efforts that enable you to try to mirror, at least, or reflect at some level what the historical employment situation has been at the yard, and at least set that as a goal -- whether it is a floor or a ceiling, I guess that would be a subsequent debate. But we at least know that there is a universe, and we know what the universe used to look like. And if you tell me you are going back to that universe, then that should enable you to start to talk about either some ranges or some goals. Because the next thing I am going to ask you is, what are the demographics and composition of all the unions that anticipate doing work at the yard.
I probably can 172 RESOLUTION 970801 respond to the last one first. I am going to look back here and make sure I am right. The unions -- Kvaerner has not negotiated an agreement for, I think, obvious reasons, in terms of where this transaction is at the moment -- since they don't have approval yet at the moment -- with, quote, unquote, a particular union or unions. If they follow a path -- and they might not, but if they follow a path -- where they would reach agreement with the prior unions there -- so let's take that scenario -- meaning what was called the Metal Trades Council, the Metal Trades Council unions are exactly reflective of the work force numbers we just talked about. Because, in fact, they were locals at the Navy Base. So even if it was the Sheet Metal Workers, there was a local at the base that was part of a Council. And the membership of that local, all they did was work at the shipyard. So that the demographic composition of the work force, 75, 22, 2, and 1, is a mirror image of the same union work force that was there. Because it was a -- I'm not sure what 173 RESOLUTION 970801 the right term is, but these were locals specific to that site and that business enterprise.
They weren't wider than it. To the first question, I think there are two responses.
Well, actually, maybe I should say, I thought this sort of -- as we discussed yesterday, when you asked is it theoretically possible it is zero, is it theoretically possible to try to construct something? The answer to that is yes. Is my sense of where we are right now -- and when I say "right now," and I don't say this for hyperbole, but we were in discussions with Kvaerner through 9 o'clock last night, and we started 7:30 this morning. So there is a parallel thing going on here trying to get this deal put together. So I am making a judgment, but it is the best judgment I can give you this morning. I think given the flow of the funding 174 RESOLUTION 970801 for training and some of the requirements that that's bringing with it, the potential flow of, for example, a union agreement with some union, beginning to define universes by those variables, that it is not possible -- that the parties would not be comfortable agreeing to put percentages in against those. Because part of their feeling here -- and you may, to some extent you are taking my word for it, because obviously you have never met these people or know them -- they would loath to do it simply, okay, we put something out there. If it happens, it happens; if it doesn't, it doesn't. They want to put things out there that in fact they have a reasonable expectation they are going to achieve. They are serious about it. So what they are going to be, what you will be seeing in the documents in terms of an MBE/WBE plan, Kvaerner is not doing it because, oh, okay, you want to see something like that, we'll throw it in there, and let's just keep going. They are putting it in there and saying, okay, this is a real thing we are going to have to go out and do. 175 RESOLUTION 970801 And so they loath to get into it on the permanent employment side, because they are just not at all comfortable how that's all going to shake out with a union aspect, reaching the requirements of the job training regulations, and then dealing with displaced workers, and these displaced workers in general, and these pools that they have to pull from. I don't think that is possible to provide that to you to the final documents. I know that's not the answer you were looking for me to give you, but I am also trying to be forthright this morning.
Well, I mean, you can understand, naturally, my discomfort. If you say that, you know, this is the pool we expect to draw from, and things should look the same, and it really kind of shouldn't be a problem, then it's all well and good. But then if for some reason you are reluctant to either say it or write it down, that gives me a little concern. 176 RESOLUTION 970801 They obviously are, I mean, whether with a smile on their face or with their arms being twisted, they obviously are willing to put something in writing --
-- as it relates to construction and the firms. Your response gives me reason to think that we are leaning more in the direction of it is less likely to happen than it may happen.
I guess I am asking, give me something a little bit beyond, you know, I am a good guy and I am telling you this, and I really need you to trust me on it, that gives me some confidence that this part is being dealt with as seriously as all the various other parts. I mean, I have to say to you -- and this is not your fault -- this is not the first time we ever had this conversation. But it is a recurring issue that seemingly always gets done at the end, almost under duress. 177 RESOLUTION 970801 And when I was thinking about this in light of our conversation yesterday, you know, it just strikes me that there is no other issue in any of these deals which seems to draw as much attention, if not concern, and at some level consternation, but it always only comes from one segment of the population. I mean, I don't think anyone has had to run in here and say, well, you know what are going to be the white business enterprise goals, or employment goals, or subcontracting goals. Because there seems to be a fairly well and automatic assumption that one segment of the population really doesn't have to worry about it. And, I mean, it almost just kind of gets tiring to have to continue to ask and ask and ask and ask, and in the end almost be grateful for whatever happens. And in this particular case, we can't even have a discussion about putting something in writing because of someone else's discomfort level. Well, I mean, if I only did things because I felt totally comfortable with them, I 178 RESOLUTION 970801 might not do a lot of stuff. So if you tell me that that's the universe, that everyone in that universe has a relatively fair chance, and if you think, and your own answer in the caucus meeting was, "We think it is going to look the same as it used to," then I guess all I am asking you to do is, within some reason and within some ranges, say that.
Or that is, at least, our goal, or that is what we anticipate doing, or this is what we would hope to do, or this is what we will try to do, and acknowledge that.
Right. Yes, I mean, you have correctly characterized my prior comments on it, which is that I do think -- and I think in fact I said this again yesterday -- that it will, you know, with some variance level, probably be reflective of the prior reality.
We may not solve this at this point. 179 RESOLUTION 970801
And it is okay. I just have three last questions. In the Mayor's response to the Council President's two letters, which, for the record, I think are as long as, if not longer than, any letters that I have written recently, there is a question that says, "How will a potential labor pool be identified?" The answer is, "The labor pool will be identified by the state Department of Labor and Industry, working with the PSDC." My only question about that, again, is there any role for the city, or even our own Private Industry Council, as opposed to just depending on state L & I?
Yes. And I think, again perhaps yesterday, in one of the questions that was asked, in terms of identifying the pool, when you start with the displaced shipyard workers, the Private Industry Council are going to need to be involved, the Navy is going to need to be involved, to the degree it is -- to the degree we end up with the Metal Trades Council involved, because all of them will have 180 RESOLUTION 970801 access to where are the people. When we move to the universe of displaced workers, both state labor and industry and the PIC deal with displaced workers. In fact, in some cases, the PIC has even been asked to go out of the city because of their capacity and help in areas, communities that don't have the capacity, where there has been a similar displaced work issue. So they, I think, were involved in the Fairless shutdown and some others. So the answer is, they would be involved. Has all that been written up in some detailed, formal plan? No. 16
One of the other questions in that same letter was, "What are the projected operating costs of PSDC? And who will provide the funding?" The answer from the Mayor was, "An Operating Budget from PSDC has not been developed. The city will not be a participant in funding it." If the city is not a participant in funding it, who is? And where would PSDC get money from? 181 RESOLUTION 970801 Is this from TIF proceeds that are not used to pay off debt service? I mean, how does this entity have a budget?
One thing that is clear in our discussions between the governmental parties -- the city, the DRPA and the Commonwealth -- is, we are in for what we are in for pursuant to the Project Summary, vis-a-vis the direct costs of the Kvaerner transaction. And a final determination as to who will pay has not been done. It is conceivable that it could be the Commonwealth. It is conceivable it could be DRPA. It is conceivable it could be some combination of those two. But there is no -- and I will put this on the record -- indirect implication in the Project Summary that somehow we would take TIF revenues to pay for PSDC, no. 21 The TIF revenues will be, in the end not directly, but checks written to Kvaerner to pay for building a shipyard.
Right. And I am not necessarily advocating 182 RESOLUTION 970801 for or against city involvement. But it strikes me, I mean, if that is the answer, that the city is not a contributing party, we have that whole discussion about who is appointing people to PSDC. It again seems that we may be in a position where the collective PSDC Board, with the exception of the city, people say to us, well, you have got your seat or however many seats, or whatever the breakout is, and you are not even putting a dime into this. It again seems to get into an issue of who is controlling what and what our ability is to tell PSDC what to do, since we seemingly won't have any money in it.
Lastly, in response to a question about PSDC and its operation, since PSDC is not subject to the Open Meetings law, do you know why that is?
I am not a lawyer, but I think the answer is, it is not a governmental -- it wasn't created by a statute or it is not a governmental authority. 183 RESOLUTION 970801 It is a private, nonprofit. And private, nonprofits are not covered by the Open Meetings Act.
Okay. This is a private, nonprofit created by the government.
And I said that as much by historic reference. There is the foundation we created. What's it called? The cities, sometimes when people want to donate --
No. I wish. Philadelphia Fund -- Fund for Philadelphia, for example, isn't technically covered by Open Public, even though it was created by the government to facilitate so people could take 501-C(3) contributions -- deductions.
All right. If you could, subsequently through the President, get us any information you have. I know there are a large number of 184 RESOLUTION 970801 unions. Whether they end up participating or not, I guess, is a function of the Kvaerner negotiations and transaction. But I would be interested to know the demographic and residential characteristics of all of the various unions who even anticipate operating at the Philadelphia Naval Shipyard.
Thank you, Mr. President. Mr. Hankowsky, I have questions regarding work force, just some followup questions to Councilman Nutter. Can you tell me, what skills and competencies does Kvaerner have now in its work force in other parts of the world? What admission criteria are they going to be looking for? Is it an 8th grade reading level, a 10th grade? What math level? Because from your testimony 185 RESOLUTION 970801 yesterday, it sounds to me like a lot of people will not be eligible to be applied to this work force.
Let me say it to you -- and I should have said it to Councilman Nutter -- if I am grimacing, it is not because of the questions; it is because of the lights. It is sort of difficult to look at you at the same time. So I don't mean to.
We discussed this in some parts yesterday during that portion of the Public Hearing. Kvaerner knows fairly well what a worker's training level and skill levels will need to be, as I would call it, at the end, at the end of a five-year period of training. Now, if a thousand people could walk in the door today and have that training level, that would be wonderful for everybody. They know it is not there, and we know it is not there. And that's why there is $187 million in the transaction to make that happen. And they had asked for it, and we didn't offer it, because we didn't expect it to get 186 RESOLUTION 970801 spent. It is going to get spent. So what they have looked at -- and they have been working in collaboration with the Shipyard College, including Philadelphia Community College -- to look at what curriculums are out there and what curriculums need to be developed, to take a worker who would enter day one, and have them able to fulfill these jobs and do everything that's necessary and be fully trained. A very good example that I used yesterday is, ships, commercial ships, in the international market are on the metric system. The U.S. shipyard down there was converting to metric, but for years hadn't been. So it is not as if everybody is totally conversant in that. And it is probably -- as someone mentioned yesterday, all of us sitting here, because when we were educated that wasn't a big thing, our children are going to be better at this than we will be. So they are not expecting that if you don't know metric, you can't get a job. There is going to be training. That's an example. They also know that, for example, 187 RESOLUTION 970801 probably very few people, if anybody, in the Delaware Valley right now know how to do robotic welding. Because, in fact, it wasn't done down at the shipyard. So some people are going to have to be trained on how to do some of those things. And we have actually looked at a scenario where, at the end of that five-year period, these workers, between the training they will get, with the addition of just a couple of courses in like reading and writing -- and the community colleges are prepared to do this -- would actually not only have gone through a classic apprentice program; they will earn an Associate's Degree. Now, in terms of the skill level or competencies that Kvaerner expects out of the gate in terms of hiring, I think they are looking at the skill levels that existed at the work force that was there. Which are, people have to be literate, people have to have basic mathematical skills, and hopefully have had some experience in shipbuilding or the industry, or whatever.
They have to base the curriculum on some education level. And I 188 RESOLUTION 970801 am just trying to find out how people can get in to train. I mean, there is no point in sending a third grade person there. But do you send a person there at tenth? Do you test people to tenth? You have to start somewhere.
They wouldn't necessarily, for example, have to have had a high school diploma. Let's just take that as a base. But to offset that, if you don't have a high school diploma, you probably would have had to have had some experience in the business, being a welder or something like that. And that the curriculum would, in fact, for those that did not have a high school degree, at a certain point, once you got through the training, would have actually earned a GED. So that, again, by the end, there will be a presumption that everybody will have equivalently done that. But I think it is fair to say that if somebody has a fifth grade education, and doesn't have a particularly high level -- because you are going to be needing to read, perhaps, computer 189 RESOLUTION 970801 manuals or, you know, manuals on how to run a robotic welding machine. There is going to have to be a base level.
Well, maybe Community College or the Private Industry Council can get more information on that?
Oh, yes. They are in the process of working with Kvaerner on, in fact, developing the curriculum.
That's the kind of information I would like to get. Thank you, Madam Chair. (Councilwoman Verna assumes the Chair.)
You are welcome. The Chair recognizes Councilman Rizzo.
Thank you, Madam Chair. Mr. Hankowsky, could you tell me, please, are there any deals already struck with consultants, security firms? 190 RESOLUTION 970801 I guess the question, not to beat around the bush, who is making the money here? Are there already some deals cut and done for various supplies, like consulting fees, insurance, things like that? Is there anything like that already waiting to go tomorrow, after this deal is done?
Not that I am aware of. I mean, yesterday I was asked a question -- I forget which Councilperson asked me -- but someone asked very specifically who was already working on the deal in terms of third parties. And Councilman Nutter is indicating he had asked the question. And I went through the list of the law firms being used by ourselves, by the state, by Kvaerner. The only other consultant that's been hired, other than law firms, has been an environmental consultant, working with Kvaerner to read the technical reports, and they are actually doing some testing down there. Other than that, nobody has been 191 RESOLUTION 970801 signed, no commitments have been made. And from Kvaerner's perspective, they expect to go through a process of, who is really good, who is competent, who is out there, who is available. There are no pre-arranged --
So most of the negotiations for insurance, for security, for all of the services required to make this operation functional will be done by Kvaerner, and not the city, not PIDC? When eventually it is operational and there is security, who will decide who the contractor is?
Well, maybe I am not being responsive because maybe I am confused by the question. In terms of the 114-acre tract that goes to Kvaerner, that piece of property, what happens inside that fence, the construction of the shipyard, those are Kvaerner's decisions. In terms of the whole Navy base -- I am going back to Councilman Nutter's questions about the operations -- in terms of picking the security firm for the Navy base or who is going to do the 192 RESOLUTION 970801 landscaping, or whatever, those are decisions that are done by PAID, by PIDC and PAID, since that's our responsibility to do it. So, for example, if that's the question, if it is the whole complex, I mean, today we use Cushman Wakefield to provide tenant services and caretaker services. We went through an RFP process. The Navy had to participate in that because, in fact, the Navy is footing some of the bill. We short-listed people, went through an interview process, they subcontract out. There is an MBE/WBE component to their package, as an example. And that might be an example for Councilman Nutter, where we didn't think about it after the fact. There is an MBE/WBE component for our caretaker operations, when we executed it. And we didn't have to come here and ask about it.
In the deal, just for, I guess, discussion sake, will the base look like the base that we presently have? In other words, when the Kvaerner people come to work in the morning, the employees, 193 RESOLUTION 970801 the union people, will they still enter the same gates and go, or will Kvaerner have a separate operation that's totally different than what we see now?
Well, one thing is, we, having nothing to do with Kvaerner, we plan to change the front door. We have funding from the federal government to build a new road at the front gate, at the front gate. We will probably change the gate experience. It is because it was a military installation, it had certain standards. If you have been there, and if you don't have a pass, you know you had to go into a building, you had to fill out a bunch of stuff, bring your registration for your car. We plan to have a more user-friendly front door. But it will be our front door; it won't be Kvaerner's front door. There is a back gate at 26th Street, currently closed just because we don't have enough volume to justify staffing it. That gate will probably be reopened because of the Kvaerner deal, 194 RESOLUTION 970801 because it will provide a second access point. But, again, those will be gates controlled by PIDC. So the Kvaerner worker will experience roughly the same experience that was experienced before. There will then be, you will get to the Kvaerner 114 acres, and there will be a door, the Kvaerner gate. They don't expect to let everybody just walk into their property, even though it is a leasehold. And, yes, their employees will simply have badges or whatever to get on their property, which is the same as it is today. We have companies down there that lease space. And they have a door and they have a lock and they have a key, and they let their employees in.
Anywhere in the deal is there a line that indicates shared expenses?
No. No. 25 Kvaerner, they are, quote, unquote, 195 RESOLUTION 970801 renting the shipyard for a buck. But they must pay their share of the common area maintenance charges. We are not subsidizing their sharing of that cost. We anticipate that in Year One, and it is based on our current budget, is about 350 to 360 thousand dollars that they are going to have to pay. And they will pay whatever the actual increase in costs are over the term of the lease. They pay their fair share of plowing the snow and --
You are welcome. The Chair recognizes Councilman Cohen. Councilman Cohen, do you wish to be recognized? 196 RESOLUTION 970801
In I think it is today's Daily News -- just tell me I have been dreaming and it doesn't exist -- there is a story that Governor Ridge was asked about some think tank in Harrisburg criticizing the state for being inaccurate as to the amount of money the state is investing. There was some think tank in Harrisburg that said the figure is not 182 million by the state, but it is, in fact, 277 million. Because the state is going to issue bonds, and the state is going to be paying the interest. And the Governor sort of waived that away as being insignificant, or of no consequence. He didn't dispute the figures. In fact, my impression is, he indicated that it is probably right. But what's the significance? Well, I just have a little concern about the whole transaction. If $95 million is not significant, how many other areas are we being given the wrong information as to cost? Or are we going to find out as we go along each step of the way? Or are we suddenly going to find out that there was certain information that the not made 197 RESOLUTION 970801 available to us?
Well, I think from the standpoint of information made available to this City Council, what you have is a fair and accurate representation.
But you have never said, I never heard you say, credit the Governor with and the state with $277 million.
If I could have a second to do it, I would be happy to. It is very clear in the documents we provided that the Commonwealth, through the Capital Budget, is providing their contribution. And in the same way when the city provides a million dollars in the Capital Budget for a recreation center, it is really not a million dollars. It is a million dollars, plus whatever the interest is that we are going to pay over the life of the bonds that we are going to issue to make that contribution. And it is generally not presented with that, you know, anywhere where we ever had to do it. But it is clear that, yes, it is a bond issue. 198 RESOLUTION 970801
But when we are talking benefits, we spread them over untold number of years, how we are going to benefit. So you mean we only, when we talk of the alleged good things that are going to happen, we used a lot of years, but we ignore that method when we talk about expenses? You know, I just think there is a serious question that is being raised. I was stunned to see that article.
Because I am just concerned, is that the kind of loose mathematics? Or is it that the project has holes in it which we are trying to hide by indicating what a great bargain we are getting, compared to what the German government had to pay Kvaerner to get them to work on something? I suspect that probably we are paying much more than the German government. That's 95 million in one fell swoop.
Well, I don't know whether we are paying more than the German government. 199 RESOLUTION 970801 But, once again, just to the specific question of, yes, the Commonwealth's contribution is a capital contribution. It will be funded by a bond issue. And, yes, there are interest expenses to the bond issue.
And the state will pay the interest expenses to the bond issue?
I will just say that it was a very troublesome fact that came out this late in the game. In the Project Summary, who pays, on , the interest rate on the first paragraph, on the PO loan?
The tax stream. The TIF revenues pay the TIF note off, principal and interest.
It is the way any TIF works. We would borrow the money, we put it into the transaction, we then owe it back. We take the taxes, and we pay the annual debt service on the borrowing, principal and interest, using the tax stream.
They are going to 201 RESOLUTION 970801 be paying the full taxes?
So that's the way in which the city makes that contribution?
Correct. If it isn't there by the TIF revenue, we don't obligate the General Fund. There is no 25 obligation to the General Fund. 202 RESOLUTION 970801
Now, what's the significance on Table 2, in the Project Summary? What's the significance of the figure Total Tax Increment Revenue, 61 million, 100-odd thousand dollars?
That's the summation over the 20-year life of the TIF, of the taxes being TIFed in the fund for the project. And it represents the cost of principal and interest.
Well, can you compare for me that $61 million figure with that $30 million figure?
Yes. It is the exact same scenario as when you get a mortgage on your home. You get a $100,000 mortgage, and you say, "I have $100,000 mortgage on my home." Every month you make mortgage payments that are principal and interest. The actual cost of the mortgage for a 20-year mortgage might be 200,000, 250,000 dollars, 203 RESOLUTION 970801 principal and interest, but it is a $100,000 mortgage. To apply that analogy here, it is a $30 million TIF note. Over the life of it, we are going to pay principal and interest on it. The total expense of that over the life is estimated to be 61 million.
All 61 million is paid by the taxes that Kvaerner pays that are TIFed.
Suppose Kvaerner runs into difficulties and defaults on taxes?
Then there will be a note, a mortgage, held by the nonprofit, PSDC. And we have the capacity to foreclose. As well as, if they don't pay their taxes, that's -- so you have a contractual right, and then you have your legal right to lien the property and put it up for sheriff's sale.
I think a fully 204 RESOLUTION 970801 modernized, state-of-the-art shipyard will have a value in the marketplace.
Well, I am concerned a bit about that. Because if it does have value -- say you are right, say the most optimistic, rosy views turn out to be right, or even turn out to be an understatement. A successful shipyard 99 years from now may be worth many billions of dollars, particularly with the impact of inflation. Yet I understand part of the deal is that Kvaerner can have that for a dollar at the end of 99 years. Now, we won't be around to see what happens to that. But was that put in? Did we offer it, or was that requested by Kvaerner?
It was requested by -- as in the flow of any long-term, two-year negotiation. But it was requested by Kvaerner. Understand that at the end of 99 years, if it is worth billions of dollars, it is going to be worth billions of dollars because they will have maintained it, they will have continued to 205 RESOLUTION 970801 invest in it, they would have kept it state-of-the-art, they will have operated it as a profitable undertaking, and they would have paid 99 years of taxes and employed for 99 years a group of people who had worked there.
But currently its value -- I was a bit confused by statements. At one point it is given a value of $450,000, or that approximate figure, somewhere around there. And then later the same figure is referred to as having changed in value to 4 and a half million dollars.
No. The entire Navy base, the 1,000 acres, is carrying an assessed value via the Board of Revision of Taxes of approximately 4 and a half million. And if you prorate that to the 114 acres, and in discussion for the Kvaerner tract, that's approximately -- obviously it is about 10 percent. So it is approximately a $450,000 assessed value.
PIDC is now, as government agencies go, a pretty venerable and ancient institution, with many years of experience. 206 RESOLUTION 970801
Yes. Somehow or other you have maintained the same youthful appearance as Councilman DiCicco, even after many years of working in that agency. Is there any study with respect to the number of jobs that have, in fact, been produced by the -- by this time billions of dollars in loans for various economic development projects? Did you have any hard nose --
Did you have any material, for example, that, in fact, during the whole lifetime, 5,000 jobs might be 1 percent of a number we have been promised over the years? But would you have any material that could do that?
Thank you, Madam Chairwoman. Mr. Hankowsky, we might have went over this before, but bear with me here. Unions. Buildings trades build the buildings.
People that are going to get the jobs that work for Kvaerner will be from the metal trades; correct? Or they get to join the metal trades, the ones that aren't already in the metal trades?
As I indicated earlier, from a pure labor management/labor relations standpoint, Kvaerner has not entered into an agreement with the metal trades. I think there is a very good -- 208 RESOLUTION 970801
Right. But they haven't actually enacted it, I want you to understand.
I understand. With that caveat, the metal trades are the people that worked at the Navy Yard. They are going to group all the trades together?
Now, when they build new buildings, if they build any other buildings besides what they are building now, they will be built by the building trades?
And the people in the building trades are people that live in Philadelphia, the City of Philadelphia and the region?
All races, 209 RESOLUTION 970801 economic background, pretty much. Maybe not as much as we would like, but it is getting there.
Now, the jobs that are going to go to Kvaerner right away, the people who possibly will be in the metal trades, if they sign a deal with Kvaerner, those jobs, the first group -- now, we went over this in caucus, but I need to get this on the record -- the first group is from the people that previously worked in the Navy Yard?
There are about a thousand. It might even be a little over a thousand after this morning, from negotiations yesterday. But we are going to, for the record, I want to leave it at the 953. Because if I do better, you can all give me some --
Any other people that get hired -- Councilman Rizzo talked about security people, service people -- they will be picked out of, I mean...
Well, I was responding to that in terms of operation of the whole base. But, yes, Kvaerner might contract -- the 953 people are the people building ships.
There might be some other jobs. I mean, I will give a simple example. There are offices, and they might hire a janitorial firm to come in every evening and clean the offices. I mean, that's not in that number. That's part of the contracting. Or the person that's going to man the security gate; that's another number.
I have a friend that worked at the Navy Yard, he has been out of work for four years. And he was a shipbuilder and 211 RESOLUTION 970801 pipe fitter. Now, he is not going to be able to do this work there, but he has some background in shipbuilding. So he was going to be trained by Kvaerner on this robotic welding. And you heard the electricians' business President, Harry Foy, I think testified yesterday, that the apprentice program up there -- and I know that they have been doing the metric system, they have been going over robotic welding, so it is available. Councilwoman Miller asked if community college might be offering something along that line. Now, our concern here is -- and it is easy for me. Like I said, eight months ago I was ready to go with this deal. Because if you come to town and say to me you are going to put jobs on the table, and it is not going to cost the city anything, that's okay. Now, other people here have some problems, and I respect that. But we need to get this thing going. 212 RESOLUTION 970801 Back to the Community College thing with Councilwoman Miller. We did have some welding classes somewhere in Philadelphia, at Community College, per se. And they will upgrade, Community College would be smart to upgrade, their welding facilities.
We are running programs down at the Navy base today for companies like Zeno Technic, and others, who are doing specific -- went to Community College for specific training, for a specific job, with a specific company.
And I don't know if I asked you in caucus -- it was in caucus, I guess -- but I asked you, after we get through the pool of workers and those jobs are full -- like I have a group in my district called Congresso, Congresso of Latino Affairs. And what Congresso does is, they supply different services. But one of the services they can supply are people from North Philadelphia, who are my constituencies, that might not get a chance to get some of these jobs, we would look at groups like that. 213 RESOLUTION 970801 I am sure every District Councilperson has a group in their neighborhood. They will get a chance?
The required pools that exist today, because of layoffs, yes.
This might be out there. But say Terry Gillen and I decide to open a machine shop down there, her and I go into business. We are going to make diesel engines, Terry and Rick's Diesel Engines -- we can call it Terry's Diesel Engines -- and we get to hire people. We can hire those people from Philadelphia?
We can hire people, hopefully, from Congresso, or from Councilwoman Miller or Councilman Nutter's district, who they have groups that do this sort of thing?
That's going to be there. And that's on the record. So if you lie 214 RESOLUTION 970801 to us, we come to get you later.
And your new hair style is not worth anything. All right? Thank you.
One other question, following up the question I raised with Mr. Hankowsky, with you, sir, before. In the event of a default by Kvaerner, and say we go through the various processes that you say are currently available when anybody is in default, who pays back, say, the HUD loans? Does HUD lose the money? Say nothing works, and you can't sell the property, you can't recover anything. Take my dismal view of what might happen. Is there any responsibility whatever by the city to make payments if Kvaerner fails to?
What do you mean 215 RESOLUTION 970801 "theoretical"? Lawyers get jittery as soon as you start talking about theoretical responsibility.
Again, I will be responsible. The HUD 108 program, which we have, I think, in various sessions discussed, there would be a first mortgage on the property by the HUD 108 loan. So one remedy is foreclosure, getting the asset and selling the asset. Kvaerner Philadelphia would be also a party to the Note, and we could go after the assets of Kvaerner Philadelphia. Then you reach the possibility that, yes, if there were -- if those remedies were inadequate, and the HUD 108 loan was still outstanding, and we couldn't pay it off any other way, HUD would have the right to subtract the annualized debt service on that loan from the annual CDBG allocation provided to the city. That's the case with all the 108 loans that are outstanding. This deal is no 24 different than any other deal.
But, see, the reason lawyers are cynics is, if everything goes well, you never have to worry whether there was an agreement or not. Everybody is happy. There is prosperity, you share it. The only time an agreement becomes important, and its contents and the small print become important, is if there are problems. If there are no problems, you forget the agreement. But if there are problems, is when people can get hurt. And that's the reason the small print worries lawyers, because that's when the agreement becomes important. I just think it is important -- it may well be a realistic thing that you have no 20 choice. It may well be that you choose to use the HUD loan 108 because it may be the best way of getting the necessary money. And then, in which case, you may have to accept the responsibility. But I just think, in fairness, every aspect ought to be told about these loans. So that 217 RESOLUTION 970801 if anything ever happened at any time in the future, you are not caught in the embarrassing position of not having made available all the information.
I am deeply concerned about that. And I think the Mayor is a very effective salesperson. I have never seen anybody that -- he could sell the Brooklyn Bridge. I never found anybody else that I thought could sell the Brooklyn Bridge to somebody just off the boat, as we used to say. But I think the Mayor probably could. But to do it without giving all the information can, you know, cause a bounce-back. Thank you very much.
You know, you were honest. All of you were honest in the Convention Center, when you said that the city was going to have to each year make up any deficit that existed. We were the payers of last resort. You said that openly, you know. And the Council considered that, and decided that was a risk worth taking, for the gain 218 RESOLUTION 970801 that may come from it. I think it would be better if we got to be clean on every aspect of this. Because if you are not, then we worry about how many hidden traps are there that may bounce up in our faces at some point. Thank you, Madam Chair.
You are welcome. Are there any other questions from members of the committee? The committee will stand in recess for ten minutes.
That's fine. (Short recess.) (Council President Street resumes the Chair.) 219 RESOLUTION 970801
May I have your attention, please. If I could have the attention of all the Councilmembers. What I would like to do is discuss with you briefly the process that we will use to conclude the day's business. I think we are now convened as a Council Committee of the Whole. And what we would like to do right at this point is make sure that we have all of the testimony on the Kvaerner resolution 12 in the record. Is there anyone here who wishes to testify on Resolution 970801? Is there anyone here to wishes who testify on the Kvaerner Naval Business Center Tax Increment Financing District resolution? If there is no one, this will complete our Public Hearing on this resolution. But we also have in front of us Resolution 970806, which is a resolution approving an amendment to the Venture Agreement between Philadelphia Facilities Management Corporation and QST Energy, Inc. I need to know, is there any member 220 RESOLUTION 970801 of the public who is here to testify on this resolution? Is there any member of the public? Now, seeing no one, that means that the only people who are here to testify on this are officers of PGW and officers of QST. A recommendation has been made to me that we consider in a Public Meeting the Kvaerner resolution. And that we then recess the Committee of the Whole, start the Council session, have the presentations -- because there are people here for presentations -- and then recess the Council session, reconvene the Council Committee of the Whole, consider the QST/PGW resolution, and then go back into the Council session so that we then can consider the Council session. I would like to amend that recommendation by suggesting that when we reconvene, when we recess the Committee of the Whole and reconvene the Council session, that we consider in that early part of the session the Kvaerner resolution as a Council. And then that probably will allow all 221 RESOLUTION 970801 or most of our beloved media, who are with us waiting for this historic vote, to be able to go about their business. And so, out of consideration for them, I would recommend that we do that. Is there any member of Council that has any concern about the recommended procedure that we take? Is that all right? We will consider in a Public Meeting the Kvaerner resolution, recess the Council Committee of the Whole, have a caucus, come back, convene the Council session, do our presentations, consider the Kvaerner resolution, recess the Council session, reconvene the Council Committee of the Whole, consider the PGW/QST resolution in the Committee of the Whole, then report it out to the Council session, complete the Council session and the QST resolution, and go home. Is there anybody who misunderstands that, of the Councilmembers? I could do that in my sleep. Councilman Nutter.
Thank you, Mr. President. Just a timing question. 222 RESOLUTION 970801 What time do you think we will actually start the Council session?
I think we will start the Council session in about 30 minutes.
I think by the time we consider, which will only take a minute, but we consider the Kvaerner resolution, convene a caucus, and get back here for the Council session, it could be 20, 30 minutes. Any question about it? Does that meet with the approval of the body? The Chair recognizes Councilwoman Fernandez.
Just one other comment. I think, at least on other Thursdays, there is often a lot of time lost between caucus and coming back from the Public Meeting. And I think, I mean, I would find it very helpful if that did move. Because often a half hour goes by in between.
We will do the best we can. As soon as we get a quorum, we will 223 RESOLUTION 970801 proceed.
If there are no 5 further questions or comments, then this Committee of the Whole will stand in recess on Resolution No. 7 970806. We will end our Public Hearing on Bill No. 970801. (Public Hearing stands in recess.) - - - 224 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING of the COMMITTEE OF THE WHOLE - - - Thursday, December 1997 8 - - - 9 Public Meeting conducted by the Committee 10 of the Whole, held in Room 400, City Hall, 11 Philadelphia, Pennsylvania, on the above date, to consider action on the following: RESOLUTION 970801 - - - PRESENT: COUNCILMAN JOHN F. STREET, Chair COUNCILWOMAN ANNA C. VERNA, Vice-Chair COUNCILWOMAN HAPPY FERNANDEZ COUNCILMAN JAMES F. KENNEY COUNCILMAN W. THACHER LONGSTRETH COUNCILWOMAN AUGUSTA A. CLARK COUNCILMAN DAVID COHEN COUNCILMAN FRANK RIZZO COUNCILMAN ANGEL ORTIZ COUNCILMAN FRANK DiCICCO COUNCILWOMAN JANNIE L. BLACKWELL COUNCILMAN MICHAEL A. NUTTER COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN BRIAN J. O'NEILL - - - 225 PUBLIC MEETING
We will now go into a Public Meeting on Resolution No. 970801. There was an amendment that was offered by the Mayor to that resolution. Does every member of Council have that amendment? Does any member of Council remember that amendment? It was made available. This is a resolution, an amendment to the resolution, on that reads as follows, delete "to execute an MBE/WBE program for the project similar to other programs for economic development projects in Philadelphia." That language will be out. The following language will be substituted for that language, "to implement an MBE/WBE program for the project, which will include good-faith goals for construction, subcontracting and construction employment similar to those in the MBE/WBE plan for the CoreStates Center, and good-faith efforts to include MBE/WBE firms in the operation of the shipyard and the supplier/subcontractor infrastructure." That's the new language that will be included in the exhibit. 226 PUBLIC MEETING Is there any question about that? The Chair recognizes Councilwoman Verna for a motion that the amendment be adopted. The Chair recognizes Councilwoman Tasco.
It is my understanding that design is included. I talked to Miss Hamilton. And, I mean, I think it is included. I don't have any reservations about doing that.
So that, okay, I think if we insert the word "design" between the words "goals" and "for" in the second line of the new language, that might do it for us. So it would read "to implement an MBE/WBE program for the project, which will include good-faith goals for design, for construction subcontracting and construction employment similar to those," et cetera, et cetera, et cetera. 227 PUBLIC MEETING Can we insert the word "design" in there by agreement? Is there any opposition to that? Then it is so ordered. The Chair recognizes Councilwoman Verna for a motion.
Thank you, Mr. Chairman. I move that the amendments as you have read be adopted. (Duly seconded.)
All in favor let it be known by saying aye. Those opposed say nay. The amendment is adopted. The Chair recognizes Councilwoman Verna for a motion on Resolution No. 970801, as amended.
Mr. Chairman, I move that Bill No. 970801 be reported out of committee with a favorable recommendation, as amended. (Duly seconded.)
All in favor let it be known by saying aye. 228 PUBLIC MEETING Those opposed say nay. The ayes have it. The Chair recognizes Councilman Nutter.
Thank you, Mr. President. I raise a question. On the resolution document that we received as amended, the two sheets, my only question, Mr. President, is, in the original Resolution, 970801, introduced December 4, 1997, there is a "whereas" that was dropped, in a comparison between the pink bill and the amended version in front of us.
Council will stand at ease. Councilman Nutter please approach the Chair. Can I get someone to get Mr. Ericson and ask him to approach the Chair. (Council stands at ease.)
May I have your attention, please. Upon further consideration, it has been pointed out to us by Mr. Ericson that that 229 PUBLIC MEETING "whereas" was intentionally dropped because there were some questions about whether or not the contents of that resolution was accurate, in light of the bill that we originally adopted. And, therefore, that "whereas" was dropped. I couldn't remember the reason. Now, does everyone have in front of him or her Resolution No. 970801 as amended? I am going to make sure there was no 11 question here. Let me have someone make some copies of Resolution 970801, as amended. I would like to distribute that to the members of Council. I want to make sure we are together. The original resolution was presented to this Council. There are a series of changes that were made in it. And that amended resolution was made available to members of Council, and it was circulated to everybody. And I know we had it, because the Mayor was here with it. I want to make sure that everybody has the amended resolution that we have amended. (Short recess.)
Order, please. 230 PUBLIC MEETING May I have your attention, please. Does everyone now have a copy of the Resolution No. 970801, as amended? I need to make it clear that the amendment, the MBE/WBE amendment that we just agreed to amend and adopt, is to the Project Summary. It is not an amendment to a resolution; it is to the Project Summary, which you have. Is there anyone who has any questions about where we are? If not, the Chair recognizes Councilwoman Verna for a motion.
Thank you, Mr. Chairman. I move that the amendments as submitted to us regarding Resolution No. 970801 be adopted. (Duly seconded.)
All in favor let it be known by saying aye. Those opposed say nay. The Chair recognizes Councilwoman Verna for a motion.
I move that 231 PUBLIC MEETING Resolution No. 970801 be reported out of committee with a favorable recommendation, as amended. (Duly seconded.)
All in favor let it be known by saying aye. Those opposed say nay. The resolution is adopted. This is a resolution for which a suspension of the rules is not necessary. At this time the Council Committee of the Whole will stand in recess. We will now convene a caucus. We would appreciate it very much if you will go right directly to the Caucus Room. We will have our caucus, come back, convene the Council session, consider the Kvaerner resolution, have our preliminaries, and then come back into the session of the Council Committee of the Whole, and then go back into Council session. Thank you. (Public Meeting stands in recess.) - - - 232 PUBLIC MEETING
If I could have Councilmembers' attention. Those of us who are here, I would appreciate it if all Councilmembers would come to the chamber. We would like to reconvene the Council Committee of the Whole. We have somewhat less than a quorum at this moment. I think, Councilmembers, if you were to please come to the chamber. I would appreciate it very much if Councilmembers would come to the chamber. If we can't get a quorum today, what we will have to do is recess this hearing until tomorrow morning at 9 o'clock, and I know nobody wants to do that. I would appreciate it if Councilmembers would come to the chamber. We would appreciate it if all Councilmembers would please come to the chamber. At this time I would like to announce that the Council session that's currently in recess will stand in recess until 1:30. (Short recess.)
We would like to 233 RESOLUTION 970806 get started. Does every member of Council have Resolution No. 970806, the pink Resolution No. 5 970806? Do we all have Resolution No. 970806? All right. Here comes Councilman Cohen with his lunch. Just like the good old days, Councilman Cohen with his lunch. So if I could have your attention. Now, what was introduced was the Resolution 970806. Attached to that resolution was the Venture Agreement between Philadelphia Facilities Management Corporation and QST. The whole agreement was attached to the resolution. Do you follow that? And I have it here attached to the original. It was attached as Exhibit A. Now, what we have, I am getting ready to pass out now a black-lined copy of amendments indicating changes to the Venture Agreement. Can I have the City Solicitor take the witness stand. This is how it gets a little bit complicated. The Exhibit A has the Venture Agreement in it. The Venture Agreement, it is my 234 RESOLUTION 970806 understanding, is inconsistent with the ordinance 3 that we passed because the Venture Agreement does not comply with those things that we requested be in the Venture Agreement, in the agreement that was approved. So that what we are now getting ready to do is consider a set of changes to the Venture Agreement which modify what it is that has been agreed to. Is that correct?
And the black-lined changes in the Venture Agreement, are they in accordance with the discussions that you and I and Councilwoman Tasco had earlier today?
Now, what I would like to do is make available to the members of Council the proposed changes to the Venture Agreement that is attached as Exhibit A to the resolution that was introduced.
Council President, if I might provide a little bit more clarity on what's being distributed to members of 235 RESOLUTION 970806 Council.
I want to make sure they all have it. The Chair recognizes the City Solicitor.
Thank you, Mr. President. The resolution had attached to it an Exhibit A, which consists of a form of amendment to the Venture Agreement. The Venture Agreement was titled Exhibit A to the ordinance that had been introduced previously. What members of Council currently have for their consideration are black-lined changes so that you can see how the proposed amendments fit into the text of the Venture Agreement, as well as a form of amendment as a separate document, which incorporates those changes.
The Venture Agreement that Council originally approved by ordinance and by resolution is being amended. It is 236 RESOLUTION 970806 being amended by a separate instrument called an amendment. You have that form of amendment, and then you also have a document called black-lined changes, which, for your convenience, show how the changes fit into the actual text of the Venture Agreement.
The black-lined changes, are these amendments to the proposed amendments?
No; they are just amendments to the Venture Agreement. And you see them in two different documents.
Is Exhibit A the Venture Agreement as authorized by City Council?
Exhibit A to the resolution is the amendment document.
Then I ask you, is Exhibit A the Venture Agreement that was entered into between QST and PGW? 237 RESOLUTION 970806
So these proposed changes are amendments to the proposed amendments to the Venture Agreement?
The proposed changes are amendments to the Venture Agreement; they are not amendments to the amendments.
Wait a minute. See, that's why I wanted everybody here for this discussion. Because I know that if, after our discussions, I am not clear on this -- and everybody has a right to be unclear. What we have in front of us is not the Venture Agreement that we authorized, is that correct, as Exhibit A to the resolution that was introduced?
All right. That's not the Venture Agreement? These, Exhibit A, are the changes 238 RESOLUTION 970806 that PGW wished for us to make in the original Venture Agreement that we authorized?
Because you weren't authorized to enter into an agreement anything other than what we authorized.
And you did that, knowing that it would never be implemented or executed, unless we changed it to conform with the changes that had been requested by QST, after it went and dealt with whoever it had to deal with; is that correct?
I'm not sure I understand your question. I apologize.
Here we are. Pursuant to an Ordinance, we authorized PGW and QST to enter into an agreement.
It is over there someplace. You did that. QST said, "We don't like it and we are not going to implement it. We need these changes." But that agreement is over there. 239 RESOLUTION 970806 So that what we have in front of us as Exhibit A to the original resolution is the changes that PGW and QST are requesting to that thing over there that we authorized you all to enter into?
Right. These amendments to the proposed amendment are the changes that we have discussed in preparation for this hearing?
And that's why I wanted us to have this discussion, so that everybody could be here. So that the black-lined changes are proposed changes to Exhibit A, which are the recommended changes to the Venture Agreement which has already been entered into.
Where there was a little confusion is that we also provided a substitute of the Exhibit A that had been 240 RESOLUTION 970806 distributed before to incorporate these changes.
Well, see, what I want to do is just make sure everybody understands where we are. Because I don't want people to think -- because we are actually amending the proposed amendments --
-- to the Venture Agreement. Now, what I would like to do is simplify this process. I would like to simplify this process in this way: What I would like to do is have the Solicitor tell us what the exhibit has in it, and explain how the proposed amendment to the amendment works, so that people can understand what the bottom line is. And then what I would like us to do is make sure we are straight on all of that. And if there is any question about it, I want to make sure that we answer those questions. I would like to have -- I want to consider it a possibility, depending on how complex this thing gets -- because we can recess this and we 241 RESOLUTION 970806 can have staff do some more work to simplify it, if necessary. Because we have a Council session to have on all those bills. And at the very end of Council session, if necessary, we can do whatever final work we have to do on this and be able to consider it. But right now what I want people to understand is that there is a Venture Agreement. Exhibit A is proposed amendments to the Venture Agreement. And after our discussions, there are proposed amendments to the proposed amendments of the Venture Agreement that get us to a bottom line as to what the Venture Agreement will be. Councilman Cohen, I see you shaking your head.
My intuition told me to have Councilman Cohen here when we had this discussion. The Chair recognizes Councilman David Cohen.
The sandwiches are 242 RESOLUTION 970806 gone, so I can't invite anybody at this point to share it.
But I am not sure what, quote, the amendment is. I know there was a Venture Agreement signed by PGW and QST that we knew nothing about. Wasn't there a Venture Agreement, the original one?
Councilman Cohen, there is a Venture Agreement that was entered into that we knew everything about. Because we had the Venture Agreement in front of us as an exhibit to an Ordinance. And we authorized QST and PGW to enter into that agreement, subject to certain conditions and limitations which were incorporated into the agreement. And it was entered into for technical reasons that we don't really need to get into here. Right? At the time it was entered into, we all knew, those of us who were following this, that 243 RESOLUTION 970806 it would have to come back here for proposed changes. Because as a result of discussions that took place between QST and its parent organization, it wasn't authorized to execute an agreement that had everything in it that we were requiring. So what we have as an exhibit to the resolution are the changes that QST and PGW agreed to come and ask Council to implement. Now, after a lot of discussion, working with the Chairman of the Gas Commission and myself, we requested some further amendments to the proposed amendments to the Venture Agreement. And those amendments are here, but there are amendments to the proposed amendments to the Venture Agreement that was attached as an exhibit to the bill that we approved. Do you follow that?
And this has nothing to do with the substance of it; this is the procedure of this. This is just so we will know 244 RESOLUTION 970806 what it is we are doing here. Because if we adopt the proposed amendments to Exhibit A attached to the Ordinance, that's going to authorize the changes in the Venture Agreement that isn't in front of us in great detail. We only have the proposed amendments attached to the Resolution. What I am hoping that we can do is, without getting to all of the particulars, and necessarily the dotting of the I's and crossing of the T's, is have a discussion with the City Solicitor that lets everybody know what the proposed bottom lines are. Do you understand what I am saying?
Well, and by "bottom line," do you mean what changes are now being proposed, changes to the agreement that City Council authorized PGW to execute?
But you get there because what you have to do is, there is a set of amendments that are proposed to the amendments to 245 RESOLUTION 970806 the original agreement which we authorized.
Yes. That's what this does, it unites them. But it is very confusing. And I knew it would be confusing, and I didn't want to have this discussion. Because now if somebody walks out, and you come back, at least you know what we have in front of us, proposed changes to the proposed amendments to the Venture Agreement. Now, I mean, that's where we are. Is there any Councilmember who has any question about where we are? I see Councilman Nutter's light.
Thank you, Mr. President. No, I think I know where we are. And I wanted to, I guess, get to the next phase. Did you say that you were going to ask the Solicitor to explain first Exhibit A as was handed out -- I believe we received this last week -- attached to a communication from the Mayor, which was, I guess, the sent-back version from QST 246 RESOLUTION 970806 and its parent company conversations? Is she going to explain that first, and then tell us what this new amendment, which is attached to the black-lined version, means in conjunction with that, and then get to what the bottom line is?
I am hoping that we can limit this and sort of drop to the bottom lines. And if we can't do it, I mean, we can take as much time as we need here. And what I thought we might be able to do is have a general discussion, a little bit of a general discussion, and then sort of work our way back. For example, one of the things that we decided in our original Ordinance was that no 18 further taxpayer or ratepayer's money would be able to be used for the implementation of the pilot PGW/QST electric project. That was a fundamental point in our discussion.
And what I wanted to do is just, for example, have a discussion of that point and find out what, if anything, has 247 RESOLUTION 970806 changed in all of that.
Thank you. I will try to make this simple. What Council did, through amendments and in the Venture Agreement that was authorized, was shift 100 percent of the financial and legal risk of the pilot program to QST. The proposed amendments generally deal with two issues, limitation of liability and indemnification. QST continues to be responsible for expenses of the pilot program, whether they relate to activities of QST or activities of PGW, after October --
Out-of-pocket expenditures related to the venture. They continue to bear the financial responsibility. The reason that you have amendments to the amendments is because when QST originally 248 RESOLUTION 970806 proposed their changes to the Venture Agreement on these liability points, the changes can be read to undercut that obligation. That is not what they intended to do. And so we have added clarifying language that makes it clear that they continue to have, as they originally intended, and as Council intended and as PGW intended, for them to have the financial responsibility for the program.
So if these amendments in Exhibit A, in the black-lined amendments to the proposed amendments in Exhibit A, if they were all approved, could Councilman Cohen and Councilwoman Blackwell and I say, well, PGW is involved in this project, but no additional ratepayer money or taxpayer money will be spent to implement this pilot? QST will spend all the cash. Those people who receive the electric will pay for, of course, their electric, and PGW will only be using existing facilities, existing personnel, existing equipment, as a part of its contribution to the 249 RESOLUTION 970806 partnership and to the Venture Agreement that we would have authorized?
That is correct. You may recall that QST is responsible for 50 percent of the same kinds of expenses prior to October 23, and then they are responsible for 100 percent of out-of-pocket expenses after October 23. So the Council President is correct in that assessment, that is not paid for by the ratepayers or by the taxpayers.
Now, a major concern of City Council was the potential liability, people sue us in all kinds of ways. Somebody is getting electrical service and claims that, as a result of the provision of this service, there was a fire. And personal property was destroyed, and maybe injury to somebody occurred. And the city gets sued, PGW gets sued, QST gets sued, everybody gets sued. We wanted QST to indemnify us against any and all expenses associated with those kinds of 250 RESOLUTION 970806 lawsuits. How does QST and PGW propose to change that with this set of amendments here?
Okay. For personal injury and property damage claims, QST does propose to limit the scope of their liability to claims arising out of their activity. But they are providing the electrical service. So any fire or incident that's related to the provision of electricity service, QST bears that liability and QST agrees to indemnify the city and PFMC and PGW for claims arising out of that activity. If there is a personal injury or property damage claim that somehow arises out of PGW's activity, what QST proposes to change is accepting that risk. We would continue to have that risk. We are, however --
Why should we have that risk? I mean, QST is responsible for buying the electricity off of the grid, for buying the electricity. And I guess somehow PECO, I mean, they 251 RESOLUTION 970806 are using PECO lines. I mean, we don't own any lines, and I guess neither does QST or PGW. I mean, what can we do that causes us to be liable? And why wouldn't QST want to be willing to indemnify us, since it appears that the dangerous activity, if there is any -- phone calls are not generally dangerous, although I guess they could be -- I mean, it is QST's responsibility?
Well, let me try to answer it this way: From a commercial standpoint, from a corporate policy standpoint, QST's position is simply, "We can't control your activity, and, therefore, we don't want to accept that risk." As a practical matter, the claims are going to arise out of what QST is doing. And we do have the benefit of their indemnification for the kind of claim that's going to arise out of their provision of electricity service. And even with the way that they propose to change the language in the agreement, we, nonetheless, the city, PGW, and PFMC, have the benefit of QST's insurance -- we are named as an additional insured -- PGW and PFMC have insurance 252 RESOLUTION 970806 coverage to cover this kind of claim.
But are there deductibles on those policies? What are the deductibles?
I don't know the specifics. I can say to you that the Risk Manager for the City of Philadelphia reviewed all of the policies, both QST and the PGW/PFMC policy, and in writing concluded that we have the protection for these kinds of claims, through the combination of QST's insurance, PGW/PFMC's insurance, and the Tort Claims Act. Not only for liability for these types of claims, but also the cost of litigation defense.
But I want to know what the deductibles are. Because if the deductibles are high enough, it doesn't matter. These policies don't mean much to us.
Ramon Sharbutt, Chief Financial Officer of PGW. The deductibles at PGW are $500,000.
So the insurance kicks in in claims over $500,000. How does that help us? We pay the first $500,000. I mean, that is a monumental problem. And I guess I would like to complicate this discussion a little further. I mean, as we see it, it is so unfortunate, it is a terrible situation, and there is a fire, and PGW and QST are delivering the electricity, and there is injury involved. And, of course, I mean, knowing, you know, one or two lawyers in this room, they sue everybody. And the juries come back, and they sometimes will find everybody liable. How does that get resolved?
If a jury finds all of the defendants equally and jointly liable, and we say QST is only responsible for its activities, I mean, and the jury finds us responsible because we are in this Venture Agreement, doesn't that mean we have to pay?
Let me say that again. We have the benefit, the insulation, the immunity under the Tort Claims Act. The first level of protection for us is the Tort Claims Act; PGW, the city. So to the extent --
But doesn't that mean that we can't be misforced to pay anything over $500,000 in an incident? It doesn't mean --
Not if it is covered by the insurance. So the levels of protection --
I only raise that question because you raised the protections of the Tort Claims Act. The Tort Claims Act keeps us from 255 RESOLUTION 970806 having to pay $10 million verdicts and $100,000,000 verdicts. It is only like $500,000, and that's very important. But if during the course of all of this, all you need is one bad incident, and it could end up costing us hundreds of thousands of dollars, based on the way I understand what you are telling us here. Because the Tort Claims Act doesn't help us. We end up having to pay our own attorney's fees; right? Wouldn't we have to defend this? We don't have any insurance that would pick up our legal fees. We have to pay our own attorney's fees. And then we may end up having to pay our share of any judgment that was rendered against us. I rest my case.
Council President, I think that we would have no exposure because this comes within the Tort Claims Act. It is the kind of claim that we would handle on a regular basis. Your point is well taken in terms of the insurance deductible. But the fact of the 256 RESOLUTION 970806 matter is that these are personal injury and property damage claims. We are insulated under the Tort Claims Act. It is not likely that the city, as a practical matter -- because we will not be providing electricity; it is QST --
But you have to answer my question. And I have had these discussions as a member of the Gas Commission. If you say the Tort Claims Act insulates us from exposure over $500,000, and we have an insurance policy that had $500,000 of limits on it, so we wouldn't have to pay the $500,000, now I am back to my question, what are any deductibles on the insurance policy? Because if it is 10,000 or 15,000 or 20,000, then what that does is, that limits what it is the insurance company has to pay on our behalf in judgments against the city, or PFMC or PGW, below the deductibles, end up being paid for by us. And there is no question in my mind 257 RESOLUTION 970806 that we pay the cost of litigation. I mean, we hire the lawyers. Some of it is handled by lawyers that work for the city, and some of it is obviously handled by lawyers that are on retainer from the Law Department to defend against these claims.
Let me also point out something that I think might add some clarity. This is language that is covered in the amendments. And although QST has limited its liability to its activities, it expressly, in language that you have before you in the changes, as between QST and PGW, QST assumes sole and absolute responsibility and liability resulting or arising out of the provision of electricity. So, again, in terms of apportionment of responsibility, the risk is not, I think, a real one that the city would actually be involved in providing electricity. And based on the Risk Manager's review of the insurance policies, the Tort Claims Act, and the language changes proposed by QST, he believes that the city, PFMC, and PGW are protected 258 RESOLUTION 970806 against these kinds of claims not simply in terms of liability, but also in terms of cost of defense.
Well, is there anything in the agreement that speaks to how disputes among and between PGW and QST, on who is liable for these things, how they get resolved? Is it possible we could end up in a big dispute with QST about who is responsible?
We tried to be clear in terms of allocation of responsibility. There is no specific provision in the agreement that provides for dispute resolution. And it is always possible, as with any of our contracts, that you could get into some disagreement with regard to who did what at what point in time. But for purposes of these kinds of claims, we are talking about activity that is clearly QST's activities. QST is providing the electricity. PGW is not providing electricity.
I will tell you, you know, we had some of these discussions before. It just seems to me that under this Venture Agreement, that the partnership is providing 259 RESOLUTION 970806 the electricity. I mean, PGW and QST, aren't they jointly providing the electricity? Maybe you need to tell us a little bit about how it is you can really fill the line between about who is providing the electricity and who isn't providing the electricity. And what happens, for example, if QST says that the electricity is provided, and we aren't responsible because, you know, it is the way electricity, it is PECO's wires, or something? I mean, it just, to me, I have to tell you, it just sounds to me like we are going to be out there potentially fending our way on our own, possibly in disputes with PGW, with PECO, and anybody else, about who is responsible for these things. And the reason why we wanted, in the very beginning, to have the clear set of responsibilities is because then we don't have to get into these arguments. QST indemnifies us. It is the expert in providing electricity; we aren't the experts. PGW isn't the expert in providing electricity. They indemnify us, they supervise 260 RESOLUTION 970806 everything that is done in the provision of electricity, and then we don't have to worry about that. And I think this seriously complicates it, and I think it compromises our position on it.
Council President, if I might, I am now looking at the Venture Agreement. And, as I testified previously, this is not a legal partnership, where it is a separate legal entity, where we have combined our assets and we are dependent on and intertwined with QST, and what they do is considered what we do. The obligations of QST and PGW are specifically delineated in the Venture Agreement that you reviewed and approved before. It says, specifically in terms of QST activities, that the provision of electricity is QST's obligation; it is not an obligation of PGW's. And, so, it is clear under the Venture Agreement. And the proposed changes to the Venture Agreement don't modify that or change that obligation. 261 RESOLUTION 970806 And QST says that we will be responsible for that liability, any liability arising out of our provision of electricity, and we will indemnify the city and PFMC and PGW for any claims arising out of that.
Thank you, Mr. President. City Solicitor, just to make a very basic example. If, when PGW starts selling electricity, the customer at that location, a contractor, is injured, electrocuted, could you just describe who would be responsible? Who would they sue? Would they sue PECO? Would they sue QST? Would everybody get sued? Could you just paint a picture of how that would work?
I think the Council President's point in that regard was well taken. Generally, everybody gets sued. The question then becomes whose obligation, whose liability, whose responsibility is 262 RESOLUTION 970806 it as between the parties that have been sued. We can't say we won't ever be sued. But it is clear that, in the agreement, that it is QST's responsibility, obligation, and liability. So that it won't necessarily prevent us from being sued. But, as I said previously, in that kind of situation, it is QST's obligation. They have agreed in the amendments to the Venture Agreement to be responsible for the liability, to indemnify us in connection with costs of litigation arising out of their activities. So if they have assumed the sole and absolute responsibility for their provision of electricity, their indemnification obligation, their agreement to reimburse us for any expenses associated with our being sued as a result of what they have done, we are covered for the litigation defense under the terms of the agreement. We are also an additional insured to their insurance policy. And if there is any question at all, we have the benefit of the Tort Claims Act, as well as PGW and PFMC's insurance. So through the combination of all of those different levels, the Risk Manager of the city 263 RESOLUTION 970806 has concluded that, under that kind of situation, and under a situation where somehow conceivably, even though PGW is not providing electricity, we could be responsible, we are adequately protected and covered.
Thank you, Mr. President. So, Madam Solicitor, let's go back to one of the earlier questions, which was, what is it that PGW could do as an action that would result in any exposure under any of the circumstances? And are you able, even in a hypothetical case, to lay out in a chart fashion or a grid what happens in a lawsuit, the issues raised with regard to either legal fees, when you have to pay your small portion -- I am forgetting that term, the car gets banged up -- deductible -- hopefully no 23 one runs into my car -- deductibles and all other potential expenses. Are you able, I guess, to show either 264 RESOLUTION 970806 on paper or explain verbally what protection covers what? You talked about the Tort Claims Act. You have talked about QST's indemnification of us. We have talked about insurance that PGW apparently has. How do all these various things get covered such that, I guess we get back to the goal, which is, when you see the City of Philadelphia line on that chart, it reads zero?
Councilman Nutter, let me answer what I think your question is. Because I think your question goes to the heart of the impact of the proposed changes. Looking at personal injury and property damage claims is one category of potential exposure. Between the City Solicitor's Office and the Risk Manager of the City of Philadelphia, we reached the conclusion that the bottom-line risk, there is, say, roughly zero, if not minimal. We are adequately protected. I don't think there is any guarantee. But we do have, in terms of the 265 RESOLUTION 970806 agreement, the reimbursement obligations on the part of QST, the indemnification; the assumption of the liability; QST's insurance; the city, through PFMC and PGW, insurance coverage; and the benefit of the Tort Claims Act. So in terms of risk, that category of claims, we are protected. The changes -- and where there is potential exposure -- really relate to other types of claims, nonpersonal injury, nonproperty damage. So if we can put those kinds of claims aside, the kinds of claims that are not personal injury, not property damage, not covered by insurance, we have no Tort Claims Act protection, that's the category of claims and risk that I think are relevant for purposes of your understanding the impact of these proposed changes. As to that category of claim, Council intended for QST to bear 100 percent of the risk, whether that kind of claim comes out of QST's activity or whether it comes out of PGW's activity. And let me give you an example.
The kind of claim would be -- remember we had extensive discussion and testimony -- for example, if a competitor of PGW or if a ratepayer or a taxpayer were to challenge our legal authority to engage in the business of electricity; that's the type of claim I am talking about. The Venture Agreement approved by Council passed the risk of that kind of claim to QST. The proposed changes by QST would modify that. QST proposes to limit its liability and its indemnification obligation to claims arising out of its activity, not out of PGW's activity.
Because this is a perfect point. They sue, and they sue for 15 different reasons. They say, one, you delivered the wrong kind of electricity; two, the wires were 267 RESOLUTION 970806 faulty; three, you didn't come when we called, and if you had come when we called; four, we called PGW at the office, and it didn't have anybody come. PGW says, well, we called QST; nobody went out there. And then they say, and you weren't authorized to go into this business in the first place, and, therefore, you shouldn't have been even in the business. And they throw all this. Because that's the way we lawyers do. We just throw it all in. And then a whole bunch of lawyers are sitting in the back room of the judge's chambers someplace. And the judge wants to leave because it is Friday, and he wants to get out of town. You know, it is 2:00 or 4 o'clock in the afternoon, and the lawyers are there, and everybody wants to go. And the judge is leaning on the city -- because we now all have to be there, because there are allegations involved -- and the judge says, "Well, everybody kick in 50,000, or everybody kick in 100." Councilman Cohen, I mean, this is what happens. Everybody kick in the money. Let's 268 RESOLUTION 970806 settle this, let's get this off the docket. And I will tell you, that's precisely what I had in mind when I say, we make QST responsible for all of that. Then we don't have to worry about it. Because QST, I mean, is at the heart of this thing, is delivering the electricity. And QST is going to do that. Let QST take the weight for all of that, and then indemnify us, and then we don't have to worry about trying to draw all those fine lines. I am telling you, whether or not this goes or does not go, this is a can of worms that will never be resolved unless we decide today who is going to be ultimately responsible for all of this. Because Councilman Nutter is never going to be able to figure out, and neither will I, whether or not the judgment was given because PGW didn't belong in the electricity, the electricity business, or was acting outside of its statutory responsibility, or whether some of these other things were the case. Because that's just the way this stuff boils down. And we won't be able to be out of 269 RESOLUTION 970806 it. Now, if QST has indemnified us against everything, then do you know what we do? All these claims, do you know what we do? We send them to QST, and QST's insurance policy covers it. And if there is any liability, QST's insurance company pays. And, to me, that's simple. And I apologize, because I think that's where you were.
What is QST's explanation for their position? And I asked this once before, when we were dealing with this issue. Are there any QST people here today?
If I might, Councilman Nutter, I apologize, before we get to that point, I do think it is important for me to try to put into context what the Council President said by way of example. Let's assume you are right, and we have a Complaint, and it makes a lot of different allegations, a lot of different kinds of claims. And, yes, we may end up in the room, we have been sued, and there is a settlement. And let's assume that we agree to pay $50,000. 270 RESOLUTION 970806 To the extent those claims relate to the obligations I just talked about, the provision of electricity, QST's activities, we then, under the Venture Agreement, QST has an obligation to reimburse us. So at least in terms of the personal injury and the property damage claims, let's assume we have paid $50,000. Then maybe as between QST and PGW and the city, $30,000 of that is attributable to those kinds of claims. We get that money back. The question then goes to the other 20,000 in that example, hypothetically. That is not covered by insurance, whether it is QST, or whether it is PGW, or the city. At this point in time it is a risk that's not insured or insurable without a lot more investigation. It doesn't mean necessarily, though, that in terms of the actual 20,000, that we believe, for those kinds of claims that I'm calling contingent liabilities, that arise out of the city's or PGW's activities, that we wouldn't have strong 271 RESOLUTION 970806 legal defenses. I believe that we do, and I believe that the risk in terms of judgment and liability is minimal, whether or not you ultimately settle and whether or not there may be an expenditure to make the nuisance of the suit go away. I'm not going to say to you that it is not possible that we could pay, say, $20,000. But that's the kind of claim or situation where I assume that the Law Department would be actively involved. Those are the kinds of claims that you would want us to be actively involved in.
But I think the primary issue that is being raised is, there appears to be virtually nothing that PGW could do, in the course of whatever it is that it will be doing, that would make it liable for anything, even in the hypothetical. I mean, they are just there. Why should they pay any money to anybody? Even if a judgment is found, or even if it is Friday at 5:00, and the pressure is on to settle, and they kick in whatever they kick in, what did they do to cause any harm to anybody to then be 272 RESOLUTION 970806 subject to suit and a payment?
I have spent some time speaking with the lawyers and the President of QST, so let me try to articulate their position. In terms of the actual --
They should be articulating their own position, let me say that for the record.
In terms of the activities as between the parties as for the pilot program, I think you are correct, PGW is not providing the electricity. PGW's activities, compared to QST's, are more limited. And, again, QST has said, we will bear responsibility for -- we will indemnify you for anything that arises out of our activity. QST takes the position that if, however, there is a challenge that's based on a claim that somehow we don't have the legal authority to do this, or a ratepayer is concerned that somehow there is an impact on the gas rate base, or if a bondholder has some kind of issue that's related to, you know, anything related to the possibility that 273 RESOLUTION 970806 the bonds could become private-activity bonds, those are the kinds of things that QST takes the position are not within their control. They have no control over those kinds of issues. That is a risk that the city and PGW should bear. And from their perspective, that is commercially reasonable. Remember, they are assuming responsibility for all of their activities. They are indemnifying us for anything arising out of or relating to what they do. They are assuming financial responsibility for the activities of both QST and PGW on or after October 23. So they bear the financial responsibility. They also are bearing the legal liability and indemnification for the period before the Venture Agreement, the Memorandum of Understanding.
Can I interrupt? Councilwoman Fernandez has to leave. She will be back. She would, in the event that this discussion concludes before she gets back, she would 274 RESOLUTION 970806 like to make a statement as to how she wishes to be recorded as voting, if that should happen prior to her getting back. The Chair recognizes Councilwoman Fernandez.
Thank you, Mr. President. I do have a meeting regarding child care and the Welfare reform, so I do need to be at that. I hope to be back by 4:15. If I am not back, I would like to be recorded as voting yes on all the bills and resolutions coming before the Council's Public Meeting.
As much as I have heard, yes, I will vote to report this out of Committee of the Whole.
On the resolution 22 and any amendments that are offered?
Okay. We have the 275 RESOLUTION 970806 outrageous exception. I thank you. I am sorry; I think Councilwoman Tasco wished to have the floor. Were you finished, City Solicitor?
I just wanted to add that I think, as the Council President, you were trying to figure out why we are where we are with QST. And I think as the Council President said in his earlier remarks, QST has looked at this risk. They do believe that they agree with our risk assessment in terms of it being minimal. These are contingent liabilities. But --
Because, as a matter of corporate policy -- and I think if you shift perspectives for a minute, it is the same idea as the city saying, "We will not indemnify you for that which we don't have control over. If we don't 276 RESOLUTION 970806 control it, why should we be responsible for it?" And that's QST's position as a matter of corporate policy. They are saying, "We will take on the financial responsibility, even for what you are doing." If PGW, as part of its obligations, whether it is marketing our whatever else, needs to expend money, QST is paying for that, they are assuming the financial responsibility. They are saying, "We will cover you for anything that we do. We have the bulk of the activity that's related to the kinds of claims that" -- you know, personal injury and property damage, the major kinds of claims that I think would really subject the city to risk, if we didn't have adequate protection. And they are simply saying that, if there is an issue as to whether or not you have authorization to do this, if there is an issue or a claim that comes in from a ratepayer or a bondholder, these are things that we have nothing to do with, we have no control over, and, therefore, why should we bear the risk of that? 277 RESOLUTION 970806
And at the same time, we would not be sued if not for the relationship between PGW and QST, and we haven't done anything. I mean, it is only the nature of the relationship that would cause any of those, in the three scenarios that you laid out, that someone would go to court in the first place. So QST cannot separate the relationship when it is convenient. We wouldn't be at the table; they would be at the table. It is the mere existence of the electricity relationship that causes a person to go to court in the first place. You can't separate the two. Before you try to respond to that, Madam Solicitor, I had asked the question kind of off to the side. Is there a representative from QST here with us today?
I mean, I have to say that it baffles me at some level. For someone who wants to do something so much -- 278 RESOLUTION 970806
He is trying to do another deal with somebody else. It is just a little confusing to me that people would spend all the time that they apparently have spent trying to get this done, but the one place that they don't want to be, notwithstanding all their conversations with Mr. Hawes, our Solicitor, or Bud or anybody else, the one place that they don't want to be to explain themselves and help us get to the bottom line is the place where, I guess, some of us happen to believe they need to be to make this happen. I mean, this not-showing-up thing is starting to get a little tiring. I mean, if I 279 RESOLUTION 970806 didn't show up as much as some other people around here don't show up, we wouldn't get any work done. Or I guess I wouldn't be here anymore. So, Madam Solicitor, you can try to explain the earlier question. I mean, what do they want? Do they want to do it, or do they not want to do it?
Council President Street, and other Councilmembers, I am Jim Hawes, President and CEO of Philadelphia Gas Works. I think, Councilman Nutter, to the question of do they -- I don't know that I can defend QST, as to why they aren't here. But I think they have demonstrated from the beginning, in that I think they have given in on almost everything that we have asked, I think they have demonstrated, through some very tough negotiations, over a very long period of time, that they absolutely want to be a part of the terrain and the marketplace in this part of the country. So I think if you just look at where we started and where we are today, and from a financial perspective, they have literally -- notwithstanding the discussions on the indemnity -- 280 RESOLUTION 970806 have literally taken all of the financial risk. I think that in itself would suggest to me that they are very, very much interested in keeping this deal alive. To the issue of why they aren't here, I think because we probably didn't ask them to come.
I said, to the question of why they aren't here, I am not sure the answer to that. But my last discussion in a three-way call last night was, I think, around 11:20, and I think there were two calls after that. And I think there were two this morning, perhaps, before 7:00. So I think they have been involved. And other than the fact that they aren't here, I don't know that I can add any more to that.
Excuse me. Mr. Hawes, something else is troubling me about all of this. Everything that we put in the Ordinance conditioning the PGW/QST relationship was done at a Public Meeting, right out here on the 281 RESOLUTION 970806 floor of Council, in the presence of the QST officials. They heard it. They were a part of all of it. They let us go with it. And I will tell you, the voice of experience is a wonderful thing. Because I did not just ask the members of Council to support amendments. What I did was, I asked you to take them to the Board of PFMC, take them to the Mayor. And I asked the Mayor, the Board of PFMC, yourself, and everybody, including the QST people, to look at all of this. We had those conditions right here. They were sent here, they were endorsed by everybody. And the QST people were here. And then, a month later, six weeks later, eight weeks later, now they have these problems with these amendments. And that's almost, to me, tantamount to acting in bad faith. They let us go through all of that. We are now covering the same ground we covered before, because we didn't want all these sticky questions about liability. We didn't want 282 RESOLUTION 970806 that. We wanted to make it clear that PGW, PFMC -- I will tell you, every lawyer in this region views PHA, PGW, SEPTA, the City of Philadelphia, as the deep pocket to go after whenever any incident occurs. That's what they do. And I will tell you what will happen is, if we are not extremely careful, that everybody will be right after PGW, PFMC, the city. All of us, we will be the targets here. And when you start trying to figure out who is going to be responsible, what will end up being, if we are not careful, if we don't have some real clear guidelines, right, I mean, we have to have something -- we don't have anybody from QST here. I actually thought there was somebody from QST here. I saw somebody. And the person who I really believed was from QST isn't in the chamber, and probably wasn't from QST in the first place. Has anybody from QST been here today?
See, I was 283 RESOLUTION 970806 probably mistaken about that. Because I did think somebody from QST was here. We aren't even in a position where we have somebody from QST here who we can ask questions to kind of get into this record in case, you know, some of these sticky liability questions would come up. We would be able to at least say, well, we had somebody from QST who testified at the Public Hearing about all of that.
Mr. President, that is not, I believe, either during my time or prior to my time, when I tried to pay attention to what was going on around here, I don't think that that is precedent-setting. I think other people have come. And, I mean, for the amount of time that we have spent on this, it would seem to me, especially now, with amendments to amendments to a Venture Agreement, and they know that backs are to the wall, that they would have themselves here. Now, Mr. Hawes has come. And he has tried to apologize for them, which I do not expect. Mr. Hawes found himself in a position 284 RESOLUTION 970806 of having to apologize for one of his own people not being here at a critical moment. We will deal with that later. So, I mean, I hate to have you in that kind of position. But it makes no sense to me at this point. And if they were in town last night, that unless they are having a meeting with the President of the United States, this seems to be fairly serious business, they should have themselves over here. Because you can't always answer all of their questions. And it is unfair, in my view, to our own City Solicitor to have to not only explain what you guys are doing, and then explain what we are doing, but also have to defend a for-profit company who doesn't have the common sense enough to bring themselves in here and explain what it is that they want to do. That makes no sense to me. The last time they had somebody over here, we gave them one sticky issue about a no-compete clause, we had a ten-minute break, and the guy never came back. 285 RESOLUTION 970806 I mean, they can do it, not do it. But I don't see why they have to be so mysterious about it, and then want to fly off to somewhere elsewhere, where maybe they are working on another deal. Well, God bless them. We are here. I am ready to do some business. But it is difficult to deal with someone who only wants to negotiate through our own people.
Well, Councilman Nutter, just sitting on the call last night, I believe -- and I really don't want to. The QST people are grownups. I don't want to be put in a position of speaking for them.
But I believe, in listening to discussions with the City Solicitor last night, I believe that they believed that they were responding to the issues. And I believe that they believed that because of the number of issues we started with, and the fact that we were down to one fairly sizable issue, I guess I would say that their position they thought was represented through discussions with the 286 RESOLUTION 970806 City Solicitor and, therefore, there wasn't a need to be here. I don't know. But the City Solicitor may want to respond to that. That was my view.
All I can tell you, Mr. Hawes, is, my father used to tell me, "Don't assume, because we know what 'assume' means."
Thank you, Mr. President. I wanted to ask the City Solicitor, in your opinion, is there any possibility of QST changing its position on this subject matter to come closer to what City Council is thinking about? I just don't want us to just be wasting our time with QST. If this is their final position, then we have got to consider whether we want to go ahead or not. I assume that this matter is before us in City Council not because we are interested in helping QST, but because we are interested in helping PGW. 287 RESOLUTION 970806 And I think the decision we have to make is whether the whole situation, including whatever risks that may exist, are of sufficient nature to warrant their saying no or, on the contrary, to warrant our reaching a decision, yes, it is good for Philadelphia. That's the only decision we had. I agree with Councilman Nutter. We are fed up to our necks with people not showing up, whether it is the Mayor of the City or whether it is QST or anybody else. But, yet, the decision we have to make is, is this good for Philadelphia. And if we are unhappy about QST, but if, nonetheless, it is good for Philadelphia, I think we ought to make a decision along that line. Now, I have asked you two questions. One, I have asked you, is there any possibility of any further change in QST. And the subsection to that would be, would QST define the way you have defined the areas where they are seeking to eliminate themselves from liability? Would they, for example, say, what we 288 RESOLUTION 970806 have in mind is, and then to use the examples you did, about they don't want to be responsible for PGW taking action? Something that would help guide a Court if it ever had to make a decision. And, secondly, I would like to know, would you be willing, as the City Solicitor, to write a legal opinion as to what you believe the extent of risk is to PGW under the circumstances of the current language, if there is no possibility for change in that language?
You have to say it to the city. Councilman, you have to say it to PGW and the city.
Councilman Cohen, as to your first question, it is my personal opinion, after conversations with the President of QST and with their General Counsel, as Mr. Hawes indicated, through last night and early this morning, that from QST's perspective, this is their final position. We did attempt to discuss possible ways that we could reach a compromise between the 289 RESOLUTION 970806 position that Council intended to take and where QST is currently. We talked about a variety of things. They were not acceptable, primarily to QST. This reflects their final position. And I think that may be at least a factor in their thinking that they have put forth their final position on these liability issues. As to my assessment of risk on what I am calling the category of contingent liabilities, in materials distributed to Council previously, we spent a lot of time, as you may recall, looking at all of these potential types of claims. That's why I can say to you, based on the analyses that we have already done, that through a combination of factors, through the passage of time, through some new events, like PGW receiving its license from the PUC to engage in the electricity business, through our research and analysis, I believe that as to the category of these risks, which we have discussed at length in legal memoranda distributed to Council previously, that our risk assessment is that we are not likely to be sued. Even if we are sued, it is likely 290 RESOLUTION 970806 that we are going to be successful on the merits because we have strong legal defenses. I can't say to you that we would never be sued. I can't say to you that there isn't at least a possibility that we would expend money defending. But it is certainly the kinds of claims that the Law Department would, at least in the first instance, assume an aggressive defense. Because these go to the heart and soul of the city's authority under state law and the Charter and so forth. So we would, obviously, assume a strong posture in the defense. But, on balance, you are correct, the decision for Council today is one of cost benefit analysis. As the Council President pointed out, the Mayor, the Board of PFMC, PGW management have looked at these proposed changes and reached the conclusion that the benefits of PGW participating in this program outweigh what we are characterizing as a minimal contingent risk. The question is whether or not it is 291 RESOLUTION 970806 an acceptable business risk. And at least the Mayor, the PFMC Board, PGW's senior management, based on at least input from the Law Department as to the strength of our legal defenses, believe that, on balance, the benefits outweigh this risk.
Can I interrupt you? Because I think that it is unfortunate that these people are not here. But I would like to ask the City Solicitor, in conjunction with Mr. Ericson and some of our staff, to consider further language. And I would like for them to consider some language that further defines what it is and how it is you interpret the general principle of what's caused by whose responsibility. For example, I would like some language that says, where there has been a claim of injury to someone's person or to someone's property that grows out of the provision of electrical service pursuant to this agreement, and where, for example, among the numerous claims are a claim that we weren't authorized to do this, and all of those kinds of claims that we are now talking about, that 292 RESOLUTION 970806 QST agrees that, where there was such injury, it could not have been caused simply because we weren't authorized to be in this activity. And I give you an example. And I want you all to think about this a little bit, and get us some language. If a person is driving an automobile and gets in an accident, and doesn't have a driver's license, then you are not guilty of negligence simply because you didn't have a driver's license. You know what I am talking about? And if there is an injury that resulted from the provision of electricity, and one of all the claims is that they shouldn't have been in the electricity business in any event, then I don't want anybody to now be able to say, "You should be responsible because you didn't belong in the electric business," and then I have to get in a fight with QST and these people about apportionment of responsibility. I want language. Now, if some ratepayer somewhere decides to file some class action and say, "You shouldn't be in it," there wasn't any physical damage, no fire or anything, but just raises the 293 RESOLUTION 970806 theoretical question that we didn't have a right to be in this business and that PGW was using its existing personnel and using its existing facilities to provide electricity in conjunction with this, and shouldn't have been doing it, and, therefore, you know, asks the Court to adjoin the activity, and we end up having to -- because we would have to defend that suit. Now, I could agree that maybe QST shouldn't be responsible for that, because we all decided to enter into that Venture Agreement. I could live with that part of this issue. And I am cutting it just a little bit finer. It is like an onion. I am trying to peel this thing back a little bit. That kind of case, we can accept the risk for. The kinds of cases that I do not wish to accept the risk for is, there is a big fire, and there is a big problem, houses burn down, the whole block burns down. Somebody says, "Oh, a fire. PGW is in this agreement, in this, and should never have been there," and then we end up having to defend ourselves and hire batteries of lawyers and get into all kinds of experts; that's QST. 294 RESOLUTION 970806 And I wouldn't care about whether or not we had -- just because they say we didn't belong in the business, that doesn't in any way make us liable for anything that resulted in that incident. Do you get a feel? Does everybody here get a feel for where I am on this? And what I would like for somebody to do is to work on some language that covers us in that respect, and that amends these various amendments, and that requires these people to agree to this. But I am very uncomfortable with the situation the way it is right now. I want more. And I want these people to certify that they should have been, or they weren't here. I want them to acknowledge the notes of testimony here, and what's going on, and agree to that language, so we have some defense against them.
And I also want them to agree that, in these situations, if there is a situation like this, where these defenses, you know, these allegations are made, that there aren't any circumstances where we end up having to pay any 295 RESOLUTION 970806 expense of any kind associated with these incidences. And if we can get that kind of language, maybe we can get comfortable enough to be able to do something here. But right now I am very uncomfortable. Because I think what we are asking for is a little bit of a can of worms. And the problem is that, after a while, the cost of litigating the thing is such that you just end up throwing in the towel and giving them money anyway. And I don't really want to have to be doing that in this case.
Can we get them to put in language the kind of thing that the President is speaking about?
Councilman Cohen, let me tell you what my feeling is on this. If we can get language that sort of mirrors what we have been talking about here, if these folks can get on the phone and find somebody from QST, fine. If they can't, and if we think that this is what we need in order to be able to pursue 296 RESOLUTION 970806 this, then we amend it into the agreement, and then they have a decision to make. I mean, I have some small sympathy, albeit very, very tiny. Councilwoman Tasco is going to owe me big on this. She is looking at me shaking her head. I have tremendous respect for the people on the Gas Commission who are our representatives, who think this is a good idea to do this. And I am going to do everything I can to work with Councilwoman Tasco and Councilwoman Fernandez, as our representatives on the Gas Commission. Because they are the people that we rely on to try to do something within the limits of what it is we can do here. But I would like to have some further language, because I think we can do better than what's in front of us. I need a point of clarification. It was originally said to me -- and I know it was said to Councilwoman Tasco at one time -- that QST is objecting to this agreement because it somehow imposes on QST the responsibility and liability to 297 RESOLUTION 970806 indemnify the city and PGW against liability, I guess, for actions of PGW employees in the provision of gas. And my understanding is that that's not in this. Is that in this?
I didn't think it was in this. We are now only talking about QST's responsibility to indemnify and hold harmless the City of Philadelphia and PFMC and PGW under the pilot project?
Okay. Now, aside from this discussion that we just had, are there other areas of relief from our previously imposed requirements under the agreement that we you are seeking to relax by these amendments? Are there other changes that we haven't talked about? The Chair recognizes Councilman Nutter.
Thank you. Just 298 RESOLUTION 970806 a quick point of information. Madam Solicitor or Mr. Hawes, is there a time issue involving these amendments? Is there a time pressure issue here? I recall in the October hearings, the time issue at that time was that the pilot program was starting on November 1, and that we needed to get the bill at that time, and the subsequent Venture Agreement, which was being approved, I believe, by a resolution, they needed to get done prior to November 1 so that PGW/QST and, really, QST could get into the pilot program. We have done all that. Now we are back for amendments. Now the President has asked for language. I have raised, very strongly, an issue with regard to lack of presence of QST. What are the time constraints, if any, other than the general interest in getting it done as soon as possible? Are there any statutory time issues that we are dealing with here?
If the amendments are adopted, the Venture Agreement will be signed as amended, and the effective date of the 299 RESOLUTION 970806 Venture Agreement is November 1. So it would cover the intervening period. So from that standpoint, we would still be in the same position.
What, if any, impact is there on PGW during this time that we, apparently, have an unsigned Venture Agreement, we have had some back and forth between the company and/or the city and QST, now we are talking about potentially making changes to these amendments based on legal discussions between yourself and Tom Ericson, and responding, in essence, to QST with, this is it, from our side, and then Mr. President said they have to make a decision? What, in all of this, is the impact, if any, on PGW?
Councilman Nutter, from an operational standpoint, which is what I believe the question is, we literally can do nothing of any magnitude in terms of the marketplace and going 300 RESOLUTION 970806 after customers without the approval of these documents from this Council. We have at this point 8600 customers that are available. Part of the reason for doing this -- and if you look back at some of the performance criteria that we agreed to, report to you on each month -- most of those we can't even impact right now because we can't go after these customers. And time is getting away, and we have made, I think, a relatively good showing up to this point. Now that these 8600 customers are available, we would like to be able to go out and get those customers as a part of the trial. And at this point we are unable to do that, or anything else, related to the marketing and testing of strategies that we had agreed to some months ago.
Well, let me ask this last question, because I interrupted the President on a point of information. What's been the impact, if any, on QST? What are they doing? 301 RESOLUTION 970806
I think they suffer from the same thing we do. We could have bigger numbers. But the supply of electricity hasn't suffered.
I thought my understanding was that whoever it signed up is presently a QST customer?
So what's been the impact on QST, other than having a whole lot of customers, or some customers?
I was saying that they are in the same boat that we are, as we talk about the 8600 customers unsigned. There's been no impact at this point. Because the customers that have signed up, the almost 3,000 customers, or whatever the number is, are ones who have signed up on the strength of the fact that I believe the majority of them saw the PGW connection in the joint venture. 302 RESOLUTION 970806 So I don't think QST has suffered a great deal up to this point.
Can I interrupt you, Councilman? Wasn't there a mailing just recently?
You mean who signed? I signed the letter, and Craig signed the letter. It was to the new customers that PECO made available because of all of those who did not sign up from the first group.
So, to that extent, anybody who signed up as a result of that mailing believes that there is an existing Joint Venture Agreement between PGW and QST?
Yes; but no different than the first mailing. 303 RESOLUTION 970806
I understand that. But the first mailing was done prior to all of our discussions on all of this ordinance; right?
Why was there a mailing? I mean, if there is no Venture Agreement, why was there a mailing? And wasn't the fact that there was a mailing in violation of the authority, or lack of authority, of this Council?
Well, I can assure you, we didn't view it that way. The mailing was a requirement, I believe, of the PUC. Is that correct? President Street, we did not view it as a violation.
Look, we said that unless and until QST and PGW agreed on a Venture 304 RESOLUTION 970806 Agreement in compliance with an Ordinance that we passed, there was no agreement. And there wasn't any. Because there was a resolution here, there was a pending Public Hearing. In spite of that, notices were sent to all of the pool of customers saying, PGW and QST, select us as your provider. Is that what it said?
I guess my view, as I think back on it, was, we sent the letter out to the new customers, which we had to do.
Hold on just a minute. I mean, if we were going to go after the customers. I think my point, President Street, is that, in terms of the agreement, I thought that we were in compliance, in that, first of all, the expenses were covered by QST, we invoiced them for the cost of the mailing. And I guess I thought that that was consistent with the agreement.
Well, there is no 24 Joint Venture Agreement. You don't have a Joint Venture Agreement with QST. 305 RESOLUTION 970806 And as far as I am concerned, I don't know how anybody could believe that there is a Joint Venture Agreement. Because if there was, we wouldn't be here having this discussion. We just wouldn't be here. And I would like to ask the City Solicitor what her position is on this. I mean, there is no Joint Venture Agreement. Isn't QST authorized to go after these customers on its own? I mean, couldn't QST have just sent them notice saying, "Pick QST"? And if this doesn't happen, if this agreement doesn't get modified, won't QST just proceed to go after those customers outside of this Joint Venture Agreement? And if nothing happens here, if this thing doesn't get done today, and then maybe in January we authorize this, after some more study, then won't you all then just proceed to work as a joint venture team? I guess in some ways the fact that you sent out all those letters sort of moots this whole process because you are acting as QST's joint 306 RESOLUTION 970806 venture partner. Let me hear from the City Solicitor.
Council President Street, I have not had an opportunity to look at the letters. But I would say that if the language changes that we're discussing, if Council favorably approves the amendments to the Venture Agreement, and the Venture Agreement is put into place, as I stated previously, it is effective as of November 1. So to the extent you could argue that somehow PGW was acting without authorization, all of that is cured by putting the Venture Agreement into place.
I am not talking about what is cured now. I don't need you to answer a question I didn't ask. In your judgment -- and I know you are in a funny position here, because you are, in some respects, everybody's lawyer in this room. In your judgment, was a letter by PGW and QST to attract customers within the letter and the spirit of the Ordinance that we passed? 307 RESOLUTION 970806 I mean, what difference does it make if we have an Ordinance? Because if it wasn't, then there is no reason for us to do this. We could do this when we come back in January. Because if you say that doesn't matter, then PGW or QST can do another mailing next week and do another mailing the next week and do another mailing the next week. And I need to have your ruling on that.
Mr. President, may I ask something in reference to what you are saying?
To, I think Mr. Hawes, this whole process is being affected because of the market and the PUC, and their position of the market --
Councilman, I need you to move that microphone up or speak a little louder or do something, because we are having trouble hearing you.
First of all, I 308 RESOLUTION 970806 think there was a supposition that this thing was going to have a quick approval today. That's what I hoped that it would. But are the mailing and the other aspects motivated because of the PUC decisions and the marketplace that is opening up?
Councilman, you are asking a whole different question. I need to hear from the City Solicitor about the propriety of the mailing. Because if she thinks the mailing is okay, then I don't know why we are having this discussion.
Mr. President, if I may, in line with that, my memory is that Council, late in October, indicated that PGW would not have any expenditures on the joint venture. Last week when PGW came in for their budget, Gregory Martin indicated that PGW had made no such expenditures. And I'd like to know, have, since last week, things changed? Who paid for the mailing of this? Was it PGW?
I think the 309 RESOLUTION 970806 earlier question was, they invoiced the company, QST, for it.
That goes to the heart of Council President Street's question.
Let me try to answer, Councilwoman Verna, the question of the QST expense. We, I think, under the agreement, have a letter anticipating that -- not for this reason, but we wanted to be covered in that situation. We wanted to make sure that we were covered. We have an invoice to QST for the work that we did. And we have a letter from QST making sure that they understood that they would be billed for that as an out-of-pocket expense. We think that is consistent with what we have agreed to. It results in no out-of-pocket 310 RESOLUTION 970806 expense to PGW, none whatsoever.
I don't think that was our understanding, Mr. President, at all.
The question is, there is no signed Venture Agreement; isn't that correct? And if you don't have a signed Venture Agreement, what actions is PGW allowed to take as it relates to the pilot electric program, in an environment or under a circumstance in which they don't have a signed Venture Agreement with QST? What are they allowed to do?
So you are saying that the letter was not authorized pursuant to this Council's process?
There is no 20 signed Venture Agreement. The authorization that Council granted to PGW and PFMC to engage in the pilot program specifically relates to engaging in the program through the Venture Agreement. So if not -- 311 RESOLUTION 970806
And, presently, there is no venture, because there is no Venture Agreement. Therefore, you cannot --
There should not have been a letter. There should not have been a letter.
Mr. Hawes, Councilwoman Verna has a question I think you can answer.
Who authorized this letter to go out to the customers?
Craig Sheppard and I signed the letter. And I think when we did it, it never even crossed my mind that we were in violation, as is becoming clear we did. No disrespect was intended. The letter was simply in line with the requirements. When PECO authorized the new customers, we had to send a letter out to those 312 RESOLUTION 970806 customers telling them that they were customers as a part of the agreement. That is all we thought we were doing. We thought that we had covered the contract piece of it by making sure that we were reimbursed for those expenses. At least that was the intent.
I want to go back and ask the Solicitor now, who is PGW, under this circumstance, responsible to as it relates to anyone requiring them to do anything, whether it is PECO or whether it is the PUC, in the environment and under the circumstance that they have no signed Venture Agreement? If a requirement by the PUC comes down telling them that they must do X, can they do X, given the fact that they don't have a signed Venture Agreement, and there is no venture? And, what should they do?
The short answer is that PGW, PFMC's authorization to engage in activity in this pilot program, derives from City 313 RESOLUTION 970806 Council.
So notwithstanding a ruling by the PUC, no matter what PECO says about notification or anything else that has to be done, if you don't have a venture, which you can't have if you don't have a signed Venture Agreement, you can't do those things; is that correct?
The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Mr. President. My question is not germane to what is being asked, so I will hold off on my question. It is a question to Mr. Hawes regarding personnel at PGW.
The Chair recognizes Councilman DiCicco. You might as well get it now. COUNCILMAN DiCICCO: Thank you. 314 RESOLUTION 970806 Mr. Hawes, I was just wondering if you could bring us up to date on the status of Mr. Collins and his employment, or his decision whether or not he wishes to stay as an employee of PGW, and wishes to remain as a resident of whatever county he was, or is he moving into Philadelphia?
Mr. Collins -- I can address that. Mr. Collins' decision is that if the current policy of PGW around residency is the prevailing policy going forward, he will comply by moving into the city in compliance with that policy, and establishing a residence where he would stay in the evenings.
That's nice of Mr. Collins. COUNCILMAN DiCICCO: So his family would remain in Buckingham Palace, or whatever that was, and he will come to Philadelphia?
Yes. COUNCILMAN DiCICCO: Which means he is going to continue to do what he has been doing since he has been employed?
Yes. 315 RESOLUTION 970806 And I think the -- but to clarify, and I think this is where -- this is what I think is really germane in this case. That was the first part of it. I am prepared to support and recommend to the PFMC Board a domicile policy. If that, in fact, becomes the law, then it will supersede the current residency issue. And, therefore, anybody not in compliance would not be eligible to work in the Philadelphia Gas Works. COUNCILMAN DiCICCO: Correct me if I am wrong. That means he would not be grandfathered in?
What? COUNCILMAN DiCICCO: Would he be grandfathered in? You are saying, "supersede."
See, I don't know what decision the Board would make. But I think one of our recommendations would be that we have got roughly 500-something employees who are currently grandfathered prior to March of 1983. I don't know what the Board would decide, but it would not be my recommendation that 316 RESOLUTION 970806 we impact those. But beyond that, I don't know what the Board's position would be, but that would be the only strong feeling that I would have at this time, that those be grandfathered, the ones prior to.
What about the rest? COUNCILMAN DiCICCO: The rest of the employees.
Well, the only thing I can do is, I would recommend and I would support the grandfathering -- I mean, the continuation of those 500-and-something employees that are already grandfathered.
And what about the others who are now under the residency provision, as opposed to the domicile provision, after '93?
It's 83. '83 was the grandfather. '93 was the change of the policy from domicile to residence. I can't tell you what the Board's position would be. But I would be prepared to 317 RESOLUTION 970806 support some language that would suggest, at least in general, that everybody be under the same policy, other than those already grandfathered. COUNCILMAN DiCICCO: Another question. Mr. Sharbutt, I believe his name is, do you know, could you give me his title?
Mr. Sharbutt is the Chief Financial Officer. COUNCILMAN DiCICCO: Do you know what his salary is?
175. COUNCILMAN DiCICCO: More than City Council, I assume. About 175,000?
Right. COUNCILMAN DiCICCO: Would you happen to know Mr. Sharbutt's address?
I don't know the exact address, but it is in East Falls. And I don't know exactly the absolute address. COUNCILMAN DiCICCO: So it wouldn't be 800 West Montgomery Avenue? 318 RESOLUTION 970806
No; that's the Philadelphia Gas Works. COUNCILMAN DiCICCO: I don't have that in front of me, but I was informed earlier today that that was the address he was using. If that's incorrect, I would apologize.
That's incorrect. COUNCILMAN DiCICCO: But he is a Philadelphia resident?
He is in the room 15 today. COUNCILMAN DiCICCO: Are you a Philadelphia resident, sir? It is not 800 West Montgomery?
Can we ask the witness to come to the witness table, identify yourself.
I am Ramon Sharbutt, Chief Financial Officer. I reside every night of 319 RESOLUTION 970806 the week as a resident of Mr. Nutter's district. And the address is on Timber Lane in East Falls. COUNCILMAN DiCICCO: Is that along with your family, Mr. Sharbutt?
Yes. COUNCILMAN DiCICCO: Thank you. It is good to know we have some people.
Well, why did you put your address down as over there at the PGW office building?
When I first moved here, I didn't have an address, and that was when I filled out the forms. I didn't have an address at that time. And I didn't realize that nobody changed it. I bought a house about a month after --
Please continue, Councilman. COUNCILMAN DiCICCO: I am through with my questions. 320 RESOLUTION 970806
President Street, could I comment? COUNCILMAN DiCICCO: I am not clear on that yet, but...
Let me just comment. You said it is good that somebody lives in the city. I think all of the people, other than Mr. Collins, who have moved into the city, since we have been here, have all bought houses in the city who are under my direct reporting staff. COUNCILMAN DiCICCO: I am going to be asking of you, as I have done with some of the other agencies, Pennsylvania Convention Visitor's Bureau, as an example, and Pennsylvania Convention Center a list of the employees and their addresses.
Sure. COUNCILMAN DiCICCO: And, for your information, just as an example. The latest report, which I received about a week ago, of the 64 employees at the Pennsylvania Convention and Visitor's Bureau, 30 of them live outside of the City of Philadelphia. Their salaries amount to $1.5 million. And one employee lives in Fairfax, 321 RESOLUTION 970806 Virginia. The rest of them live in New Jersey. So understand I am not just picking at PGW. It is a very important issue for me, and I think for the citizens. That when we are asked to do things that we are asked to be doing today, to keep PGW in the ballpark, to make it competitive, which will employ people and pay people's salaries, my first and foremost obligation, I believe, is Philadelphians first. So I have to continue to monitor residency in not only PGW, but in all of the departments.
And I think, as I said before, even without the domicile policy, for people who report, the leadership of PGW who report to me and who have moved in since I have been here, I can assure you that they all have bought houses in the City of Philadelphia, each one of them. COUNCILMAN DiCICCO: Thank you. Thank you, Mr. President.
I need a further clarification. It is my understanding that prior to 322 RESOLUTION 970806 1983, are employees who were at PGW prior to 1983, a substantial amount of them, over a thousand of them, were grandfathered in, they are still there. We are not talking about them. Between 1983 and 1993, there was a domicile requirement. So people who came during that period of time should have to live in the city, domicile requirement. It is my understanding that in 1993, the domicile requirement was changed to a residency requirement. So at that time, there were certain people who could be hired to be in Mr. Collins' position. And our position -- and I think this is pretty much a unanimous position of this Council -- is that we would like for you to lead the charge and support a change in the policy from a residency to a domicile policy, and require that all employees that may have come in after 1993, between 1993 and now, have a domicile in the City of Philadelphia where they and their family lives. And not this residency stuff, and some nights I sleep here, and some nights I am over there, and all of that. That doesn't work for us, 323 RESOLUTION 970806 not at PGW. And that's where we would like for you to be. And can you give us the comfort that that's where you are, and that's the recommendation you will take to that Board?
Thank you, Mr. President. Mr. Hawes, I did not completely understand your explanation in response to Councilman DiCicco, specifically to Mr. Collins and what he thinks or what he feels or what he plans to do. And it seemed to be tied to, if somebody else does something, then I will do something. If somebody doesn't do anything, then I am not going to do anything. And I was confused by that.
Let me try to be clearer. Under the policy that is in place 324 RESOLUTION 970806 today, and that has been in place since 1993, Mr. Collins would be required to move in the address that he mentioned before in Wissahickon, get a voter registration card, register his vehicle, stay there at least during the week, during the work week. That is what he said before he did not do. That would be what he would be required to do under the policy that is in effect today at the Philadelphia Gas Works.
I am sorry. Under the policy in effect today, he would be required to do what?
The policy in effect today in the Philadelphia Gas Works, since 1993, is, he would be required to establish a residency, not a domicile.
First of all, living there at least continuously during the week.
And we have changed recently a number of our monitoring programs and internal control programs to make sure that people are doing and complying with that policy. But I think that those are the policy requirements as they exist today.
Okay. But now Mr. Collins' testimony, when he was here with us on October 29, states that he does not live at 5450 Wissahickon Avenue, he does not stay at 5450 Wissahickon Avenue, he does not sleep at 5450 Wissahickon Avenue, his family is not there, his car is not registered there. I would hope that he would get a voter registration card, because he is in my district, also. Although, at this point, also, he would probably not be voting for me. So, I mean, he is not in compliance with the current residency policy. 326 RESOLUTION 970806
And gives no 4 indication, at least in his last appearance here, that he had any intention of complying with the residency --
What I said earlier was that he was given an X amount of time to --
Originally it was December 1. But he was having some appraisal work and so forth on his home, trying to look at all of the factors that you have to take into consideration in this kind of situation. As of last week, he told me that he was prepared to move and comply with the residency requirement that is in effect today at the Philadelphia Gas Works. I think the point is that, as we move now beyond that to domicile, that would become a moot point. But at this point, you asked me what 327 RESOLUTION 970806 his decision was; that was the original question. And my answer was and is that he has agreed to comply with the policy that is in effect today and has been in effect since 1993.
Okay. Thank you. (Councilwoman Verna assumes the Chair.)
Councilman DiCicco, just looking at you, I know there is something you are dying to say. COUNCILMAN DiCICCO: Madam Chair, the object here was, hopefully, that he would make a decision to move himself and his family into the City of Philadelphia. And, with all due respect to 328 RESOLUTION 970806 Mr. Hawes, I mean, you can't answer for what decisions he and his wife and family make. But I think he came from -- where is it?
Tulsa, Oklahoma. COUNCILMAN DiCICCO: Oklahoma. I mean, he traveled across this country to take the job at PGW. And he has had --
No. He came here to work for Sun Oil. COUNCILMAN DiCICCO: Well, at some point he made a decision to move halfway across this country to take a job in the Philadelphia area. Subsequently, he makes application for a job at PGW. My point is, it had to be much more difficult, I would assume, for he and his family to make the decision to move from Oklahoma. And it has to be a lot easier to make a decision to move from Bucks County, into Philadelphia, I would think, than from Oklahoma to Philadelphia. And for some reason, I guess -- and I wish he were here today -- I always want to ask people, why is it you find it so difficult to live 329 RESOLUTION 970806 amongst people like us who are trying to make PGW have an opportunity to compete, continue to work and pay the high salaries that people like Mr. Collins are making today. It is a look of frustration. I fight this fight, and I have probably said this a dozen times, and my colleagues are probably tired of hearing me. When we go out in the community, we talk to people who are thinking about leaving. We ask them to stay and fight the fight, and you can't run away from your problems. But for some reason people just think that it is beneath them. And that's the impression I get, that it is beneath them to live with people in the City of Philadelphia, people like us. You know, I am a neighborhood guy. I went to high school. I raised two sons. One is a dentist today, born and raised in the heart of South Philadelphia, in a little old row house, whose father only had a high school education, played hockey in the street, played stick ball in the schoolyard, did all the things that everybody else does in the city. 330 RESOLUTION 970806 And I am so proud that my son is a dentist. And my youngest son is in the second year of law school. Do they think that -- thank you. More confusion in this world, another lawyer. That's what we need, right.
We both have one second-year law students. COUNCILMAN DiCICCO: Present company excluded, Miss City Solicitor. It just drives me nuts. And I look at this in every department. And we keep making an excuse. Are there not any qualified people here? And I have no reason not to like Mr. Collins. I am sure he is a decent guy, and he is a good family man. But why do they do this? Registering to vote, which may or may not be good for Mr. Nutter or the rest of us, and registering a car in Philadelphia, really gets me nowhere, as far as I am concerned. It doesn't help me. I want him to be really a part of our community. I want his kids to be able to interact with kids in our city, the kids that we are trying 331 RESOLUTION 970806 to help out and make a better life for, and all the things that are important to us, why most of us took this job.
Right. I guess I don't want to speak for Tom. But I think for the rest of us who do live in the city, we do understand that, and we do support that. And we do have children who live and go to school here. And we do love living in the city. I can't speak for Tom. I know that Tom was already where he is. And I think there was some economic reasons, which we were not able to help him with, that would have perhaps caused him to do some of the transition. But I am having to speak for too many people, and I don't want to do that. I can tell you that our view, I think, Deborah, who lives in Center City, I think Ray, who lives in East Falls, I think Bud, who lives in Mt. Airy, I think myself, who lives in Mt. Airy, I think we all agree with that. But I don't necessarily believe that Tom isn't a good person because he wants to say 332 RESOLUTION 970806 where he was and because he wants to keep his children where they are. I don't want to make excuses for him. I don't want you to think it is a prevailing situation. COUNCILMAN DiCICCO: I don't expect you to make excuses. And it is kind of sad that it is one person we are centering on. But it is one person in a universe of many people. The School District, over 5500 employees have gotten waivers over the years, they don't live here. And Philadelphia Convention and Visitor's Bureau, they don't have people that live here, but are paid by our tax dollars or the hotel tax. The Pennsylvania Convention Center, they have 10 or 15 employees who live in New Jersey. Again, it is our tax dollars. We have to deal with tax issues, raising taxes, liquor by the drink tax, all these things that pay their mortgages. And if we are not good enough for them and their families to live with us, then maybe 333 RESOLUTION 970806 they ought to go find a job in the counties and states where they reside. Let those Commissioners figure out a way of getting the tax revenue to pay for their jobs. We have enough people in Philadelphia who need jobs, enough qualified people who need jobs. And I know I get in trouble with the Mayor. Because he always says we are trying to encourage regionalization. Well, I don't know if that will happen in my lifetime. God bless us, if it does. But, in the meantime, my responsibility is to the city. Thank you, Mr. President. Thank you, Mr. Hawes.
DiCicco said everything I was going to ask. But this is what boggles my mind. Why do we even actively recruit people, so he has to 334 RESOLUTION 970806 do that 20-minute scenario there, so I have to sit here and listen to it again? Aren't there enough people that live in the city, that were educated here, that could possibly do a job? $175,000? I mean, it is amazing. I mean, not to pick on you or Mr. Collins -- and Frank just went through the whole scenario, the School District -- why are we here and doing all of this? This is like dental surgery without anesthesia. I am looking for Councilman Nutter. He must have stepped out. He asked the questions. We are doing things that are making it hard for us to help out the Gas Works. The Solicitor is sitting here, and we are beating the crap out of her. Why are we paying her to stick up for them?
Let me say a couple of things about all of this. And sometimes when we have these discussions, I start feeling very old in local government. Because if I had this discussion one 335 RESOLUTION 970806 time, I have had this discussion one hundred times. And Councilman Longstreth will tell you, I have had this one hundred times. Philadelphia Home Rule Charter requires different things of different people. The Charter requires and authorizes people who are recruited into this government by a Mayor, the Charter says you get six months to move into the city. Because it is unrealistic to expect that we are going to find all the people to run this big government who all live in the city. And it is not unusual to do national searches for a variety of different searches. We did a national search to find Mr. Hawes, and to find the City Solicitor and Mr. Hayllar and all. And that is not unreasonable. And what the Charter says is that you have to live in the city. You get six months to move in. But you have to live here while you are an officer of the City of Philadelphia. But what it does is, it allows them to maybe maintain a house someplace else. Because they are here. And the average person who comes 336 RESOLUTION 970806 into Administration stays probably between two and three years, not four years, not five, not eight. It is a rather short period of time. The City Council of Philadelphia imposes by way of ordinance the domicile requirement on city workers. If a majority of the members of this Council wanted to, we could say that people who work for the City Council of Philadelphia do not have to live in the city. We would never say that. We will never, ever say that. Because people who work in the police department, the fire department, the recreation department, and all these agencies, ought to live in our neighborhoods. And they just ought to be here. We had a terrible problem with a former Police Commissioner who wanted to say, "I live in the City of Philadelphia," but wanted to have his wife and children someplace else. But that's not the situation we have at PGW. Because it is assumed that people who come to work for PGW are making a commitment to this city, not to an Administration. It is a commitment 337 RESOLUTION 970806 to the city. And we want them to live here. We want them to do the kinds of things that we do, to feel the pain that we feel, and to feel the joys that we feel. And it is unreasonable to think that people will come to work for a wholly owned subsidiary of the City of Philadelphia, and then live someplace else and have an apartment in the City of Philadelphia. Now, those situations ought to be distinguished from the Kvaerner situation, where we are creating jobs, we are spending money, and we know that all the people who have those jobs are not going to be residents of the City of Philadelphia. We have terrible problems with the situation that the Councilman has mentioned, where we have a convention and visitor's bureau, that gets paid out of tax dollars that's raised by the hotels in this city, and live all over the region. The Convention Center Authority now, again, is a little different. Because its Board members are appointed from people all over the Commonwealth, because the Governor has appointees 338 RESOLUTION 970806 and everybody has appointees. But, the source of the revenue is the bed tax, the hotel tax in this city. So this is not a simple proposition. But my bottom line is that the situation at PGW seems to me to dictate work over there, live in the city. Live in the city. Now, we don't say you have to live in the city at the time you take your job over there, like we say, city workers, you have to live in the city a year prior to the time you can even be eligible to take the Civil Service test. We say, you can get hired, but you have to move into the city. Councilman. COUNCILMAN DiCICCO: Mr.
President, just for clarification, the Pennsylvania Convention Center Authority, somewhere between 10 and 15 of the employees don't even live in the Commonwealth; they live in the State of New Jersey.
Just let me 339 RESOLUTION 970806 finish this. It is not these three at the table here. I look around the room, I see two Civil Affairs cops here. The one over there on the left, Eddie Maynor, he grew up four blocks away from me. So I know when I ask him a question about the police or Civil Affairs, he has sort of a mindset how it is to have grown up in Philadelphia. Now, we all can't be fortunate enough to have grown up in Juniata Park or even Philadelphia. I understand that. We are glad to bring talent from other cities and other neighborhoods. We are glad to have them. But if it is good enough to be a Philadelphia policeman, to sit there for a year before they do anything -- I understand we need all these big, high-priced talents. And maybe the next Mayor will think about, when he starts recruiting people, that maybe a little regionalism or that a little city experience is something to add into the mix. We went to Boston looking for somebody who is in charge of the Parking Authority, 340 RESOLUTION 970806 and we have probably 30,000 people here who could do the job. And it is not intended as a shot for Miss Cutler or these people. We have to start looking at the talent we have here. We sit here, and we are putting kids through public school and parochial school. We have people that can do these jobs. And you are welcome to them. They weren't handed anything. They were certainly qualified. But if it is good enough for the Police Police department and Eddie Maynor, it is good enough for us. That's what it is all about. It is Philadelphia. We were here. We were here long enough. And I am going to go out on a limb here. If everybody wants to live in New Jersey, they can continue to live in New Jersey, but they just can't work here. It is simple. They can bring their company here and work here, but they are not going to get paid the tax dollars that people do. Eventually that's going to change. Thank you, Mr. President. 341 RESOLUTION 970806
Thank you very much. No lights are on. The Chair recognizes Councilman Nutter, wherever he may be.
I would like to recommend we take a couple-of-minute break.
I may want to go further than that. I need to ask the City Solicitor as to whether or not there are any other parts of this agreement where either the amendments to the original QST/PGW agreement or the proposed amendments to the amendments take anything away from what we put in the original ordinance?
The only additional change, Mr. President, I would like to point out to members of Council, it is in the section on indemnification, but it has to do with who controls the defense of the potential claims.
Originally the language provided that the city would direct and manage the defense of any claim through Council 342 RESOLUTION 970806 selected by the City Solicitor. The changes proposed by QST provide for that to occur only in the event that QST in the first instance fails to undertake the defense. So, in other words, we would have the right to assume, direct, and manage the defense of any claim, only in the event that QST fails to undertake the defense of any such claim or proceeding. So it does not relate to the reimbursement obligation; it relates to who actually directs how the claim is handled.
But why did we put that in there in the first instance? That was your amendment. That was your amendment. And if it was good enough for you then, why are we being asked to change that? I mean, don't we want to pick our own lawyers and don't we want to direct our own defenses?
I think that 343 RESOLUTION 970806 this change corresponds with the other changes that QST has made. So QST is still reimbursing us, assuming the liability for claims related to their activity. And their position is, they should then be in the position to manage and direct how that claim is defended. That is not unreasonable.
Is the last statement, that it is not unreasonable, based on the fact or the supposition that whatever judgment or damage that comes out of that case, they would have the responsibility for paying?
There is no 16 change to the fact that QST can't settle a claim without our consent. This simply relates to who between QST and the city would actually call the shots in terms of how the claim is handled, how we defend it. It doesn't change the fact that, at least in terms of the scope of their indemnification obligation, they would pay for it. It doesn't change the fact that as 344 RESOLUTION 970806 far as claims arising out of their activity, that they would have the liability for it. It simply goes to the question of who is going to be in control of how the claim is managed. But it can't be settled, no money can go out, without our consent. And the only change there --
Since it relates to -- it ties to the scope of QST's indemnification obligation. So, again, here the context is that QST is indemnifying us, they are assuming liability, they are indemnifying the city in connection with anything that arises out of their activity, the provision of electricity. So this relates to, in any of those claims or actions, they still have the indemnification obligation. They can't settle the claim or action without our consent, but it simply shifts as between QST and the city who actually manages. 345 RESOLUTION 970806 And it says, we still have the ability, if between QST and the city we mutually agree that this is something that we should assume, then we would assume and direct and manage the defense.
Okay. Back into the general area of liability, Madam Solicitor, while we are talking about this kind of issue. Would you, subsequent to the hearing, be able to address the proposal, I guess, that I made earlier about some kind of hypothetical, $5 million claim, and be able to lay out to us -- this is when we were having the discussion about, I think it was, nonpersonnel, nonproperty damage claims, but this other thing about somebody coming after us because we weren't supposed to be in the business at all, according to their view or opinion, or the view of their lawyer, and you provided layers, in your view, of defense, ranging from insurance, to political subdivision, Tort Claims Act, deductibles, and a wide variety of things that seem to cover us all around. And then I said, and that all of 346 RESOLUTION 970806 those things should, on that chart, show City of Philadelphia, zero. Would you be able to provide us with such a chart or a document or something that we would be able to see for this example, the hypothetical $5 million claim against us, or lawsuit against us, or something?
Yes, I could try to put something together. Yes, I can do that.
As most of you know, the Council session of today, December 11, is in recess, and we are now conducting a Public Hearing on Resolution No. 970806. What I would like to do -- and if I could have your attention -- lawyers are working on the language that I requested earlier. What I would like to recommend that we do, because they are taking a long time, and I am not surprised about that, what I would like to recommend we do is, go into recess on the Council Committee of the Whole. We have a whole calendar here to do, 347 RESOLUTION 970806 with a lot of bills and all on it. And that we do the calendar for today, complete our Council session, of course have the Committee of the Whole stand in recess. And if we can work out some language, I will, of course, make it available to every Councilmember. We can discuss it. And if people are satisfied with it, then we can consider it. If there is, you know, no agreement, then we can decide then what it is we want to do about that. But can we put the Committee of the Whole in recess? And we will say we will be in recess, I think it will take us probably, if we could do a consent addenda, Mr. Cohen -- just kidding. Maybe we could stand in recess until 4 o'clock for the Council Committee of the Whole, and then do our Council session, and then come back into session here, and then go back into session, if it is necessary. With your agreement, this committee will stand in recess. 348 RESOLUTION 970806 I think maybe we could just leave the table here and move the box, so that we could quickly move back and forward. And let's just see if we can get this. There is one other item, though. Just before we do that, it is my understanding that today the PUC took an action that probably didn't make PECO very happy, i.e., it rejected by a three-to-two margin their proposal, PECO's proposal. And I further understand that that doesn't affect the pilot, and we really don't need to worry about this as it relates to this discussion. Is that true?
We do not have to worry about the Public Utilities Action today, as it relates to this transaction. I know everybody got it, got the copy of the press release. You didn't. Okay. Can we distribute it? I thought you had it. The PUC did something today. But I 349 RESOLUTION 970806 understand it has nothing to do with what we are doing here. And, therefore, we don't have to bother ourselves about it. The Committee of the Whole will stand in recess until 4 o'clock. We will now reconvene the Council session and continue our Council business. (Public Hearing stands in recess.)
This is a reconvened Committee of the Whole, and we have under advisement Resolution No. 970806. At this time I would like to ask the Sergeant At Arms to distribute this to the members of Council. If I could have your attention, please. Do all the members of Council who are here have the proposed amendment to the amendment? And at this time I would ask that the City Solicitor read the proposed amendment to the amendment.
Mr. President, the language distributed would add a sentence to the end of Section 10(a). The sentence that's underlined, for 350 RESOLUTION 970806 your convenience, the preceding sentence was retyped so that you could view the change in context.
So that if a member of Council takes the black-lined, indicating changes to the Venture Agreement, and looks on the first page under 10, you will see the underlined language, "As between QST and PGW, QST assumes sole and absolute responsibility and liability resulting or arising out of the provision of electricity," as described in a couple of other paragraphs. And after that, we propose to add the language, "The liability described in the previous sentence shall in no event be limited, denied, expunged, or otherwise circumscribed as a result of any degree, holding, or finding by any agencies, commission, or Court that PGW, the city, or PFMC is or is not authorized to engage in the activities set forth in this agreement"?
Does every member see where we are? Now, would you tell us why this is important to us? What does it have to do with all the other stuff that we said earlier? 351 RESOLUTION 970806
This change makes it absolutely clear that in the event there is a lawsuit, and we are sued along with -- and by "we," I mean the city, PFMC, PGW -- we are sued along with QST, and the claim arises out of QST's provision of electricity, its activity, and there is a count or some part of the Complaint that also raises the question or alleges that PGW has no 10 authorization to enter into the Venture Agreement, that QST, nonetheless, remains responsible for any liability arising out of its activities, and that liability is not limited in the event it is ultimately determined that we do not have authority to engage in the activities.
So, Madam Solicitor, you are saying that if we are sued, QST cannot then turn to us and say, well, but, you know, Count No. 5, out of a 20-count charge, is that you shouldn't have been in this business in the first place, and, therefore, you have to go and defend yourselves on that particular count. And, if that were found to be the case, you, the city would have 352 RESOLUTION 970806 to go and pay for it? Even if someone said that, that QST is still responsible?
What it means is that QST could not take the position that, if all of the allegations in the Complaint, except one, related to the property damage that arose because of their provision of electricity, that simply because of that one count, that they no longer are responsible for paying for any liability. It does not mean -- its liability. It does not mean that, in that context, we would not defend that count. So, in other words, QST --
For liability, correct. Or liability arising out of the fact that we don't have authorization. But QST cannot back away from its responsibility. And what would happen in that situation, as a practical matter, let's assume we're talking about a Complaint where all of the allegations except for one count relate to the 353 RESOLUTION 970806 building that blows up because of the provision of electricity. QST will defend the city on all of those other counts. They will have the liability. They will reimburse us for any liability that we have that is related to that activity. As to the count that relates to our legal authorization, while theoretically we would have to pay the costs of outside counsel, because, practically, they are assuming the bulk of the defense -- and I would personally be interested in the outcome of an allegation of that nature -- the Law Department would defend and work closely with QST and cooperate in the defense of that Complaint. So that, as a practical practical matter, we may not incur any expense of outside counsel in defending the city and PGW in that situation.
Thank you very much. Is there any other member of Council that has any questions about this amendment? 354 RESOLUTION 970806 So that you will understand, what we will be doing is, amending this language onto the black-lined set of amendments, to the proposed set of amendments to the Venture Agreement. And all of it gets merged into one agreement. Is there any question that anyone else has? Any question that anybody wishes to ask of anyone at the table? Anybody have any more residency questions? Just kidding. I think we beat that residency thing. Councilman Nutter.
Mr. Chairman, I have a question of Mr. Hawes. Mr. Hawes, you responded very definitively on the question of Mr. Collins. In light of the bill introduced by Councilwoman Tasco, that was introduced during the earlier Council session regarding domicile, your statement was that you would ask, I guess, the PFMC Board to adopt its own domicile requirement. The question is, when would you expect that to happen?
I would make the request at the December Board meeting, which is a week from today.
And when would you expect the PFMC Board to take action?
That's, I would assume, in a reasonable time. Maybe at that meeting, but I can't answer that. I would assume they would act reasonably fast, but I can't answer that.
Then all I would ask you is, if you make the request in the December meeting, and if the action has not taken place by February 1, that you report to the Chair of the Committee of the Whole what action has been taken, what action has not been taken by the PFMC Board. And then at that point we can do whatever it is that we decide to do on this side.
Thank you very 356 RESOLUTION 970806 much. The Chair recognizes Councilman Cohen.
Mr. President, some day we are going to get modern amplification.
This appears to me to deal quite effectively with the questions that were raised. But I am wondering -- and I direct the question to the President -- do you share my feeling, or is there something that I am missing?
Councilman Cohen, we determined that we were not going to have to go over this ground again. We believe we have reasonable assurances that if the amendment is made in this way, that the agreement will be accepted by QST and its parent corporation. If not, somebody is going to get killed. For us to go through this and then these people not agree to this, somebody gets shot, all the residents and non-residents. We won't be 357 RESOLUTION 970806 distinguishing between whose blood will flow. But, actually, I think we have an agreement that if we do this -- this adds, this actually adds a layer of protection that we didn't have before. And this language, coupled with all of this discussion and our ability now to go to QST in the event that there is litigation around all of this, really puts QST at a monumental disadvantage, which is part of the reason why we wanted to have this discussion and then have this language in the first instance. So now, I mean, nobody, I think, will be able to question what we intended by this language. Because clearly this language and the record of this hearing would work in favor of the city and the Council and PGW and PFMC, in the event that there was any real litigation. The other thing that's probably very important to us is that the company has changed its position about being responsible for all the cash outlays. I mean, we will not spend cash to implement this program. PGW won't spend cash, the 358 RESOLUTION 970806 ratepayers, the taxpayers. It isn't as strong as we all originally intended it to be, but it is certainly not anywhere near what QST and its parent company wanted when it came over here for this hearing today.
All right. Thank you. That was, in general, my thought. But I wanted to check it out.
Any other questions? This is what I would like to do. I would like to first have a motion from Councilwoman Verna to add to the end of Section D this amendment, black-lined amendment, to the changes in the exhibit. If I could first do that amendment, and then move the amendments, all the changes, the black-lined changes. And then I would like to consider the resolution in front of us. Does everybody understand what we are doing? Is there anyone in the chamber who 359 RESOLUTION 970806 wishes to testify or say anything else about anything that's in front of us? You can even say something about things that are not in front of us. No? Okay. (Public Hearing adjourned.) - - - 360 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING of the COMMITTEE OF THE WHOLE - - - Thursday, December 11, 1997 - - - Public Meeting conducted by the Committee of the Whole, held in Room 400, City Hall, Philadelphia, Pennsylvania, on the above date, to consider action on the following: RESOLUTION 970806 - - - PRESENT: COUNCILMAN JOHN F. STREET, Chair COUNCILWOMAN ANNA C. VERNA, Vice-Chair COUNCILWOMAN HAPPY FERNANDEZ COUNCILMAN JAMES F. KENNEY COUNCILMAN W. THACHER LONGSTRETH COUNCILWOMAN AUGUSTA A. CLARK COUNCILMAN DAVID COHEN COUNCILMAN FRANK RIZZO COUNCILMAN ANGEL ORTIZ COUNCILMAN FRANK DiCICCO COUNCILWOMAN JANNIE L. BLACKWELL COUNCILMAN MICHAEL A. NUTTER COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN BRIAN J. O'NEILL - - - 361 PUBLIC MEETING
Thank you, Mr. President. I move that the amendment as read by the City Solicitor to be added to the end of section 8 10(a), be adopted. (Duly seconded.)
All in favor let it be known by saying aye. Those opposed say nay. It is so ordered. The Chair recognizes Councilwoman Verna for a motion.
Mr. President, I move that the amendments as provided to us by the City Solicitor for the Venture Agreement be adopted. (Duly seconded.)
All in favor let it be known by saying aye. Those opposed say nay. And just for purposes of clarification, these are the amendments that we have 362 PUBLIC MEETING in our possession under a document entitled "Black-Lined Indicating Changes to Proposed" -- it should be "Proposed Amendments to the Venture Agreement." We all have it. So that there is no 7 misunderstanding, that this is the black-lined indicating changes. And these changes are not to the Venture Agreement itself, but to the proposed amendments to the Venture Agreement. Any question about that? Thank you. Now the Chair recognizes Councilwoman Verna for a motion on Resolution No. 970806, as amended.
Mr. Chairman, I move that Resolution No. 970806, as amended, be reported out of committee with a favorable recommendation. (Duly seconded.)
All in favor let it be known by saying aye. Those opposed say nay. It is so ordered. This brings us to the end of our Public Meeting. 363 PUBLIC MEETING (Public Meeting adjourned at 5:00 p.m.) - - - 364 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Thursday, December 11, 1997, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COMMITTEE OF THE WHOLE _____________________________________ DEBRA A. WHITEHEAD, RPR