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?