COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING BEFORE THE COMMITTEE ON FINANCE - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, October 15, 1997 10:40 a.m. - - - BILL 970564 - An Ordinance amending Section 19-201 of the Philadelphia Code, entitled "City Depositories," by authorizing the City to deposit funds in Progress Bank. BILL 970584 - An Ordinance authorizing the Procurement Commissioner and the Director of Commerce to enter into a Lease and Service Agreement with the Phila. Municipal Authority, pursuant to which the City will undertake certain obligations under a contract the Authority will enter into with Caravan Transportation, Inc. - - - PRESENT: COUNCILWOMAN ANNA C. VERNA, Chair COUNCILWOMAN MARIAN B. TASCO, Vice-Chair COUNCILWOMAN JANNIE L. BLACKWELL COUNCILWOMAN HAPPY FERNANDEZ COUNCILMAN JAMES F. KENNEY COUNCILMAN W. THACHER LONGSTRETH COUNCILMAN MICHAEL A. NUTTER COUNCILMAN BRIAN J. O'NEILL KATHLEEN MURRAY, Clerk - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center Plaza, Suite 600 Philadelphia, PA 19103 (215) 561-2220 I N D E X BILLS 970564, 970584 Thomas Queenan, Treasurer, City of Philadelphia--------------------------------- Charles Isdell, First Deputy Director, Division of Aviation, City of Philadelphia------------ 10 Abby L. Pozefsky, Chief Deputy Solicitor, Philadelphia Law Department------------------ 20 Marc Liciardello, Facility Manager, Philadelphia International Airport------------------------ 21 Lawrence Greene, President Caravan Transportation, Inc.------------------------- 28 Louis Applebaum, Procurement Commissioner, City of Philadelphia------------------------------ 37 - - - Public Meeting---------------------------------- 61 - - - 3 BILL 970564 P R O C E E D I N G S CHAIRWOMAN VERNA: Good morning. This is the Public Hearing on the Committee on Finance. I would like the record to reflect that we do have a quorum. To my extreme left is Councilman Kenney, Councilman O'Neill, and Councilman Nutter is to my right. I'm sorry, and Councilman Longstreth has been here, and he is sitting in the back of the room. The record should also reflect that Bill No. 970396 is being held. I would ask the clerk to please read Bill No. 970564.
Bill No. 970564, An Ordinance amending Section 19-201 of the Philadelphia Code, entitled "City Depositories," by authorizing the City to deposit funds in Progress Bank, under certain terms and conditions. CHAIRWOMAN VERNA: Would the City Treasurer please approach the witness table. Kindly identify yourself for the record and proceed with your testimony. COMMISSIONER THOMAS QUEENAN: Good 4 BILL 970564 morning. My name is Thomas Queenan, City Treasurer of Philadelphia. I am also accompanied by Douglas Smith, who is the Deputy Treasurer of Operations for the City of Philadelphia, as well. For this particular ordinance that's before the Committee today, I don't have any written testimony. However, I am here to say that my office has reviewed the financial statements of Progress Bank. We have also had an opportunity to meet with representatives from the bank, as well. And we have reviewed them in accordance to the sort of four basic criteria that is used to determine whether or not a bank is able to meet the requirements to be an authorized depository bank for the City of Philadelphia. They being, that the bank has been in business for at least five years. Progress Bank has been in business for more than years; 22 That they have been profitable for 23 the last two years. And Progress Bank, yes, has 24 been profitable for the last two years; 25 That they have FDIC insurance and 5 BILL 970564 other required insurance to perform the duties that they provide in our communities. And they do; And that they have at least $100 million in assets. Which this bank does have in excess of $350 million in assets. CHAIRWOMAN VERNA: Thank you. Can you tell us what actions the City is taking to modernize the list of depositories shown in Section 19-203 of the Code. COMMISSIONER QUEENAN: Well, that's actually a very good question. This past summer we took the initiative to review this particular aspect of the City Code. And I have been working with lawyers from the City Law Department to bring before this body an ordinance to modernize that list. As you know, there are a number of banks that are represented on that list that are no 20 longer in business and/or do not function under the same name because they have been purchased or acquired by other financial institutions in this area. So we hope to actually have an ordinance before Council some time this session, 6 BILL 970564 before December. CHAIRWOMAN VERNA: Thank you. Are there any questions from members of the Committee? The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. Mr. Queenan, have you had discussions with Progress Bank with regard to -- we get, I believe, an annual report from the Finance Director on various analyses of bank operations in the city with regard to mortgages and lending practices. Have you had any discussions with Progress Bank about their participation in that process? COMMISSIONER QUEENAN: No, I have not had any discussions with them in terms of their community reinvestment activities and/or -- I believe you are referring to HUMDA data that actually calculates that information.
Right. And there is a relatively, I think it has been going on for at least three years or so 7 BILL 970564 now, we just received a report recently from them. COMMISSIONER QUEENAN: I believe that's correct, it has been ongoing for about three years. The Director of Finance manages that out of his department.
Would you expect that they would be participating in that process or share the appropriate information? COMMISSIONER QUEENAN: Yes, I believe so. If they are approved as a depository bank, we certainly would make sure that they would submit the information so that they can also be evaluated along those lines.
Progress Bank, as I understand it, is based outside of the City of Philadelphia, but they have a branch office in the Roxborough section of the city. Is that correct? COMMISSIONER QUEENAN: That is correct. They are based out of Blue Bell, Pennsylvania, but they do have a branch office in Roxborough.
Okay. And do you 8 BILL 970564 know whether they -- we can have this discussion in another public hearing -- what their ATM fee charge position is? COMMISSIONER QUEENAN: No, I do not. But I can get that information for the Council.
Okay. I would appreciate it. We will talk with them about that at another time. Thank you, Madam Chair. CHAIRWOMAN VERNA: You are welcome. Are there any other questions from members of the Committee? Do we have anyone else to testify on this bill? Is there a need for a suspension of the Rules on this, Mr. Queenan? COMMISSIONER QUEENAN: No, there is no need for a suspension of the Rules. CHAIRWOMAN VERNA: Fine. Thank you very much. COMMISSIONER QUEENAN: Thank you. CHAIRWOMAN VERNA: The clerk will please read Bill No. 970584.
Bill No. 970584, An 9 BILL 970584 Ordinance authorizing the Procurement Commissioner and the Director of Commerce, on behalf of the City of Philadelphia, to enter into a lease and service agreement with the Philadelphia Municipal Authority, pursuant to which the City will undertake certain obligations under a contract the Authority will enter into with Caravan Transportation, Incorporated, to undertake a project to lease, maintain, and operate equipment for ground transportation bus services for the Department of Commerce, Division of Aviation, in conjunction with the operation of the Philadelphia International Airport, all under certain terms and conditions. CHAIRWOMAN VERNA: I notice that we have several people from the Administration. If they will all come to the witness table, I would appreciate it. And let the record also reflect that Councilwoman Fernandez has joined us. Good morning. Please identify yourself for the record.
Good morning. I am Charles Isdell, First Deputy Director of Aviation. CHAIRWOMAN VERNA: With a new look. 10 BILL 970584 What do you think of it, Brian?
It was a photo opportunity for my family. We all had the goatee look this summer vacation. CHAIRWOMAN VERNA: It looks nice. I think we agree, we like it.
Would you like us each to introduce ourselves? CHAIRWOMAN VERNA: Please. COMMISSIONER APPLEBAUM: I am Louis Applebaum, Procurement Commissioner, City of Philadelphia. CHAIRWOMAN VERNA: Good morning.
Good morning. Abby Pozefsky, Chief Deputy City Solicitor with the Philadelphia Law Department. CHAIRWOMAN VERNA: Please proceed.
Good morning, Councilwoman Verna and members of the Finance Committee. I am Charles Isdell, Deputy Director of Aviation for the City of Philadelphia, and I am pleased to appear before you today to testify in support of Bill No. 970584. 11 BILL 970584 This bill will authorize the City of Philadelphia, through its Department of Commerce, Division of Aviation, to enter into a six-year lease and service agreement with the Philadelphia Municipal Authority for a new fleet of shuttle buses to be used at Philadelphia International Airport. , the Authority will lease buses from Caravan, and Caravan will maintain and operate the shuttle buses at the airport. The Authority selected Caravan Transportation pursuant to a competitive bid process that was coordinated through the City's Procurement Department and followed the City's usual competitive bid procedures. Caravan's bid also includes commitments to disadvantaged business entities to participate in this contract. 92. The actual cost of the contract will 12 BILL 970584 vary, depending on the actual number of bus service hours the Division of Aviation requires. There is no minimum number of hours guaranteed, and the City has the right to increase or decrease the bus service hours by 850 hours per month. The entire cost of this contract is being paid with monies from the City's Aviation Fund, with no projected cost to the City's General Fund. Before I discuss details of the agreement between the City and the Authority, I would like to provide you with a description of the shuttle bus services that are provided at Philadelphia International Airport. In the course of operating Philadelphia International Airport, the City requires shuttle bus services to transport approximately 5,000 passengers and employees each day along specific routes. The bus service must be operated 23 hours a day, 7 days a week, in all weather 24 conditions, including snowstorms. The bus routes include two separate 13 BILL 970584 routes to the airport terminal buildings from an off-site employee parking lot and from the economy parking lot. A third route provides interterminal transportation for passengers transferring between Terminals A through E. A fourth route transports airport employees between the Cargo City facilities and Terminals A through E. In addition to the fixed routes described above, the City may also require buses to carry military personnel and their dependents between the airport and Bayonne, New Jersey. Further, the City sometimes needs buses for miscellaneous transportation services at the airport; such as, tours or emergencies. These bus services, or very similar ones, have been under contract with various vendors for more than 15 years. The agreement before you, however, has three substantive differences from previous vendor agreements. First, the City is requiring 18 new buses that are powered by compressed natural gas, 14 BILL 970584 also known as CNG. The City has received federal and state grant monies under the Congestion Mitigation and Air Quality Program to offset the increased cost of leasing CNG buses. Use of cleaner-burning alternative fuels is consistent with the City's policy to pursue environmentally positive operating methods that assist in improving the region's air quality. The City's requirement of buses 12 increases the airport shuttle bus fleet by 2 buses. 13 This increase provides the airport 14 with greater flexibility for expanding bus service 15 to accommodate the significant growth that the 16 airport is experiencing. 17 The shuttle bus service is an 18 integral part of the airport system, and is important for ensuring that the passenger's overall experience at the airport is a positive one. The second difference from previous bus lease agreements is that this agreement between the City and the Authority is for a fixed six-year period.
We have determined that the City's 15 BILL 970584 cost of leasing the buses is reduced by entering into a longer-term contract, since it enables the Authority's vendor to amortize its capital cost of purchasing the buses over a period that more closely parallels the useful life of the buses. Further, the six-year term generated more competition for this contract, since vendors knew that the bus cost could be amortized over the longer term. Although the buses have an estimated useful life of ten years, the Division of Aviation did not want a term of longer than six years, since the Division is committed to offering first-class service to the passengers and employees using the shuttle buses. And, after six years, the condition of the buses may be unacceptable for those services. The contract between the Authority and Caravan gives the Authority or the City the right, but not the obligation, to purchase the buses at the end of the contract for the unamortized value of the buses. The unamortized cost of the buses at the end of six years is set forth in Caravan's 16 BILL 970584 contract as $572,696 for all 18 buses. If at the end of six years the buses are in a condition that would make it advantageous for the City to purchase them, the City will have the right to do so for the unamortized value described above. On the other hand, if the buses are in poor condition, or if the market for CNG buses has changed so that it would be unreasonable for the City to pay the unamortized value for the buses, the Authority and the City have the option of walking away. The third difference from previous leases is that the City, and not the vendor, will pay the cost to fuel the buses with compressed natural gas. This adds an estimated cost of $150,000 annually to the contract amount, which is paid to the Philadelphia Gas Works. The City benefits by paying the fuel costs directly because it receives a special discount from the Philadelphia Gas Works. The contract between the City and the Authority requires service using the new CNG buses 17 BILL 970584 to start on July 1, 1998. The proposed manufacturer of the buses has advised that he can deliver new CNG buses to Caravan in time for this start date if a firm order is placed before October 31, 1997. Therefore, we respectfully request that the Council vote on this bill prior to October 31, 1997. The Division of Aviation believes that the contract you are approving today has numerous advantages to the City. The contract's six-year term helps to keep operating costs lower at the airport, which benefits the annual carriers and is important to the ongoing growth which is taking place at the airport. Providing new buses and first-class bus service will also enhance service to the traveling public and the employees at the airport. Finally, the use of CNG buses is an environmentally positive operating method that helps to improve the quality of life for our citizens. I greatly appreciate this opportunity to speak to you today in support of Bill No. 18 BILL 970584 970584. I will be happy to answer any questions you may have. And I also have with me today representatives from the Law Department, the Procurement Department, the Authority, and Caravan Transportation who can respond to questions you may specifically apply to them. I would also request a suspension of the Rules in order to enable passage of the bill as quickly as possible. Thank you. CHAIRWOMAN VERNA: Can you tell the Committee if any company from Philadelphia submitted a bid?
There was only one potential bidder. There was a pre-qualification process prior to the opening of the bids. There was a proposed joint venture from the Philadelphia area named Metro Care/Keystone Bus Services. That joint venture was determined to be not qualified during the pre-qualification process. There were six proposers. Two of the 19 BILL 970584 six were disqualified prior to the bid opening, and four were qualified. None of the four qualified bidders is from the Philadelphia area. CHAIRWOMAN VERNA: And Caravan is from Long Island?
That's correct. CHAIRWOMAN VERNA: Can you tell us what, if any, reimbursement the City receives for the military shuttle to Bayonne, New Jersey?
We do not receive a reimbursement for that service. That service was offered, as I understand it, as one of the enticements to have the Air Mobility Command locate to Philadelphia and stay in Philadelphia over the last 15 years or so. CHAIRWOMAN VERNA: You also mentioned in your testimony that the City has received federal and state grants. Can you tell us the amount of the grants that we have received for this program?
The CMAQ grant, in terms of the buses, will pay for the difference between the cost of a diesel bus, which is what the airport 20 BILL 970584 uses now, and a CNG bus. And that cost is $25,000 per bus, for a total of $450,000. In addition, I believe the discounted rate from the Philadelphia Gas Works for the actual fuel is a result of federal grant or some support --
The discounted -- CHAIRWOMAN VERNA: Identify yourself, please.
I'm sorry. Abby Pozefsky, with the City Solicitor's Office. The discounted rate is a product of a negotiated rate between the Gas Works and the airport. In addition, though, there are some additional federal and state grant monies that have been used in conjunction with the program. And they would include federal and state grant monies that are used to build a CNG fueling station at the airport. If you would like some more information about the federal and state grant monies that are being used, we have the person from the airport who is in charge of the CNG program. CHAIRWOMAN VERNA: Well, I read that 21 BILL 970584 we did receive grants, but it didn't specify exactly how much money we were receiving. I don't know if anyone on the Committee would like to see that written information?
Yes. CHAIRWOMAN VERNA: Please. Would you have somebody from the airport come to the witness table.
Good morning, Council. I am Marc Liciardello. I am the Facility Manager at Philadelphia International Airport. Specifically for our Alternative Fuel Program, which includes the buses we have presented to you today, the airport will receive a total of $1.735 million in grant money as a combination of both federal and state money. The federal share, which is 80 percent, which Charles indicated, was the CMAQ funds, totals 1.388 million. The state's share, which is called AFIG, that total is approximately $347,000. And that will be used for the City's in-kind or 20 percent share that we're committed to paying through 22 BILL 970584 this program. So there is a total of $1.735 million in grant money specifically for the vehicles. CHAIRWOMAN VERNA: Thank you.
That is a part of the -- the program consists of buses and 40 10 light-duty vehicles. Okay? 11 So the $450,000 is a portion of the 12 overall program. 13
Abby Pozefsky. 14 Councilwoman, we have a fact sheet, 15 if it would help you. 16
If it would help you review, let us hand you a copy of that. We have one for the alternative fuel vehicles, which is what Marc Liciardello just outlined, and we have a supplementary one, should you so desire, that also describes the grant monies that will be allocated to the CNG fueling station. CHAIRWOMAN VERNA: Mr. Isdell. 23 BILL 970584
Yes. CHAIRWOMAN VERNA: I understand that under this contract new buses are required, but 5 there are also provisions in the contract for old 6 buses. 7 How many of the older or used buses 8 will be under the contract, and how old are the 9 buses? 10
That provision in the 11 contract would only be used in the event that the 12 vendor is, or the manufacturer is, unable to meet 13 the deadline of July 1 next year. 14 Assuming that all goes well, and the 15 manufacturing schedule is maintained, we will not be 16 using anything but new CNG buses. 17 In order to exercise that provision, 18 the vendor would have to ask for the City's approval. And we would weigh the situation based on a good-faith effort and whatever understanding we have of the manufacturing situation at that time, as opposed to, there are also provisions for punitive measures, I think up to $500 per day, for late delivery. It would be our desire at that time to make a fair decision. 24 BILL 970584 And, if it would be appropriate, we needed to have a specification in the contract for what a used bus, what minimum standard it would have to meet. The standard is, essentially, in our opinion, as good as a new bus. And in terms of the age, the buses can be no older than eight years of age in that alternate specification. CHAIRWOMAN VERNA: Thank you. The Chair recognizes Councilwoman Fernandez.
Well, actually, in response to the other questions, you provided some information about the refueling station. And, also, I was wondering if there were penalties if the vehicles were late. Because I know SEPTA, they had serious problems with late delivery of vehicles. So I am glad there are penalties in that contract. I would just like to say, for the record, that I think I am very pleased that we both got the federal and state money, and that the airport is undertaking this way to have cleaner 25 BILL 970584 fueled vehicles out at the airport. I was thinking as you were talking, last Christmas I had to go to Boston for a family medical problem. And got to the airport at the night in Boston, and stood waiting for this bus that was going to take me out to my next stop. And I waited probably minutes or a 9 half hour. And I thought I was going to be 10 asphyxiated by all these buses going by. It just 11 was choking me to death, with all these fumes 12 spewing as I waited there. 13 So for us to have especially 14 clean-burning compressed natural gas vehicles I 15 think will be a very positive addition both to air 16 quality and then also for comfort of customers and 17 health of customers. 18 And I'd say the other very positive 19 part of this proposal is to get an additional 20 compressed natural gas refueling station. Because right now there are only two in the city, and this would add a third. Because we do face this problem of, if the City and other businesses want to use compressed natural gas or an alternative fuel, BILL 970584 having accessible refueling stations is a major issue. So I think it sounds like a very good project, and I'm glad the airport and the City are going in this direction. CHAIRWOMAN VERNA: I would also like the record to reflect that Councilwoman Blackwell, who is also a member of the Committee, has joined us.
And Councilwoman Tasco. CHAIRWOMAN VERNA: I thought I mentioned you earlier. I'm sorry. And Councilwoman Tasco is also here. I thought I had indicated that earlier. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. Mr. Isdell, I would like to go back to some of your testimony. You indicated in response to Councilwoman Verna's question that this Caravan Transportation is based in Long Island City, New 27 BILL 970584 York; is that correct?
As a result of this contract, will they have an office in Philadelphia to provide this service?
Yes. They are required to have an office and a maintenance facility in the Philadelphia -- in the vicinity of the airport.
Well, currently, the office that's maintained by the current vendor, is literally a trailer that we provide space on the airport property for. And that is provided for in the contract. I think the maintenance facility would be more significant in terms of a local investment, if that's what you are interested in.
I'm not sure if I can get the answer for you. I think one of the representatives at the table can answer the question. 28 BILL 970584 The proposed maintenance facility would be located at 6823 Norwitch Drive in Philadelphia. And if you would like more information, the representative from Caravan can answer questions directly.
That's okay. And how many employees will be hired as a result of this contract?
I will get the answer to that question for you. I don't know about that.
70, seven zero. And they will work for Caravan. CHAIRWOMAN VERNA: How many of them will be bus drivers and how many will be working with maintenance? Please come up to the table and identify yourself.
Good morning. 29 BILL 970584 My name is Lawrence Greene. I am with Caravan Transportation, Incorporated. We plan to have approximately 70 bus drivers, full and part time. And we're anticipating the need for 3 mechanics to maintain the 18 buses.
And are any of those people in your employ today, or will you have to hire 70 new employees?
We plan to offer employment to those people doing the services at the present time.
We plan to offer employment to all those employees that are presently doing the service.
And to fill in any vacancies with people from the Philadelphia area. We're not going to import employees for this project.
Okay. Thank you. Mr. Isdell, in your testimony, again in response to questions from Councilwoman Verna, 30 BILL 970584 you indicated that there were some local companies that possibly did put forward bids, but they may have been disqualified. And then I seem to remember you mentioning four other companies, for a total of six or seven, that got through the initial bidding process, but they also may have been disqualified. If I'm not correct on the numbers, can you make the correction, and then tell me why or what happened?
You are almost correct. There were six proposers. And the bid process, which was coordinated by the Procurement Department, included a pre-qualification segment and then a bid price opening segment. So the six proposers, in their pre-qualification packages, had to present their financial and experience wherewithal. And of the six, two were disqualified. One of those was a proposed local joint venture called Metro Care/Keystone. The other disqualified company was ATC Van Com. The four companies that were qualified prior to the actual bid price opening were 31 BILL 970584 Caravan; Hudson General Corporation, which is a New-York-based company; Laidlaw Transit Services, which is based in Kansas City -- and that's our current vendor -- and Coach USA, which I believe is based in North Jersey in the Newark area. But none of them were from this area. So they were the four for whom we opened the pricing.
So they were not disqualified. Your testimony just was that they also were not from the area?
Okay. Just off to the side, do you have any idea of why there are no Philadelphia based -- I mean, put the joint venture issue aside, why is it that no one from Philadelphia seems to be in this business? I assume this is a rather lucrative business?
It would be -- I mean, my answer would be speculative. Did you want Mr. Greene to speculate on that?
No. I would like 32 BILL 970584 Mr. Greene to move his company to Philadelphia. But if he has a perspective, he can share it. No. It's fine. Your testimony on talks about commitments to disadvantaged business entities to participate in this contract. What are the commitments, and who are the companies?
Okay. There are a total of five. The first is Anderson Travel from Elmwood Avenue in Philadelphia. Their specific subcontract would be for the military shuttle service to Bayonne, New Jersey, estimated at $50,000 annually. Multi-National Electronics from Cinnaminson, New Jersey. Their subcontract would be for two-way radio communications. Estimated annual value of $10,000, in addition to initial equipment purchase of approximately $15,000.
Third is Philly Oil, 33 BILL 970584 Inc., from Huntingdon Valley, for petroleum products. Annual estimated requirement for motor oil, automatic transmission fluid of $5,000. The fourth company is Tri-State Leasing, Incorporated, from Villanova, for the equipment leasing and financing. Estimated at a million-dollar value over the term of the contract. And the fifth --
So we're talking, okay, like $150,000, $175,000 a year?
And the fifth company is Jamar Insurance Company, 3508 Market Street, Philadelphia, as the insurance agency for workers' compensation. Estimated at $100,000 per year.
And this information that I just summarized is included in Attachment D in the package that you have.
All except the leasing financing, the million-dollar number for Tri-State; that's over the six-year term.
Right. That seems to come to $345,000 a year for those five companies. And I guess over the six-year term what are we talking, a million eight, a million nine?
I will give you the benefit of the doubt. We will go with two. So we are talking a little less than 10 percent of the contract?
We don't have to burden the record with it today, but I would like all of that material that you read out to be handed up to the Chair either today or subsequent, but prior to vote on this bill, so we have some better details on minority and female participation in this 35 BILL 970584 contract.
Okay. Councilman, if I may, you do have that material that I just read in Attachment D in your package.
And, also, the MBEC commitment, if you have a copy of the actual bid, which was in the package. Caravan's MBEC response is in that package in more detail.
Actually, I understand that this is a lease for six years through the Philadelphia Municipal Authority. Just very quickly, can you tell me what the actual cash value, if you just went out and bought these 18 buses today, as opposed to a lease, what do they cost?
I do have that number. We have the cost, for all 18, as $2,863,481.
Yes. That's the 5 unamortized cost of the equipment at the beginning 6 of the term. 7 And this is, I'm looking at 8 Attachment C to Exhibit A in your package, which is 9 the Vehicle Amortization Schedule. 10
Well, then, I 11 know I said that that was my last question, but this 12 will be my last question. 13 The cash value of buying the buses 14 today, if we just decided to go out and order these 15 buses and cut a check, is $2.8 million, versus a 16 six-year lease for which you are saying we are going 17 to spend $21 million. 18 And, at the end of the lease term, we will decide at our option, depending on the condition of the buses, whether to buy them or not. And if we did, we would then pay, I guess, a balloon note of a half a million dollars, is that the number on the -- $572,000?
Yes, that would be the remaining unamortized value of the buses at the 37 BILL 970584 conclusion of the term, $572,696.43. But the contract is not only for the purchase of equipment; it also involves maintenance and operation of the entire bus service. So the total $21 million is not just a balloon cost of financing the equipment; there is a lot more in the contract than that.
Okay. Between now and the time that we vote on this, I would be interested in seeing a cash deal for purchase of buses, and what the value of the service is, versus a lease deal. If you could provide that information, I would be very interested in it.
Okay. CHAIRWOMAN VERNA: Commissioner, I think you want to respond to that, do you not? COMMISSIONER LOUIS APPLEBAUM: Louis Applebaum, Procurement Commissioner. Councilman Nutter, the major part, the major cost of the contract, is not the procurement of the buses; it is a complete service that is billed at a certain price per hour for the economy lots, for the military lots, for Cargo City, 38 BILL 970584 for additional. So there is an hourly rate that we are paying, which is an overall rate which includes the cost of the labor, the management, the overhead, the maintenance, repairs of the total package. The lease part of it that relates to the vehicles is the amortization at a cost of buying the equipment of $2.8 million. The balance of the cost, which is approximately $20 million over the term, is for the operation of the service.
Okay. So, I mean, it is your argument, Mr. Applebaum, that if we just went out and bought the buses, we would not be in a position to still provide a service. And someone has to provide that service, and it is either going to be Caravan or, probably, in the worst-case scenario, it would be us? COMMISSIONER APPLEBAUM: You said that, not me.
I understand that. I mean, you have 18 buses, you have 39 BILL 970584 17 Council members and the Mayor. I mean, we can each take a bus. COMMISSIONER APPLEBAUM: I will drive one, too.
We can take a bus a night. And no one would get anywhere. All right. I understand. COMMISSIONER APPLEBAUM: It is a very competitive bid. The amount of profit or markup on the buses is minimal.
Okay. COMMISSIONER APPLEBAUM: And the best part of the program is, at the end of the program, at the end of six years, the City has an option. We can buy those buses for, I think --
It is like a car lease. You lease a car. As long as you don't drive it over 15,000 miles a year, you do whatever you want to do with it, and you keep it or you get rid of it. COMMISSIONER APPLEBAUM: Depending on the market at that time, the risk is not with the City, but the risk is with Caravan. So we don't 40 BILL 970584 have the risk at the end of the time.
All right. Thank you. CHAIRWOMAN VERNA: The Chair recognizes Councilman O'Neill.
Charley, this has nothing directly to do with these purchases. But in one of the descriptions of what the buses do is, take people around the airport that want to go from B to A, they have to circulate on the back road?
Circulation road? Or what is the proper definition for that road?
Recirculation road. It is totally inadequate, that road. And while you are doing this, which is a major effort to improve the situation generally at the airport with transit, sometimes it takes 20 minutes to a half hour to go around that road, particularly when the buses that the rental car companies use 41 BILL 970584 just decide to slow down because they are mad at something. Maybe they are mad at you; I don't know. But they are upset, maybe because you wouldn't let them triple park or something. They tie up the whole line, they just drag down. It is one of the irritating things, because you are not sure you are going to make your plane, because you had to drop somebody off and then go to park the car, or something. It seems like it is a solvable problem with an extra lane or something there. Is there anything on the table right now to deal with that?
Yes. We are looking at widening the recirculation road. The land to the north of the road, I believe, is currently owned by PennDOT. That is one of the hurtles that we would have to deal with, would be the acquisition of that land or permission to use the land. The other thing that we're looking at is a more effective system. At the end of the recirculation road, you are probably familiar -- it sounds like you are 42 BILL 970584 very familiar with the recirculation road -- there are a couple of stop signs that tend to create sort of a false traffic jam that does not have to occur. We believe that traffic signals at those locations and occasional use of actual police officers directing traffic there during peak hours might alleviate some of the problems. We have also targeted the rental car agencies, because they are frequent causes of complaint. For their own particular reasons, they tend to cruise very slowly, particularly if there is one right behind the other. The bus in the back is actually trying to go slow, aggravating all the cars behind them. We have already, our Operations Department, has gone to the rent-a-car managers and asked them to work on a more sympathetic schedule to the rest of the passengers who are trying to get back around to the arrival road. But we are looking at that. And I think the real fix is that the road needs to have more than just one lane. We did also look at whether in its 43 BILL 970584 present consideration, could it be striped for two lanes of traffic. And, unfortunately, that's not possible.
Now, I hate to pin you down, but is there anything actually going on with PennDOT, or are we just kind of talking about it in-house?
As far as I know -- we don't have our Engineering Department with us today or representative, I don't think. But does anyone know? Is there anything going on with the recirculation road presently, that you are aware of? We don't know if there has been a contact with PennDOT, but there is a design to widen the road being worked on as we speak. And Mr. Buoy is extremely anxious to make that happen, which means that it will be accelerated.
I would just like to suggest, Councilman Longstreth has a contact there. He is very close to the Governor. All the secretaries pick up the phone as soon as they hear he is on the phone. You would probably get it done 44 BILL 970584 like that. I don't know if he is in the room, but you may want to talk to him.
He has given a lot of money, apparently. He is a big contributor. CHAIRWOMAN VERNA: The Chair recognizes Councilman Kenney.
Thank you, Madam Chair. What other airports, if any, does Caravan operate in today?
In actuality, we operate two separate contracts at JFK. And we started services there in 1987, with bus services for employee parking lot. That was a six-year contract. It went -- well, it was two years with -- two, two year extensions, as I recall, and the contract went full term. Before the termination of that 45 BILL 970584 contract, another contract was let by the Port Authority for services at JFK called the CTA, or Central Terminal Area, contract, which consists of 36 buses providing shuttle services for long-term parking lot services and inter-terminal services at JFK. That contract requires 36 new Flier buses, which are 40-foot transit coaches. They are diesel powered, but they are unique in that they are low-fuel design. And, in addition to that service, there are also -- we also operate five cars on a VIP service, primarily geared to those people coming off the Concord that have to go from one terminal building to another. That contract has an initial term of three years, with one three-year extension which we are currently in. And it has the option of three, one-year extensions, for a total of nine years. Shortly after that contract started, we re-bid an employee parking portion. And we were victorious in that bid, as well. And that has 14 buses operating -- they relocated the employee parking area. 14 buses 46 BILL 970584 for a seven-year contract full term. We're up to 20 on that. So, in total, we operate 60 buses at Kennedy. I would like to add, however, that we have been bidding for airport operation contracts, that's on airport sites, we have bid Logan, which we were second or third in 1993. We bid Newark Airport, which we were second on to Red and Tan, which was one of the bidders on this project. I believe we were second in Los Angeles for 50 buses. We have bid for Philadelphia in 1992, so we're not new to Philadelphia. We have been looking to expand our airport operations and school bus operations into other states for a long period of time. We're in business for years. 19
The company is 20 primarily school bus transportation? 21
We are primarily school 22 bus, but we do service one of the word's largest 23 airports. 24
Do you 25 anticipate, or what number of employees do you 47 BILL 970584 anticipate, now retaining? Is that process begun or has it been projected, as to what employees are working there now for the current vendor and how many you anticipate bringing over? Or has that discussion not happened yet?
Well, that has not happened, as we have not been awarded the contract, and we haven't been able to take that step forward. It is my desire, as I have done with other contracts in the past, to go to the existing work force and offer them positions, offer that work force positions, if they are qualified under our guidelines. For instance, we do drug testing. Although it may not be required, we do it. We require annual physicals, although the federal statute might require biannual physicals. So there are qualifications that we have at Caravan that might be a step above others. So the applicants still have to meet our criteria for selection.
And is that similar to what it is at Kennedy? Or I guess the standard of living, cost of living, at New York is different.
Okay. Is your operation union or non-union, just for information sake?
Our airport operations are under Local 447 of the IAM, which is aerospace and machinists.
Have the airlines been involved in this discussion of the award of this contract, or potential award of this contract? And have they expressed an opinion either publicly or privately as to -- Mr. Isdell.
Have the airlines been involved at all in the discussions relative to this potential award, and have they expressed an opinion?
Not the specific award to this vendor since the bid opening. But the airlines have approved the concept of the six-year lease agreement and also their expressed desire, if there is a choice between the purchase option, which tends to put a big lump in your annual budget in a particular year, versus the spreading of payments out, it is preferable to them to spread the payments out over the longer term. So they supported that notion, as well.
So they have been involved in the general philosophy of lease versus purchase?
What, in general -- and I don't want to go through each individual company that was disqualified -- but, in general, are there general reasons for disqualification? Are there certain things that seem to 50 BILL 970584 be recurring that disqualify a company, generally?
Well, in the two instances that we had, one was very simple, they did not bid the right equipment, according to specification.
The second one, which was the joint venture, was really -- we spent a great deal of time reviewing the experience, the financial capability, and the familiarity with the technology, including the CNG buses. And it was our feeling -- in fact, we went through a formal hearing procedure at the end of that process -- that the joint venture was not qualified. So there really isn't a general answer to your question. Each one was specific.
In relation to the minority or disadvantaged business firms and the selection process, how are those firms selected, how are they solicited? Is it a bid process within that particular process? And, you know, how does that work?
Commissioner Applebaum 51 BILL 970584 would like to respond to that. COMMISSIONER APPLEBAUM: I will answer that, Councilman Kenney. Under the Executive Order 193, there is a specific program that all vendors, all bidders must adhere to. And that is, commitments and solicitations of companies that are certified in the City of Philadelphia MBEC directly. The vendors solicit the companies. In some cases they make commitments, if they win it. In other cases, the pricing may not be correct, so they may not make a commitment. And there is a form, a specific form, that they fill out indicating all of the minority companies, W's, M's, et cetera, that they have contacted and the results of that solicitation. I must note, in this particular bid, of the four bidders that we opened envelopes for, only two, the first -- the Caravan and Coach, which was the highest price, actually had MBEC commitments. The middle two companies had zero commitments from minority companies, but yet were ruled responsive by MBEC because they followed the 52 BILL 970584 rules. But they didn't bring any minority participation to the table. So, fortunately, in this particular award, Caravan followed the rules, so they were responsive and, also, brought to us almost 7 percent in dollars. 8
So the actual 9 solicitation for the disadvantaged business is done 10 by the potential vendor. COMMISSIONER APPLEBAUM: Absolutely.
They are given a list of qualified minority businesses. COMMISSIONER APPLEBAUM: They are given a list of what we call Certified Minority Companies that have been certified by Philadelphia, our MBEC. That's a book that they get.
And they go and make the deal with them? COMMISSIONER APPLEBAUM: Then they go out. The list gives them the various commodities that these companies are involved in, and they go out and make their deals, yes.
Thank you very 53 BILL 970584 much. CHAIRWOMAN VERNA: The Chair recognizes Councilwoman Tasco. Councilwoman Fernandez.
Madam Chair, I had needed to leave for a previously arranged meeting. I would like to be recorded as voting yes on all three bills. CHAIRWOMAN VERNA: Two bills. One was held.
Thank you. Following up on that question, I noticed that in the MBEC form, there are two companies -- CHAIRWOMAN VERNA: Excuse me, Councilwoman. I believe Councilman Longstreth wants to make an announcement.
I would just 54 BILL 970584 like to leave the room at this time and be recorded as voting yes on all two bills. CHAIRWOMAN VERNA: Thank you. I am sorry, Councilwoman.
Okay. Just following up on the issue of the disadvantaged commitment. I noticed that the Keystone Bus Service -- have these commitments been confirmed? This sheet is dated July '97. But I noticed that Keystone Bus Service, there is no 13 commitment yet because they didn't respond to the phone calls. Will you just use Anderson Travel, or are you going to try to contact Keystone Bus Service, or substitute another bus service for the subcontracting of military shuttle services to Bayonne?
If I may. I guess the reason that Keystone didn't respond is because Keystone became a bidder themselves.
We did our best to contact as many M and WBE firms as we could who 55 BILL 970584 would be able to provide goods and services that we need. But I must add that, in this particular contract, the City's commitment to provide the fuel for the buses, to pay for the fuel, actually took away a very good source for minority participation. So it has made it much more difficult for us to come anywhere near the percentage of participation that the City would like. As we begin doing business in Philadelphia, I have no problem giving all of the business to minority vendors. It is a situation where it is a low bid that wins the bid. And we will be out there seeking competitive bids in our own right for goods and services that we require. To directly answer your question about the military shuttle service, no, I would like not to give service to Keystone. I would prefer giving it all to Anderson. And we will give them as much of the military shuttle service as we possibly can.
Also on the 56 BILL 970584 Multi-National Electronics, I noticed that you have a commitment -- I'm sorry. That's not the question. Tri-State Leasing, cannot make commitment until equipment is ready for delivery and interest rates can be established. Have you since that time confirmed a commitment with them?
No. In fact, I spoke with Tri-State yesterday, Mr. Henderson, Gerald Henderson. We are not going to be able to reach a commitment until the eve of the delivery of the buses. What I did ask him to do was to provide me with various alternatives to financing and/or leasing that we can look at with some benchmark figures on them, X number of basis points over T bill, so many percentage points over prime. He has not been able to give me anything concrete, that I could take to the bank, to use that expression. We are talking about $3 million in equipment. And every basis point is a lot of -- 57 BILL 970584 equates to a lot of dollars. I do believe that we will be able to come to a conclusion, though, and that he will be able to be as competitive as anyone else on the financing.
Suppose he isn't? What would your alternative be? Are there other companies that you could go to?
We financed $7 million in buses for our J.F. Kennedy project with Fleet Credit Corp., and they have been doing quite a bit of our financing for us. And, in all probability, we would go there. We could also look at other minority participants. We're not against doing that. But we need -- we need the commitment back to us at the lowest possible price. And not to be redundant. It is our low price that won the bid, so we can't just afford just to give away free.
We just know 58 BILL 970584 that sometimes the vendors are sought in order to gain the contract. Once the contract is signed, then the vendor doesn't use the minority vendors, as proposed in the contract. So that is really what I'm getting at, is, will the commitment follow through once the contract is signed, or do you find a way to -- not just you individually, but you all vendors find other ways -- to get out of the commitment.
We have to buy goods and services. And if Vendor A, who we may have selected as a minority vendor, or subcontractor, if you will, cannot provide those goods or services, we have to find other vendors that will. We need those goods and services to conduct business. Where we have made commitments for minority participation or women's participation, we will continue in that vein, until we exhaust the possibility of having a minority or a women's business enterprise provide that good or service. For instance, if, for one that we have already made a commitment, if Anderson can't produce the military shuttle to us, we will continue 59 BILL 970584 in the minority, what do you call it, guide, the directory, the minority directory, to every single bus company to subcontract that portion of our contract. When we exhaust that, then we are left with no choice either to go to a nonminority or to provide the service ourselves. And the same thing will hold true for -- I believe we have also made commitments for workers' comp insurance to Jamar. If Jamar can't provide it to us at a reasonable rate, we will go to another minority company.
That's interesting. You use their bid to you to develop your bid for the City --
Okay. Who will maintain the buses? Who will provide maintenance to the buses?
We will employ the mechanics necessary to maintain the buses. 60 BILL 970584
We have a site that we have selected at 6823 Norwitch Drive, which is approximately a mile out of the airport.
You are welcome. CHAIRWOMAN VERNA: Are there any other questions from members of the Committee? Do we have anyone else to testify on this bill? Seeing none, this will conclude the Public Hearing. We will now go into our Public Meeting. (Public Hearing adjourned.) 61 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING of the COMMITTEE ON FINANCE - - - Wednesday, October 15, 1997 - - - Public Meeting conducted by the Committee on Finance, held in Room 400, City Hall, Philadelphia, Pennsylvania, on the above date, to consider action on the following: BILLS 970564, 970584 - - - PRESENT: COUNCILWOMAN ANNA C. VERNA, Chair COUNCILWOMAN MARIAN B. TASCO, Vice-Chair COUNCILWOMAN JANNIE L. BLACKWELL COUNCILMAN JAMES F. KENNEY COUNCILMAN MICHAEL A. NUTTER COUNCILMAN BRIAN J. O'NEILL - - - 62 PUBLIC MEETING CHAIRWOMAN VERNA: The Chair recognizes Councilman Nutter regarding Bill No. 4 970564.
Madam Chair, I move that Bill 970564 be reported out of this Committee with a favorable recommendation. (Duly seconded.) CHAIRWOMAN VERNA: Properly moved and seconded that Bill No. 970564 be reported out of Committee with a favorable recommendation. All in favor will signify by saying aye. Those opposed. The ayes have it. The motion is carried. The Chair recognizes Councilman Nutter regarding Bill No. 970584.
Madam Chair, I move that Bill 970584 be reported out of Committee with a favorable recommendation, and a further recommendation that the Rules of Council be suspended so as to permit first reading at our next session. (Duly seconded.) 63 PUBLIC MEETING CHAIRWOMAN VERNA: Properly moved and seconded that Bill No. 970584 be reported out of Committee with a favorable recommendation, also a recommendation that the Rules of Council be suspended so as to permit first reading at our next session of Council. All in favor will signify by saying aye. Those opposed. The ayes have it. This concludes the Public Meeting. Thank you. (Public Meeting adjourned at 11:45 a.m.) - - - 64 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 Wednesday, October 15, 1997, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COMMITTEE ON FINANCE _____________________________________ DEBRA A. WHITEHEAD, RPR