Does it make any sense to maybe take some of our more seasoned employees in customer service and offer them the opportunity to become bilingual?
We have done that, we have done that, and we have gotten some basic sort of bilingual skills as a result of it. But we also have employees who are hired, not as bilingual, who provide bilingual services for us within the Department. So it's not like we don't have these services or we are not communicating. We think we can do better. If we have an employee who is hired as a bilingual, what -- some of the feedback that I get is that the multi-language employees want to be paid more because they're providing additional services besides customer services. That's not something I can control, but when you look at the 1815 OPERATING BUDGET - BILL 05 - 2/23/00 job specification, it doesn't pay -- there's no 3 pay difference between being an English-speaking representative and being a bilingual representative. However, you may be called off of your job to provide bilingual services and then you still have to go back and provide your job. So there needs to be some equity in looking at that, and that could be some of the barrier to being able to hire --
But it's a priority for you guys, and you're working on it.
In fact, I was approached again about two months ago, and I have approached our personnel director over at the Water Department to ask him what his progress has been in being able to recruit members from the bilingual community.
Thank you. Are there any other questions from 1816 OPERATING BUDGET - BILL 05 - 2/23/00 members of the committee? (No further questions.)
Thank you very much. COMMISSIONER KISHINCHAND: Thank you very much.
Next is the City Planning Commission. Oh, I'm sorry, I'm sorry. The Office of Housing and Community Development is next. (OHCD witnesses come forward.)
Good morning, President Verna. I'm John Kromer, Director of Housing. With me is Roderick Lyles and Raymond Cesario from the Office House of Community Development Fiscal Unit. I believe you have my written testimony.
And, as in prior years, I anticipate that the proposed consolidated plan for the coming fiscal year will be heard before the Finance Committee this spring. 1817 OPERATING BUDGET - BILL 05 - 2/23/00 Briefly, however, I wanted to indicate that the proposed operating budget for OHCD is $139.1 million proposed for the coming fiscal year. Of that amount, 74.8 million is proposed for the Grants Revenue Fund, 60.1 million in the Community Development Fund, and 4.1 million in the General Fund. This funding pays for the staffing for the Office of Housing and Community Development as well as the two other primary housing agencies -- the Redevelopment Authority and the Philadelphia Housing Development Corporation -- and for all program costs. The testimony that I have submitted also describes the proposed use of general funds for traditional housing services. These are services that have previously been administered through the Office of Emergency Shelter and Services, but transferred to the Office of Housing and Community Development as part of their divisional responsibility that has been in place for several years, in which transitional housing is handled by OHCD, while OESS continues to maintain the emergency shelter system. I'll be happy to answer any questions 1818 OPERATING BUDGET - BILL 05 - 2/23/00 that Councilmembers may have at this time.
Thank you. Mr. Kromer, when will you be presenting your Consolidated Plan authorizing the Community Development Block Grant for Fiscal Year 2001?
The federal government, the U.S. Department of Housing and Urban Development, requires that an initial plan, a first draft, called "the Preliminary Plan," be published and made available for public comment. We expect that that preliminary plan will be published within a month. Within three or four weeks, there will be public review of that document. And then I would anticipate that in April, the so-called Proposed Consolidated Plan, which is transmitted by the Mayor to City Council, would be available, so that that hearing could be scheduled in May.
Thank you. The Chair recognizes Councilman Goode.
Thank you, Madam President. Good morning, Mr. Kromer. 1819 OPERATING BUDGET - BILL 05 - 2/23/00
I sent a letter to your office asking a number of questions on Monday, February 14th, we've had a discussion this morning about the information being forthcoming, but I wanted to ask you a few questions on the record. You recently cited a lack of change in economic conditions of low- and moderate-income neighborhoods through CDBG spending. I think it was in response to your book. Could you please elaborate?
At the end of last year, I made some remarks here in City Hall in a conversation in connection with -- sort of summing up the Community Development Block Grant Program. And I think it's very encouraging what has been accomplished. We're the envy of other cities in a number of respects -- housing counseling and settlement assistance, the development in lower North Philadelphia, the homeless and special-needs housing. We've really come a long way, and we have a lot to be proud of. But at the same time, if you look 1820 OPERATING BUDGET - BILL 05 - 2/23/00 around the city, there is no neighborhood that has been decisively turned around that was declining and falling in 1990 and that is a success story or even measurably on the way up in the year 2000. And, of course, you could say, Well, it's the economy and we're still recovering from a long history of the disinvestment. And, yes, that's part of the problem. But my purpose in stating that was to say that we need to do even more in the future. And by "more," I mean digging in deeper and producing more value for these neighborhoods so that we can have some success stories when critical issue is continuing to integrate the City-sponsored housing programs with the Philadelphia Housing Authority programs, and we've come a long way in doing that. And Carl Green has been very responsive to that and has initiated some new ideas, which have been very constructive, but we've got to show a lot more progress in that area. Just quickly, one other area where I think we need to improve is in the area of workforce development. We need to be actively 1821 OPERATING BUDGET - BILL 05 - 2/23/00 involved in training neighborhood residents for the good jobs in the metropolitan economy, not just the Work First jobs or the public service jobs, we've got to get them into quality jobs, and we've shown that that's doable.
But in terms of actually reversing economic conditions and economic decline within these neighborhoods after years of Community Development Block Grants 11 spending, in your opinion, is low-income housing 12 production more important in small-business 13 development as an anti-poverty strategy? 14
I think you can have a 15 very valuable housing program and a very valuable 16 small-business development program. I think this 17 is the time, rightly so, when every program needs 18 to be scrutinized. 19 There are many worthwhile activities 20 that we'd like to fund, but I think this first 21 year of the new administration is a great time for 22 a reevaluation, to ask questions like those that 23 you're asking, about the relative weight that 24 should be given to housing versus -- 25
But historically, 1822 OPERATING BUDGET - BILL 05 - 2/23/00 OHCD has used only approximately 10 percent of CDBG entitlement funds for economic development. Can you tell us why the City historically has used such a small percentage of block grant money for economic development.
The area historically -- and I'm not speaking for Street Administration, because the proposal for the coming fiscal year has not yet been prepared, but historically, the argument has been that unlike other cities -- New York and Baltimore and Boston, for example -- there's been little or no funding from the city budget or from the state to support affordable housing. The Community Development Block Grant is the only real resource to support affordable housing and, therefore, the vast majority of block grant funding should go into affordable housing. That's been the argument in the past.
Okay. Although everything seems to be on the table for discussion while we're still in a period of transition with the new administration, after serving as housing director for eight years, could you tell us, do you yourself have any plans to increase his 1823 OPERATING BUDGET - BILL 05 - 2/23/00 allocation particularly for neighborhood small-business development or commercial corridor revitalization?
I think -- I've had some discussions with Mjenzi Traylor, and I think we need to have more discussions and that there needs to be the kind of reevaluation that I mentioned. I'd be delighted to work with you and staff in completing that evaluation.
Okay, thank you. I appreciate it. I have no further questions, Madam Chair.
Thank you. The Chair recognizes Councilman Kenney.
Thank you, Madam Chair. Mr. Kromer, good morning. And gentlemen, good morning.
Again, this is -- I mentioned this the other day, and I've had the opportunity over the last eight years to raise these issues a number of times, and I think maybe 1824 OPERATING BUDGET - BILL 05 - 2/23/00 this is the third time I've raised this issue, and I want to point to something that concerns me. PHDC's annual report about their activities during 1999 indicates to me -- unless I'm reading or adding it up wrong -- that all of the projects listed in that particular report created 258 new homes in Philadelphia in Philadelphia for low- and moderate-income people, at a total cost of $38,300,000, an average of $148,000 a house. Now, ten years ago, I bought my house in South Philadelphia for about $80,000. Probably I paid a little too much, but we wanted to move and we went -- the average person in Philadelphia is not living in a house that's worth $150,000. That is, the average working person, middle-class, blue-color taxpayer is not living in a house of that value. How do we justify spending that kind of money to house low- and moderate-income people when middle-class taxpayers are not able to find a program or a house of that value with amenities unless they move into Washington Township or Springfield, Delaware County. I mean, are -- 1825 OPERATING BUDGET - BILL 05 - 2/23/00 where's the emphasis and? Why are we spending this much money for unit?
Most of the housing that is produced or made available through the program costs substantially less per unit. The Settlement Assistance Grant Program has been widely publicized. The cost per unit through that program is $1,000 per house. It's a sales housing program that's linked to the private market. We have a very successful moderate rehab program for recently-vacated houses. The top subsidy is $25,000.
The deal with that program is that on the other end of the scale, there is higher-cost rehabilitation, very higher-cost rehabilitation that we have supported. And we have supported that on a limited basis while trying to keep costs as low as we can, because a part of the mission of OHCD, as we've seen it in the past, has been to rebuild neighborhoods in North Philadelphia, west and south and elsewhere that were previously industrial. 1826 OPERATING BUDGET - BILL 05 - 2/23/00 And frequently, that means acquiring land that was broken up into small parcels, correcting environmental problems at great cost, producing and building new streets, removing lead from older houses to comply with federal regs. And that's very costly. And in some cases where we felt that the development has value as an anchor for community, we've supported higher-cost rehabilitation while trying to support an underwriting that squeezes every dollar. The result is a still very high cost.
How do you explain -- or how do I explain to the family in Mayfair or Mt. Airy or South Philadelphia, the Northeast, who lives in a rowhouse, who wants to move up to a $150,000 home but can't find it because they work and pay taxes under any program but wind up being forced out the door to find a house, a single- family home with a garage, and a lot of these projects that are done that I've seen are $150,000 rowhouses.
They're not even the single-family, better-amenity house that you 1827 OPERATING BUDGET - BILL 05 - 2/23/00 would find in the suburbs. We're doing $150,000 rehabs on rowhouses. I mean, how can we justify that in the spending of tax dollars? Now, granted, a lot of this money may not be coming directly from the General Fund, if any of it's coming from the General Fund, but it's coming from their taxes. And when they get paycheck and go down that line that takes out federal taxes and state taxes, that money comes back to programs and agencies like yours and we wind up spending exorbitant amount of monies on stuff that they don't even have an opportunity to buy themselves. I mean, it. . .
Exactly. Well, I believe that a number of families in Mayfair have been assisted through the Settlement Grant Program and have moved up to a higher-priced, better-quality house. Your question --
Where are they doing that at? What higher-priced, better-quality house are they moving to?
I can give you the statistics, but I believe the answer is, in 1828 OPERATING BUDGET - BILL 05 - 2/23/00 neighborhoods like Fox Chase, there is a movement to the Northeast that we've supported through the program. But the question remains, how can we justify this? My response has been, and it may not be a response that plays well out there, that housing production of this type, in strategic locations to rebuild older industrial communities, is a part of the City's economic development policy. It's just as important in its way as the Convention Center, which cost $30 million per acre. How do you justify that? You don't go around --
I justify it in the number of jobs it's produced, in the number of tax revenues those jobs have produced. And my problem is, and this is what I've been asking for now for three years now, what is our program to invest either state, federal or local dollars into providing projects that appeal to people who make 50, 60, $70,000 a year, 150,000 of which have left the City over the last eight years? Now, I mean, talking about economic development issues and rebuilding North 1829 OPERATING BUDGET - BILL 05 - 2/23/00 Philadelphia or other areas, that economic development loss of taxpayers and their families and their contribution to the City because we haven't paid one iota of attention, in my mind, to anything that their needs are about, and that's why I have had people who have moved out of the City who said, I never wanted to go, but my wife drove me crazy for a house with a garage and a family room, and I couldn't find it anywhere in Philadelphia, so I had to move to Washington Township. I would love to have stayed in the City.
So when I have low- and moderate-income people living in $150,000 homes and we don't have one program to build new construction for people who want to stay in the City and who are making 50, 60, $70,000 a year, we're going to lose that tax base, we're going to have wonderful homes for poor- and moderate-income people, but we're not going to have much of a tax base left to pay for anything else. And that's one of my real disappointments in the last three or four years, 1830 OPERATING BUDGET - BILL 05 - 2/23/00 is that I don't think we're doing anything to approach that cohort of people, and I think we're going to continue to lose them as long as we don't give them choices.
Just a couple of comments. The "Come Home to Philadelphia Program," cosponsored with PNC Bank with the Economic Stimulus Program, is aimed at just that income level and has produced many settlements for middle-income people. Stimulus Funding, of course, is supporting the Jefferson Square Development, which is specifically designed to address that problem, and a major commitment of funding Spring Garden venture, which is a mixed-income development. Clearly, it's not enough. But if I could just add, with respect to the North Philadelphia, middle-income people who make up to 120 percent of the City median are now moving into the 18th and Oxford area, the Cecil B. Moore area, and they're delighted to do that because we made a substantial investment in upgrading that area at a very, very high cost, but we've got a mixed-income community there and we've 1831 OPERATING BUDGET - BILL 05 - 2/23/00 got a middle class there that was not moving into that area for or 30 years. 4
And I'm not 5 contending that we stop doing that. What I'm 6 contending is, we've got to find a project or 7 program somewhere that takes vacant available 8 land, turns it over to a private suburban-style 9 developer, and then offers housing stock for 10 people who want to pay for a house between 120, 11 130, 150, 160, who can't forward to be 12 participants in any of the other programs that 13 come with low- and moderate-income requirements. 14
But I can't point 16 to one of those projects that we've taken and 17 we've segregated some money and said, Let's take 18 40 acres, 50, 80 acres somewhere in Philadelphia, 19 let's find out about the environmental concerns, 20 turn it over to a Toll Brothers or somebody like that and say, Build a suburban community here in Philadelphia so that I don't have to have people who are leaving the City. And what we could wind up with is a middle- and upper- middle- community that's integrated, that's ethnically diverse, that 1832 OPERATING BUDGET - BILL 05 - 2/23/00 has the same income levels that are not now spread all over Maple Shade, Turnersville, Springfield, and everywhere else. I mean, we have try to in some way deal with that cohort of people, and I don't think we're doing it. I think we're making some particular developers rich who are involved in low- and moderate-income housing development, and I think that's where all the emphasis has been. And I think it's a huge mistake, and we've overlooking that group of people.
I think we'd probably agree that Jefferson Square is the kind of venture that we need to see more of on a larger scale. Two points with regard to that. To do more Jefferson Squares, we need more non-federal money. We can't support a Jefferson Square with the HUD money because of the income limits that go with it. Secondly --
Have we attempted to deal with the federal government or a Congressional delegation with some of these issues for some potential waivers or anything like that?
It's a statutory 1833 OPERATING BUDGET - BILL 05 - 2/23/00 requirement which would take an act of Congress to change, and I don't see --
Have we approached any committee any Congressional people to change any of these regulations or to give us a special opportunity to deal with on a waiver situation some dollars to deal with this kind of project? Or do we just assume, Well, these are the rules, and this is all we can do?
We have inquired into that, but consistently, the response that has been "no way."
Secondly and more important to me strategically is, where is the site? As you know, with Jefferson Square, a lot of discussion has taken place with regard to relocation and the fact that we don't have 40 acres of cleared land but --
There is land that I can identify for you privately. I don't want to do it publicly --
-- 'cause the 1834 OPERATING BUDGET - BILL 05 - 2/23/00 prices will start skyrocketing, but there are parcels of vacant area available along our waterfront, in parts of Northeast Philadelphia and other places like Southwest Philadelphia, that we could deal with, but we're not even paying attention to that.
I think it would be very worth while to have that discussion so that we can start doing some homework regarding those parcels and see if we can't pursue them.
Thank you very much. And I'm sorry I went overtime. Thank you.
Thank you. The Chair recognizes Councilman Nutter.
I was looking at your testimony, and in the third paragraph on the first page, you lay out that the Operating Budget for OHCD is $139 million, and then you go through what the major components are in the 74.8 and the 1835 OPERATING BUDGET - BILL 05 - 2/23/00 60.1 and the 4.1 million in the General Fund. Now, my recollection from last year's CDBG hearings, CDBG Year 25, was that for the Consolidated Plan, it showed administrative costs and program costs of a total, I believe, of $29 million. Is that your recollection?
Can you explain the difference between administrative costs and program costs. And if your General Fund support is $4.1 million, where does the rest of that money come from?
Yes. The basic division that is set forth in the Consolidated Plan is between general administration, the salaries of people like myself and these gentlemen, who carry out the overall administration of the program, and so-called program delivery, in which a person's -- an individual's job is directly related to the production of housing or the delivery of services. Program delivery would include, for example, the construction inspections that the Redevelopment Authority staff undertake, or the 1836 OPERATING BUDGET - BILL 05 - 2/23/00 architectural work that the Authority's staff architect completes. That's a -- there's basic link between the work and the production of housing.
And those positions are not funded by General Fund dollars; they are funded by what pool of dollars?
Most of those positions are funded through the federal dollars, the Community Development Block Grant. The General Fund enters into the picture only in connection with these programs that are listed in my testimony. These are programs, the transitional housing programs that have always been funded by the City but had previously been administered through the Office of Emergency Shelter and Services. So the administrative funding associated with those programs, the Voucher Program and the Homelessness Prevention Program, continue to be funded through the General Fund, and only those programs. All of the other programs are proposed to be funded through the Community Development Block Grant. 1837 OPERATING BUDGET - BILL 05 - 2/23/00
All right. So let me make sure I understand this. The total cost to really run the operation, Housing, RDA, PHDC, PIDC, there's even smaller sums of money for like the Law Department, Planning Commission, other entities, that total is $29-plus million.
-- of the federal funding in either CDBG funds or home funds or any of those --
All right. So the 1838 OPERATING BUDGET - BILL 05 - 2/23/00 City, rather than using General Fund dollars to support, in most cases, the salaries of City employees, is off-loading those costs onto the federal programs whose primary purpose is to provide low- and moderate-income people with a wide variety of services, whether it's housing or any of the various eligible items, according to the federal regulations; is that correct?
And if that's the case, then is it accurate to say that for whatever dollars the City might substitute in the cost of administration and program services, those dollars would then go into -- the substituted dollars would then be able to provide more service or more housing to low- and moderate-income people; is that correct?
Now, why is it done that way? Why are we off-loading our mostly public employees, City of Philadelphia, or quasi Authority people, why are we off-loading their salary costs onto the programs that are supposed to support low- and moderate-income people? 1839 OPERATING BUDGET - BILL 05 - 2/23/00
I think the rationale in Philadelphia and in other cities in the past has been that the administrative costs are ineligible program expense, and that it makes sense to organize the program, complete with program costs and administrative costs, as a single entity, as a single unit, in the consolidated plan.
Yes, but it that doesn't mean that it has to be done that way in the future. But I think the feeling was that there's a finite grant program that comes to the City from HUD, and that that grant should pay for both the program and its administration. It doesn't mean that that is the only way that it can be done but that, I believe, has been the rationale.
But you would, in fact, have more dollars available for the population for which the funds are sent to the City. I mean, as I best understand this, the 1840 OPERATING BUDGET - BILL 05 - 2/23/00 federal government has some kind of formula, they figure out how many low- and moderate-income people are here in the area, based on census data, or however they figure it out, and they send the City of Philadelphia a proportionate share?
Isn't it true, then, that to the extent that the City of Philadelphia increases its support for administrative and programmatic costs on the General Fund side, you can then provide more services to the people for whom the money was sent here in the first place?
What percentage of the federal dollars that come are, in my terminology, "off-loaded" to pay salary costs for public employees?
I can provide the exact amount later, but the amount is roughly one-third of the total grant, including both the administrative and the program delivery.
Do you know of any 1841 OPERATING BUDGET - BILL 05 - 2/23/00 other cities across the country that do it that way? I mean, in an era of either stagnant dollars, and when they increase its -- and you may need a magnifying glass to see the increase, I mean a third of the dollars that come never reach the people that they're sent here for because they're off-loaded on salaries. I mean, isn't that a significant percentage?
I think the distinction between admin. and program delivery is important here. Program delivery, for example, includes the salaries of the Redevelopment Authority's Home Ownership Rehab Program staff, the Moderate Rehab Program staff. That program is a very good entry program for nonprofit groups that are just starting, and the Redevelopment Authority staff literally work with a new group on the first deal. They package the deal together and they spend a substantial amount of their time working directly with the group to build that capacity. So there are other kind of parts like that in which the salary is being paid but there's a substantial value that's being rendered to the community. 1842 OPERATING BUDGET - BILL 05 - 2/23/00
Well, your response raises another interesting question, then. The CDCs that make their application, you know, they're going to great work and they want to rebuild their communities and the like, and they put forward, I guess, a budget proposal for whatever it is that they want to do, how much of the dollars that they receive from the City are they allowed to show or account for administrative costs of their work?
The only dollars that they receive for -- through contracts, for example, for housing counseling or for neighborhood advisory committees, are dollars to deliver services or administrative dollars --
I'm talking about if somebody's going to build something.
They're going to do, you know, 50 units of housing, Councilman Kenney was talking about some of those per-unit costs, we don't need to have that discussion.
We're going to do 1843 OPERATING BUDGET - BILL 05 - 2/23/00 50 units of housing and we're going to develop it and it's a CDC that's either doing it on their own or they're doing it with a third party, maybe a for-profit entity. What amount of that money is allowed to be used for administrative costs for that project?
Well, there really isn't any set-aside for administrative costs. All of the development that is supported through the program --
-- is awarded on a performance basis, and the underwriting allows for a 5 percent developer fee, which has to cover everything -- you know, all of the overhead. And that fee is released as the construction gets completed. But there's no separate breakout for admin.
I understand, but admin. has to be covered by this 5 percent. So in essence, at the most, it could be 5 percent for what the CDCs do but the government is allowed to use up to a third of what it gets to cover its 1844 OPERATING BUDGET - BILL 05 - 2/23/00 costs, one, because part of it is allowed; and, two, because the City government, then, gets to not fund those public employees through general tax fund dollars as opposed to the federal dollars. Is that correct?
That's the approach that's been taken. Again, as with the division between housing and economic development, everything can be reevaluated, and if this is a good time -- this is an excellent time to do that reevaluation. Philadelphia devotes a lot more of its funding to contracts with community-based organizations. And if we didn't have so many contracts, we'd have a much lower cost -- much less administrative overhead, but we'd have less program delivery going out to the community and less work being done by community people rather than City employees.
Councilman, I'm not talking to anybody now, and I do know that you've gone way beyond your five minutes, so we'll have to recognize you with the next go-around. The Chair recognizes Councilman Cohen.
That cost of around 1845 OPERATING BUDGET - BILL 05 - 2/23/00 $150,000 per house that came up in the interplay of question and answer between you and Councilman Kenney before, is that $150,000, is that the cost just of building that house, not -- I'm trying to eliminate the other items you mentioned, about taking care of environmental problems, building streets, doing other things that you have to do when you deal with a badly polluted neighborhood, polluted in a very broad sense, physically polluted as a result of the neighborhood being run down for many, many years and basically deserted by most of its population? What does that 150,000 represent? Does it represent the total cost of putting everything in order so that you can build? Or does it, in fact, represent the cost of building a house?
That figure represents everything, including land acquisition, infrastructure, environmental work, and so on. The actual construction costs are under $100,000 for the most part, and in some cases, substantially lower, down to 80,000 or so. But really, Councilman Kenney's point is still well taken, that's still a lot of money, 1846 OPERATING BUDGET - BILL 05 - 2/23/00 there's no question about that.
For the house only, no. 6 It's the house plus all this other stuff.
I mean, as Councilman Kenney is pointing out to me, he's not -- he did not develop that figure, he is using the figure that PHDC used in its own report, and I think it gives a misdirection. I think there ought to be a figure -- I'd like to know it and I think we'd all like to know, what does it cost? And why does it cost so much? Because the common language is that it costs many those thousands dollars more to build a residential unit in the City than it does outside the City, and I would like to know, why does it do that and are their City policies to blame for it? And if there are, let's find out what they are and address those problems. I don't think the people that live the in the homes ought to be seen as the beneficiaries of large sums of money that they're not, if it costs 80 to $100,000 to build a home, and I agree 1847 OPERATING BUDGET - BILL 05 - 2/23/00 that's more than it ought to cost if the house has a market value, say, of 45 to $50,000. Now, we all know one imbalance that exists that nobody seems to be able to do anything about, and that's what Realtors generally refer to as a three-word slogan -- "location, location, location," that the identical house in the City will cost much more than outside the City. And within the City, different areas will cost much more. Fairmount, near the Art Museum, the houses are far more expensive as well as other parts the Center City. We can enumerate many areas where the houses cost much more than similar structures, maybe just as good structures, maybe better structures in other areas of the City. That, I don't know how you resolve. But I think there is a need to address middle-class needs in the City, and there's also the need to address low-income needs. And I would like the City to approach it in a way that doesn't pit one group against the other. Because both groups together, I think, form the bulk of people in the City. We haven't convinced corporations to 1848 OPERATING BUDGET - BILL 05 - 2/23/00 whom we contribute in all kinds of funding to induce them to come in, we contribute many millions of dollars to them, but apparently, the City either hasn't bothered to or has been unable to convince them to give certain advantages to their workers to live the City. I'm not sure that it's just the wage tax. You know, they say you lose 5 percent to your wages as soon as you come into the City. It seems to me if we give corporations many millions of dollars and different kinds of benefits to come in, maybe those benefits ought to increase an automatic 5 percent increase to the workers to make up for the loss, you know, in some fashion or another. But I think we need it. As a City, we need every income level, and I think Philadelphia physically houses and has sites that would accommodate almost every conceivable need except maybe -- well even, the super mansions, we have many super mansions in the City. I don't know how many of them still survive. So I would like to see a breakdown. Now, is PHDC under your general jurisdiction? 1849 OPERATING BUDGET - BILL 05 - 2/23/00
Yes. They produce that housing under contract with us. And I will submit to the Chair a breakdown.
And then we at least will have, I think, a basic comparison, though I say we ought to find a way to address the needs of every element of the population.
Maybe the fault lies in the fact that when we cut the top levels of the federal income taxes from 90 percent to 39 percent, maybe that's what has to be reconsidered again, because the beneficiaries of that may be able, if that condition were restored, to provide the kind of income necessary to help level the housing stock for everybody in the City.
Yes. I will also reopen, based on your comment and Councilman Kenney's, I will reopen with the Mayor's staff the issue of, can we go to Washington, can we get some of the policy raised, is there an opportunity to -- 1850 OPERATING BUDGET - BILL 05 - 2/23/00
Yes. I think we could develop a sound program that unites all groups in Philadelphia. I think there certainly ought to be programs for middle-class people because I find in every community that there are a lot of people who kind of don't understand why they're excluded from so many governmental programs because maybe they don't make -- I heard the figure of 40, 50, 60,000, sometimes the exclusions begin at and $30,000 in certain 12 programs. 13 I think we've got to -- and we're 14 looking for your office to suggest programs, 15 because you're the ones that are most familiar 16 with what exists now in the way of federal and 17 state regulations. But if you could come up with 18 the other kind that unite instead of pit one 19 element against another element, I think you could 20 get a lot of unified support. 21 And I sense the beginning in 22 communities throughout the country, I think the 23 election results are showing, there's something 24 going on in the country that none of us quite 25 realize. And I think what it basically is an 1851 OPERATING BUDGET - BILL 05 - 2/23/00 awakening of interest by people in political activity. For many years, they were satisfied the economy seemed to be meeting all of their needs. I think they're beginning to want to participate, and I think we have a new opportunity to raise the kind of issues that we're discussing this morning. Thank you, Madam President.
Thank you, Councilman. The Chair recognizes Councilman Ortiz.
I go along the same way, the same route, because I've been in most of these houses that we, you know, I've attended most of the openings, I supported most of the programs that have gone. And the thing that shocks me about it is that these houses are not worth $150,000, and the rooms is too small, the materials that seem to be used are not of the quality that seems -- for $150,000 you can get two fireplaces up in Mt. Airy, East Oak Lane, and so on, you can get nice, sturdy, big homes across the City. And the cost of it, you know, for a very, very small quantity. . . 1852 OPERATING BUDGET - BILL 05 - 2/23/00 The question Jim Kenny asks is very real. It has a sound to it because we all worry about the cost. This is money that perhaps can build more than one house. If we're going for low-income housing for the cost that we're spending, you know, and because the market value of the house will never reach $150,000. The person who will move into that house will not be able to sell that house for $150,000. Is that true, right?
That's true, but that doesn't mean that market values won't go up at a higher rate in neighborhoods than in other areas of the City -- Yorktown has proved that -- and in areas like Germantown, where we've made consistent investments for more than a decade. The Greater Germantown Housing Development Corporation is now pricing some of its houses at more than $100,000 per house. It's a breakthrough.
Mr. Kromer, one of the things that I've asked you across the years is, as we build these developments and we spend these huge amounts of monies in these neighborhoods, minority contractors, what is the 1853 OPERATING BUDGET - BILL 05 - 2/23/00 participation of minority contractors, one, in the jobs that are created through these developments, in the contracts that flow down to them? What is the level of contracts that go to minority contractors? And what is the level that goes to the contractors that come in, the big contractors the majority contractors that get the monies?
There's really a wide variation in the level of neighborhood resident and minority participation in the program. But I expect, as we've discussed in the past, that Council would not be satisfied, as I am not satisfied, with the level of participation that we see. In some developments, it's more than others. Overall, I don't think we have reason to be satisfied. As I indicated in a memo that I circulated to Council at the end of last year, we've got a problem, a workforce problem in terms of minority participation in the building trades and in the prevailing wage and --
We've had that problem with the building trades for 30 years.
That's right, and it's 1854 OPERATING BUDGET - BILL 05 - 2/23/00 being alleviated somewhat, but I don't think anybody would be satisfied with the rate of progress that's being made, and I think that's one of the issues that we'll need to confront this year, about either mixing up the prevailing-wage jobs or getting --
I'd like -- I'd like -- I'd like it to see writing, for instance, the amount of jobs and building that has gone on in the last four years or five years and who has had the majority contracts, the companies, and how many minority contractors across the City. You know, how many minority contractors have participated and what has been the level of participation of minority contractors in terms of thousands of dollars or whatever? Okay? The question, Councilman Goode asked you before is, I think, a discussion we've had about, how do we create jobs so that people can then create the market, so that people can go in and build homes and they can buy them? And it's a question that has never been answered to our satisfaction because job creation, business development, for instance, up in the Fifth Street 1855 OPERATING BUDGET - BILL 05 - 2/23/00 corridor, has not been what it should have been, and I don't think any corridor, any neighborhood corridor has gotten that type of development. That is a discussion, I think, that is overdue. But a shift in priorities has to begin sometime, because it is the job market, the entrepreneurial aspect, and if we can help rebuild, housing will pop up around those neighborhoods if people are working.
On the other hand, if an aggressive housing development program will produce more retail, as the APM experience shows, with a supermarket having opened only because a critical mass of housing development produced new families in the neighborhood. I think the other question too is, does more public money make a difference? Is more public money going to be decisive in substantially increasing small-business development expansion? I just don't know, because that's not my area of expertise, but I think part of the discussion should be, what is the value, what is the result that we get out of a housing dollar compared to an economic development dollar? And we've got time 1856 OPERATING BUDGET - BILL 05 - 2/23/00 to have that discussion, and I'd certainly welcome that.
Thank you, Madam Chair. I just want to go back won't be one more time to the PHDC report on developments. If my numbers are correct of $38,300,000 expended in 1999, $22.1 million seemed to have gone into one particular section of the City, which left 16.2 for the rest of the City. What process is employed to determine that that level of available dollars in this particular program goes into one section of the City as opposed to the housing needs in southwest or northwest or South Philadelphia or West Philadelphia? How do we determine that that bulk of that $38.3 million got put into one section of the City as opposed to anyplace else? 1857 OPERATING BUDGET - BILL 05 - 2/23/00
During recent years, PHDC has been assigned by me, by the Office of Housing and Community Development, to take responsibility as a developer in areas where we have no community development corporation, and we have either an existing commitment to a community or a need to produce some housing as part of the City's overall strategy. One example, the home ownership zoned area and the Cecil B. Moore area was planned out by the National Temple Non-Profit Corporation in the 1980s. The group went out of business, PHDC was assigned by me to take on that role, and the result is, roughly, a $20 million commitment of development funding to PHDC to carry out. That was true in a number of other smaller cases. And in addition to those assignments, PHDC takes responsibility for a relatively smaller program, the Home Start Program, in which within half a dozen target areas around the City, vacant houses are rehabilitated. But the basic PHDC activity over, the past five or six years, has been the Cecil B. Moore area and lower North Philadelphia area. 1858 OPERATING BUDGET - BILL 05 - 2/23/00
What's the rationale for that? And do other sections of the City have less housing needs, less problems?
And -- I'm sorry -- is there a board that makes that decision, is it you who makes that decision?
The decision is really made by the Office of Housing and Community Development, and PHDC carries out the assignment, and the priorities and funding allocations by area are a part of the consolidated plan, which is submitted to City Council. In the Cecil B. Moore area, we had an opportunity to secure a substantial amount of additional federal funding, more than $12 million, as part of a national competition, and that area was the only area that was available in Philadelphia, because we had a neighborhood plan, we had some cite control, we owned some real estate there, and it was the only area where we could show the federal government that we were ready to go, and we won that wared and --
Just so I 1859 OPERATING BUDGET - BILL 05 - 2/23/00 understand how the process works, that is a decision made by you?
Is there some board or is there some process, I mean, or is that just soley the decision or at the discretion of the housing director?
The discussion is mine, but it is, in every case, based on the Consolidated Plan, which is authorized by the Mayor and City Council.
What do we expect to happen in various other sections of the City in the future as we move forward into the future? I mean, since we've put in such an emphasis on housing development in one area, have we neglected or in some way not done some of the work we needed to do in other areas, and will that emphasis be swinging back at some point in time?
Again, this is a good time for reevaluation, and the answer is yes, because a good deal has been accomplished in areas like lower North Philadelphia. I think a good example of going to 1860 OPERATING BUDGET - BILL 05 - 2/23/00 another area is the substantial commitment that's been made to the King Plaza Revitalization Program. Which not only includes demolishing the high-rises and building on site, but implementing a very, very ambitious program of housing rehabilitation east and west of Broad Street so that there's a total improvement on either side of the Avenue of the Arts. The Community Development Block Grant is funding a substantial amount of that have area-wide improvement, and the result will be a substantial improved real-estate market reinforcing the middle- and upper-income neighborhoods that surround that area and a completed community that will be successful for generations.
I'm just trying to get an idea of how the process works. Thank you.
Thank you, Madam Chair. Mr. Kromer, let me just go back to 1861 OPERATING BUDGET - BILL 05 - 2/23/00 where I was and I will hopefully finish up in that area. In response to one of my questions, you said that what seemed to be driving the high level of administrative or administration in program costs was the large number of contracts that you have with the various CDCs. Now, is that accurate? Is that what you said?
That's a substantial piece of the program delivery element, yes.
So I mean, I took from that in the last round, and then I had to relinquish. I mean, that's almost, in essence, saying that it's the CDCs' fault or comes as a result of, Well, if we didn't have so many CDCs, then our admin. and program costs wouldn't be so high, but it's always been my impression that we have actively kind of encouraged and promoted CDC activity in Philadelphia. I must have sat through a half a dozen budget hearings over the years where it was proudly stated that Philadelphia has a high proportion, maybe the highest in the country, of CDC activity, and we like them and we love them. So I mean, now they take on the added 1862 OPERATING BUDGET - BILL 05 - 2/23/00 responsibility that even though we pushed and encouraged you and supported you to do things, it now causes us to spend a third of our money that comes from the feds on admin. costs to monitor you and what you do. I mean, is that the deal?
It's well worth the expenditure, and I think we can be proud of the accomplishments we've achieved, and I believe we should continue to support the role of CDCs. Thinking, however, from a strictly --
That doesn't mean, though, that we then have to add on that as a part of that, we will also spend a disproportionate share of the funding that you would normally get to feed the government beast. Because the government can be fed from somewhere else, right?
If "somewhere else" means the General Fund, in theory, yes, if the money's available.
Well, more than in theory; in fact. I mean, you do factually have some General Fund dollars that support your operation.
You have a $139 million total budget, million from the 4 General Fund.
There is nothing to stop, other than my good friend back there who monitors the purse strings, there's nothing to stop the City of Philadelphia from increasing its share of covering the cost of these public employees and not off-loading those costs out of CDBG funds. There's no prohibition on that, correct?
So if the City decided that it could cover all of its public employees as it normally covers all of its public employees out of its money and not the federal money, there's no prohibition on that, correct?
And if we did something like that or changed the percentage mix, we would, in fact, increase the amount of funding that's available out on the street to do low- and moderate-income housing, to do all of the items 1864 OPERATING BUDGET - BILL 05 - 2/23/00 that are eligible by the way of CDBG guidelines; isn't that correct?
Okay. Let me ask Mr. Dubow a quick question. (Rob Dubow comes forward.)
Very good. Mr. Dubow, why does the City, in its budget process, deal with OHCD and the various other agencies and have such a small percentage of funding from the General Fund to cover the regular administration and programmatic costs of our various housing programs and choose, rather, to utilize the scarce federal dollars that are sent here on the benefit low- and moderate-income people, and pay public employees with those dollars? Why do we do that?
We do it because the -- those employees work exclusively on projects funded with those dollars, and we do that with a 1865 OPERATING BUDGET - BILL 05 - 2/23/00 number of grants.
Mm-hmm. Well, isn't it true that when we revitalize housing or put new housing in place, that eventually those properties get on the tax rolls, and then the Board of Revision of Taxes, I guess, send its assessors out and they figure out what the taxes are for that, and somebody starts paying property taxes, whether it's on the home ownership units or even on the rental units, I assume someone must be paying real-estate taxes on those properties; is that correct?
Okay. So we have money from the feds to do housing, we off-load from that money to pay public employees to help with the production of that housing, the City puts a very small amount of its General Fund dollars to cover those costs. The houses then get built, and taxes are generated, which only go to the General Fund. Is that the circular process? 1866 OPERATING BUDGET - BILL 05 - 2/23/00
Well, they go to the General Fund or they go to the School District, but yes.
Okay. Well, why don't we at least at some proportionate level increase the amount of General Fund support for OHCD, given the fact that we know that what those people do, and in the production of housing, we're actually going to make money off of that? Isn't that true?
It is. And I don't think we've ever done the economic analysis to see what level of revenues we generate out of that, so I don't know whether it's a substantial amount of real-estate taxes. It's probably an analysis that's worth looking at.
Well, let me more formally make the request. Why don't we go back over the last six CD years and take a look at all of the housing that was produced during that time, look at what the tax level was for that particular property before it came on line, look at the tax 1867 OPERATING BUDGET - BILL 05 - 2/23/00 assessment on that particular property when it became occupied, and calculate what we've received in the General Fund, the real-estate taxes from the now-developed properties that were done primarily with the federal dollars. And even if it's not some incredibly huge number, wouldn't it just be a better show of the City's support for housing and housing production services if the City paid its public employees who do that work, and put the maximum amount of low- and moderate-income dollars that come to the City out on the street for the benefit of the people that it was sent here for in the first place?
Again, the theory is that those employees work on those projects so it's justified to pay them out of the those revenues. And also to the extent that --
And to the extent that we shift those employees to the General Fund, it replaces other General Fund dollars for other services. 1868 OPERATING BUDGET - BILL 05 - 2/23/00
Were many of those employees already on the General Fund payroll in the first place, and don't some of them do other things beside the housing activity? All of the people in that budget only work on CDBG-related projects?
There may be a small number of Redevelopment Authority staff who work on downtown projects, but the vast majority are exclusively CDBG.
Okay, I'd like to see that. If you could forward it to the Chair, I'm sure she will get it to us. Lastly, Mr. Kromer, can you -- did it go?
Madam Chair, I'm having hearing problems over hear. 1869 OPERATING BUDGET - BILL 05 - 2/23/00
Mr. Kromer, can you get some data on the top cities in the country 6 and find out how they utilize their CDBG funds and 7 deal with the issue of the admin. costs and the 8 programmatic costs and what support those cities 9 provide for the comparable agency to the Office of 10 Housing and Community Development here in 11 Philadelphia through their own regular tax 12 dollars? 13