COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE OF THE WHOLE PUBLIC HEARING - - - Room 400, City Hall Philadelphia, Pennsylvania Monday, March 24, 2008, 10:15 a.m. - - - Bill 080022 - Alternative BPT computation Bill 080154 - Capital Program - FY '09-'14 Bill 080155 - Adopt FY '09 Capital Budget Bill 080156 - Adopt FY '09 Operating Budget Bill 080157 - Amending tax rates, credits, alternative tax computation for BPT Bill 080160 - Establishing rate of taxation on parking transactions Bill 080161 - Re Wage and Net Profits Tax Bill 080168 - Revising certain types of BPT Bill 080173 - Resolution providing for approval of Revised Five-Year Plan (Full text of all of above attached hereto) Committee Members Present: Anna C. Verna, Chair Curtis Jones, Jr. Jannie L. Blackwell James F. Kenney Darrell L. Clarke Donna Reed Miller Frank DiCicco Frank Rizzo W. Wilson Goode, Jr. Marian B. Tasco Bill Green - - - V A R A L L O Incorporated Litigation Support Specialists 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 I N D E X WITNESS Rob Dubow, Director of Finance......... Steve Agostini, Budget Director........ 27 John Nacchio, Acting City Treasurer.... 37 Keith Richardson, Revenue Commissioner 81 James Haley, Deputy Revenue Commissioner 96 Marlene Duley.......................... 97 Deputy Water Revenue Commissioner. 3 3/24/08 Whole 08022,154,55,56,57,60,61,68,73
Good morning, everyone. The Committee of the Whole is now in session. (Witness comes forward.)
Good morning, Mr. Dubow. Please identify yourself for the record and proceed with your testimony.
Good morning, Council President Verna and members of City Council. I am Rob Dubow, Director of Finance, and I am pleased to provide testimony on the department's proposed Fiscal Year 2009 operating budget. The proposed budget for the Office of the Director of Finance supports a number of departmental divisions; Executive Direction, including debt management and the Administrative Services Center; the Office of Budget and Program Evaluation, Minority Business Enterprise Council, the Accounting Bureau, the Office of Administrative 4 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 Review/Bureau of Administrative Adjudication, and Risk Management. Joining me here today are representatives from those divisions who are available to answer your questions. In the Five-Year Financial and Strategic Plan, Mayor Nutter indicated that his administration would focus their efforts on achieving results in six key areas, which are: 1. Public Safety 2. Education 3. Jobs and Economic Development 4. Healthy and Sustainable Communities 5. Customer Service During these FY 2009 budget hearings before City Council, you have heard from various departments already and, will hear from additional departments, regarding their plans to achieve results in these six areas. 5 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 The Office of the Director of Finance is a central agency that provides leadership and support to departments so that they may achieve success in each of these key areas. The FY '09 budget, as proposed, provides the necessary funding for the Office of the Director of Finance to accomplish this objective. 1 billion and includes: 1. $967 million in Class 100 funds. This will provide compensation for 169 employees and fund fringe benefits for all City of Philadelphia General Fund employees. The Class 100 appropriation for salaries remains unchanged from FY '08, and the fringe benefit appropriation represents a decrease of about $13 million from the FY '08 estimated obligation level. The 6 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 requested fringe benefit appropriation decreases because FY '08's estimated obligations included one-time payments made as part of settlements with the City's unions. Also, a portion of the Class 100 funds will allow us to continue a fellowship program that began in FY '08 to host five post-graduate school fellows for a year-long placement in a City department. This is a new and exciting approach to attracting talented and energetic future leaders to the City. 2. million decrease overall from FY '08. million for legal services provided by the Defenders Association, and that's an increase of $781,000 over FY '08. The decrease in requested Class 200 expenditures is caused by the end of the City's agreement to provide 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 funding for CORE Philly Scholarships. 3. The budget has $575,554 in Class 300/400, unchanged from FY '08, for materials, supplies, and equipment. 4. 4 million in Class 500 funds for contributions. 6 million in indemnity costs. 7 million in fees and interest earnings that will be deposited to the Housing Trust Fund and 10 million pay-as-you-go financing to fund street reconstruction projects. The Office of the Director of Finance has an 18 percent participation rate in contracting opportunities for female-owned businesses in Fiscal Year '08. 8 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 I'd also like to note that this represents the percentage for only a portion of the contracts in finance. The Finance Department also contracts with a number of law firms, financial advisors, and underwriters to assist with the issuance of debt and debt management. These contracts are not included in the above calculations 'cause the advisers are paid from bond proceeds and the budget does not include a contract (indiscernible) that can be included in the calculation for budgeted FY '08 contracts.
For contracts related to City bonds issues, the Finance Department achieved a 29 percent participation rate. And I'm sure you may have questions about the City's plan to issue pension-obligation bonds. We have posted an RFP for a financial 9 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 advisor to assist in our efforts to analyze this transaction. When we have an additional details analysis, we will provide that information to Council. At this time, I also wanted to recommend an amendment to the bill 9 that's before Council for consideration in the budget for the Office of the Director of Finance. I'm recommending that the 10 million in Class 800 appropriations for pay-as-you-go financing to fund streets reconstruction projects be removed from the Finance Department's budget and be placed in the budget of the Department of Streets, and that's consistent with the discussion we had in the earlier hearings. And during today's and tomorrow's hearings, you'll be hearing testimony from other departments and commissions under the Office of the Director of Finance, including the 10 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 Revenue Department, the City Treasurer, the Board of Pensions and Retirements, and the Sinking Fund Commission. I appreciate this opportunity to provide testimony, and I'll be happy to answer any questions that you may have.
Thank you. Mr. Dubow, on -13, you show an External Services Unit of ten positions at a requested level of $858,000. What does this unit do?
It's actually a group of people who work in other departments, and they're assistants to the Director of Finance. And in a sense, it's because the other departments don't have exempt positions, and we're supplying them with the exempt positions. And you can see there's an expenditure transfer below that. We 11 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 eventually ship all of those costs back out to the other departments.
Well, my next question was: You then show on the same page an expenditure transfer of 850.
Yeah. It's charging those people back to the departments where they work.
Okay. I see that for FY '09, you're eliminating the $4 million that went to the Philadelphia Education Fund in FY '08. What are the consequences of eliminating this program, and why are we doing it?
We entered into a -- originally entered into a four-year agreement to provide funding for the CORE Philly Scholarships, and that agreement has come to an end. And part of the rationale for the four-year agreement was that the CORE Philly Scholarships was also setting up an 12 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 endowment, and that endowment was supposed to help provide funding on an ongoing basis. We've since found out that there's probably not sufficient funding in that endowment, and so we're looking at our options for how to continue, or whether we want to continue funding, the scholarships.
Okay. On -18, you are requesting $74,000 for hearing officers. Can you elaborate on that, please.
Okay. And can you tell us why you're requesting an additional $16,000 in FY '09.
Yeah. I think there were vacancies during the year, and we're anticipating that those positions will be filled during '09. 13 3/24/08 Whole 08022,154,55,56,57,60,61,68,73
It was really one -- one member who wasn't present for most of the hearings.
Mr. Dubow, why is the administration of the Water Revenue in your budget? I assume it's because of the exempt nature of the positions?
Will the Charter change dealing with deputies alter how this is budgeted in the future?
It will -- I think it will help both here and with the line item we were talking about before, External Services; more of those individuals would all be assigned to the departments where they actually work in the budget.
Thank you. 14 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 On -71, you're requesting $36.5 million for the Defenders Association, which represents an increase of $331,000 from their FY '08 anticipated obligations. How will the increased funds be used?
Those increases are to pay for increase in benefit costs for the defender.
On -72, you are requesting $18 million for PGW. When will the City be able to eliminate this payment? You know, we're hearing about how 15 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 well --
PGW also actually gives us million, which you can see 12 on the revenue side, and it helps them 13 with their rate calculation to be able 14 to show this payment. So the net 15 impact on the City is zero of this 16 arrangement. 17 However, PGW's -- 18
Yes. I was going to get to that part next. PGW's calculation show that in 2012, they think that this payment may go away, so that that's their projection. We don't show that in the 16 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 plan, but they project it in 2012.
Would you please go to -79 and explain line 193. Why are the estimated obligations over $50 million more than the budgeted amount?
Yes. There were a number of -- that's the health medical benefits line. And during the first half of FY '08, settlements were reached with all four major unions on outstanding health-benefit-contract issues, and a number of one-time lump-sum payments were made as part of those settlements. So those one-time payments increased the cost of health benefits for the year. And then you'll see that in the next year, the cost goes down 'cause those one-time lump sums don't repeat.
Mr. Dubow, I know that you and Charlie McPherson talked last week about the 17 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 allowance of doubtful accounts of $794 million. That appears on of the City's annual financial report for 2007. Can you explain what this is and what measures the City is taking to collect these funds?
Right. And clearly, that is a huge number that, you know, sets off alarms at the moment.
We looked at it. As we're digging in, it's clear that there are items in there which never really were collectible, there are some items that are really old. And it's kind of raised issues for us on how we classify collections and how we go about collecting money in general. So we have been sitting down with the Revenue Commissioner to talk about ways to improve our process and 18 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 to figure out, you know, the best way to classify all of what we now call "receivables."
When you say many of them are not collectible, would you expand on that, please?
Yeah. I'll give you an example. For EMS, we charge $500 a run. Medicaid allows a reimburse of $300 and then funds 80 percent of that. The difference between 300 and 500 we never intend to collect for Medicaid recipients.
Yet it's shown as a receivable and then it eventually hits this category of something that is uncollectible.
But 19 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 didn't we hear not too long that the City was talking about raising the rates?
So if we can't collect them now, if we raise the rates -- (Indiscernible; parties talking over each other.)
This is just for the portion of people on run to our Medicaid. So there's a portion of people who get ambulance service who aren't on Medicaid, and that's where the revenue increase would come in.
-- we're charging $500. 20 3/24/08 Whole 08022,154,55,56,57,60,61,68,73
That's something that we're looking into. I mean, this issue obviously just came up last week, and we're trying to track all of this down.
Well, if in fact we're not collecting, as we should, I don't know what the sense is of raising rates.
So we're going to have that much more of a debt, which doesn't make too much sense to me. 21 3/24/08 Whole 08022,154,55,56,57,60,61,68,73
That's correct. We have the same exact issue; we're looking into that.
Councilman Rizzo, you have a point of information?
Madam President, I think you answered my question, but I want to ask it again. You're specifically referring to Medicaid. What's the difference between a person that's on Medicare that may not have the money to pay the difference than a person on Medicaid?
I think, actually, you're right, it's Medicare. There's no -- I don't think there's actually -- we have to get back to you on that.
Please, because, you know, you're cutting out an entirely, you know, a different -- a whole different group of people. Medicare, I think, are normally people that are very, very poor, which I can 22 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 understand, but there's a lot of people on Medicare that are also -- I don't want to use the word "poor" but might not be able to pay that difference, especially if they're insurance companies. And, you know, one of the basic things in life, when you pay taxes for 50, 60 years and you need an ambulance, you know, you kind of expect your government, if you've paid those taxes for a lot of years, to be helpful to you. So you're always going to get a little fight from me when you try to raise rates or you try to charge or go aggressively after people that can't afford to pay that difference.
Mr. Dubow, what is the current status of the administration's proposal for a 23 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 pension-obligation bond?
We issued an RFP for financial advisors to help us put the deal together, select bond counsel, select underwriting. The responses to that RFP are due today.
When do you anticipate that you will be able to present this proposal to City Council?
Thank you. The Chair recognizes Councilman Green.
I just have a question about the health, medical, and fringe benefits and why, for the entire city, they continue to be in 24 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 the -- finance your budget rather than assigning to each department so that we can see the true cost of, you know, each department's service delivery.
Actually, I think it's the way that our accounting system works, but, I mean, you raise a good point. In theory, it would make more sense to be able to see it in each department.
Is that something you think we can accomplish by next year?
I don't think we would have a new accounting system in place by next year. I mean, it's kind of a longer-term goal.
Do you have any sense of what the breakdown is, or is it just, you know, courts versus --
For example, courts versus, you know, other City 25 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 agencies.
I mean the largest payroll is in the Police Department, so they would have the largest benefit costs. I think courts is a fairly high personnel; they're in the top five or six departments, I think, in terms of personnel, so their benefit costs would be relatively high compared to other departments.
Can you try to give me a breakdown by department of what that is?
Thank you. I have a -- I'll take advantage of your presence here today to ask you a question about the feds' declining growth projections for the country as a whole. I know that the 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 overall budget was based on initially fed projections for the national economy they've been lowered significant -- FY '08's down to 3 percent -- and I'm just wondering whether or not you're revising your assumptions regarding overall revenue in the City of Philadelphia.
Well, we continue to monitor what's happening locally and what's happening with our collections. So, for example, the wage-tax collections have been very strong so far. If they start to weaken, you know, then obviously, we'll take another look. There are a couple of taxes in general that seem to be bellwethers of what will happen at least locally. One is the sales tax which was weak earlier in the year and now has actually gotten stronger, which is a good sign for our revenues. The other one, though, is the 27 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 transfer, tax which has been really weak, and I think one of the things we're likely to do before this process is over is take that projection down because that has come in more slowly than we thought.
But most of the out-year's assumptions are based on what the fed predicted for the national economy and I'm just -- as they lower your estimates, I'm wondering if you plan to lower your estimates. (Witness comes forward.)
Madam Chair, Steve Agostini, Budget Director. Actually, the projections we were using were from the Congressional Budget Office. The Federal Reserve doesn't typically doesn't do long-term projections because of the impact it has on interest rates. We used the first year and the near term for both Fiscal Year '08 and '09 and then calendar years '08 and 28 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 '09, and those projections were in the two-and-a-half percent and that was at nominal growth. They're anticipating real growth to slow down. I have not seen recent CVO projections that have reduced out-year growths in Years through of our plan yet; they haven't done that yet.
Yeah, that's correct. I haven't either, and I did misspeak. The only new projections I could find were from the fed, and they lower growth from to 1.3 to 2 percent next year. I just have a question now about the likelihood of -- and I think I know your answer to this, but what is the likelihood of a successful $4.5 billion bond issuance by the City given that our Dutch auction bonds continue to fail?
I don't think those two things are really related. The auction rate -- the auction rate market 29 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 has been failing. The fixed-rate market, which is what we're anticipating doing with our pension- obligation bonds has not been failing, so I don't think that it has any -- that that makes it any more likely that we'd have problems marketing our bonds. And we continue, when we talk to, you know, people in the industry about it, they still think that we'll be able to sell them.
I've had a few conversations with people in the industry, some well known FA's from around the country, and it is suggested that we ought to look at different alternatives; for example, look at cash outflows versus projected savings based on interest rates, doing a series of bonds that cover the difference every single year going out to 2019 versus borrowing 4.5 billion up front. And I just -- I know we talked about this the last time you were 30 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 here, but when you have an FA on board, that's the analysis I would like to see.
Right. And one of the reasons, obviously, that we're using an FA and going through the RFP process is to get, you know, a whole series of ideas and to look at how they all play out and what we think are the most attractive options.
Would you say that there are a lot of eggs in the pension-obligation bond basket with respect to --
A lot of eggs in the pension-obligation bond basket with respect to this budget? And, if for some reason, that we cannot issue these bonds or we can't issue them at a rate that is interesting to us, that we're 117 million short Year 1, and it continues to be 31 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 increasing up to 173 million in Year 5, not to mention the 50 million that we're spending as part of the savings until the budget. I mean, do we -- should we be looking at an alternative budget that has an assumption -- you know, one with pension-obligation bonds, one without?
Yeah. I'm not sure where your -- I think your numbers are a little overstated, but I think your conclusion is right. And one of the things that we are doing is looking at what kind of other scenarios we would have if the pension-obligation bonds didn't come through.
-- when it's done? Thank you. Thank you, Madam President. 32 3/24/08 Whole 08022,154,55,56,57,60,61,68,73
You're welcome. The Chair recognizes Councilman Jones.
Over the Easter break, a couple of financially disturbing things have happened countrywide: experienced a stock selloff that has shook the financial markets, and the rippling effects of it have impacted here in the Commonwealth of Pennsylvania with FIA. FIA has announced that they will not originate loans for college students this year they will leave that task to private banking institutions. Young people in June are going to be faced with the possibility that they are going to have to go to a bank, take out a loan for their education at a higher 33 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 interest rate; and for some of them with not so perfect credit, are going to have to go to even more oppressive lending sources. Most of this has been a track back to the sub prime interest rates, the high number of financial failures on these mortgages. And I want to just take this opportunity to commend Councilman Goode for sending a letter to the sheriff asking for a moratorium on sheriff sales while this crisis continues. But specifically germane to the young people that are going to not have FIA this year to depend on, we note that you are considering not funding CORE Philadelphia, which is a no-interest grant to young people coming -- or seeking higher education higher education, that over 9,900 Philadelphian young people have gone on to college with a grant as opposed to a loan with and that we've expended 34 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 about $20 million in the fours years of its existence, and I think it's a good investment. I'm very concerned that with the cuts in this that a lot of young people are going to have to make a serious choice as they fill out their financial applications right now. And can I count on this last dollars in grant opportunity? So you said that you were considering what we do, and I just want to ask the pointed question: When will we come to a conclusion so that we can tell Philadelphian young people that they can count on this money or whether they have to look elsewhere?
I think we have to come to a decision relatively quickly because they'll be making their decisions about college relatively quickly, so I'm hoping that that's something we can deal with in the next 35 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 couple weeks.
Most of these CORE Philly grants go to Commonwealth schools -- state and I 6 think an additional 7 colleges and 7 universities that are not necessarily 8 state schools, a total of 21 schools 9 that participate in this. 10 I just want to emphasize that 11 as we make tough budget cuts, as we 12 reprioritize where our dollars go, 13 that to accomplish some of the goals 14 that this administration wants to accomplish by increasing the number of college graduates, this is where the rubber meets the road, and I wanted to make that point on the record.
You're welcome. The Chair again recognizes Councilman Green. 36 3/24/08 Whole 08022,154,55,56,57,60,61,68,73
I'm sorry, Madam President. My light was inadvertently on.
Thank you. Are there any other questions of the Finance Director? (No further questions.)
I believe we were to break at 12:30. My suggestion is that we just go through because we only have two other departments today. We did make a call to the Revenue Commissioner, and it's my understanding that he's on his way. But I do see the City Treasurer here. So if the City Treasurer would please approach the witness table. (Witness comes forward.) 37 3/24/08 Whole 08022,154,55,56,57,60,61,68,73
Nice seeing you. Please identify yourself for the record and proceed with your testimony.
Sure. I have prepared written testimony today. And good day, Madam President and members of City Council. I am John Nacchio, acting City Treasurer for the City of Philadelphia. I appreciate this opportunity to testify before you about the FY '09 operating budget appropriation request for the Office of the City Treasurer. The total requested FY '09 budget appropriation is $770,304. This amount represents no change in funding or service levels from the current year of FY '08. The highlights of the FY 2009 38 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 budget request by proposed expenditure are as follows: Class 100 personnel projected expenditure of $672,992 represents 87 percent of the Treasurer's Office proposed budget and funds 8 positions. 9 The Class 200 amount is 73,088 10 and includes funding for the calendar 11 year 2007 study for -- to examine 12 authorized depositories' lending 13 practice. The combined Class 3 and 400 amount is $24,224 for supplies and equipment. As an overview, the mission of the office is to maximize the value for the taxpayers' cash and the City of Philadelphia government by promoting secure and responsible cash investment and check disbursement practices that are provided through friendly service. The core responsibilities of 39 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 the office is to be the disbursing agent for payments from the City's treasury by the distribution of tax and electronic payments in the modern, secure, and effective and efficient method. In addition, the office has adopted financial practices to identify the maximum amount of cash available after meeting daily cash requirements and investing the cash in various fixed-income securities, thereby providing a source of income revenue to support the City's financial commitments in both the Operating and Capital Budget. A treasury operations overview is provided as follows: Operationally each year, the Treasurer's Office provides internal services to 31,000 paid employees in over 48 departments in addition to external services to 36,000 pensioners, 19,000 vendors, 9,800 election workers, and 4,500 40 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 foster parents. The Treasurer's Office's manually initiates electronic payments of approximately 6,000 wire transfers and manages the coordination of over 900,000 automated clearinghouse (ACH) payments. In addition, the office provides administration for over 100 bank accounts associated with the multi-layer and tiers of banking transactions related to the disbursement of the City's $4 billion budget. 5 billion of investments that involve daily market trading and approximately 10,000 trades annually. In FY '08, the City Treasurer's Office has remained focused on providing departmental service and efficiencies. Safety and 41 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 security have been increased by implementing fraud and theft prevention measures. One example is the redesign of the different types of checks printed and issued by the City. This project was done in conjunction with MOIS. The green checks -- there were various sizes and required perforating and sometimes suggest -- have been replaced with a new standard single-page white stub, with a checked, blue-pattern background at the bottom. To make the check unique, an oval image of City Hall at the center is included. At the bottom, there is now a white background for a more readable micro code for more effective processing by the bank. The reverse side was blank, and now a signature line has been added, consistent with industry standards. There are also other, both visible and invisible, fraud 42 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 prevention features included. In addition to the check paper, another example of increasing security is the implementation of positive pay and positive payee matched on City bank accounts.
This is an electronic verification process engaged to protect both the City and the payees from potential fraud on a paper check by verifying the check number, check amount, and payee. In an effort to increase efficiencies, we have implemented automated e-mail notifications from the bank for reimbursement to the petty cash and imprest accounts, all of who have enrolled for an ACH payment. This has been a task that has eliminated what was done manually by approximately 150 Citywide petty cash, imprest, and account custodians. To further increase efficiencies in FY 2009, we will research the possibility of automated 43 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 online reconciliations for the petty cash and imprest account custodians as well as solutions to increase direct-deposit enrollment. I highlight that the City's voluntary enrollment of direct- deposit-of-pay program is in both the active employee payroll and pension payroll system and continues to grow. By way of a breakdown, 75 percent of active employees participate in the City's direct-deposit program, as do over 85 percent of our pensioners. For the City, the Office of the Finance Department's payroll division and the Pension Board administer the enrollment for the direct deposit. It seems that the message is being heard that is the most simple, safe, and secure form of payment. Another example is the volatile and uncertainty in the financial markets. We have performed 44 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 a risk assess of our investments, and the outcome indicates no significant risk. This has resulted by the guidelines and the guidance of our prudent investment policy adopted by the City. As with the six results areas of the administration, the Treasure's Office contributes to the goals of the shared vision and commitment to a responsive, effective, and collaborative city government by focusing on the values of respect, service, and integrity. In reference to public safety: Public safety has increased by implementing processes that reduce fraud and theft on City accounts and disbursements. These processes include increasing direct-deposit enrollment, redesigning checks to improved safety features, and the timely reconciliation of bank accounts. Increased direct deposit 45 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 will eliminate employee trips to the bank to cash a check, reduce the risk of lost and stolen checks, and reduce processing costs for the City in stop-payments and reissuance of checks. The goal is to achieve one hundred percent direct deposit. This can be achieved through an internal marketing campaign and the enrollment of employees with the continued cooperation of the Finance Department's payroll division. As it pertains to education: Education is implemented through the Treasurer's Office MBUCS, which is a group called Municipal Banking Users Group of Custodial Services. Seminars are held for the over 100 City employees who have banking-related functions in departments across the City government on topics about best banking practices as well as discussions on fraud and identity 46 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 theft. The focus for 2009 will be automated reconciliations. To support jobs and economic development and healthy and sustainable communities, we are called upon by the City Council to commission an annual study that analyzes data on community reinvestment, access to banking services, and loan commitments to the citizens of Philadelphia from our authorized depositories. The most recent study for the calendar year 2006 has been delivered to the members -- to all members of City Council in early March. In addition, the Treasurer's Office issues an annual request for information, an RFI, to be completed each year by the authorized depositories to maintain a focus on compliance and topics of current concern.
As it pertains to ethics: 47 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 Ethics training and classes have been provided and attended by all of the employees of the City Treasurer's Office. Ethics and best practices are reinforced within our daily operations. As it pertains to customer service: Our customer focus includes ensuring that outgoing payments are received in a timely and safe manner. All checks and payments are distributed the same day as the issue date. Replacement checks are to be issued within one to five days and ACH payments within 48 hours. In addition, we focus on improving the banking processes of the City custodians. Measuring progress will be achieved by developing an analytical staff to prepare operational studies and develop periodic and annual reports. This will both track and provide a basis to measure progress 48 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 for internal and external customer service. In terms of participation, the City Treasurer's Office has contracted with one nongovernmental entity in FY '08. The contract was with Econsult and MFR Associates in the amount of 75,000 for the lending study. The participation rate for contracts is 50 percent for African-American and women. So, in conclusion, the propped budget of the City Treasurer's Office will support the mission of promoting secure and responsible cash management, cash investment, and check disbursement practices that are provided through friendly service. This concludes my written testimony, and if there's any questions... Thanks.
Thank you. 49 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 The Chair recognizes Councilman Goode.
Let me start with a question I've asked you in previous hearings; I think we now have an answer to it. How many financial institutions are minimally qualified to hold payroll deposits?
For payroll documents, all of the 11 banks that are on the authorized depository list are enabled to participate in the payroll services.
But you put out an RFP last year for payroll depositories?
That's correct. And it concluded the RFP posting in 50 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 August of last year.
And how many financial institutions submitted proposals?
In the final proposal, there were six bank of the eleven authorized depositories. None of the banks were non-depository banks.
And were all six deemed to be qualified to receive payroll deposits?
In the process of the RFP of the committee, they took the top four and asked them to do further presentations, so it was narrowed down to two of the six that they felt were most qualified. 51 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 (Witness consults with Mr. Dubow off the record.)
Well, without getting to the two names of the banks that were eliminated from the final process, can you tell me why those six banks were reduced to a number of four banks?
I believe the committee looked at the submissions and didn't feel as though they met the minimum requirements for the RFP in terms their response. So they didn't -- they were either incoherent or they did not submit all of the material that they needed to submit.
So of the four banks, are all four qualified to hold payroll deposits?
Okay. So are we to anticipate legislation will be introduced at some point that will 52 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 include one bank that's been selected to hold payroll deposits and/or all of the banks that are qualified to hold payroll deposits? (Witness confers with Mr. Dubow off the record.)
There would be a possibility that in the legislation that all four banks could be mentioned, but most likely, the City would tend to select either one or two just for the requirement of security of the process so that it's uniform and consistent.
But it's anticipated that the City would want as many banks as possible that are actually qualified in terms of security and safety to be authorized rather than putting all of our eggs in one basket; is that the position of the administration?
Thank you. Thank you, Madam President. 53 3/24/08 Whole 08022,154,55,56,57,60,61,68,73
You're welcome. The Chair recognizes Councilman Green.
On your testimony, you mentioned that measuring progress will be achieved in terms of customer service by developing analytical staff to prepare studies, et cetera. Doesn't this capacity exist elsewhere in the administration; for example, the MBO's Office or the Budget and Program Evaluation Offices within the Director of Finance? I don't -- you're not implying that you're going to create your own staff to do this, are you? Or --
Yes, yes. Those abilities or those -- those services are provided in those agencies but not 54 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 particularly to the City Treasurer's Office. Currently, the office is composed of operational-type folks, and we don't have anyone who spends a full one hundred percent of their time analyzing our financial position and our banking statements, et cetera. We have relied on the program and evaluation units in the Finance Department, particularly for the RFP that Councilman Goode mentioned, because without them, we wouldn't have been able to go through the process, which was a year-long process. So we hope to develop some of those capabilities within the Office of the City Treasurer.
Currently, there's two positions that have been vacant; that's the executive assistant and an administrative analyst- 55 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 specialist.
And it would -- those people would now perform this function?
Yes. One of the things I would hope for is to do more periodic and annual reporting that would be the tools by which we could make better financial decisions.
Is there an audit trail within the City's financial computer system? By that, I mean: If someone makes adjustments or transfers, is it clearly logged to a particular user or to a particular computer, et cetera?
I don't know if I'm the best one to answer that question, but the person, or persons, in our office who enter into the accounting system do log on with their I.D., and they do enter information that is attributable to them.
And if 56 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 someone makes a change to someone else's information, is there a trail to that, of what the old information was and what the new information is and who did what?
I'm not sure where you're going with that question, but within the City's system, the City Treasurer's Office is only -- is dependent on the Office of the Finance Director and the accounting system, so we follow the guidelines or rules that they have for logging on and logging in an audit. The City -- one of the things the City Treasurer does not have, we don't have an independent system of our own, which would be a treasury work station, so we don't have that.
Okay. If -- since Rob's no longer testifying, could you please provide the Chair with the answer to that question, what the audit trail processes are within the City's 57 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 finance system?
Are there any other questions from members of the committee? (No further questions.)
Do we have -- I understand that the Revenue Commissioner is entering the building as I speak. Councilman Clarke, I think you may have had a question or two for Mr. Dubow? We can get him back. Mr. Dubow, Mr. Dubow? (Rob Dubow returns to witness table.)
I thought I was done. 58 3/24/08 Whole 08022,154,55,56,57,60,61,68,73
I believe Councilman Clarke would like to ask you a question or two, please. So we won't have to have a callback.
I just wanted to ask you a couple of philosophical/policy questions. What year did the City administration -- I'm -- I'm thinking it was during the -- maybe during the Rendell administration that we started a policy of tax reduction.
Fiscal '96, I think, was the first year where there was a reduction.
Do you know the amount of taxes that we cut from that time period? 59 3/24/08 Whole 08022,154,55,56,57,60,61,68,73
I don't -- I would just be completely guessing. You mean the first year of the cuts? I mean, I think it was probably in the, like, 10 to 20 million range.
No, I'm saying the total amount from that point to this point.
Have you -- have we seen -- 'cause we're all in this -- any evidence of job creation as a result of that tax reduction?
I think probably the best way to look at that is to look 60 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 at how the City does compared to the rest of -- to the national economy, you know, and how we track that. And I think we actually do a little better in the international economy than we used to, but it's something we should -- that we'll get back to you with, you know, the detail on that.
Yeah, in terms, you know, the changes in the number of jobs locally versus the changes in the number of jobs nationally.
So we're creating more jobs locally on a percentage basis, then?
I think, but we'd have to get back to you. I think we 61 3/24/08 Whole 08022,154,55,56,57,60,61,68,73 can do that analysis and get you the information.
So that's inconsistent with pretty much every newspaper report I've ever read.
Well, actually, I mean, if you look at the last year, for example, I mean, we've actually gained some jobs. And the question really isn't just, you know, that -- isn't just how does Philadelphia do? It's how does Philadelphia do versus the nation, and how does that compare to --