With me is Kumar Kishinchand, the Water Commissioner of the Philadelphia Water Department. Mr. Kishinchand and I are here to testify in support of Bill No.'s 980791, 980792, and 980793. The purpose of bills 980791 and 980792 is to authorize an ordinance constituting the Fourth and Fifth Supplemental Ordiance respectfully to the General Water and Wastewater Revenue Bond Ordinances of 1989, authorizing the Bond Committee, on behalf of the City, to issue and either at public or private sale in one or more series or subseries Water and Wastewater Revenue Bonds of the City of Philadelphia in an aggregate principal amount not to exceed $255 million, excluding original discount. The bonds, the Series 1998 and '99 Bonds, pursuant to Bill No.'s 980791 and 980792 will refund outstanding portions of the Series 77 12/2/98 FINANCE COMMITTEE - Bill 980791, 792, 793 1993 and the Series 1995 Water Wastewater Revenue Bonds. Due to historically low interest rates, the estimated net present value savings for this refunding is -- in fact I have some new numbers, but it is at least $4.5 million. Yesterday, the market actually rallied, so the savings levels have actually increased for this proposed funding.
And as of yesterday, what do you think the savings would be?
I have it here. We're looking on the Series '98 bonds, we're looking at about a 6.7, $6.9 million savings to the total transaction.
I suggest we get in the market this afternoon before anything happens. (Laughter.)
So it's a good time to be in the market. The purpose of Bill No. 980793 is to authorize an ordinance constituting the Sixth 78 12/2/98 FINANCE COMMITTEE - Bill 980791, 792, 793 Supplemental Ordinance to the General Water an Wastewater Revenue Bond Ordinance of '89, authorizing the Bond Committee, on behalf of the City, to issue or sell at either public or private sale to Pennvest, which is the Pennsylvania Infrastructure Investment Authority in one series, a bond in an amount not to exceed $6.7 million. Bill No. 980793 will authorize -- would authorize a 20-year loan from Pennvest at a very low rate of 1.406 percent for the first 5 years, and 2.729 percent for the remaining years. The 13 proceeds of this loan will be used to fund the 14 Water Department's water distribution renewal and 15 replacement program. The Series '98-99 Bonds will be fixed rate bonds in denominations of $5,000. Interest will be payable semiannually, and the bonds will be issued as revenue bonds, revenue bond debt secured by the revenues of the Water Department. We expect to pursue provision of bond insurance for all bonds. Therefore, such bonds will be rated AAA. None of the revenue bond debt will have any recourse to the revenues of the City General Fund. 79 12/2/98 FINANCE COMMITTEE - Bill 980791, 792, 793 As required by the First-Class City Revenue Bond Act and the Restated General Water and Wastewater Revenue Bonds Ordinance of 1989, the Finance Director and the City has transmitted with this financial report with respect to the water and wastewater system. Attached is the Finance Director's Report and the Consulting Engineer's Report, which should be a part of your package that was sent over a couple days ago. The preliminary schedule for the sale of these bonds is December 17, 1998. Therefore, we respectfully request a suspension of the rules to permit the City to issue the bonds in accordance to this schedule and in order to take advantage of the historically low interest rates. Attached is a listing of the financing team assigned to this transaction. That concludes my testimony. I will turn it over to Mr. Kishinchand to describe the use of the proceeds by the Water Department.
Commissioner, please identify yourself for the record and proceed with your testimony. COMMISSIONER KISHINCHAND: Good 80 12/2/98 FINANCE COMMITTEE - Bill 980791, 792, 793 morning, Chairwoman Verna and members of the committee. My name is to Kumar Kishinchand. I'm the Water Commissioner for the City of Philadelphia. I believe my testimony has been sent to the committee.
Yes. Does everyone have a copy of the Commissioner's testimony?
I have the Commissioner's testimony, don't have Mr. Queenan's testimony. COMMISSIONER KISHINCHAND: I have some extra copies if you'd like.
We have your testimony, Mr. Kishinchand. COMMISSIONER KISHINCHAND: Okay. Then I'll just summarize it. I essentially support what Mr. Queenan has already told you. As he mentioned, that this -- these monies from Pennvest will be spent essentially for water distribution system. The refinancing is essentially to reduce our debt service, and that reduction would be in the neighborhood of about $1 million on an annual 81 12/2/98 FINANCE COMMITTEE - Bill 980791, 792, 793 basis from the year 2000 to 2003 and somewhat more modest savings in the following years. These kinds of savings are certainly going to help us in reducing the pressure on increasing the rates, and if you recall --
Oh, I didn't hear you say that. (Laughter.) COMMISSIONER KISHINCHAND: We've already pledge to you that there will not be a rate increase until the year 2000. And this, with your support on these bills, will certainly help us achieve that particular goal. And insofar as the Pennvest loan is concerned, it's an excellent rate that we are getting. It's a revolving loan fund that has been set up by the Commonwealth of Pennsylvania. It's essentially financed initially by the federal government's grant program to the State, but we have become eligible for it, and this will be our second loan that we'll be obtaining, and the rates are excellent for it. And comparing to what our bond rates were essentially in 1997, the savings that we'll achieve will be in the neighborhood of 82 12/2/98 FINANCE COMMITTEE - Bill 980791, 792, 793 about $2.5 million over that 20-year period. So I would respectfully request your favorable consideration of this bill.
Thank you. Commissioner, with the Pennvest loan, it's my understanding that that is a statewide competitive program. When was the last time we received a Pennvest loan? COMMISSIONER KISHINCHAND: I believe in '93. It was in 1993, and that was for about $20 million that we received that.
Commissioner, you have identified approximately $1 million in savings from FY 2000 through FY 2003 if these bonds go to the market at relatively favorable rates. What savings do you project in the outer years of the debt service?
Excuse me, I'll just check the numbers. They are much smaller than that, but I will see if I have some numbers on it.
Okay. As mentioned by the Commissioner, the numbers are a million dollars out to 2003. Then, starting in 2004 to 83 12/2/98 FINANCE COMMITTEE - Bill 980791, 792, 793 2007, it's about 480,000 a year in savings. And from that point forward, it's several thousand dollars a year in savings out to the final year, which is 2013. COMMISSIONER KISHINCHAND: They range from a little over $4,000 to a little over $1,000 a year during those out years. So most of the savings are in the initial years.
Up front. COMMISSIONER KISHINCHAND: Up front, correct.
Well, we expect the cost for issuance to be somewhere between and percent of the paramount of the bonds of the total size of the transactions.
What was the rate that the City received on its bonds that went to market last month?
Two weeks ago, the City issued the series 1998 General Obligation Bonds, which was in the amount of $250 million, that was approved by City Council. It was a 30-year 84 12/2/98 FINANCE COMMITTEE - Bill 980791, 792, 793 issuance. We received a 5.15 interest rate on the longest bond, the 30-year piece. The average yield for entire transaction was 5.12, which is very good, very low, great rate.
Will the bonds be sold at public sale or a private negotiated sale?
This is a negotiated transaction. We have selected an investment bank to senior-mange this transaction. It will be a public sale from the perspective that we will go to market. We plan to go to market in mid-December, and it will be a public offering to the open marketplace for sale.
You have requested a suspension of the rules on these bills. Is it accurate that the required number of advertisements have appeared in the papers, which will allow us to suspend the rules on this bill?
One quick question. Mr. Queenan, attached to your 85 12/2/98 FINANCE COMMITTEE - Bill 980791, 792, 793 testimony, as with the previous bill, is a layout of the financing team. The total amount we're talking about is upwards of $250 million for this loan?
Yes, yes. Right now, we expect, given where rates are, the deal size is about $180 million at this point in time. It's been as los --
Right now, with the rally in the market, yes, it's actually up to 180 million. About a week and a half ago, it was down to about a 100 million. When we actually submitted the bill to City Council. When rates were very, very low, it was up to about 240, 250.
That's why you asked for the authorization not to exceed 255?
Right. At the time that we submitted the ordinance, where the market was, we were looking around 240, 250. The markets trailed off bit as, you know, time has moved on, 86 12/2/98 FINANCE COMMITTEE - Bill 980791, 792, 793 and we were down to 100 about a week and a half ago. And right now, we're back up to about 180. It's a lot of volatility in the marketplace right now.
I understand. With regard to the composition of the financing team, I would at least like to point out for the record, and I know there is a structure that the Treasurer's Office and Finance tries to follow with regard to selection of team members and kind of a pairing of different investment bankers or the legal team to specific entities, whether it's the Redevelopment Authority or the Parking Authority, or in this case, the Water Department. You've provided the asterisks next to the various companies designating either MBE or WBE. It does stand out in contrast to, I think, the last transaction that the senior investment banking team does not have either a minority or a female firm assigned to this particular financing team, although there are some in the comanager ranks. You and I have probably had a few discussions in the past about the nature of this 87 12/2/98 FINANCE COMMITTEE - Bill 980791, 792, 793 kind of work and what it means to be in the senior tier as opposed to the lower tier. Notwithstanding whatever title's next to your name, in the final analysis, it's usually the senior-ranking memebers that actively manage and participate in the offering and get the bonds for sale, and that's essentially how people make money in this business, that they have bonds to fill the order. So I just wanted to make it noted for the record, the team is what the team is, but it does stand out in this particular transaction. This is a fairly sizeable transaction; is that correct?
Yes. It has the potential to be quite a quite a sizeable transaction, you're absolutely correct.
Okay. This is an ongoing concern of mine. Commissioner, for you, I can only say that after reading through the -- is it look Black & Veatch? COMMISSIONER KISHINCHAND: Mm-hmm, Black & Veatch, the engineering report, mm-hmm. 88 12/2/98 FINANCE COMMITTEE - Bill 980791, 792, 793
Did the Water Department pay for this consultant review on the Black & Veatch document? COMMISSIONER KISHINCHAND: The Water Department did pay for it, right.
Well, you paid well. It's an outstanding document. COMMISSIONER KISHINCHAND: Thank you.
I could have used one of these, you know, probably at some point in my career. No, it does attest to the good work that the Water Department is doing. I was very pleased to read through it, and you're to be commended for it. COMMISSIONER KISHINCHAND: Thank you very much. I appreciate your comment.
Commissioner, you come here, and we're also throwing you roses. You must be doing very good.
He keeps that water flowing. COMMISSIONER KISHINCHAND: Thank you.
Any other questions from members of the committee. 89 12/2/98 FINANCE COMMITTEE - Bill 980679 (No further questions.)
Do we have anyone else to testify on these bills? (No response.)
Thank you. Thank you, Commissioner. COMMISSIONER KISHINCHAND: Thank you very much.
Bill No. 980679, an ordinance amending Section 19-201 of The Philadelphia Code relating to city depositories by clarifying and updating the list of institutions in which the City is authorized to deposit funds and by amending certain conditions.
I'm here today to testify 90 12/2/98 FINANCE COMMITTEE - Bill 980679 in support of Bill No. 980679, and to also say from the very beginning that I have no amendments to the ordinance that I've given you. This bill is amending Section 19-201 of The Philadelphia Code relating to authorize City depositories; specifically to clarify and update the list of financial institutions that the City is authorized to deposit funds. To this end, I have reviewed the financial information provided by Commerce Bank Pennsylvania and have determined that they meet the basic criteria for becoming an authorized depository. Commerce Bank has, one, been a business for the past five years; two, been profitable for the last two years; three, is federally insured; and four, has over $100 million in assets. That concludes my testimony. Again, myself and my staff have reviewed statements of Commerce Bank, and they certainly meet the four criteria to become an authorized depository bank of the City of Philadelphia. Thank you.
Thank you. Mr. 91 12/2/98 FINANCE COMMITTEE - Bill 980679 Queenan, recently City Council approved an ordinance that was supposed to "clean up" the language, so to speak, in this ordinance related to banks that have gone out of business or who have been renamed. Do you anticipate many more changes to this section in the near future?
No, I do not. I think the last time this bill was before Council and it was approved, we cleaned up a lot of the, you know, banks that are no longer actively in business. What we're doing essentially now is adding banks that are deemed capable of being a depository for the City.
Thank you. Any questions from members of the committee?
Well, Madame Chair, in light of your question, I guess I'm only wondering, for instance, letter H still has CoreStates Financial. Was this bill done prior to the cleanup?
So we only have 92 12/2/98 FINANCE COMMITTEE - Bill 980679 that list to -- okay.
Right, right I understand. Mr. Queenan, it is my understanding that you've had a complete change of heart on the issue of the ATMs. (Laughter.)
And you'd like to lay out your new position with regard to the banks doing business with the City? Do you want to have that opportunity now?
No, I will defer to the next time that item comes before this committee. (Laughter.)
Thank you. Any other questions from members of the committee? (No further questions.)
Hearing none, this will conclude public hearing. Is there a need for a suspension of the rules on this?
Pardon me. We'd like to make a request to suspend the rules for this particular ordinance.
We will now go into our public hearing. The Chair recognizes Councilwoman Blackwell regarding Bill No. 980679.
Madame Chair, I move that Bill 980679 be reported out of committee with a suspension of the rules and a favorable recommendation so as to be considerd at our next session of Council. (Duly seconded.)
It's been properly moved and seconded that Bill No. 980679 be reported out of committee with a favorable recommendation; also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. 94 12/2/98 FINANCE COMMITTEE - Public Meeting All those in favor will signify by saying aye? Those voting nay? The ayes have it, the motion is carried. The Chair recognizes Councilman Longstreth regarding Bill No. 980759.
I make the same recommendation on Bill No. 980759, that it be voted out favorably, with a suspension of the rules.
It's been properly moved and seconded that Bill No. 980759 be reported out of committee with a favorable recommendation; also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. All those in favor will signify by saying aye? Those voting nay? The ayes have it, the motion is passed. 95 12/2/98 FINANCE COMMITTEE - Public Meeting The Chair recognizes Councilman Nutter for a motion regarding Bill No. 980782. Now, this is the one that we have to amend the Exhibit B on.
Madame Chair, I move that Bill 980782 be amended as the amendments were read into the record in the public hearing, and that the new Exhibit B is -- that there is a new Exhibit B being attached to the bill.
No, it's not attached, right. The new Exhibit B is in the chief clerk's office. So I move the amendments that have been read into the record earlier. (Duly seconded.)
Those in favor of the amendments will signify by saying aye? Those voting nay? The ayes have it, the motion is carried. The Chair recognizes Councilman Nutter. 96 12/2/98 FINANCE COMMITTEE - Public Meeting
Madame Chair, I move that Bill No. 980782, as amended, be reported out of this committee with a favorable recommendation and a further recommendation that the rules of Council be suspended so as to permit first reading at our next session. (Duly seconded.)
It's been properly moved and seconded that Bill No. 980782 be reported out of committee with a favorable recommendation; also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. And the record will also note that the Exhibit B has been submitted to the chief clerk's office. All those in favor will signify by saying aye? Those voting nay? The ayes have it, the motion is carried. The Chair recognizes Councilman Nutter regarding Bill No. 980791.
Madame Chair, I 97 12/2/98 FINANCE COMMITTEE - Public Meeting move the adoption of the amendment read into the record in the public hearing for Bill 9807911. (Duly seconded.)
All those in favor will signify by saying aye? Those voting nay? The ayes have it, the motion is carried. The Chair recognizes Councilman Nutter.
Madame Chair, I move that Bill No. 980791, as amended, be reported out of this committee with a favorable recommendation and a further recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. (Duly seconded.)
It's been properly moved and seconded that Bill No. 980791 be reported out of committee with a favorable recommendation; also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. All those in favor will signify by saying aye? 98 12/2/98 FINANCE COMMITTEE - Public Meeting Those voting nay? The ayes have it, the motion is carried. The Chair recognizes Councilwoman Blackwell regarding 980792.
I move that Bill No. 980792 be amended as read into the record. (Duly seconded.)
It's been properly moved and seconded that the amendment be approved. All those in favor will signify by saying aye? Those voting nay? The ayes have it, the motion is carried. The Chair recognizes Councilwoman Blackwell. 99 12/2/98 FINANCE COMMITTEE - Public Meeting
Madame Chair, I move that Bill 980792 be reported out of committee with a favorable recommendation and for a suspension of the rules so as to be considered at our next session of Council.
It's been properly moved and seconded that Bill No. 980792 be reported out of committee with a favorable recommendation, as amended; also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. All those in favor, aye? Those voting nay? The ayes have it, the motion is carried. Chair recognizes Councilman Nutter regarding Bill No. 980793.
Madame Chair, I move the adoption of the amendments as read into the record in the public hearing for Bill No. 24 980793. (Duly seconded.) 100 12/2/98 FINANCE COMMITTEE - Public Meeting
It's been properly moved and seconded that the amendments be adopted. All those in favor will signify by saying aye? Those voting nay? The ayes have it, the motion is carried. The Chair recognizes Councilman Nutter.
Madame Chair, I move that Bill No. 970793, as amended, be reported out of this committee with a favorable recommendation and a further recommendation that the rules of Council be suspended so as to permit first readings at our next session.
It's been properly moved and seconded that Bill No. 980793 be reported out of committee with a favorable recommendation, as amended; also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of 101 12/2/98 FINANCE COMMITTEE - Public Meeting Council. All those in favor will signify by saying aye? Those voting nay? The ayes have it, the motion is carried. This concludes our public meeting on the Finance Committee. Thank you all very much. (Adjourned at 11:19 a.m.) - - - 102 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Wednesday, December 2, 1998, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE ON FINANCE BILL NO.'S 980759, 980782, 980791, 980792, 980793, 980679 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter