COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT Room 400, City Hall Philadelphia, Pennsylvania Thursday, October 7, 2010 1:10 p.m. PRESENT: COUNCILMAN W. WILSON GOODE, JR., CHAIR COUNCILMAN DARRELL CLARKE COUNCILMAN BILL GREEN COUNCILMAN CURTIS JONES, JR. COUNCILWOMAN MARIA D. QUINONES-SANCHEZ COUNCILWOMAN BLONDELL REYNOLDS BROWN BILL 100547 - An ordinance amending Section 16 19-2604 of The Philadelphia Code, relating to tax rates and credits for the business privilege tax, by amending the provisions providing a credit for contributions to community development corporations to add certain nonprofit intermediaries as eligible recipients of contributions... - - - 2
Good afternoon. This hearing is called to order. This is a public hearing of the Commerce and Economic Development Committee on Bill No. 100547. My name is W. Wilson Goode, Jr., Chair of this Committee. I note that a quorum is present. To my far left is Councilman Curtis Jones, then Councilman Darrell Clarke, Councilwoman Blondell Reynolds Brown, Vice-Chair of the Committee. To my immediate right is Bill Green and next to him is Councilwoman Maria Quinones-Sanchez. The title of Bill No. 100547, amending Section 19-2604 of The Philadelphia Code, relating to tax rates and credits for the business privilege tax, by amending the provisions providing a credit for contributions to community development corporations to add certain nonprofit intermediaries as eligible recipients of contributions, under certain terms and conditions. 3 10/7/10 - COMMERCE - BILL 100547 Our first witness is Andrew Frishkoff, Commerce Department. (Witness approached witness table.)
Good afternoon, Mr. Chairman and members of City Council. Thank you for the opportunity to testify today. My name is Andrew Frishkoff. I'm the Director of Neighborhood Economic Development for the Philadelphia Commerce Department. I am here today to provide testimony regarding Bill No. 100547 regarding an amendment to the CDC Contribution Tax Credit Program. Since the inception of the program, the Commerce Department has assisted the Revenue Department with determining CDC eligibility and with reviewing new applications and renewal applications. In that specific role, our primary responsibility has been to ensure that the targeted communities are economically distressed and that participating CDCs use contributed funds 4 10/7/10 - COMMERCE - BILL 100547 for eligible economic development activities. In the broader role of the Commerce Department, as the coordinator of economic development activities in the City, we work closely with many of the participating CDCs to assist them with their projects and programs. We also work with many intermediaries who provide financial, technical and policy assistance to CDCs. The proposed amendment would allow as many as three qualifying nonprofit intermediaries to be designated as recipients of tax credit-eligible contributions under the program. The amendment defines a qualifying nonprofit intermediary as a nonprofit organization with an established record of providing financial, technical, policy or related assistance to community development corporations or other organizations undertaking neighborhood economic development activities within the City of 5 10/7/10 - COMMERCE - BILL 100547 Philadelphia. Insofar as many intermediaries provide tangible assistance that supports measurable economic development activities, the Commerce Department is supportive of this amendment. We recommend one change and we seek clarification regarding program administration and accountability. First, we would suggest eliminating the phrase "or other organizations" from Subsection (6)(a)(.2). Because the current program is limited to qualifying CDCs, it seems reasonable to target the amendment to those intermediaries that provide assistance to qualifying CDCs. Second, we would like to state for the record that Commerce intends to apply the same program performance standards to intermediaries that it does for CDCs. We will expect intermediaries to demonstrate annually that they have used tax credit-eligible contributions to assist CDCs with eligible economic 6 10/7/10 - COMMERCE - BILL 100547 development activities in economically distressed communities. Where feasible, we will ask them to document the outcomes of such activities as well. We ask for clarification that this approach is consistent with the intent of the proposed program amendment. Thank you again for the opportunity to testify today. I'm happy to answer any questions you may have.
Thank you for your testimony, Mr. Frishkoff. The amendment has been circulated to members of the Committee, so we will strike those three words. In addition to that, for the record, "qualifying organization" is defined within the legislation as a qualifying CDC or qualifying nonprofit intermediary, and we would expect that both of them would be treated the same as qualifying organizations. Are there questions from members of the Committee? Councilman Green. 7 10/7/10 - COMMERCE - BILL 100547
I'm just curious what your definition or if there's regulations about what "economically distressed communities" means with respect to this ordinance.
Right. I think our definition and what's in the regulations maybe could be clarified further. Our definition is generally that there is physical blight and particularly in terms of business areas, and that there is underemployment, that the CDC would be able to document both of those in their application, or in this case the qualifying intermediary would be able to document for the areas that they're providing support.
I'm sorry. You said there was an inconsistency between your definition and the regulations?
The regulations don't lay out a very specific set of criteria, so I gave you what the Commerce 8 10/7/10 - COMMERCE - BILL 100547 Department would apply. That's not necessarily spelled out in that level of detail in the current regulations.
I guess I'd suggest that you make the rules as clear as possible in promulgating regulations that further the intent of these proposals.
We would seek to do that with the Revenue Department. Just a note, that the current program is getting close to its ten-year anniversary, which means that a number of the current participants will reach the end of their current commitments with their business partners, and we think that is a good time to look at both regulations and what the outcomes have been of the program and to address all of those issues, because there will be a question for those that come up for renewal what the process would be for determining whether they are more eligible or less eligible than new 9 10/7/10 - COMMERCE - BILL 100547 applicants for those current 30 slots.
Yes. Thank you. Good afternoon, Andy. Question, because I know where we want to go with this. I want you to operationalize this for me in my head. So we have one tax credit partnering CDC who then receives -- who is going to be able to split their tax credit piece with technical assistance, as the case of PACDC?
For this amendment -- and I'll defer to Councilman Goode on this, but this would be that within the 30 slots, as many as three would be for intermediaries, and they would be able to provide assistance to any of the qualifying CDCs or participating CDCs in the program, as well as other CDCs. So it wouldn't be on 10 10/7/10 - COMMERCE - BILL 100547 the participating CDCs to seek the technical assistance. It would be on the intermediary who is proposing to fill a slot to demonstrate that they will be providing eligible assistance.
Prior to this amendment, there are zero slots available for intermediaries. Right now the current ordinance requires that you be a qualifying CDC. So the current 30 occupants of those slots are all qualified CDCs.
Okay. Again, I know where we want to go with this. I'm just concerned that outside of the Philadelphia CDC Association who else would be potential applicants of this.
And this was one of the reasons why we sought the clarification around CDCs. It would be an organization that provides financial assistance to CDCs -- 11 10/7/10 - COMMERCE - BILL 100547
It could be the Reinvestment Fund or Local Initiatives Support Corporation. It could be technical assistance, which could be Community Design Collaborative. It could be policy assistance, which could also apply to Philadelphia Association of CDCs. That's our current reading in terms of the financial, technical, policy-related assistance. Those would be examples.
Okay. I mean, I do have a little bit of concern about how many hands could get in this pot, just because I do have many tax credit partners, tax credit folks in my district in terms of CDC doing actual activity. General operating support is so difficult for these CDCs to receive, and then you have them potentially competing with the bigger guys, who have access to a lot of other technical 12 10/7/10 - COMMERCE - BILL 100547 assistance. Again, I'll take the Pennsylvania Association of CDCs out of it, but when you start talking about the Reinvestment Fund and some other folks, it becomes very competitive for some of my local guys. So if you assure me today that none of my local guys are going to be impacted with this, I'll be okay.
So as of this moment in time, all 30 slots are occupied by CDCs. So unless a group falls out of the program prior to their ten-year renewal period, it would have no 15 immediate impact.
Is anybody in jeopardy for being taken off the program?
There are one or two that are looking for new corporate partners. I think in one case in your district, I think they've secured a partner, but we've not yet gotten the formal renewal application from them. But where I think it does become an issue 13 10/7/10 - COMMERCE - BILL 100547 is when we get to the ten-year mark -- and Councilman Green's question as well -- and making sure that we have clear criteria for performance, for what determines a distressed community and is there any preference given to a current CDC renewing their slot versus a new CDC who applies when a slot becomes open. So I think all of those we need to determine and make sure that we're in keeping with the spirit of the ordinance, but make sure that we have good regulations.
We're looking at not this coming calendar year but the year after will be the first.
For the record, there are only three slots for intermediaries, and so there will only be competition for those three slots, at 14 10/7/10 - COMMERCE - BILL 100547 most. Any more questions for this witness? (No response.)
Our next witness is Rick Sauer, PACDC. (Witness approached witness table.)
Good afternoon. Please state your name for the record and proceed with your testimony.
Good afternoon and thank you, Councilman Goode and members of the Committee, for the opportunity to testify. My name is Rick Sauer and I'm the Executive Director of the Philadelphia Association of Community Development Corporations. As most of you, I think, know, PACDC is a citywide association of 80 community development 15 10/7/10 - COMMERCE - BILL 100547 corporations and other organizations that are engaged in neighborhood revitalization and addressing the community development needs of local residents. Many of our CDC members are working to strengthen their neighborhood economies and commercial corridors and are actively participating in the CDC Tax Credit Program right now. As the umbrella organization of Philadelphia CDCs, PACDC advocates for policies and resources to support CDCs' efforts to revitalize their neighborhood commercial corridors, grow jobs, strengthen their communities and ultimately increase the City's tax base. We also provide technical assistance and training to community development practitioners, such as the upcoming two-day training later this month on mixed-use commercial/residential development, in conjunction with the National Development Council and Citi Foundation. This training, I believe, is 16 10/7/10 - COMMERCE - BILL 100547 especially timely given that the City now has a new dedicated funding source for mixed-use development. First, I would like to express my gratitude to Councilman Goode and members of this Committee for their leadership in creating and working to strengthen the CDC Tax Credit Program. About two years ago, PACDC released this report called "Expanding Economic Opportunities and Revitalizing Neighborhoods," which highlights accomplishments of partnerships that are currently participating in the Tax Credit Program and also lays out a series of recommendations to further strengthen the program that are enumerated on the last two pages of the report. PACDC's recommendations have included expanding the program to 30 partnerships, which we did work with City Council and the Administration to implement back in the fall of 2008. Also to allow a CDC to partner with up to two 17 10/7/10 - COMMERCE - BILL 100547 businesses instead of just one, given the downturn in the economy, to ensure continued success of the program, which Council approved in spring of 2009. We also worked with the Commerce Department and Revenue to strengthen the reporting requirements for participants in the program last year and to amend and strengthen the regulations governing the program this past spring. Today, we seek your support for Bill No. 100547 that would implement another key recommendation from the report we drafted by, as what was mentioned, allowing up to three nonprofit intermediaries with established track records in assisting CDCs in their economic development efforts to participate in the Tax Credit Program. And we strongly believe that now that the program has grown to 30 partnerships, it's essential to also strengthen the infrastructure to support the long-term success of these partnerships and the 18 10/7/10 - COMMERCE - BILL 100547 capacity of CDCs to undertake neighborhood economic development work. The proposed amendment was referenced earlier. We certainly support that proposed amendment to clarify that the nonprofit intermediary must have an established track record of providing assistance to CDCs versus a broader range of organizations and, in particular, because the emphasis for creating the program and both the focus going forward has been around expanding CDC capacity with regard to neighborhood economic development.
We believe that the bill before you today, along with the need that sort of Andy just outlined around clarifying the process for CDCs and businesses currently participating in the program to be able to continue to do so after their initial ten-year term is up, is critical at this point in time to the success of the program and will further advance the impact and its connection to the City's 19 10/7/10 - COMMERCE - BILL 100547 overall economic development strategy. So we want to urge this Committee to amend the bill as proposed and report it from Committee with your full support and to continue to work with us to continue the program's success. Thank you, and if you have any questions, I'm certainly willing to answer them.
Thank you for your testimony. Any questions for this witness? (No response.)
Our next witness is Antoinette Truehart, Philadelphia Development Partnership. That's actually the final witness I have slated. There's written testimony from the Greater Philadelphia Chamber of Commerce and the Center City District, which has been given to the stenographer 20 10/7/10 - COMMERCE - BILL 100547 and will be incorporated into the record. (Witness approached witness table.)
Good afternoon. I am Antoinette Truehart, Managing Director of Philadelphia Development Partnership, here to testify on behalf of the amendments being proposed to Bill 12 100547. So good afternoon, Councilman and Chairman Wilson Goode, Jr. and distinguished members of the Commerce and Economic Development Committee of City Council. I am Antoinette Truehart, Managing Director of Philadelphia Development Partnership, which is a micro-enterprise development and finance organization serving the Philadelphia area. Philadelphia Development Partnership provides micro-loans and business support services to entrepreneurs and small businesses 21 10/7/10 - COMMERCE - BILL 100547 throughout Philadelphia's low- and moderate-income communities. Small businesses are critical to the quality of life and economic health of our neighborhoods, and small businesses are the lifeblood of our neighborhood economies, especially in our low-income and minority communities. They provide accessible and affordable goods and services. They keep dollars circulating in the community. They create jobs for local residents, and they generate income for their households and families. With limited resources and support systems in place, these hard-working entrepreneurs struggle day in and day out to keep their businesses up and running. Therefore, it is imperative that we as civic leaders look for ways to support and indeed strengthen this all important but often overlooked sector of our local economy, and I'm here today to support the passage of this bill that amends the provisions of the business privilege tax which will 22 10/7/10 - COMMERCE - BILL 100547 expand the type and number of organizations eligible to receive contributions in exchange for tax credit to the contributor. The Business Privilege Tax Credit Program has successfully leveraged private-sector dollars to invest in community development in Philadelphia since its inception. These investments in community development corporations have brought about positive change in our communities that have ranged from new housing development, commercial development and streetscape improvements. We applaud these achievements and support the efforts to continue this important work. However, by limiting the type of organization eligible to receive qualifying contributions, the community development corporations may limit the choices of the contributing companies and thereby limit the potential private-sector investment. Expanding the 23 10/7/10 - COMMERCE - BILL 100547 eligibility of qualifying organizations to include nonprofit intermediaries will serve to expand the potential private resources by opening up new investment opportunities. This will result in channeling more resources into our communities in need, leveraging additional investments, and protecting the investment and progress that has already been made. It is our hope and expectation that the program will be further expanded in the near future to include nonprofit organizations that provide direct economic services to residents in these very same communities, organizations such as community development financial institutions like PDP, who provide services that go right to the heart of the neighborhood economic development by helping small businesses start up and grow. I commend the Commerce and Economic Development Committee of City 24 10/7/10 - COMMERCE - BILL 100547 Council for taking this initiative to amend the Philadelphia Tax Code and thereby improve economic health of our City's neighborhoods and our region. Thank you very much for your time, and I'm open for any questions or comments.
Thank you for your testimony. Any questions for this witness? (No response.)
Is there anyone else to testify on this bill? (No response.)
Seeing none, we will move from our public hearing into a public meeting. The Chair recognizes Councilwoman Reynolds Brown for an amendment to Bill 100547.
25 10/7/10 - COMMERCE - BILL 100547 Mr. Chairman, I move that Bill No. 100547 be amended. (Duly seconded.)
The bill is amended. The Chair recognizes Councilwoman Reynolds Brown for a motion on Bill No. 100547 as amended.
Mr. Chairman, I move that Bill No. 18 100547, as amended, be moved out of the Committee with a favorable recommendation and further move that the rules of Council be suspended so as to permit first reading at the next scheduled session. (Duly seconded.)
Bill No. 8 100547, as amended, is reported out of the Committee with a favorable recommendation and a suspension of rules to allow first reading at our next Council session. This concludes our public meeting. Thank you very much. (Committee on Commerce and Economic Development concluded at 1:30 p.m.) - - - 27 CERTIFICATE I HEREBY CERTIFY that the proceedings, evidence and objections are contained fully and accurately in the stenographic notes taken by me upon the foregoing matter on October 7, 2010, and that this is a true and correct transcript of same. -------------------- MICHELE L. MURPHY RPR-Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)