Committee Hearing, May 13, 2010

COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE OF THE WHOLE Room 400, City Hall Philadelphia, Pennsylvania Thursday, May 13, 2010 1:20 p.m. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL CLARKE COUNCILMAN FRANK DiCICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN BILL GREEN COUNCILMAN WILLIAM K. GREENLEE COUNCILMAN CURTIS JONES, JR. COUNCILMAN JACK KELLY COUNCILMAN JAMES KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILWOMAN DONNA REED MILLER COUNCILMAN BRIAN J. O'NEILL COUNCILWOMAN MARIA D. QUINONES-SANCHEZ COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO, JR. COUNCILWOMAN MARIAN B. TASCO BILLS 100115, 100116, 100117, 100118, 100131, 100254, 100284 RESOLUTION 100141 - - - 2

Good afternoon. Thank you. We appreciate your patience. This is a public hearing of the Committee of the Whole. I would ask Mr. McPherson to please read the bills that we have before us today. MR. McPHERSON: Bill No. 10 100115, an ordinance to adopt a Capital Program for the six Fiscal Years 2011 to 2016 inclusive. Bill No. 100116, an ordinance 14 to adopt a Fiscal 2011 Capital Budget. Bill No. 100117, an ordinance 16 adopting the Operating Budget for Fiscal Year 2011. Bill No. 100118, an ordinance 19 amending Title of The Philadelphia Code, entitled "Finance, Taxes and Collections," by adding a new Chapter 22 19-3600, entitled "Sugar-Sweetened Beverage Tax," under certain terms and conditions. Bill No. 100131, an ordinance 3 5/13/10 - WHOLE - BILL 100115, etc. amending Chapter 10-700 of The Philadelphia Code, entitled "Refuse and Littering," by providing for a sanitation services fee, under certain terms and conditions. Bill No. 100254, an ordinance 8 amending Title 19 of The Philadelphia Code, entitled "Finance, Taxes and Collections," by adding a new Chapter, entitled "Tobacco and Tobacco-Related Products Tax," under certain terms and conditions. Bill No. 100284, an ordinance 15 amending Section 19-1301 of The Philadelphia Code, entitled "Real Estate Taxes," by revising the real estate tax rate, under certain terms and conditions. Resolution 100141, Resolution 20 providing for the approval by the Council of the City of Philadelphia of a Revised Five Year Financial Plan for the City of Philadelphia covering Fiscal Years 2011 through 2015. Bill No. 100119, an ordinance 4 5/13/10 - WHOLE - BILL 100115, etc. amending Chapter 19-1800 of The Philadelphia Code, entitled "School Tax Authorization," by amending Section 5 19-1806, entitled "Authorization of Realty Use and Occupancy Tax." Bill No. 100120, an ordinance 8 amending Section 19-1801 of The Philadelphia Code, entitled "Authorization of Tax," to further authorize the Board of Education of the School District of Philadelphia to impose a tax on real estate within the City of Philadelphia; all under certain terms and conditions.

Thank you. Our first witnesses will be from the Administration. (Witnesses approached witness table.)

Good afternoon. (Good afternoon.)

5 5/13/10 - WHOLE - BILL 100115, etc. Doctor.

Good afternoon, Council President, members of City Council. I'm Donald Schwarz, Health Commissioner. Thank you for the opportunity to present testimony today on Bill No. 100254, which is Councilman Clarke's proposal to tax the retail sale of non-cigarette tobacco products in order to provide an additional revenue source to help fill our significant budget gap. According to the Centers for Disease Control and Prevention, tobacco use is the leading preventable cause of death in the United States. More deaths are caused each year by tobacco use than by all deaths from human immunodeficiency virus (HIV), illegal drug use, alcohol use, motor vehicle injuries, suicides and murders combined. Tobacco use is defined as smoking cigarettes, pipes, cigars or the use of smokeless tobacco, which consists of chewing tobacco, moist snuff 6 5/13/10 - WHOLE - BILL 100115, etc. and dry snuff. Tobacco use of any kind causes many adverse health effects, including heart disease, cancers of the oral cavity and pharynx, oral soft tissue lesions, gum recession, gum disease, tooth decay and nicotine addiction and dependence. The Department of Public Health supports this legislation as a deterrent and prevention measure for the use of tobacco products, and, of course, the revenue from this proposal would help in our ongoing budget considerations. I thank Council for their support of public health issues, and the Administration is in support of this measure. We're happy to answer questions.

Thank you. Steve, are you going to testify?

No, I'm not.

7 5/13/10 - WHOLE - BILL 100115, etc. Mr. Dubow.

Not on this bill.

Okay. Doctor, I understand you have a speaking engagement?

I do.

All right. Members of the Committee, do you have any questions of Dr. Schwarz? (No response.)

Apparently not.

Thank you very much.

You can leave. Thank you.

Madam President, I have one quick question.

Yes.

Thank you. Dr. Schwarz, when you came by my office and we had a great meeting with your staff about your plans in the Health 8 5/13/10 - WHOLE - BILL 100115, etc. Department for the budget, you then followed up with a -- or your people followed up with some information for us regarding the budget. In that follow-up, we were told that if you got all of the positions you were requesting for your department, you would not need the $571,000 of overtime in your budget for Class 100, and I received a letter from the Administration saying something different, but --

We clarified on overtime, both the amount and use of overtime for the department. In the conversation that we had, we talked about overtime in general, and that was intended to be specific information for you to the dollar and by proportion.

Right. So you have no objection to reducing your overtime budget by $571,000.

I'd be happy to be able to. The issue for the department is that overtime is used in emergency 9 5/13/10 - WHOLE - BILL 100115, etc. situations and on weekends and other times, evenings, for instance, when staff aren't ordinarily around. So they're called in, and that's overtime use. So the department needs overtime funding, and that was what was described, I believe, in the letter which was sent through the Council President.

Okay. Even if you have every position you've requested filled?

Even if we fill all positions, we still don't have staff for emergency coverage. There will always be a need for that, as with other departments in the City.

Sure. Now, are you going to be able to fill all of your staff on July 1st?

We, as you could imagine, likely won't have all staff there, but we're making a major push to hire staff at the moment, as we talked about. We also talked about classes of 10 5/13/10 - WHOLE - BILL 100115, etc. public health workers where we've waited a very long time for there to be lists, and there finally are lists, so we are already going through the process of hiring from the list.

Okay. Well, I just wanted to clarify that. Thank you.

Thank you.

Any other questions for the Doctor? (No response.)

Thank you again.

Thank you.

Mr. Dubow.

Good afternoon, Council President Verna and members of the Committee. My name is Rob Dubow. I serve as the Director of Finance, and I'm here to provide testimony on Bill No. 24 100284, which would revise the real estate tax rate for Fiscal Years 2011 and 11 5/13/10 - WHOLE - BILL 100115, etc. 2012. The bill proposes to raise the combined rate to 9.008 percent, which would generate approximately $78 million in each of those years for the General Fund. While the Administration is reluctant to increases in the real estate tax rate, we think this increase is essential to provide a portion of the revenues needed to allow us to avoid making service cuts. I will note, however, that the bill falls short of providing sufficient revenue to replace the 107.7 million from the sanitation fee included in the proposed FY11 operating budget. Thank you for the opportunity to testify, and I'd be happy to answer any questions you may have. I'm also joined here today by the Budget Director, Steve Agostini, who will also answer questions.

Thank you. Thank you very much. The Chair recognizes Councilman 12 5/13/10 - WHOLE - BILL 100115, etc. Goode.

Thank you, Madam President. Good afternoon, Mr. Dubow.

Good afternoon.

At our last hearing on revenue measures on March 17th, I posed a question of what the average homeowner pays in terms of property taxes in the City. Can you give me the answer to that question?

I think we sent a written response. I don't have it with me.

I have it. Don't worry.

You do? Okay.

The average homeowner pays $1,146. A proposed bill 21 before us is a 9 percent increase. Nine percent of $1,146 is $103.14, divided by 12 months, that's about $8.60. There is, I believe, a proposed amendment that would take this tax increase to 9.9 13 5/13/10 - WHOLE - BILL 100115, etc. percent. The average homeowner pays $1,146. Nine point nine percent of that is $113. If you divide it by per 5 month, that would be $9.50 a month. 6 Is it clear to say that the 7 average homeowner, if we do a 9 or 9.9 8 percent increase, will pay per year about 9 $103 to $113, which is far less than the 10 $300 flat fee? 11

That's correct. 12 That's correct. It generates slightly less revenue too, but that's correct. The average homeowner would pay less. I should actually say, it's property owners, since this includes businesses too.

And so if we divide that by 12 months and for people working on a monthly budget, $25 a month is to some people a burden. Particularly if they're paying $500, $1,000 in property taxes, that's a considerable increase, but this is at this level for the average homeowner less than $10 a 14 5/13/10 - WHOLE - BILL 100115, etc. month; is that correct?

That's correct.

Thank you, Madam President.

You're welcome. The Chair recognizes Councilman Green.

Thank you, Madam Chair. Madam President, as I said during our Stated Meeting earlier today, I'd like to raise a point of order regarding Bill No. 100284, which provides for a 9 percent real estate tax increase. During Council's Stated Meeting on April 29th, Councilman Goode put forward a bill 19 which he said was on behalf of Council leadership and noted that he did not draft the bill and did not sign the bill. Councilman O'Neill made clear that the bill was not on behalf of republican leadership. No one in democratic leadership identified himself or herself 15 5/13/10 - WHOLE - BILL 100115, etc. as the sponsor of the bill. There is no 3 sponsor of the bill. Our rules provide that all bills shall be signed by the member or members introducing them, or when bills are introduced by request, the rules require that the bill identify the person or persons requesting introduction. My understanding is that this bill is not signed and that this bill -- no other person requesting introduction is listed on the bill. Our rules also provide that a hearing on the bill shall only be held at the request of the principal sponsor of the bill and only after such request has been approved in writing. It is my understanding that someone on Council President's staff requested a hearing for the bill. In this case, there was no 22 request for a hearing by the principal sponsor of the bill. My point of order is that because our rules were not followed, 16 5/13/10 - WHOLE - BILL 100115, etc. there is a fatal procedural flaw with this bill.

Point of order.

I am concerned that this bill could result --

The Chair recognizes --

-- once passed being found invalid.

Excuse me, Councilman Green. The Chair recognizes Councilman Goode.

I'm sorry, Madam President. For clarity of the record, Councilman Green has said, one, that there is no sponsor of the bill. Then he is going to reference the primary sponsor, which is confusing.

You know, I think that we all have the greatest respect for Rick Auerbach. He is here. He has looked into the law, and 17 5/13/10 - WHOLE - BILL 100115, etc. he will address this issue. So, Mr. Auerbach --

Madam President, I'm not -- I have one more sentence --

I'm sorry, sir.

-- in my point of order.

I'm asking Councilman --

Mr. Auerbach, would you please. I think we heard Councilman Green earlier this morning, and I don't see any reason to keep going down this avenue when we can correct it, once and for all. Mr. Auerbach. I'm sorry?

Madam President, I'm not arguing the point. I'm not arguing Councilman Green's point. I'm asking for a clarity in terms of what he said. He first said there was no 18 5/13/10 - WHOLE - BILL 100115, etc. sponsor for the bill. Then he went on to refer to the primary sponsor of the bill. I wanted to clarify --

Would you clarify, sir?

Under our rules, there is no sponsor. There was an attempt to introduce a bill. The fix is easy, introduce a bill, advertise it and pass it on June 3rd. I think we put ourselves at great jeopardy passing this bill --

Point of order.

-- without having followed the rules.

I asked Councilman Green to clarify his statement. He first said -- and this is going to be a matter of this transcript. He first said that there was no sponsor. Then he went on to say that the primary sponsor of the bill had to request a hearing and the primary sponsor did not. 19 5/13/10 - WHOLE - BILL 100115, etc. How could there be a primary sponsor if there's no sponsor of the bill? Clarify your statement, Councilman.

With respect to that issue, because there was no 8 primary sponsor, no hearing could be requested, and, in fact, the person who requested the hearing was not any member of City Council but was a person on the President's staff.

Exactly. The bill was introduced --

From the President's staff?

-- on behalf of Council leadership. Councilman, are you listening? The bill was introduced on behalf of Council leadership, as I said, as a result of a phone call from the Council President that morning. It makes perfect sense that if the bill was introduced on behalf of the Council 20 5/13/10 - WHOLE - BILL 100115, etc. President and leadership, that a member of the Council President's staff could request a hearing. Because it's not my bill. It was introduced on behalf of Council leadership. Does that make sense?

It makes sense to me.

I understand what you're saying. I don't think the procedural rules were followed, and that's my point of order. Thank you, Madam President.

I want to put this to bed, once and for all. I would like Mr. Auerbach to address Councilman Green's issues.

The issues raised by Councilman Green are not issues of requirements that are set forth in the Philadelphia Home Rule Charter or requirements that are set forth in any other law of Pennsylvania. They're solely matters of Council's internal 21 5/13/10 - WHOLE - BILL 100115, etc. rules. And the law is clear that Council is free to disregard its internal rules if it chooses to do so, and acting contrary to its internal rules is implicitly a waiver of its rules. Council's rules provide that any rule of Council may be suspended. So this bill 9 was introduced by Councilman Goode on behalf of leadership. It was duly referred to the Committee of the Whole by the President. As required by the Charter, it was advertised in the newspaper. This is the hearing the Charter requires, and then the Committee will act on the bill. And you've raised issues of procedure. The Committee is free to accept or reject your issues in deciding to report the bill out, but it fully has power to report the bill out, and the Council has power to act on it and implicitly waive its rules, if it so chooses.

I do have 22 5/13/10 - WHOLE - BILL 100115, etc. tremendous respect for your opinion, Mr. Auerbach. I don't believe -- and there is caselaw in Pennsylvania on this point -- that you can suspend a rule or change the rules after an action has been taken. Certainly you can beforehand. And I just think when the fix is introduce a bill, advertise it and get it out June 3rd, that we ought to act in that regard rather than in haste. But my point of order is on the record, and I appreciate it. Thank you.

The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam Chair. Good afternoon, gentlemen. I want to go back to the line of questioning by my colleague Councilman Goode when he broke it down into monthly and annual real estate tax increases on average for each household. In your testimony, Mr. Dubow, you talk about -- you say while the Administration is 23 5/13/10 - WHOLE - BILL 100115, etc. reluctant to see increases in the real estate tax rate, we think this increase is essential to provide a portion of the revenues needed to allow us to continue to avoid making devastating cuts. And then you go on further to say you will note, however, that the bill falls short of providing sufficient revenues to replace the $107.1 million from the sanitation fee included in the operating budget. As you know and as was brought up again today and mentioned today, I did have a tax bill in at 12.01 percent, which I withdrew, and I would gladly reintroduce it if I can get nine votes for it. But using the figures on the 9.9 percent, how much more do we need to raise?

It's about $30 million. COUNCILMAN DiCICCO: And we get there, correct me if I'm wrong, and we get there by charging commercial property 24 5/13/10 - WHOLE - BILL 100115, etc. owners $300 annually for trash collection?

That's part of it. COUNCILMAN DiCICCO: I'm going to give you the four items.

Okay. COUNCILMAN DiCICCO: Three hundred dollars a year for commercial property owners to pick up their trash.

Right. COUNCILMAN DiCICCO: A hundred fifty more than we negotiated a couple months ago.

Correct. COUNCILMAN DiCICCO: Three-quarter cent on the soda tax.

Right. COUNCILMAN DiCICCO: Nine point nine percent real estate tax. And what was the smokeless tobacco? It raises 4 million, but how did we get there? What was the --

The rate? COUNCILMAN DiCICCO: Well, 0.3 25 5/13/10 - WHOLE - BILL 100115, etc. cents, 30-something cents, whatever.

Right. COUNCILMAN DiCICCO: So in actuality, we will be raising four separate taxes to cover the deficit. On the real estate end, if we did the 12.10 percent, according to the numbers that you gave me a couple of months ago, we would raise about $107.2 million?

Correct. COUNCILMAN DiCICCO: And how far short would we be then to accommodate the necessary funds that we need to avoid any service cuts?

It would be -- it looks like it's about a $4 million difference. COUNCILMAN DiCICCO: Four million dollars. So one tax versus four taxes pretty much closes the gap, the deficit. And if we took the 10 million that the soda industry has offered the Administration for the -- in place of the 5/13/10 - WHOLE - BILL 100115, etc. soda tax, we'd be plus million. 3

I haven't been 4 involved in any discussions about that. 5 If that's -- I mean, if that's true and 6 then that math works -- COUNCILMAN DiCICCO: We'd be plus 6 million.

Right. The other issue for us, though, is we need recurring revenues. So the property tax would be recurring. The $10 million wouldn't. So in '12 -- COUNCILMAN DiCICCO: The 10 million is over two years, but I understand they would front load it to give it the first year, which would cover the two.

Right. So there would be -- in '12 we'd have to figure out how to replace that. COUNCILMAN DiCICCO: And what portion would we have to figure out in '12? How much?

Well, it would be 27 5/13/10 - WHOLE - BILL 100115, etc. about the million. COUNCILMAN DiCICCO: Four million. We'd have to find $4 million --

Well, no. That's actually not right, because it would be more like million, because the -- 8 COUNCILMAN DiCICCO: Five 9 years? 10

11 Liquor-by-the-drink -- not 12 liquor-by-the-drink. 13 COUNCILMAN DiCICCO: We did 14 that before. 15

The sugary drink is 16 for half a year in '11. It goes to a 17 full year in '12. So you'd be replacing 18 about another 14 and a half million of 19 that. So you'd have about a 20 20 million -- COUNCILMAN DiCICCO: In '12?

Yeah. You'd have about a $20 million issue. COUNCILMAN DiCICCO: So if we did the 12.1, we'd pretty much be out of 28 5/13/10 - WHOLE - BILL 100115, etc. here today, we'd cover the deficit?

For '11, right. COUNCILMAN DiCICCO: No further questions, Madam President.

The Chair recognizes Councilman Green.

Thank you, Madam Chair. Under the proposals before us today and that you're testifying in favor of, what is the fund balance?

The fund balance at the end of 2011 would be about 57 million. I'll give you one other number, which is where our cash would be at the end of the year, and that would be about 12 million.

I'm sorry.

I gave you two numbers. One was the fund balance, which would be about 57 million. The other number that's important to remember is how much cash the General Fund would have at the end of the year, and that's about 29 5/13/10 - WHOLE - BILL 100115, etc. million. 3

So there's a 4 $57 million fund balance at the end of 5 the year and -- 6

And $12 million in 7 cash in the General Fund. 8

And that 9 assumes that you're working off of the 10 revenue estimates in the budget presented 11 to City Council; is that correct? 12

That's correct.

Could you comment on how much additional revenue we will have compared to the revenue estimates just making a relatively simple assumption, and, that is, that the wage tax receipts continue to increase at their current rate, what would then be the fund balance at the end of FY11 and the cash position of the City?

Steve Agostini, Budget Director for the City. It would be about the same as the numbers we have there. 30 5/13/10 - WHOLE - BILL 100115, etc.

I'm sorry?

They would be approximately the same as the numbers Mr. Dubow just quoted you, the $57 million.

Well, when you look at wage tax receipts, the most recent numbers we have, they appear to be on an increasing upward trend, and if you annualize that figure, we would end up with significantly more --

It would be a mistake to annualize that figure. It is one month, and it does not represent a significant trend.

And it's a series of months for which we've had increases.

As I said, it would be a mistake to annualize that number, because it's one month, and then there are also -- we're showing less than what we had budgeted for property tax.

So why 31 5/13/10 - WHOLE - BILL 100115, etc. should we argue over that number? Neither one of us is the kind of economist that's going to get that exactly right. We're making our best guess. Have you had a chance to look at the 5 percent property tax increase that I proposed that has a float down in the event that the tax amnesty comes in above million or in the event that 12 wage tax or other receipts are above 13 projections in the first quarter? 14

Yes, I have. It 15 would be insufficient in order -- it 16 would be insufficient to the City's needs 17 with respect to fund balance and it would 18 be dramatically insufficient with respect 19 to cash flow needs. 20

With respect 21 to the 5 percent increase. So what would 22 be your objection to putting a float-down 23 provision on 9 percent, assuming you're 24 right, on the tax increase that's the 25 bill that you're here testifying on 32 5/13/10 - WHOLE - BILL 100115, etc. today? Basically what that would mean is, you'll have all the revenue you say you need and in the event that things come in better than expected, taxpayers will get a break.

So can you just kind of walk through how the float-down provision would work in relation to a 9 percent or 9.9?

Sure. We would just take essentially -- let's say the tax amnesty -- we're raising how much, $89 million in real estate taxes; is that right?

Well, at 9 percent it's about 80 -- 78.

Okay. So essentially let's just say the tax amnesty comes in at 50 million rather than the million budgeted. 22

Thirty million 23 budgeted. 24

Thirty 25 million budgeted, okay. 33 5/13/10 - WHOLE - BILL 100115, etc. The real estate tax millage would go up only enough to raise $58 million in taxes. So you take the 5 extra that we got and you'd lower the 6 millage. If, say, wage tax first quarter 7 comes in 10 million more than we 8 expected, we would lower the tax we're 9 going to raise by another 10 million. 10

You're saying if 11 any tax comes in higher than we 12 anticipate? 13

No; just the 14 ones that are steady and predictable. 15 Like the amnesty we'll know for certain, 16 wage tax first quarter comes in above 17 what we would project for the first 18 quarter. And I'm not talking about 19 annualizing these figures. I'm just 20 saying the cash actually in the door at the end of the first quarter.

I think there are a couple of issues with that, and I think Mr. Agostini may want to add something. First, I think you can't just look at one 34 5/13/10 - WHOLE - BILL 100115, etc. tax or another tax and say this is coming better than we projected, so we're going to reduce rates, because other taxes may be coming in lower.

Sure. I'm talking in the aggregate.

Secondly, I think looking at the amnesty, which is a one-time event, and comparing it to something that's going to be recurring also can create problems, and I think you also have to look at what the amnesty means in terms of delinquent collections going forward. So there's some analysis that has to go -- you can't just look at the gross number.

Those numbers you're discussing are already built into your projections, however.

They're built in assuming 30 million.

Right.

So the question is if you get 50 million, does that have a 35 5/13/10 - WHOLE - BILL 100115, etc. different impact on the delinquent collections you're going to have in the next couple years, and we'd need to understand that before we made any kind of changes to the budget.

Well, I would suggest that it's something we ought to consider, because if, for example, wage tax comes in 10 million higher in the first quarter, every economist I talked to says that that is going to -- likely will trend up throughout the entire year, and we're not talking about annualizing that figure, for example. And it's certainly my goal to raise the revenue that we need, but the minimum amount of revenue we need, without burdening taxpayers unnecessarily, and I just wondered what your rationale was for that.

I understand. I guess the only thing I would add is if we had done that this year since wage taxes came in actually much more weaker in the 36 5/13/10 - WHOLE - BILL 100115, etc. first quarter and we tried to base a rate off the first quarter, we would have gotten a much different result than we would get looking at two quarters or three quarters.

And we were able to manage to that. I have full faith and confidence in you and Steve that you can manage to whatever appropriation we provide. Thank you, Madam Chair.

The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam Chair. I left out something very important in my earlier comments. Going back again to my colleague Councilman Green, when you went through the numbers, that the average household would see an increase of approximately $113 annually if we did the 9.9 percent real estate tax increase. If we did the 12.10 -- I don't have a calculator in front of me, but is 37 5/13/10 - WHOLE - BILL 100115, etc. it safe to say that would average out to about $136 annually?

Give us one second. COUNCILMAN DiCICCO: 146?

Yeah. That's right. COUNCILMAN DiCICCO: So it would be a $33 difference from the 9.9 to the 12.10 for the average homeowner in the City of Philadelphia. Instead of paying 113, they would be paying $146 a year. And as I mentioned in the past when I introduced the bill that I withdrew, if you file a federal income tax return, you get a deduction, either a full deduction or a partial deduction, for any real estate taxes that you file, and if you are a property owner who qualifies for the state rebate, real estate tax rebate, you would be made whole. So in many instances, given the number of people who meet the poverty level in the City of Philadelphia, they would in actuality not be receiving any 38 5/13/10 - WHOLE - BILL 100115, etc. increase, because they would be fully refunded. Is that a fair statement?

It's certainly true for some people, yes. (Applause.) COUNCILMAN DiCICCO: So the political hit we stand to take if we do the 9.9, the $300 a year annual commercial trash collection fee, the three-quarter cent soda tax and whatever that percentage of the smokeless tobacco is, it pretty much comes out about the same, if not more, for some people. If you're a commercial property owner, you're actually going to be paying a lot more because you have a fee.

Right. COUNCILMAN DiCICCO: Where you didn't have it as a real estate tax. So if we're going to take a political hit no 22 matter what we do, I'd say take the political hit, figure it out between now and next year how we can make this thing a better place and hopefully get more 39 5/13/10 - WHOLE - BILL 100115, etc. efficiencies in, do the 12.10 and not have to worry about the other taxes, because we can't get the nine votes anyway. Thank you. (Applause.)

Are there any other questions or comments from members of the Committee of our two witnesses? (No response.)

Gentlemen, thank you.

Thank you. MR. McPHERSON: Our next witness is --

Excuse me. You're going to stay with us, I hope?

Sure.

Thanks. Our next witness? MR. McPHERSON: Is a panel: 40 5/13/10 - WHOLE - BILL 100115, etc. Kevin Pasquay, Joe Gatta, Joseph Bright and Danny Grace. (Witnesses approached witness table.)

Good afternoon, gentlemen. Please identify yourself for the record and proceed with your testimony.

I guess I will go first. My name is Kevin Pasquay and I'm here -- I represent Swedish Match. Swedish Match makes cigars and other tobacco products that are sold by various retailers throughout Philadelphia. I am here today in an advisory capacity to state that the tax on cigars and other tobacco products, be it the business privilege tax, requires reconsideration. 3 percent. Over the years, our previous Mayors have worked hard to reduce it. Now, if this 41 5/13/10 - WHOLE - BILL 100115, etc. tax is assessed against the retailers, you seek to further burden this industry by adding an additional tax on top of it. For Philadelphia tobacco retailers, that initiative would be a tremendous hardship on an industry that is already heavily taxed and would simply serve as a Band-Aid in attempting to resolve the current City budget crisis before you, not to mention the disadvantage those business retailers, who already contribute to the City via the business privilege tax, would need to endure. Secondly, when you look at any retailer, tobacco or otherwise, they start out of the gate with a State tax of 8 percent as opposed to 6 percent in four surrounding Pennsylvania counties. Taken into effect, the BPT, the business privilege tax, and sales tax difference, you are getting woefully close to 9 percent between Philadelphia and those four surrounding counties. Now you propose adding to that tax burden for 42 5/13/10 - WHOLE - BILL 100115, etc. tobacco retailers. Please allow me to put that into perspective. Here is a tin of Ashton's. There are ten cigars, small cigars, in this tin, Ashton Esquires. They cost approximately $21, including tax, here in the City at Holt's. 75 in the suburbs, I most likely would head out to that retailer in the course of errands I am already doing in those areas. I buy these tins in bulk of ten. 50. These counties are right next door and easily frequented by many of us. It is well known that Philadelphians are very savvy customers. In my working-class neighborhood of Port Richmond, we might head over to New Jersey via the Betsy Ross Bridge for dinner or shopping and, while there, purchase our gas and/or alcohol products. I hope through illustration of these examples, to which we could all 43 5/13/10 - WHOLE - BILL 100115, etc. relate, that you see my point. To make that differentially even more convincing, the cost of doing business in the City as opposed to the suburbs or neighboring New Jersey or Delaware would be going in the wrong direction. If anything, we need to decrease the tax burden to make our shops, retailers and vendors more competitive with our neighboring suburbs and within the tri-state area. Finally, it is my understanding that you plan to assess part of this tax as weight based. I don't know if the good Councilpeople know what that means, but let me show you. I want to show you the products that a tobacco retailer might be carrying. As you can see, they come in different sizes, weights, et cetera. There's no uniformity whatsoever to them. 5 ounce; more chew; chew; pipe tobacco; chew tobacco; 44 5/13/10 - WHOLE - BILL 100115, etc. snuff; snuff, half an ounce. There it is, and I might even be missing some products, quite honestly. The tax you propose will be part of the business privilege tax. How will it be collected and identified? How will it be enforced? What are plans for follow-up? What's a poor retailer to do? He will have to purchase an electronic scale. It will cost him in time and money. It will cost him in the accounting process trying to figure it out. Needless to say, it could be inferred that additional employees will be needed to enforce the tax. Again, this proposal will already stress a system that is not meant to be policed additionally.

My gut, as a lifelong Philadelphian, tells me that if I go to a couple retailers in my neighborhood over in the Kensington area and I buy cigars over there and they sell -- those good folks over there sell 45 5/13/10 - WHOLE - BILL 100115, etc. pipe tobacco, you roll cigarettes, do all sorts of things, all sorts of snuff products, they will just try to work around this proposed tax. I doubt that much revenue would be implemented if this proposal were to become law. If anything, it could have the opposite effect; that is, the City is not a good place to do business. Now we have specialty taxes on top of the already excessive business privilege tax that was never meant to be a long-term solution but rather found itself being a fixture in doing business in Philadelphia in response to a short-term solution. Just how many more of these short-term solutions will become permanent in our already distressed City? A final note, a friend of mine, Scott Segan, who Councilman Rizzo and Councilman Kelly know well, who runs Burton Photo Industries with 50 to 60 employees, left Philadelphia, the Kensington area -- he was a good 46 5/13/10 - WHOLE - BILL 100115, etc. manufacturer -- for Bucks County. He said the business taxes were killing him. In Bucks County, he feels reborn. Just how many more of these types of stories can the City endure? While Scott had to move large, heavy, sophisticated machinery at a pretty significant cost, he made the move. Scott indicated that Bucks County is enticing since it was only ten miles away. Today, we're going to hear from Robbie Levin of Holt's. I thought I would be giving my statement after him, but I do have a statement here, my feeling of -- as to Robbie Levin, what his sentiments are. Robbie Levin, owner of Holt's, is less than a mile away. Bucks County beckons, as does Delaware, Montgomery and Chester Counties. Please take the points I discussed seriously and seek another solution to our current economic crisis. 47 5/13/10 - WHOLE - BILL 100115, etc. Imposition of this tax would further cement the message that Philadelphia is a terrible place to do business, and we will see another empty storefront on Walnut Street, among the many who have pulled out of the City for greener pastures. Thank you again for your time and consideration.

Thank you. Mr. Grace, are you going to testify next?

He's going to go next.

Madam President, members of Council, thank you for the opportunity to speak on this subject. I am Joe Bright, tax lawyer, tax writer. My firm represents the Pennsylvania Beverage Association, and I was asked to give my view on whether this tax would be sustained by the courts -- by "this tax," I mean the sugar beverage tax -- if it 48 5/13/10 - WHOLE - BILL 100115, etc. were challenged. I was asked to do the same thing two months ago, and my view now is the same as it was two months ago. I think it will be stricken down by the courts as preempted by the State sales and use tax and by the City's own business privilege tax. The source of the taxing authority is the Sterling Act. The City can tax what the State doesn't take. There already is a State tax on beverages. Now, I have seen the City Solicitor's opinion in which he says, But we have drafted it so that the tax is actually on the seller. The tax authorities -- and by that I mean the learned authorities -- tell you that that doesn't make any difference. What you look at is the actual operation of the tax. The Pennsylvania Supreme Court has said the same thing a number of years ago in the first effort to pass a liquor drink tax in Philadelphia. It was struck 49 5/13/10 - WHOLE - BILL 100115, etc. down by the Pennsylvania Supreme Court as preempted on the grounds that other taxes, which were not imposed in precisely the same way, preempted it. I think -- now, as a result of that, the General Assembly gave special authority and we now have a drink tax. I believe that that same view would be applied here. When you cut through it, this is a substance over form argument. What's it really about? What this proposed tax is about is to hit consumers. That's what it's intended to do. That's what the City says, and that's what it would do, and that's what the sales tax does. If you take the substance view, the tax falls. If you, on the other hand, look at the form as drafted by the City, we already have a privilege tax on doing business in the City, detailed and laid out comprehensively by the General Assembly. Generally speaking, in 50 5/13/10 - WHOLE - BILL 100115, etc. Pennsylvania if the General Assembly legislates thoroughly in a field, there is no room for local improvisation. If that rule is applied here -- and I think it will be -- the tax will fall, if it isn't dead already under the first ground. There are other points, but I don't think I need to belabor them here. As I said, my view now is what it was two months ago. If attacked, this tax will fail.

Thank you, Mr. Bright. Mr. Grace.

Thank you, Council President Verna and all members of City Council, for once again affording me this opportunity to provide testimony in response to the Nutter Administration's proposal to enact a sugar-sweetened beverage tax. For many weeks now, I and Teamster brothers and sisters have implored you to stand against the 51 5/13/10 - WHOLE - BILL 100115, etc. so-called soda tax for multiple legitimate reasons. It is telling that the Nutter Administration appears to have backed off its original two-cents-an-ounce proposal and is now floating various compromised deals. This development should alert every member of City Council that the Administration has come to the realization that the citizens of Philadelphia have no taste whatsoever for this burdensome tax at any level. The only thing that this would -- the only thing that would be compromised by accepting any form of the soda tax is the financial livelihood of many hard-working families, not just the thousand of Teamsters who will stand to lose their jobs if any form of this tax is passed, but also small retailers, their employees and workers in our restaurant and food-service industries. It is also noteworthy that the Nutter Administration seems to have abandoned any pretense that this tax is 52 5/13/10 - WHOLE - BILL 100115, etc. really a public health initiative. It is not. It is yet another unfair tax burden that will disproportionately hurt hard-working, middle-class families and the working poor of this city. Far too many Philadelphians are already struggling to make ends meet in this dire economy. The soda tax is an impractical and shortsighted policy decision that will succeed only in cutting jobs, not cutting obesity rates. Virtually any food or drink consumed without moderation will cause weight gain. Why aren't we talking about taxing cheese steaks, soft pretzels and Tastykakes? Clearly -- (Applause.)

Clearly, the soda tax is discriminatory. Taxing one product and one industry to the exclusion of numerous items containing similar sugar-based ingredients is simply unfair. This initiative is not about health. It 53 5/13/10 - WHOLE - BILL 100115, etc. is about deficit reduction and raising taxes on Philadelphians, who are already burdened with among the highest taxation rates in the country. The Nutter Administration has repeatedly and cynically denied the Teamsters' position that a soda tax will result in lost jobs. They did not do their homework. Beverage industry statistics show that when soda prices rise ten percent, sales drop eight to nine percent. Reductions in soda sales mean job losses from bottling plant workers to Teamster Union delivery drivers. Our best estimate at this point in time is potentially as many as 2,000 lost regional jobs if this tax is passed in any form. Yet, these job losses will not be limited to Teamster members alone. Supermarket employees, convenience store workers and small business owners who sell soda in their stores or restaurants would also be adversely affected. There are thousands of family-sustaining, middle-class 54 5/13/10 - WHOLE - BILL 100115, etc. Philadelphia jobs in beverage production, supply, distribution, sales and retailing which depend on a healthy beverage industry. The loss of any of these jobs will only further erode the City's tax base. Teamsters Local Union 830 represents 2,200 Philadelphia members in the soft drink and beverage industry. These hard-working, tax-paying City residents do not deserve to have their jobs placed in jeopardy because of a misguided attempt to fill the City's coffers sorely by taxing the product they produce and deliver. Furthermore, it appears that the Administration has not exhausted all other avenues to reduce overhead costs and increase revenues. Just yesterday the City announced that it had received the first installment payment of $3 million that had been sitting in the Clerk of Quarter Sessions' bank account, and there are still untold millions of dollars yet to be identified and 55 5/13/10 - WHOLE - BILL 100115, etc. transferred from the Clerk's Office to the City's General Operating Fund. Similarly, the editorial boards of the City's leading newspapers continue to urge the Administration to make the kind of cuts that other major cities have made to cope with this down economy as opposed to breaking the backs of our bruised and beaten citizens with yet another tax. Members of City Council, I respectfully ask that you vote against any version of the soda tax. It will be an additional financial burden on the families already struggling to make ends meet. It does not work for Philadelphia or for Philadelphia's workers. Thank you. (Applause.)

Is there anyone else to testify? (No response.)

The Chair recognizes Councilwoman Brown. 56 5/13/10 - WHOLE - BILL 100115, etc.

Thank you very much. Good afternoon, gentlemen. Mr. Joe Bright, I'd like to focus on the legal questions around this proposal, so could you walk through again slowly why, from a legal perspective, this tax is not on solid ground, this proposed tax is not on solid grounds.

Sure. The City has no taxing power that it isn't given by the General Assembly, has no inherent power. The general power is in what we call the Sterling Act. That is, the City is empowered -- and I'm paraphrasing now -- to tax whatever it wants, provided that the State doesn't tax the same thing. So the question here is, has the State taxed the same thing, speaking colloquially, when it has imposed the sales tax on many things, including soda. And as an economic matter, it absolutely has. I mean, common sense tells you that 57 5/13/10 - WHOLE - BILL 100115, etc. when you impose a tax like this, just one step up in the distribution chain, it's going to be passed on. The burden will fall on the consumer, and, in fact, that's what the City said it's intended to do. The original justification of the bill was to deter what was thought to be undesirable behavior from a health point of view. So if you take that view, it's flatly preempted, because the State is taxing the same thing; that is, placing an economic burden on the sale of these items. That's point number one. Point number two is, if you disregard what I just said and if you do not look at the substance of what's going on here and you simply look at the words as they have been drafted in the proposed ordinance, the proposal is to tax the privilege of selling sugar sodas, beverages. We already have a tax on the privilege of doing business generally, including selling all kinds of things in 58 5/13/10 - WHOLE - BILL 100115, etc. the City and --

And that would be known as the?

The business privilege tax. And in State law, there is a doctrine that where the General Assembly lays out a comprehensive plan, either in regulation or in taxation, then that's the set of rules that must be followed, and a municipality, including the City, cannot vary those rules by, for example, doubling the tax on sugar bevs. That's point two. Now, there are other arguments that are contained in the memorandum that I did a couple months ago, but those I think are the key points.

Now, can you cite an example that supports the two points you just articulated?

Sure. There are quite a few of them. On point one; that is, is this preempted by the sales tax, the case cited in my memo is a decision 59 5/13/10 - WHOLE - BILL 100115, etc. by the Pennsylvania Supreme Court which struck down the first version of the City's liquor-by-the-drink tax. The City defended it on the grounds that the other State taxes were further up the distribution chain, and the Court gave a backhand to that and said they were intended to burden the consumer. Functionally, they are consumption taxes. That's what we have here preempted, and the General Assembly then passed specific authorization, which it is entitled to do any time it feels like it, and we now have the tax. But we have it because the General Assembly said so.

Okay.

Now, on the preemption argument, there are lots and lots of cases that illustrate the point that where the General Assembly, in the language of tax parlance, occupies the field, the field in this case being privilege of doing business, that that's it, you can't add additional 60 5/13/10 - WHOLE - BILL 100115, etc. requirements. I don't think I cited any in the memo, but there are lots of them, and if you want me to give you some, I'd be more than happy to do it.

If you would just send one example to the Chair of the Committee, that would be helpful.

Sure.

But thank you very, very much for your testimony. Thank you all for your testimony. Thank you, Madam Chair.

Thank you very much. Any more testimony? (No.)

Thank you very much. MR. McPHERSON: Our next witness is Dr. Sam Monismith, Sherri Fiorentino and Jonathan Kirch. (Witnesses approached witness table.)

Good 61 5/13/10 - WHOLE - BILL 100115, etc. afternoon. Would you please state your name for the record and begin your testimony, please.

My name is Sam Monismith and I'm a volunteer for the Pennsylvania Division of the American Cancer Society and a member of the Division's Board of Directors, and I want to thank the Council for allowing me to make a few comments to share the American Cancer Society's position on taxing tobacco products, both smoking and smokeless, in the City of Philadelphia. As members of the Philadelphia City Council, you have the opportunity to pass legislation that will help reduce suffering and death caused by tobacco and create parity among the prices of all tobacco products sold in the City. This is vitally important to the American Cancer Society, because the mission of the American Cancer Society is to eliminate cancer. Let's be clear. Where there's 62 5/13/10 - WHOLE - BILL 100115, etc. smoking or smokeless, all tobacco products are harmful, highly addictive, cause cancer and other serious health problems, and unfortunately are commonly used by the youth of Pennsylvania. Tobacco use is the number one cause of cancer death and disability in Pennsylvania. According to the Campaign for Tobacco-Free Kids, it's estimated that 20,000 Pennsylvanians will die each year from their own use of tobacco. Smokeless tobacco users are four to seven times more likely than non-users to get oral cancer and have a 50 percent higher risk of developing pancreatic and esophageal cancer. Use of smokeless tobacco products among high school youth nationwide is three percent. According to the Pennsylvania Department of Health's 2009 Tobacco Facts report, Pennsylvania middle school males use smokeless tobacco at a rate of six percent and high school males use at a 63 5/13/10 - WHOLE - BILL 100115, etc. rate of percent, obviously well above the national percentage. And about 17 percent of high school males report smoking cigars. Despite its serious health risks, Pennsylvania is the only state in the United States that does not tax smokeless tobacco products. Taxing tobacco can obviously bring in revenue, but it also provides the added benefit of reducing tobacco consumption. Increases in cigarette prices are effective at reducing both smoking prevalence and average cigarette consumption in adults and youth. Studies show that a ten percent increase in the price of cigarettes produces a cigarette decrease, a use decrease of seven percent in youth and an overall four percent decrease in smoking consumption in general. Increasing tobacco taxes on cigarettes is one of the most cost-effective strategies to reduce tobacco use among adults and to prevent 64 5/13/10 - WHOLE - BILL 100115, etc. youth from starting. 50, bringing the cost of a pack of cigarettes in New York City to about $9. According to surveys, public opinion indicates that more than 70 percent of New Yorkers support the tax. When creating a tax increase on cigarettes, it is important to create parity among other tobacco products. There is evidence that shows how a price differential impacts use of other tobacco products. Rhode Island last increased their cigarette tax by 75 cents in 2004. They did not increase their smokeless tobacco tax, causing a large disparity in price. In the first six months after the increase, pack sales of cigarettes declined by percent, but sales of other tobacco products increased by 31 percent. A price differential exists that makes smokeless tobacco very attractive to Pennsylvania youth. From 65 5/13/10 - WHOLE - BILL 100115, etc. both a public health perspective and revenue perspective, it is important how we tax tobacco products. In order to maximize revenue for the City and to ensure the greatest benefit to public health, ideally your tax would tax all tobacco products at the same rate as cigarettes. If you don't do this, you will lose revenues when smokers switch to other tobacco products, simply because they're cheaper, but we still end up paying for the long-term healthcare costs for the use of those products.

It is also important to provide comprehensive definitions of the tobacco products that will come under this ordinance to make sure some tobacco products cannot escape being taxed. The industry has developed ultra lightweight products that will escape being taxed without comprehensive definitions to capture the new products. Because of the range of different non-cigarette products and the absence of any standardized 66 5/13/10 - WHOLE - BILL 100115, etc. packaging, many states and localities tax other tobacco products at a percent of the price charged for the product. A percentage tax based on price also results in price correction when the tobacco product price increases. A weight-based tax does not allow for this correction. I also have brought along one of these new products. This product is called Ariva. Its package identifies it as cigalettes. What are cigalettes? 14 According to Ariva, the tobacco in Ariva 15 is 100 percent Virginia star-cured 16 tobacco. All tobacco products, including 17 Ariva, contain nicotine, an addictive 18 substance. So why should this product 19 which is advertised in this manner: 20 Place a cigalette piece in the mouth and allow it to dissolve. Do not chew or swallow. Use a cigalette piece when you might otherwise have a cigarette but can't. So, in essence, it's advertised on the package that it's a substitute for 67 5/13/10 - WHOLE - BILL 100115, etc. smoking cigarettes. What's so special or unique about this product that it should be given a special tax break that cigarette products in Pennsylvania that are already taxed don't get? The American Cancer Society strongly supports your efforts to tax smokeless tobacco products at the same rate as other tobacco products based on the price of the product. By using this taxation method, Philadelphia can help ensure that the tax on smokeless tobacco products remains an effective public health tool over time. Appropriately taxing smokeless and all tobacco products can help make sure that youth do not view these products as an attractive and cheaper alternative to smoking. The American Cancer Society is available to you and would be happy to assist you in your efforts in passing this ordinance. Thank you.

Thank 68 5/13/10 - WHOLE - BILL 100115, etc. you very much, Doctor. Who is going to testify next? Please identify yourself for the record.

Good afternoon. My name is Sherri Fiorentino and I'm a staff member for the American Lung Association. The American Lung Association supports an excise tax on other tobacco products, OTP, that is based on a percentage of the wholesale cost, not the proposed per ounce. An excise tax in the City of Philadelphia would generate approximately $10 million or more. Tobacco-related healthcare costs would also decrease by enacting an OTP excise tax. Other tobacco products such as smokeless tobacco, cigars, cigarellos, blunts, et cetera, are harmful and can be deadly. They cause oral cancer, gum disease and nicotine addiction, and increase the risk of cardiovascular disease, including heart disease. 69 5/13/10 - WHOLE - BILL 100115, etc. According to the Centers for Disease Control and Prevention, OTP use in the United States is higher among people who are employed in blue-collar occupations, service labor jobs or who are unemployed. Many of these individuals are also less likely to have adequate health insurance. Smokeless tobacco is the second most commonly used tobacco product in Philadelphia. As many of you are aware, Pennsylvania is the only state in the nation that does not tax non-cigarette tobacco products. For far too long, the tobacco industry and businesses have enjoyed the bounties of profit while their products remain untaxed in our Commonwealth. 12 billion in tobacco-related healthcare costs in this year alone. With the shortfalls in the City's budget and tough economic times, now more than ever citizens are expecting decisive leadership to find missed 70 5/13/10 - WHOLE - BILL 100115, etc. revenue streams. Now is the time to close this loophole and tax OTP to maximize the overall reduction in tobacco use. From both a public health perspective and a revenue perspective, it is important how the City goes about closing this loophole. In order to maximize revenue for the City and to ensure the greatest benefit to public health, ideally we ask that you tax all other tobacco products at roughly the same rate as cigarettes. The City will lose revenues when smokers switch to other tobacco products because they're cheaper, but still end up paying long-term healthcare costs. It is a lose-lose proposition for the City. 60. To create equity with other tobacco products, the City should look at an excise tax of a percentage of wholesale costs, which would generate more than $10 million, 71 5/13/10 - WHOLE - BILL 100115, etc. provide comprehensive definitions to make sure tobacco products cannot evade paying the tax, new smokeless tobacco products. Orbs, sticks, tobacco water or lozenges are examples. Percentage of wholesale price tax systems are preferable to weight-based systems because they will keep pace with inflation automatically and avoid creating a loophole for new extra light tobacco products that are being marketed by the major tobacco companies. It is projected that by closing the loophole, the City of Philadelphia would generate well over $10 million in new revenue. Economic fears have been raised in regard to taxing other tobacco products. Economic fears in this economy are justified, but it is important to remember that fears are not facts. The reality is, in every state that has passed a significant tobacco tax increase for either cigarettes or other tobacco products, revenues have increased while 72 5/13/10 - WHOLE - BILL 100115, etc. consumption has declined. Research has shown that when you increase tobacco taxes, decreasing tobacco sales actually leads to increases in total sales taxes collected by convenience stores, likely because the people are no longer buying cigarettes, are buying other products instead with the money they are saving. The potential revenue from this proposed excise tax is considerable and would go far to support health initiatives.

The American Lung Association is asking the City of Philadelphia to tax OTP at a percentage of wholesale and allow Philadelphia to reap the benefits of taxing these products. This will generate a significant revenue stream that will reduce OTP use rates, raise critically needed revenue and save lives. Thank you.

Thank you. Good afternoon. 73 5/13/10 - WHOLE - BILL 100115, etc.

Good afternoon. My name is Jonathan Kirch. I'm with the American Heart Association, and we're here today -- we thank the Council, we thank Councilman Clarke for bringing attention to taxation of tobacco products and other tobacco products specifically. I want to try to bullet point what some people have said before me. The American Heart Association supports taxation of all tobacco products at rates significant enough to discourage use and initiation, especially among young people. The bill before this Council is of some concern to my organization because of the methodology that is utilized to calculate the tax. The American Heart Association and others support taxing tobacco products, other tobacco products, at a percentage of the wholesale price. That method will ensure that the tax does not erode with inflation and also is at -- will bring the City more revenue than a weight-based 74 5/13/10 - WHOLE - BILL 100115, etc. method. And it's important to note that new novel tobacco products are probably going to be missed by the tax methodology being proposed today. And this methodology in some regards is more helpful to premium-priced producers who market more heavily to young people and is more harmful to some of the discount tobacco producers and sellers. The American Heart Association has a charge to protect Americans from the deadly effects of tobacco use on the vascular system. We're engaged in a long campaign in this state and across this country to raise the tax rates on other tobacco products using a percentage of wholesale price calculation method. And the proposal before Council, if unchanged, does present some concerns for that effort. So we strongly encourage the Council to consider modifying the taxation method to the wholesale price approach. Again, it yields more revenue to the City, probably $10 million, as 75 5/13/10 - WHOLE - BILL 100115, etc. opposed to the or that the current proposal would bring to the City, and it preserves the progress being made by health advocacy organizations across the country to tax all tobacco products in a sensible way that maximizes the public health impact. I'm happy to answer any questions that the Council might have.

Thank you very much for your testimony. Do we have any members that would like to question the witnesses that are before us presently? (No response.)

Seeing none, thank you very much for your testimony. (Applause.)

Our next witness? MR. McPHERSON: Robert Levin, Holt's Cigar Company. (Witnesses approached witness 76 5/13/10 - WHOLE - BILL 100115, etc. table.)

Good afternoon, sir. Please identify yourself for record and proceed with your testimony.

Robert Levin. My name is Robert Levin. I am the owner of Holt's Cigar Company in Philadelphia. I want to thank City Council for the opportunity to present this testimony today. The taxes contained in the pending resolution threaten the financial well-being of my family business and all its employees. Holt's has been in business in Center City since 1898.

Mr. Levin, excuse me a moment, please. Would you pull the microphone closer to you. We're having difficulty hearing you.

Okay. Is that better?

Yes. 77 5/13/10 - WHOLE - BILL 100115, etc.

Holt's has been in business in Center City since 1898 and was purchased by my parents in 1957. I started working with my father full time in the early '70s. When my family took over the business in 1957, Holt's was a small retail cigar store across from City Hall. Over the years, our family has grown the business into two retail stores in Philadelphia, our wholesale business, which imports and distributes our proprietary brands all over the world, and a catalogue mail-order business, all based out of our 53,000 square foot facility in Northeast Philadelphia. We now have 95 employees, and I am proud that we have continued the family tradition and that my son and daughter joined me full time in the business. We provide excellent healthcare benefits for all our employees. We pay our fair share of local, state and federal taxes, and our local employees also pay substantial taxes to the City of 78 5/13/10 - WHOLE - BILL 100115, etc. Philadelphia. Last year, Holt's paid the City of Philadelphia over $420,000 in various business and wage taxes as part of doing business in this city, and in addition, we have paid the Commonwealth of Pennsylvania $578,000, for a total of almost $1 million, not including corporate income taxes. My City taxes consisted of the following: Philadelphia City wage tax, $176,000; Philadelphia real estate tax, $80,000; the business privilege tax, $50,000; Philadelphia use and occupancy tax, $44,000; Philadelphia City sales tax, $70,000. Philadelphia has been and remains one of the most heavily taxed cities in the country, and each time this tax burden is increased, it becomes harder to compete effectively against competitors in more tax advantageous locations. Over the past years, I have remained committed to this city and have continued to invest in Philadelphia. I 79 5/13/10 - WHOLE - BILL 100115, etc. own the building in which our downtown store is located, and purchased the building in Northeast Philadelphia in 2003, where our second retail store, corporate offices, operation center and warehouse are now located. I'm a Philadelphia guy. I was born and raised in this city. My children were born and raised in this city. Both of them graduated from Temple University. The emotional ties I have to this city grew out of my belief that a long-term mutual relationship had developed between our business, our employees, our City customers and the City as a whole. Other businesses abandoned the City and urged us to do the same, reminding me of the significant tax savings that we could achieve. They ran, whether just over the City line or to other jurisdictions entirely. I felt my family and Holt's had a multi-generational relationship that transcended this and we remained 80 5/13/10 - WHOLE - BILL 100115, etc. committed to Philadelphia. This tax could well change that relationship and cause irreparable harm to our family business and our ability to stay and keep our employees gainfully employed and paying their taxes to the City of Philadelphia. When the impact of the proposed tax is considered, I am certain that the analysis could not adequately address the impact it will have on cigar revenues from my two stores, as well as other stores within the City. Premium cigar stores fight a daily battle with online retailers and catalogue companies who constantly bombard people with the message that they can buy the same product at cheaper prices and avoid paying taxes such as the one proposed. While the increase proposed may not seem like much, each small increase on our already heavily taxed products drives consumers to alternate sources and drives down our sales. 81 5/13/10 - WHOLE - BILL 100115, etc. My retail stores are already burdened with Philadelphia City taxes that threaten our ability to compete. The taxes that concern me most and threaten my ability to profitably operate my business are those that are levied directly on my product and must be directly passed on to my customers.

6 cents per cigar makes that burden even greater. I have been a cigar retailer and wholesaler for almost 40 years and have personal experience with the impact each tax increase has on our sales. What I can assure you is that this tax will not generate the amount of revenue projected, as our sales will decrease as more of our customers purchase on the Internet or from catalogues. That brings me to the second and more disturbing impact of this tax. My catalogue and web store sales are all 82 5/13/10 - WHOLE - BILL 100115, etc. fulfilled out of our Northeast Philadelphia facility. If this tax is enacted and I am forced to collect this tax on all catalogue and web sales throughout Pennsylvania, it will put Holt's at more of a competitive disadvantage to our competitors both in and out of state, who will then have additional margin available to beat our prices. Please understand that the Internet and catalogue marketplace is incredibly price competitive, with customers often changing retailers based upon minute differences in total costs. The imposition of this tax on my catalogue and web sales will leave me with little alternative but to succumb to the pressure which has been building over many years to relocate these operations to a more tax-favorable location, which may be as close as a half a mile further northeast of our current facility. The unfortunate consequence to 83 5/13/10 - WHOLE - BILL 100115, etc. the City would not only be the loss of the significant taxes paid by Holt's and our employees, but many high-paying jobs with excellent benefits. Bucks County is one-half mile down the road from our offices and distribution center and is offering tax incentives, not additional taxes, to attract employers and businesses. My professional advisors have informed me that if I follow the lead of many other businesses and relocated my operations to Florida, I could realize over $1 million a year in overall tax savings before considering any impact from this tax. Florida has no state income tax and very low business taxes, unlike our own Commonwealth and City. Unfortunately, we also know that taxes never disappear, but always go up. As destructive as this tax is to Holt's and my employees now, it is certain to become more destructive as it increases year after year and my business 84 5/13/10 - WHOLE - BILL 100115, etc. cannot support these increases. That is the reason why I discussed the possibility of a sunset provision in my meetings with several Councilmembers concerning this tax. I have always believed that the long-term prosperity of our city can only be built upon a foundation of a strong and vibrant business community, with businesses that can compete effectively through their success and provide high-quality jobs. This tax, without a sunset provision, will be raised in future times of fiscal need, and I cannot risk the economic health of my business in a city that is clearly sending the message that it is not an environment that understands the needs for businesses to operate with some sense of financial security. I would ask you to direct your attention to the audience in the Council Chamber and ask my employees who have come to this hearing today to stand up. ) 85 5/13/10 - WHOLE - BILL 100115, etc.

These are some of my employees of Holt's Cigar Company who stand to lose their well-paying jobs with good benefits if this seemingly unimportant tax is enacted. Many of them, like many of our employees, have worked for us for over ten years. I have always said that the success of our company is founded on two things: quality products and great customer service. These employees are the reason for that great customer service and the success of this company. I believe that it is important to put faces to this discussion to understand the impact of this tax. Prosperity cannot be built upon new taxes that threaten long-term loyal businesses and cause them to consider packing up and leaving the City. Prosperity cannot be built upon new taxes that prevent businesses from growing and adding more jobs. That alone is reason enough to reconsider the merits of the 86 5/13/10 - WHOLE - BILL 100115, etc. proposed tax. However, I understand the financial issues facing the Council and the City. For me, it would be much better to pay an increased property tax. While I have almost paid $80,000 to the City last year in real property taxes, an increase in this tax would be much preferable than another tax on our products that would be detrimental to our business. (Applause.)

Taxing our products would raise an insignificant portion of the revenue to fix the City's current problems and would cause my family business to relocate, costing the City, my family and these employees more than any potential revenue gain. Leaving Philadelphia and Pennsylvania is neither my desire nor something to be said or undertaken lightly. Holt's has been a proud Philadelphia institution for over 100 87 5/13/10 - WHOLE - BILL 100115, etc. years, and I request that this Council consider all the implications of this proposed tax. I would like to give my son and daughter the same opportunity that my father gave me, to take our family business to the next level and create more jobs as our business grows. Thank you for the opportunity to address these issues.

Thank you, sir. (Applause.)

The Chair recognizes Councilman Clarke.

Thank you, Madam President. Good afternoon, sir. First, I would like to publicly thank you and say how much I appreciated having an opportunity to meet with you one and a half times. I count the time in the hallway as a half time. And as a result of our conversations, I learned a lot more about your company, and I want to 88 5/13/10 - WHOLE - BILL 100115, etc. thank you for having a company business in the City of Philadelphia for more than 100 years. That's quite a significant achievement. And I know that we talked about a number of things as it related to the industry. I heard you, but I also told you what our fiscal challenge was in the City of Philadelphia that caused me to even propose something like this.

Right.

If it were not for our challenge, there's no way in the world I wake up in the morning thinking about taxing smokeless tobacco or cigars. But understanding that, at the end of the day, we do have a challenge. So during the course of the debate as you talked about your industry, having done the research that we did, it was clear that, one, in terms of what has happened in the State -- I'm not just going to pick on the City of Philadelphia -- that it is clear that with the exception of 89 5/13/10 - WHOLE - BILL 100115, etc. two states --

Three other states.

Is it three now? Well, not counting Pennsylvania.

Florida and New Hampshire.

There is some sort of a tax imposed on these products directly.

Correct.

Which we actually thought it was none, but you corrected me. And we also understood in doing our research, as you heard in earlier testimony from folks from the American Heart and Lung Association, that the way we were taxing -- proposing the tax to this product, it was actually not the best way as it related to getting revenue for the City, and I was chastised actually by another member of the industry who would have preferred that we did it in a different way and I understand makes it lesser cost or a 90 5/13/10 - WHOLE - BILL 100115, etc. lesser quality product, and they feel like they're being penalized because we were proposing a per-unit price as opposed to a percentage of the cost. But I said, you know what, after talking to you and understanding your commitment to the City, I said that's okay. I said, I want to minimize the potential impact on a business in the City. Now, when we did the research, we looked at the various products, and understanding that you don't make all of these products, but you happen to be the last person to testify on behalf of the industry at large, when I look at the surrounding counties because -- the surrounding states when I heard the reference during the course of various testimony, when you look at snuff, for instance, which you do not produce, in Delaware, it's 54 cents an ounce; New Jersey, 75 cents an ounce; New York, 96 cents per ounce; Texas, $1.10 per ounce; Maine, $2.02 per ounce. Philadelphia, 91 5/13/10 - WHOLE - BILL 100115, etc. what we're proposing is 36 per ounce, which is much less. Chew and smoking, we actually have wholesale prices, but you can compute the numbers. Fifteen percent wholesale on chewing and smoking; 30 percent wholesale; 40 percent, six percent wholesale. That's based on the price. Much more. We're proposing a price per weight, which is much less if you compute the numbers. Cigars, wholesale prices, 14 percent; 30 percent; 46 in those same 15 states; 15 cents, which is actually per cigar, in Texas. So bottom line is, the numbers are relatively significantly more than what we're proposing. And in spite of that, I said, you know what, after talking to you, I said -- and let me finish, because you have pretty lengthy testimony. You'll have an opportunity to respond. And when I look at -- and I understand after talking to you that some 92 5/13/10 - WHOLE - BILL 100115, etc. of these numbers as it relates to the particular product are a little different, but we did an analysis on the products that were ones that people like to utilize, and we looked at single-stick price, and correct me if I'm wrong, and I'm sure you will, there's a product, a cigar, single cigar, that our information shows that the one most likely to be used or the most popular is $4.80. Boston there's one called the Peretti, $5.90; Las Vegas, $9, on and on, all of them pretty high. But you told me that your average cigar is $2.50, $2.60. I'm going to give you a chance to respond. I sat there patiently over there and here.

All right.

And when we compute the numbers based on what we believe to be the most popular, we're talking about a single-stick cigar at 4.80. After the proposed price increase, it will be 4.83. Box of 25, $107. After 93 5/13/10 - WHOLE - BILL 100115, etc. the proposed price increase, $108. So we're talking about an extremely small increment as it relates to an increase in price. Additionally, something that you also made me aware of is that your business does a significant cash -- what is it called, Internet?

Mail order.

Mail-order product, which I did not know at the time of the proposal of the ordinance, and you talked about the fact that a significant number of your employees, some of whom are here, was their sole responsibility to produce that product that was sent out on mail order. And I didn't think that it was fair to create a disadvantage on products that you sell outside of the City, so I agreed, at your request, to amend that section out, of which we have here today. So in all due respect -- and trust me, I do respect you. I actually 94 5/13/10 - WHOLE - BILL 100115, etc. like you. I was telling Councilman O'Neill that I like that guy.

And I told him you liked him, too.

And that happens more often than not, when you actually have an opportunity to sit down and talk. Your lawyer? No. I'm sorry. But I think that we're trying to be as fair as possible. And I understand your concern. You're supposed to do what you have to do.

Right.

But the reality is, we have a challenge. I'm just trying to put something -- because I don't want to go to the percentage base, because I know that's much more onerous, so I think what we're proposing is fair and reasonable.

That was a long question. However --

It actually wasn't a question. It was just a 95 5/13/10 - WHOLE - BILL 100115, etc. statement. Feel free to respond.

I'm very willing to pair our fair share of taxes on anything City Council will do, except our product, because that affects the people we sell it to. Increase a lot of other taxes. Don't increase a tax that I have to put on the product. Now, it's true that every state, except Florida, Pennsylvania, New Hampshire, tax premium cigars, because that's all we sell is premium cigars. We don't really -- we're not in the snuff business, we're not in the smokeless business, we're not in the cigarette business. We just sell handmade premium cigars. And because of our wholesale distribution business all over the country, I can tell you that all the taxes that the states are enacting are destroying the brick and mortar stores in every city in every state, and mail-order companies are the ones that are growing. 96 5/13/10 - WHOLE - BILL 100115, etc. So all the cities, all the stores are struggling because of the high taxes, because the business goes elsewhere. The business goes elsewhere. If there's a high tax in New York and a New York guy wants to buy a box of cigars, he's going to go on the Internet or dial an 800 number, order it from Philadelphia, order it from Bethlehem, Pennsylvania, order it from North Carolina, get those cigars, with no taxes paid, no sales tax, no 13 tobacco tax. And in premium cigars, that's the way it goes. So it's just driving business to mail order. Any tax that a city or state puts in, it destroys the small retailer. It doesn't cut down cigar smoking.

Okay. All right. But you did acknowledge that --

It is a small tax.

You did acknowledge that there's a tax --

Yeah, and it's a very small tax. 97 5/13/10 - WHOLE - BILL 100115, etc.

-- on product. You did acknowledge that.

It's a very small tax you're proposing, but like every tax, my fear is that it's just going to keep going up and up and up. No taxes stay the same. They just keep going up. So if it's 3.6 cent now, if the City has a fiscal problem two years from now, it's going to be a cent tax, and two years 12 after that it could be a dollar tax. 13

Point of 14 information. 15

The 16 Chair recognizes Councilman Rizzo for a 17 point of information. 18

Sir, could 19 you just clarify something? You said 20 earlier that if a person makes a purchase 21 on the Internet or mail order and they 22 are outside the State, Commonwealth of 23 Pennsylvania, that they are still taxed? 24

No. No. 25

I thought 98 5/13/10 - WHOLE - BILL 100115, etc. you said that earlier.

Pennsylvania doesn't have a tax. It's a -- New York has a high tax. If you were living in New York, you wanted to order a box of cigars, you would go on the Internet, order a box from another state, order the cigars from another state to be shipped to your house and there would be no taxes charged.

But you wouldn't be affected -- your customers outside the Commonwealth of Pennsylvania if this is enacted would not be affected by a tax?

Correct.

That's all I wanted to know.

Nor outside the City of Philadelphia.

Well, I wasn't sure of that when we talked.

I just want to clarify that. 99 5/13/10 - WHOLE - BILL 100115, etc.

All right.

All right. I'm good. Thank you.

Councilman Clarke, are you finished?

Madam President, I'm actually -- and I tell you, I like him. It's not a personal issue, and I've tried to be as fair as possible, and I think this is a reasonable proposal and I'm prepared to address what I thought was his most significant concern, was the mail-order/Internet sales, and we do have, at the appropriate time, an amendment to exempt that out of the bill.

Thank you.

Thank you.

Do we have any Councilmembers who would like to question Mr. Levin?

Madam President, let me say one other thing 100 5/13/10 - WHOLE - BILL 100115, etc. that was in the half a meeting that we had in the hallway. We just met. He doesn't know me for real and I don't know him for real. The reality is, as it relates to my commitment -- and I know he has a concern, because taxes tend to go up and not down, but what I told him, that as a sponsor of this particular bill 10 and I'm not -- frankly speaking, I don't think a whole lot of other Councilmembers are interested in entertaining this or any other similar bill, that I'm not going to propose to increase the cost of particularly as it relates to the cigars, particularly given the fact that it is an industry within the City of Philadelphia, and as most of us know, traditionally we have this decor within Council if it's an issue that -- and I hate to use the term champion, but an issue that relates to a particular Councilperson, it tends to stay within that realm. So I'm just saying that I'm not going to increase the tax. It's an issue 101 5/13/10 - WHOLE - BILL 100115, etc. that we currently have. Hopefully down the line we may not even need the tax anymore. I mean, I'm hoping that some of the news that you hear on CNN and MSNBC is actually correct, that the economy is improving. So as we move down the line, I'm hoping that we're in a position where we won't need this or any other proposed taxes. So I just want to put that on the record.

Okay. Thank you.

You're welcome.

Thank you. Thank you, Mr. Levin.

Thank you. (Applause.) MR. McPHERSON: Our next witnesses are Robert Wonderling and Varsovia Fernandez. (Witnesses approached witness table.)

Good 102 5/13/10 - WHOLE - BILL 100115, etc. afternoon. Nice to see you. Please identify yourself for the record and I would ask you to proceed with your testimony.

Thank you. Good afternoon, President Verna and members of the Committee of the Whole. My name is Rob Wonderling and I am President and CEO of the Greater Philadelphia Chamber of Commerce. I'm also joined to my right, your left, with Denise Earley, who is a member of our Public Policy team at the Chamber of Commerce, and to my left, the President of the Hispanic Chamber of Commerce, Varsovia Fernandez. We're pleased to join you today to offer comments on the City's FY11 budget. This is a too familiar position for all of us. Once again, Council and the Administration face a very difficult challenge in crafting an annual budget. The economic outlook for FY11, although not as dire as last year, still shows 103 5/13/10 - WHOLE - BILL 100115, etc. sluggish job growth as businesses of all sizes proceed with great caution at adding to their workforce. Businesses have made painful decisions to create real efficiencies in their operations, have enhanced their technology to improve employee output, and generally have become leaner in order to remain competitive. This is the new normal, and we must recognize it and all adjust to it. This year's municipal budget requires a shared sacrifice approach. It must be a budget that takes a scalpel to spending and imposes realistic goals for revenue. If we are truly to address the challenges of the future, it must produce real efficiencies on the spending side and shared responsibility on the revenue side by both businesses and residents. While we applaud the Mayor and this Council for identifying expense reductions in the budget, we foresee circumstances beyond the City's control 104 5/13/10 - WHOLE - BILL 100115, etc. which could dash the assumptions on which these proposed cuts have been crafted. Just as business has been forced to make difficult, substantive and definitive spending reductions, the City too must accept this fiscal reality and seek to deliver its services in a more efficient manner. The business community is justifiably proud of the work done by the Mayor's Private Sector Outreach Board in conjunction with the Administration and members of this Council. However, the fruits of its labor are long-term efficiencies. We pledge to continue that work, in the hope of helping the City to balance future budgets and to restore the City's tax cut program as quickly as possible. It's important to note that these identified efficiencies cannot be counted on as spending cuts for FY11. Of course, reducing expenses is not the sole solution to balancing the budget. We understand that this budget 105 5/13/10 - WHOLE - BILL 100115, etc. requires shared sacrifices. While revenue enhancements must be part of the overall solution, we point out that no 5 tax increase is popular, particularly during an economic slowdown such as we are experiencing. Still, the Chamber has supported the work of the Mayor's Task Forces in both 2009 and 2003. Both panels have recommended the need to move from mobile taxes, such as the wage and business privilege tax, to non-mobile sources, such as the real estate tax. Let there be no mistake. A hike in the real estate tax affects the business community just as it affects residents in this great city. Some 45 percent of the revenue raised by the real estate tax comes from levies on commercial property. Even those commercial establishments who do not own their space will see this hike passed through to them into their CAMs. Nonetheless, this temporary, temporary increase in real estate -- if there is an 106 5/13/10 - WHOLE - BILL 100115, etc. increase in the real estate tax, we would hope that it would be temporary and that it is indeed preferable to the continued reliance on wage and business privilege taxes. While we recognize the real estate valuations are not perfect, we believe this non-mobile tax approach correctly addresses the broader principals of the two task forces' recommendations.

And a non-mobile tax reflects this Chamber of Commerce's fundamental support for macro tax policy that supports free enterprise throughout the City. Now, we understand that the fee on residential trash collection has little support in this body, and based on comments earlier today and other conversations, we are concerned and would oppose any additional proposals that would increase the commercial fees on trash. 107 5/13/10 - WHOLE - BILL 100115, etc. We'd like to express our concern, we feel compelled to do so, to express our concern, as it relates to the proposed sugar tax. Now, impact to this tax and the potential impact of this tax will have on the beverage industry and small retailers in the City. In this particular case, the targeting of the beverage industry alone is never to address the objective outlined in the budget address. That is, it's designed to address childhood obesity. We are concerned that this sugar tax will not address that stated goal because of how it is being proposed to be imposed; namely, through the change in the business privilege tax that may result in different vendors levying the tax in different ways. For the record, we have heard from several of our members who do not support this proposal. Each has indicated that they will reduce staff if this levy is enacted. Also, and as you 108 5/13/10 - WHOLE - BILL 100115, etc. know, the Chamber's mission is to attract, retain and grow jobs. We have launched a campaign to visit with every Council District to discuss jobs and economic development in this city. In fact, we will be visiting the 7th Council District later this evening. The proposed tax on cigars and chewing tobacco, if not preempted by the State, is really a consumer tax and will generate some additional revenue. This Chamber of Commerce did support the smoking ban in 2005, and this levy is one that complements the effort of the Commonwealth in taxing tobacco products. Now, while every effort is being made to identify each dollar that can be saved to close the budget gap, we think serious consideration should be given to the recommendations of the Committee of Seventy as identified in its report, Tracking True Reform. These recommendations include reducing the size of government, elimination of row 109 5/13/10 - WHOLE - BILL 100115, etc. offices, elimination of redundancies in government, revamping the Board of Revision of Taxes and et cetera. Some of these recommendations are clearly underway, and next week there will be a question on the primary ballot to eliminate the BRT. The extreme challenges that the City faces in this budget may not be lessened by this time next year. The economy has not yet turned a corner. We hope to see new jobs being created and consumer spending starting to increase, but absence of solid evidence of a substantial recovery, we urge this Council to make realistic and even conservative projects for FY11. Let's be pleasantly surprised rather than face draconian corrections at mid-year. In closing, Madam President and members of the Committee of the Whole, we offer our congratulations and gratitude to all the members of this Council and to the Administration for working together 110 5/13/10 - WHOLE - BILL 100115, etc. to address the needs of both residents and businesses in what indeed has been a very challenging year. Thank you for this opportunity.

Thank you. The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam Chair, and good afternoon, Mr. Wonderling and panel. In your testimony you talk about the temporary increase in real estate tax would be more preferable. I don't know if you were here earlier when I went through my round of questioning following Councilman Goode's line of questioning about the percentages. The bill that I withdrew, the 12.10 percent, had some language in there that basically said that Council shall consider, in light of every year's City budget, the need for total value reassessment. It did not say -- it was not spelled out as a sunset provision, so 111 5/13/10 - WHOLE - BILL 100115, etc. I guess my question to you is -- I'm not sure if you can answer it now or not. If I were to reintroduce a bill or amend an existing bill to the 12.10 percent with a sunset provision of one year, is that something that you think the Chamber could get behind?

Well, first let me restate our position on tax policy as our support of the two commissions and the most recent commission of 2009. We are philosophically in support with you, Councilman, the notion that we should move from mobile -- to mobile sources, but we believe first if we were to do so in this budget year, it should be temporary, and so we would acknowledge any bill that had a sunset provision as part of the language and must correlate to ongoing reductions in expenditures as well. So temporary, with a sunset provision, combined with the appropriate level of spending cuts, which has to be agreed to with this body and the 112 5/13/10 - WHOLE - BILL 100115, etc. Administration, if that is the proposal and the wisdom of this Council where discussions end up in lieu of other proposals that target the mobile sources on a precise basis, then on a philosophical basis we would be supportive. COUNCILMAN DiCICCO: Thank you. Thank you, Madam Chair.

Thank you. Councilman Green, you had your light on. Did you want to be recognized?

I have no 16 questions.

Thank you. Thank you so much. We appreciate your coming in to testify. MR. McPHERSON: Our next panel consists of Curt Gasper and Reverend Ken Metzner. (Witnesses approached witness table.) 113 5/13/10 - WHOLE - BILL 100115, etc.

Good afternoon. Kindly identify yourself for the record and proceed with your testimony.

Thank you very much. My name is Curt Gasper. I am President of the Greater Philadelphia Association of Realtors. I do want to thank City Council for allowing me to testify here today. I'm not going to read this script. I'm just going to go off my memory here. I appreciate you if you bear with me for a moment here.

Take your time.

The Board of Realtors opposes any real estate tax increase, obviously. That's why we're here today. We're very concerned on many different aspects. Number one, the homeowners. The homeowners right now, there's a lot of them don't have jobs, being laid off. Money is very tight 114 5/13/10 - WHOLE - BILL 100115, etc. right now. To raise the real estate taxes on the homeowners would be a difficult time. There's a lot of homeowners right now that are -- have mortgages are what they call under water or the mortgage is higher than the actual sale price of their home. We're concerned a tax increase on the real estate taxes could also maybe push some more homeowners into the fact that just doing what they call short sales or foreclosures or whatever and adding to the problem. So that's a major concern that we have. We also have major concerns with the real estate industry as far as selling real estate. Right now it's very difficult to get mortgages. There's a lot of added expenses. FHA is increasing their down payment. Seller assist is being eliminated to half of what it was last year. To increase real estate taxes would be another problem that we would have to deal with right now. 115 5/13/10 - WHOLE - BILL 100115, etc. We also want to remind City Council -- I'm sure they know this -- that when we sell a home in Philadelphia, the average income it generates for the local economy is $66,000 for an average home that sells across the Delaware Valley. If we raise real estate taxes, that could actually slow our industry down even more, and it actually affects transfer tax and other items. We're also concerned with future buyers, future homeownership. I have a buyer sitting on the fence right now, and if he hears in the local newspapers that the real estate taxes are going up, I'm sure that's going to make him even more nervous and sit on the sideline once again. We need the buyers to get off the fence, start buying these homes and, therefore, would give everybody and the City more transfer tax and more income. We have a large situation with people wanting to leave the City rather 116 5/13/10 - WHOLE - BILL 100115, etc. than move in. We don't want people hearing about another real estate tax increase and preventing people from moving into the City or relocating to the City. Of course, we know there's the highest transfer tax -- one of the highest transfer taxes in the country is Philadelphia at four percent. Raising the real estate taxes right now would not be a good thing to do. Unfortunately, I don't hear a lot of talk about cutting spending. All I hear about is tax increase, and this has the real estate community very concerned. We'd love to hear about cutting taxes, not raising taxes. Right now any taxes increased would definitely stifle real estate sales and also would hurt --

I think we agree. We would also love to cut taxes. I don't know of any city that's doing that right now. Now, you're suggesting that we not raise the property 117 5/13/10 - WHOLE - BILL 100115, etc. tax. Would you prefer that we charge $300 a year for trash removal?

I think we need to find other ways to deal with the situation than raising any taxes right now.

Do you have any suggestions?

Of course, the same thing I did in my business. Two years ago, I had five secretaries. I got two secretaries. Two years ago I was buying lunch in the office, going out on a regular basis. Everything is being cut back right now. (Someone yelling in the audience.)

Who is talking?

We ain't saying cutting jobs. We're saying cutting across the board. Look across the country. Everybody is having a problem, and raising taxes and raising expenses 118 5/13/10 - WHOLE - BILL 100115, etc. right now on the citizens is a problem.

Thank you. Councilman Greenlee.

Not to belabor this point -- thank you, Madam President. Does it get to the point, sir, though, if we don't have the proper services, what's that say about the City too?

Sir, the answer is not always to raise taxes. I mean, that seems to be the only answer we ever have.

I'm not saying that's true. But I think really, with all due respect, if you're going to come in here and say we don't want any tax increase, you're not saying about a little less, any tax --

We don't want any real estate tax increase.

All right. And obviously that's a lot of 119 5/13/10 - WHOLE - BILL 100115, etc. money we're talking about here. I think in all fairness, you should have some plan and not just say do something else. That's real easy to say. (Applause.)

One of the situation we have, we have a situation where one row house in one neighborhood, the taxes are $2,000. In another neighborhood not that far away, that maybe the taxes are $500. It just seems to be there's a lot of other things that we could look at to make things more fair than just raise real estate taxes.

Well, we agree with that, and that's one of the reasons why there's a question on the ballot about the Board of Revision of Taxes. City Council put on, by the way.

I understand that, sir. I'm not to --

But what I'm saying is, I think if you're going to come in here and say don't do something, 120 5/13/10 - WHOLE - BILL 100115, etc. then you have to tell us or make some suggestion -- you don't think for three months we've been thinking about stuff?

All I hear about is raising taxes, sir. I just think we have to --

Well, you haven't been listening to everything then.

I'm trying to work also.

Thank you.

Thank you very much. Sir, are you going to testify? Please identify yourself for the record.

Good afternoon, Council President Verna and members of the Committee. I'm Reverend Ken Metzner, and this is the third time I've had the privilege of testifying before you. Since receiving a notice last 121 5/13/10 - WHOLE - BILL 100115, etc. fall of a proposed 236 percent increase in the property taxes on the home I share with my life partner, I certainly appreciate the very daunting task that Council faces in attempting to close this budget gap, but I feel that there are compelling reasons why the property tax increase being considered today is not the appropriate way to do that. First, a broken tax system should not be used as the basis for generating increased revenues. Doing so only compounds the well-documented regressivity of the current system, which is a scheme that has caused tens of thousands of Philadelphia property owners to unwittingly pay too much in property taxes over the course of many years, and it is beyond good-faith dispute that it is the poorest of our city that are being hit the hardest. I'm not going to speak at length about that today, because that particular manifest unfairness is 122 5/13/10 - WHOLE - BILL 100115, etc. something that City Council has been aware of since at least September of 2002 when Council's Finance Committee held three days of hearing on the subject. But if there ever had been any lingering question as to just how bad the data and methodology for assessing our properties are, that certainly was laid to rest on January 26th of this year when Mayor Nutter issued the moratorium on routine property tax increases going forward. This Council not only embraced the two-year forward-looking moratorium, but went so far as to pass a resolution 16 in these Chambers by a vote of to one seeking to expand the moratorium backward for the benefit of the 18,000 property owners who had received tax increases prior to January. That resolution said, in part, quote, "As a matter of simple fairness and common sense, the BRT should not be defending assessment increases issued under an admittedly broken and unreliable assessment system." 123 5/13/10 - WHOLE - BILL 100115, etc. I am mystified as to how one can reconcile public statements made in January and February that our assessment methodology is so bad that we will need at least two years to fix it with a decision today that seeks to use the very same methodology to extract more money from Philadelphia's hard-working citizens. I also struggle to understand how our City Council could consider taking action that employs bogus numbers to ruin people's credit ratings and contribute to increased homelessness. Now, how can I say that? Well, if the data for generating the tax bills is bad, that means that the data on which tax liens and sheriff's sales are based is also bad. It is, therefore, appropriate to ask how many people have already been forced out of their homes due to an inability to pay their improperly calculated taxes, and how many more will be made homeless or have their 124 5/13/10 - WHOLE - BILL 100115, etc. credit ruined if Council votes today to increase these inaccurately calculated taxes. If consideration of these questions were not enough to give pause, I would submit as well that Philadelphia simply cannot afford to implement another tax increase. Philadelphia's overall tax burden is already one of the highest of any major city in the United States. That is not a distinction of which many Philadelphians are aware, nor is it one to be proud of. At some point, you, our leaders, must simply say no to more taxes. I submit that that time is now. In summary, please do not vote in favor of a measure that will illegally dispossess people of their homes. Please do not vote in favor of a bill that will ruin people's credit ratings without any legitimate basis. And please do not vote in favor of a measure that guarantees that Philadelphia will be the most overtaxed city in America. 125 5/13/10 - WHOLE - BILL 100115, etc. Thank you.

Thank you very much. Are there any questions of the witnesses? (No response.)

Seeing none, thank you, gentlemen.

Thank you.

You're welcome. Our next witness? MR. McPHERSON: Pat Conway. (Witness approached witness table.)

Good afternoon. Kindly identify yourself for the record and proceed with your testimony.

Yes. Good afternoon, President Verna and members of Philadelphia City Council. Thank you very much for the opportunity to provide testimony on Bill 100118 and our concern 126 5/13/10 - WHOLE - BILL 100115, etc. and opposition to any sugary drink tax, which would drive up the cost of a variety of beverages, including soft drinks, fruit juices and sport drinks in the City of Philadelphia. We believe this is a very regressive and onerous tax proposal really at any level of taxation and it would lead to job losses that we simply cannot afford, especially during these very difficult economic times. My name is Patrick Conway and I am speaking for the Pennsylvania Restaurant Association today, as well as our Philadelphia Delaware Valley Chapter. Our association represents restaurants all over the Commonwealth, but today we're speaking for over 10,000 restaurant units located in the City of Philadelphia. Restaurants have a significant economic impact in the City. Each one million in sales in Philadelphia eating and drinking establishments provides for 43.3 jobs. In addition, nine out of ten 127 5/13/10 - WHOLE - BILL 100115, etc. restaurants are involved in charitable and philanthropic activities that improve the quality of life in Philadelphia and its neighborhoods. And our business owners, their families and their employees are your constituents. Restaurants operate on slim profit margins, averaging only three to four percent even in very good economic times, and today many restaurants are fighting just to keep their doors open for business, and many others have been forced to close due to the tough economic times. In Philadelphia, restaurants are now also burdened with a costly and cumbersome new menu labeling law that has forced many restaurants to spend thousands of dollars to comply with what is the nation's most extensive and onerous menu labeling mandate. A sugary drink tax on top of the menu labeling mandate will only force more restaurants to close their doors during these tough 128 5/13/10 - WHOLE - BILL 100115, etc. times or to consider relocating outside the City, costing the City even more jobs and tax revenue. In an industry where profit margins are lower than many others, rising costs and economic pressures are especially challenging for restaurants. A sugary drink tax at any level would be another serious blow with a very negative impact on our local restaurant community in Philadelphia. If the sugary drink tax is enacted, the new tax will certainly lead to a significant loss of jobs and economic fallout that will be felt throughout the City and its neighborhoods. Philadelphia's unemployment rate is already in double digits, over ten percent, and a sugary drink tax would also bring a devastating blow to many local families who are already struggling to make ends meet. Not only will local families have to pay significantly more for a broad range of beverage products in 129 5/13/10 - WHOLE - BILL 100115, etc. Philadelphia stores and restaurants, but these families will be hard hit by additional job losses and the economic ripple effect sure to be felt throughout the City. This is simply not the time to add another new tax on the backs of our customers and your constituents. In closing, we respectfully urge you to oppose any sugary drink tax and to fight for Philadelphia jobs. The sugary drink tax proposal at any level is a regressive and onerous tax proposal that would hurt Philadelphia's restaurants, retailers, workforce and families. Thank you again for the opportunity to provide testimony today.

Thank you very much. Are there any questions of this witness? (No response.)

Thank you very much for your testimony. 130 5/13/10 - WHOLE - BILL 100115, etc.

Thank you very much. MR. McPHERSON: Our next witness is Lauren Huminski. (No response.) MR. McPHERSON: Andrew Weikert. (Witnesses approached witness table.)

Good afternoon. Can you hear me?

Sure. Good afternoon.

I think there may have been a slight discrepancy in the schedule, because in the next grouping that was to come up, I actually have two of those people with me. With me today is Michael Mercado -- first of all, my name is Andrew Weikert. I'm the Director of Government Affairs for Auntie Anne's hand-rolled soft pretzels, and with me is Michael Mercado, who the Manager of our company-owned stores in the City of Philadelphia, and also John Lyman is an 131 5/13/10 - WHOLE - BILL 100115, etc. independent franchisee who owns the three stores at 30th Street Station. First, I just want to thank you for the opportunity to be here today. Again, my name is Andrew Weikert. I am actually here speaking on behalf of a total of independently owned and 9 operated Auntie Anne's franchise 10 locations located in the City, including 11 the Gallery Mall, South Street, Cheltenham Square, the Shoppes at Penn, as I mentioned, 30th Street Station and the Philadelphia International Airport. These stores employ approximately 120 City residents who understand the danger that the proposed sugary beverage tax represents to their livelihoods. As I've testified in the past on this issue, I can't overstate enough how devastating this tax would be to Auntie Anne's locations located in the City. It needs to be understood that this tax poses a severe threat to our stores' most valuable asset, the 132 5/13/10 - WHOLE - BILL 100115, etc. employees who work in our stores every day, day in and day out. While Auntie Anne's locations is indeed primarily a hand-rolled soft pretzel store, we depend very heavily also on the incremental sales that come from beverages. In fact, a full 9 percent of our total sales mix is based 10 on beverage sales. So another way of 11 saying that is, even though we're a 12 pretzel concept, a full 25 percent of our 13 business is coming from the sale of 14 beverages. So it has an extraordinary 15 impact on us. 16 There's been a lot of 17 discussion about the beverage tax in 18 terms of the proposed tax on finished 19 product, but there's been less discussion 20 on the legislation as it concerns the tax 21 on beverage concentrate. At 18 cents an 22 ounce on beverage concentrate, that tax 23 adds $115 to a five-gallon bag of 24 concentrate that only costs $55 to the 25 business owner. So you have a $55 bag of 133 5/13/10 - WHOLE - BILL 100115, etc. concentrate that actually increases now to a total of 170, and a $20 box of lemonade now jumps to $70. Being that there's no way for the small business owner to absorb this cost, the cost is actually going to be passed on to our customers, City residents. In the calculations we've done, it actually adds 48 cents to a typical -- to our most -- our typical drink size is a 21-ounce drink. It adds 48 cents to a soda and an additional 72 cents to a 21-ounce lemonade. 91. So I just go through some of these price points to point out that at these price points, there's no question that it's going to suppress consumption and sales. And when percent of our 24 business model is based on the sale of 25 beverages, we're very fearful on taking 134 5/13/10 - WHOLE - BILL 100115, etc. that kind of sales hit, what it does to our franchisees, who have invested heavily into these businesses and even more so in the livelihoods of the people who work in these stores, the employees, and I think John is going to touch on that as well. Now, I will -- to be honest, we have every intention as opportunities arise in this city, if we can find good locations, we do intend to expand, open more stores in the City of Philadelphia. The challenge comes when we try to find franchisees, people who are willing to invest and buy into the franchise, when they know they're going to be facing these kinds -- this kind of inhibition on their ability to sell drinks. It's going to be tough to find people who want to make that investment in the City. So with that, thank you very much for allowing me to be here today.

I'm going to pause and allow Mr. Mercado to take over. 135 5/13/10 - WHOLE - BILL 100115, etc.

Thank you. Members of Council, thank you for this opportunity to discuss the sugary beverage tax and the impact it would have on our employees. As General Manager of company-owned stores, my main responsibility is to provide support to over 120 employees who work in our company-owned stores. I have come to you today in direct support of the City 12 residents who work in our two locations 13 within the Franklin Mills Mall. 14 Like many businesses, the 15 number of labor hours we can provide our 16 employees are directly affected by store 17 performance. The sugary beverage tax 18 would have a significant impact on about 19 25 percent of our business. This loss of 20 business, without question, would affect 21 our labor force. Some employees could 22 lose their jobs. Those that are lucky 23 enough to keep their positions would have 24 a significant reduction in hours. 25 We at Auntie Anne's have always 136 5/13/10 - WHOLE - BILL 100115, etc. strived in making sure that business is more than just turning a profit. It's about caring for our employees. For example, we have offered health coverage to all of our company-owned store employees, whether you're the store manager or a crew member within your first year of employment. This health coverage is the same health coverage that is provided to our corporate staff based out of Lancaster, Pennsylvania. They have the same opportunities as our corporate employees. Well, this tax, by cutting and giving a reduction in hours, would not provide enough hours for eligibility. And this not only has an effect on that individual, but their family as well. It will trickle down to them, as many of our employees opt for the family option. You know, I realize this isn't just an Auntie Anne's issue. This is an issue for many similar businesses that offer beverages. My fear is if we can no 137 5/13/10 - WHOLE - BILL 100115, etc. longer employ our current employees, where will they turn? As you walk up and down a mall, an enclosed mall, you'll find many businesses that provide beverage opportunities, and you're going to -- my fear is that you will see many darkened stores as they close for business. So I just ask you again to reconsider your position with the beverage -- the sugary beverage tax. Thank you.

Thank you.

Good afternoon. My name is John Lyman and I'm an Auntie Anne's franchisee, and I do -- I operate three locations within the City of Philadelphia. I am sure at this point Council has heard enough of, yes, I pay my business privilege tax, I pay all the licensing, use and occupancy taxes within the City. I also can state unequivocally I feel that the proposed tax will be 138 5/13/10 - WHOLE - BILL 100115, etc. devastating to my own individual businesses within the City. I have no notes, so best I can say, our hand-rolled pretzels and a cold beverage, they go hand in hand. It's almost like Abbott and Costello. And with this proposed tax, it will not only devastate my business -- my beverage sales, but that will also affect my pretzel sales, which affects my business. And maybe I'm the first person -- I will talk to Council this afternoon. I want to appeal to the human aspect of this. As a business person in Philadelphia, I'm very proud to say 100 percent of my employees live in the City of Philadelphia and pay Philadelphia wage tax. I'm really proud to say almost 90 percent of my employees are single moms, and I'm really proud to tell this Council that 90 percent of my employees are single moms who are recovered drug addicts. I work with New Directions for Women. I hire these women. They have 139 5/13/10 - WHOLE - BILL 100115, etc. become great employees. They have become good moms. They have become great people for your City of Philadelphia. They give back to the community. I know, without a doubt, this tax on beverages, I will either have to eliminate some of my locations in the City, which will eliminate jobs, or get rid of some of these people. Ladies and gentlemen, I can just tell you this: These women live in a very, very fragile environment. I want to keep them employed. I don't know what would happen to them without their jobs. So thank you for listening to me. It's a little different approach to this, but I hope you will certainly take that into consideration. Thank you very much.

Thank you very much for your testimony. We appreciate it. (Applause.)

We are 140 5/13/10 - WHOLE - BILL 100115, etc. familiar with New Directions for Women. That's good that you employ them. Thank you for that.

Thank you.

Any questions of these witnesses? (No response.)

Thank you very much for taking time to come down today.

Thank you.

Is Mr. Lenny Francisco here?

Yes. (Witness approached witness table.)

The Chair recognizes Councilman Green. You have a question?

I just wanted to -- I just have one quick question for Mr. Dubow. I know they were somewhere around here. I'll wait until after public testimony, but I just wanted 141 5/13/10 - WHOLE - BILL 100115, etc. to let anybody from his staff know that before the hearing ends, I have one quick question.

Thank you.

Good afternoon. My name is Lenny Francisco. I'm here today to testify on behalf of the Dominican Association of Business Owner of Pennsylvania. I would like to thank you for giving us the time. I work with my father on his grocery store, which is normally known as a mom-and-pop store, and also we are a member of Business Association, which has approximately about 700 members; that is, 700 business owners, which includes grocery stores, restaurants, accountants and so on. We've been here in Philadelphia for about five years now, and throughout the time -- the Association is quite new to us and it's basically a baby to the community, the Dominican community. However, this Association has been working to help our 142 5/13/10 - WHOLE - BILL 100115, etc. members and our community by providing counseling to the business owners and also offering free English classes to all Dominican communities and instead try to close the gap of culture, language barriers. Through this time, we have seen many families and many business owner having to leave Philadelphia because they cannot sustain their business in here, because as we already know, the situation is tough enough. This is harsh time for the whole country, especially here in Philadelphia. As you all know, we are already paying a high price on gas, and many of our products have higher prices than many other cities around, such as Camden, Delaware and so on. Today I'm here, as many other people, to request that you, the Councilmembers, say no to this proposal on the tax on sugar beverage. Not just because it will affect our customers and our businesses directly, but because it 143 5/13/10 - WHOLE - BILL 100115, etc. will affect every single person in Philadelphia, because we can count -- I'm quite sure it's a minimal group of persons who doesn't drink any kind of sugar beverage. So this tax will be affecting every single family directly, especially, as I say before, the business owners who will be not able to keep on doing business and they will have to close their door, as many other have done already. As I spoke before in another meeting at another hearing that we had, tax is not a solution. I know that we have a huge gap in our budget right now, and I heard that you already asked many people, But what other options do you have. At this moment I may not have a bunch of solutions for you or I may not have every single solution. However, I know that another tax will only hurt our community. If we put another tax in our products, especially in sugar beverage, people still going to buy it, but instead 144 5/13/10 - WHOLE - BILL 100115, etc. of buying it here in Philadelphia, they're going to go to the surrounding cities, and the money is not only going to go away from the stores, but from the City as well, which going to cause, as many mentioned before, you're going to cause job cuts and job losses. If somebody lost their job, they're going to have to go on unemployment, and then it's going to be another person living on the expenses of the City of Philadelphia. So we're trying to get some revenue in one part, which is actually going to be hurting the people itself, and forcing them to come and basically live at everybody else's expenses or in Philadelphia's expenses. Because as everybody knows here, every time somebody goes to take unemployment, it's every single one of us paying for their unemployment benefits. As I mentioned before, this already are harsh times on the economics. Please do not put another tax on our 145 5/13/10 - WHOLE - BILL 100115, etc. back. We cannot take any longer. We already paying high wage taxes. We already paying property taxes. We already paying high prices on gas, as I say before, and we do not need or we cannot have another increase on the tax on the beverages. As everybody mentioned before, increasing the taxes on this products will cause job losses, will cause families to lose their revenues, their incomes, their wages to sustain themself.

Please, again, please do not vote in favor of this proposal. Again, me, in behalf of the Dominican Association of Business Owner, want to thank you for the time, and please again do not vote in favor of this proposal.

Thank you very much. (Applause.)

Are there any questions of this witness? (No response.) 146 5/13/10 - WHOLE - BILL 100115, etc.

Thank you. Mr. Eugene Naydovich. (No response.)

I hope I'm saying it right. Naydovich. (No response.)

Is there anybody else here to testify on these bills? Please come forward.

Good afternoon, Madam Chairperson and distinguished members of City Council. My name is Stanley Daniel. I am a property owner, real estate investor and realtor with my office and properties all located in Philadelphia. I support increasing the real estate taxes. As I have testified at past Council meetings, the real estate taxes in Philadelphia are one-half to one-third of what the same valued property would be taxed if it was located in the other counties of the Delaware 147 5/13/10 - WHOLE - BILL 100115, etc. Valley and South Jersey. Earlier Councilman Goode had mentioned that the average real estate tax in the City of Philadelphia is $1,046. Please correct me if I'm wrong. The average valued house in this city is about $122,000. That property in the counties would be taxed at $2,000 to $3,500 compared to the thousand dollars that's being taxed right now in Philadelphia. However, the tax increase is not being done in the correct way. Increasing the tax rate is just a quick bandage to a wound that should be stitched. Changes are needed in tax Bill 19 100284. The correct and equitable way to heal the real estate tax issue is to reassess each property in the City at the fair market value. Currently, there is no rhyme or reason to how much money the taxes are. Property owners living next door to each other may find a 100 percent 148 5/13/10 - WHOLE - BILL 100115, etc. difference in the taxes that they are paying for virtually the same house. Unless this inequity is resolved, then property owners of Philadelphia will always feel that they are not being taxed fairly, and this feeling would be justified, because they are not being taxed fairly. Earlier Councilman DiCicco had mentioned that raising the real estate tax would be a political hit. Well, there are some suggestions I have here that would politically make it a lot easier and fair to everyone. Number one, the taxpayer should be educated as to just how low their taxes are relative to not only surrounding counties, but practically every large city in the country. Number two, all properties should be reassessed at fair market value. This is the only way that the taxpayer will know that they are being treated fairly. 149 5/13/10 - WHOLE - BILL 100115, etc. Number three, all abandoned and boarded-up properties should be identified and taxed or fined heavily, with the intention of making them productive properties once again. This will not only increase values in the respective neighborhoods, it will also decrease crime and eliminate blight. Number four, tax-delinquent properties should be legally acted upon in a prompt and swift manner. I know of properties that are more than six years delinquent in tax payments and the City has not foreclosed on them. There is no 16 excuse for this. I know in Montgomery County, if you're four months late on your taxes, the sheriff comes knocking at your door. Number five, the amount of money collected from eliminating these ugly properties from our neighborhoods should be publicized and those funds used to reduce the tax burden of other property holders. 150 5/13/10 - WHOLE - BILL 100115, etc. These suggestions can be implemented in a reasonably short timeframe of months. I know that the 5 BRT has been trying to reassess 6 properties since 2004, but they are going 7 about it in the wrong way. I also know 8 that there is a power struggle going on 9 between the Mayor's Office and the BRT. 10 Whoever wins the battle very well may be 11 losing the war if they do not understand 12 how to cure these problems. Thank you for your time this afternoon. Are there any questions?

Are there any questions of this witness? (No response.)

Thank you very much.

Thank you.

Is there anyone else here to testify on these bills? (Applause.) (Witness approached witness 151 5/13/10 - WHOLE - BILL 100115, etc. table.)

Good afternoon. Would you state your name.

My name is Walt Pazinski and I'm very much -- I've been involved with city and government affairs for over 35 years here in Philadelphia, and right now the City of Philadelphia has a problem, okay, to me personally, as I would look at -- it says $1.5 million. Okay? That's $1,500,000 that it needs, right? Now, we're building a casino down on this riverfront. All right? And it's going to be done. Fine. Okay? And it's going to be done by September of this year. I would say that the Finance Committee here in Philadelphia, before they bring on the 9 percent increase on the real estate taxes, go to up in Bucks County for three months and look at the revenue that they take in for three months, six months from now. Okay? Then go down to Chester down to that casino 152 5/13/10 - WHOLE - BILL 100115, etc. and see how much that they take in, okay, in revenue. Now, we have here in Philadelphia one of the -- I mean, Philadelphia is the birth place of the United States. We have tourists that come in from all over the United States. We have the Convention Center here in Philadelphia that bring in people from all over the world into Philadelphia. Now, I would like to know, okay, it's $1.5 million this year that the Mayor is stuck with. Okay? Now, you pay nine point -- that 9 percent that you want to increase on the property tax. Now, let's forget about the casino and everything. This next coming year, how much will the increase go up again on the property taxes or any taxes that City Council or the Mayor would come up with? Now, let's say it's not there. So I would say before any taxes are increased, that the City, what do you call it, go down to there and look up for 153 5/13/10 - WHOLE - BILL 100115, etc. six months how much is taken up up there at the race track, and then go down to, what do you call it, the other one, down in Chester, down there, and take all of that money and look in all that revenue. Then take in the consideration that Philadelphia, okay, with all the tourists that come into the City -- and I'm going to tell you, I go down to the Convention Center and I talk with business people that are all over the United States, that I talk to people that are all over the world coming to Philadelphia. Now, how much money do you think is going to come into this casino that they're building down there within one year, maybe two years. Okay? All we're asking for, okay, the Mayor, is $1,500,000 and we're stuck, and we're out trying to get it all. So why not -- I would say before we go and raise the taxes, go and get, okay, these figures. I mean, it's just ridiculous, because everything that everybody has 154 5/13/10 - WHOLE - BILL 100115, etc. said here, you're driving business out of the City with raising the property taxes. There's poor people here that just can't do it. The real estate people talked. They're driving -- I mean, people won't even come into the City. They're driving people out of the City. People won't come in, out. But we have an opportunity here, okay, of getting all this millions -- I mean, I would say -- I would love, you know, for the Treasury Department here just to go up to the race track and look for six months --

Excuse me. I think you're being a little repetitious at this point. You're talking about the casinos.

Yes, Ann.

And it's my understanding that the Administration has already estimated what revenues will come in, and that figure is in the budget. 155 5/13/10 - WHOLE - BILL 100115, etc.

How much?

I don't know off the top of my head --

Well, this is one thing --

Wait a minute. Wait a minute. You're talking about us not raising property taxes.

What's this?

You're saying we should not raise property taxes.

I'm not -- that's what I'm talking about.

That's what you're saying; is it not?

Right.

Okay.

All the taxes.

All right. Wait a minute. Would you prefer that we do what the Mayor proposed, and, that is, that you pay $300 for your trash removal? 156 5/13/10 - WHOLE - BILL 100115, etc.

I'm saying we shouldn't even pay anything.

Which would you prefer -- oh, we shouldn't pay anything.

No, and I'm going to tell you why. Because if you go and go up at the race track and figure out what they take in for six months or a year and go down the other one and then take into consideration, like I've said, all around the world, all the people that come into Philadelphia and want to really -- these people that I talk to say, Well, where's a good place to go? I send them down to Chinatown. They would go down to that racetrack. How much do you think they would pour in there? Millions of dollars that would eat up that 1.5 million that you want.

Thank you.

So next year my question is, how much is it going to be without that in there? 157 5/13/10 - WHOLE - BILL 100115, etc.

Thank you very much.

That's the question that everybody wants.

Thank you very much.

I mean, I can't make it any simpler, because it's really -- the people are really peeved. I mean, it's really -- I mean, it just got to the point that the people do not want the taxes increased. Because it's only 1.5 million. Even business people.

Thank you.

I mean, it's --

Thank you.

Thank you.

I'm sorry the way I'm talking to you, but I'm talking down to earth. Okay? And I can't make it any simpler. And what can I say? I mean, take it all into consideration. Get the Treasury Department and go up 158 5/13/10 - WHOLE - BILL 100115, etc. there and get the figures. Because next year, we want to know, is it going to be again 1.5 million? What can I say? You know, Frank? I'm not, you know...

Thank you, sir. We appreciate your testimony.

I mean, it's simple as that. I mean, nobody wants to talk about it. They just give -- but after I sit here all day and listen to everybody talking and they're saying, well, they're going to move out of the City, all the business -- they're all moving out of the City. You say that the City is going to gain. Well, if businesses move out of the City, they ain't never going to come back, and they're going to take all the jobs with them, and all these people are going to go on the unemployment line.

Thank you, sir.

So where is the 159 5/13/10 - WHOLE - BILL 100115, etc. City going to get --

Thank you, sir. Thank you very much for your testimony. We appreciate it.

You know, it's --

Any questions of this witness? (No response.)

But I'm sorry.

That's all right.

Thank you for coming in.

I just hope you all take it into consideration.

Sure. (Applause.)

Thank you. Is there anybody else here to testify? (No response.)

Is Mr. Dubow here? I understand that my 160 5/13/10 - WHOLE - BILL 100115, etc. colleague would like to ask you a few questions. (Witness approached witness table.)

That's kind of a hard act to follow.

The Chair recognizes Councilman Green.

Thank you, Madam Chair. Thank you for coming back over, Mr. Dubow. I appreciate it.

Sure.

Just one quick question. Could you for the record go through the revenue raised from each -- in your estimation, in each revenue category that's before consideration in Council today.

Sure.

So property tax?

Yeah. The property tax at 9 percent is about 78 million. I 161 5/13/10 - WHOLE - BILL 100115, etc. understand there's an amendment to take that to 9.9. That would be about 86 million. The smokeless tobacco, the estimate we have is about 4 million. The commercial fee increase to --

Is that 4 million taking out --

That's without the amendment. The amendment lowers that and I don't have a calculation for what that does.

Thank you.

The commercial trash fee increase to $300 would be 7 million. Sugary drinks at two pennies is about 39 million in the first year, going to 78 in the future years.

And so at one cent, it's 18 and a half, at half a cent --

Nineteen and 38, correct.

Right. Okay. So the figure you gave of -- what 162 5/13/10 - WHOLE - BILL 100115, etc. was it, the total amount raised?

I don't think I did. I gave you each component.

Okay. So how much is that in total?

Let's see. I'd have to add it up. I'll assume the 9.9 percent.

That's fine.

It's about 137, in that range.

One thirty-seven. So at that level of spending, how much of that is going to anything but the General Fund for sort of regular services, City services?

In FY11, that money would all go to the General Fund. Maybe talking about there's 2 million for sanitation-related improvements that's kind of an expansion. It's not tied to any of these things.

And there's no other expansion in FY11 tied to any of 163 5/13/10 - WHOLE - BILL 100115, etc. these monies?

Correct.

These are all to raise revenue for the General Fund.

In FY11, that's right.

Thank you very much for your testimony.

Sure.

Thank you. Thank you for coming back.

A pleasure.

Do we have anyone else that would like to testify? (No response.)

We're going to recess for ten minutes, and I would ask all members to be back in ten minutes. Thank you. (Short recess.)

This concludes our public hearing. We will 164 5/13/10 - WHOLE - BILL 100115, etc. now go into our public meeting. The Chair now recognizes Councilwoman Tasco regarding Bill No. 5 100115.

Madam President, I report out Bill 100115.

With a favorable recommendation.

With a favorable recommendation. COUNCILMAN DiCICCO: Point of order, Madam President.

Yes, sir. COUNCILMAN DiCICCO: If voting in the affirmative on this bill, does that mean we're voting for -- no. It's not the tax bill, right?

No. 21 COUNCILMAN DiCICCO: It's the capital. I'm sorry. Thank you. Sorry about that.

Councilwoman Tasco, I will recognize you 165 5/13/10 - WHOLE - BILL 100115, etc. again regarding Bill No. 100115.

Madam President, I move that Bill No. 100115 be reported out of Committee with a favorable recommendation and that the rules of Council be suspended so this bill can be heard at Council's next session. (Duly seconded.)

It has been moved and seconded that Bill No. 13 100115 be reported out of Committee with a favorable recommendation and that the rules of Council be suspended so as to permit first reading at our next session of Council. All in favor will indicate by saying aye. (Aye.)

Those opposed? (No response.)

The ayes have it and the motion carries. 166 5/13/10 - WHOLE - BILL 100115, etc.

Madam President, I move that Bill --

Just a moment. (Pause.)

The Chair recognizes Councilwoman Tasco concerning Bill 100116.

Madam President, I move that Bill 100116 be reported out of Committee with a favorable recommendation and that the rules of Council be suspended so as to have this bill presented at the next Council session. (Duly seconded.)

It has been moved and properly seconded that Bill No. 100116 be reported out of Committee with a favorable recommendation; further, that the rules of Council be suspended so as to permit first reading at our next session of Council. 167 5/13/10 - WHOLE - BILL 100115, etc. All in favor will indicate by saying aye. (Aye.)

Those opposed? (No response.)

The ayes have it and the motion carries. Again, the Chair recognizes Councilwoman Tasco regarding Bill 100117.

Madam President, I believe there's an amendment for Bill 100117. (Pause.)

Back in business. The Chair recognizes Councilwoman Tasco again regarding Bill 20 No. 100117.

Madam President, I offer an amendment to Ordinance 100117.

And has the amendment been circulated? 168 5/13/10 - WHOLE - BILL 100115, etc.