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 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.
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.
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.
Yeah, and it's a very small tax. 97 5/13/10 - WHOLE - BILL 100115, etc.
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
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
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?
I just want to clarify that. 99 5/13/10 - WHOLE - BILL 100115, etc.
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.
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.
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?
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.
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.
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.)
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.
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 --
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.
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.
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.)
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.)
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.
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 very much for taking time to come down today.
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.
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.
Are there any questions of this witness? (No response.) 146 5/13/10 - WHOLE - BILL 100115, etc.
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.)
Is there anyone else here to testify on these bills? (Applause.) (Witness approached witness 151 5/13/10 - WHOLE - BILL 100115, etc. table.)
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.
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.
Wait a minute. Wait a minute. You're talking about us not raising property taxes.
You're saying we should not raise property 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.
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.
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.
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.
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...
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.
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.
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.)
Thank you, Madam Chair. Thank you for coming back over, Mr. Dubow. I appreciate it.
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.
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 --
That's without the amendment. The amendment lowers that and I don't have a calculation for what that does.
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 --
Right. Okay. So the figure you gave of -- what 162 5/13/10 - WHOLE - BILL 100115, etc. was it, the total amount raised?
Let's see. I'd have to add it up. I'll assume the 9.9 percent.
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?
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.
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.)
The ayes have it and the motion carries. 166 5/13/10 - WHOLE - BILL 100115, etc.