m. - - - RES. NO. 000325 - Resolution calling upon the Law & Government Committee to hold hearings on the question of public financing of new stadiums. - - - PRESENT: COUNCILWOMAN ANNA C. VERNA, Chair, Committee of the Whole COUNCILMAN DAVID COHEN, Chair, Committee on Law and Government COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK RIZZO COUNCILMAN FRANK DiCICCO COUNCILWOMAN JANNIE L. BLACKWELL COUNCILMAN DARRELL L. CLARKE COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILWOMAN DONNA REED MILLER - - - VINCENT VARALLO ASSOCIATES, INC. ----------------------------- 46 Pete Matthews, President AFSCME District 6 Council 33------------------------------------ 57 Wayne Johnson, Secretary/Treasurer, AFSCME 7 District Council 33--------------------------- 57 Cheung Ping Leung, President, Chinese Benevolent Association----------------------------------- 68 Prof. Andrew Zimbalist, Economics Professor, Smith College--------------------------------- 73 Prof. Mark Rosentraub, Professor, School of Public and Environmental Affairs, Indiana University------------------------------------ 73 Leyhar Cheung, Interpreter----------------------- 131 John Vago, Mechanical Engineer, Water Department- 132 Bihong Guan, President, Greater Philadelphia United Chinese American Chamber of Commerce--- 136 C'Anne Anderson, Resident------------------------ 139 Whittier Dow, Representative, Housing Consortium for Disabled Individuals---------------------- 143 Mary Goldman, Representative, Americans for Democratic Action----------------------------- 146 Loraline Jones, Athletic Director, University City High School------------------------------ 149 Reverend Kathleen Jones, Resident---------------- 155 Ellen Somekawa, Executive Director, Asian Americans United------------------------------ 158 John Chin, President, Duck Chun Association------ 161 Robert Sugarman, Representative, Chinatown Coalition------------------------------------- 162 Amy Hooper, Resident----------------------------- 170 Sharon Nitage, Resident-------------------------- 173 Walter D. ) Eileen Hing, Hing Wah Yuen Homeowners Assoc. 183 Tim Lee, " " " " " 184 A. Toy, Phila. Chinatown Development Corp. 189 Lou Incognito, West Mt. Airy Neighbors ------ 196 Asian-American Students: Phally Chroy, Anh Ha, Wilfred Yip --------- 199 R. Addessa, Phila. Lesbian & Gay Task Force 206 Hal Sawyer, Germantown Community ------------ 209 Frances Gabo, Communist Party --------------- 216 Grant Gulibon, Commonwealth Foundation ------ 220 Beth McConnell, PennPIRG -------------------- 226 John Struble, Private Citizen --------------- 230 Debbie Wei, Asian-Americans United ---------- 232 Hele Gym, Concerned Asian-American Citizen 239 Mary Yee, " " " " 241 Gary Lee, Concerned Asian-American Citizen 249 George Moy, " " " " 258 Mai Huynh, " " " " 266 Robert Sklaroff, Private Citizen ------------ 278 Mitch Deighan, Northern Liberties Resident 281 S. Young, Hing Wah Yuen Homeowners Assoc. 286 P. Uyehara, Concerned Asian-American Citizen 288 Z. Abdul-Raheem, East Mt. Airy Neighbors 293 H. Hyde, Concerned Citizens of Del. Valley 295 Sara McEneaney, SOCC Member ----------------- 298 Tony DeSantis, Concerned PA Resident -------- 302 Jack Butler, Private Citizen ---------------- 307 Jack Trinsey, Developer --------------------- 312 Ron Hankin, Beaux Arts Lofts ---------------- 320 Dom Giordano, WPHT-AM Talk Show Host -------- 323 John Morley, South Philadelphia Resident 329 Marc DeBeary, Private Citizen --------------- 332 Ann Dixon, West Philadelphia Resident ------- 335 Sidney Lee, Lifelong Chinatown Resident 338 Louis Innocenzi, Simon Agape Club ----------- 343 Marilyn Kirsch, South Philadelphia Resident 347 Stephen Zwick, Architect -------------------- 350 Elizabeth Van Schaick, Beaux Arts Resident 357 Pamela Bierce, Concerned Phila. Resident 361 Lai Har Cheung.
Asian Americans United 364 Palma Moyer, South Philadelphia Resident 367 Gilbert Von Rettig -------------------------- 369 Gene Miller, Fairmount Area Resident -------- 370 M. Nagaki, Concerned Asian-American Citizen 373 Brian Huey " " " " 374 A. Devore, Concerned Philadelphia Resident 376 R. Averso, Concerned Philadelphia Resident 379 4 RESOLUTION NO. 000325
Thank you. This is a Public Hearing of the Committee of the Whole. I would ask Mr. McPherson to please read the title of Resolution No. 325. MR. McPHERSON: Resolution 325, Calling upon the Law and Government Committee to hold hearings on the questions of public financing of new stadiums.
Good afternoon, everyone. Because of the importance of the issue of providing public funding for the development and operation of sports facilities, I have placed this issue before the Committee of the Whole, rather than the Law and Government Committee, to which it was originally assigned. The purpose of this hearing is to simply elicit information and opinions, which I expect to be both positive and negative, regarding the appropriateness for which and the extent to which public funds should be considered for use to finance stadium projects. I want to make it perfectly clear that the purpose of this hearing is not to vote for 5 RESOLUTION NO. 000325 or against any particular stadium site or project, but it is merely an opportunity to have witnesses express their views and to educate the public and City Council on what has been done in other jurisdictions and on what might be feasible for the City of Philadelphia. I want everybody to know that we do have a witness list of approximately 132 people. To that end, I want to establish certain ground rules regarding how the hearing will proceed. Anyone who wishes to testify will certainly be given the opportunity to do so. If necessary, time limitations may be placed on the testimony of witnesses. The audience will treat witnesses with respect and shall not be allowed to interrupt testimony. If the audience does not maintain ordinance, any individual causing disruption will be asked to leave the chamber. If the person does not leave of his own volition, the person will be escorted out of the chambers. To my knowledge, there is no 6 RESOLUTION NO. 000325 legislative body who allows disruption in their chambers, and I will not tolerate any disruption here in Council chambers. With that being said, the Chair recognizes Councilman Cohen.
Thank you, Madam President. I agree very much that this is an extremely important hearing. Because for the first time the people of Philadelphia are going to have an opportunity to speak to their elected representatives here in Philadelphia and to state their view about public financing for stadiums, whether there ought to be; and, if so, how much; and is it an investment or is it a contribution; how will it be collected; how does the city deal with the question of public financing for stadiums in view of public financing needs. The hope ultimately is that all the facts will be placed before all the people of Philadelphia so that they can help City Council reach a sound conclusion when the matter finally comes to us before a vote. Today is, I hope, the beginning of a 7 RESOLUTION NO. 000325 dialogue across all of Philadelphia. We want to know what you think. Most Council Members have heard from their constituents in their local communities or at meetings wherever they have occurred. Now is the time to put your views out before us officially. And I think all of Philadelphia welcomes the opportunity. Until now it has appeared that there seemed to be only one question involved in the stadiums, and that was the question of site, where was it going to be. Well, that's an extremely important question, but that is not the only question. The other very major question is, to what extent, if at all, is it appropriate for public financing for these stadiums. So with that, Madam President, I thank you. I think your initial statement was very much in order. Because we want people to be able to speak without any kind of interruption. This is the beginning of putting together the information that will contribute to a final result. 8 RESOLUTION NO. 000325 Thank you, Madam President.
You are welcome, Councilman. Our first witness is Randy Albright, Senior Budget Analyst for the Pennsylvania Senate Appropriations Committee. Is Mr. Albright here? Good afternoon, sir.
Welcome. Please identify yourself for the record and proceed with your testimony.
Welcome, and thank you. Again, my name is Randy Albright. I am here as a Budget Analyst from the Senate Democratic Appropriations Committee in Harrisburg. The analysis that I am about to speak about was done by the Appropriations staff, at the request of Senator Fumo, who happens to be the Chairman of the entire Committee. And by virtue of the fact that, at least to date, all of the proposed stadium locations happen to be within the Senate district, he has asked us now on this second occasion to at least 9 RESOLUTION NO. 000325 provide, from our viewpoint, a fairly detailed cost analysis of locating the stadium this time at the proposed 12th and Vine site.
Mr. Albright, before you go ahead with that detailed analysis, can you tell us from the state perspective what the original financing plans were for stadiums in Philadelphia and in Pittsburgh, and anywhere else in the state, if there were any?
The original financing plans as they were discussed at the state level were done in conjunction with providing the state Capital Budget financing. At the time that they were discussed at the state level -- and this would have been during the fall of 1998 and into the winter of 1999 -- the expectation was that both projects would be financed with a third of the contributions coming from the state, and a third of the contributions coming from the teams, and a third of the contributions coming from the local jurisdictions.
I was referring to two 10 RESOLUTION NO. 000325 stadiums for both football and baseball in Pittsburgh; and two stadiums, one for football and one for baseball, in Philadelphia. At the time of those discussions and the Capital Budget authorizations that resulted, the state provided a total of $150 million for two stadiums in Pittsburgh and $170 million for two stadiums in Philadelphia, or $85 million per stadium.
75 million for each stadium, a total of $150 million. And, again, there is an assumed one-third share for total project costs that were expected to be about $450 million in Pittsburgh and slightly higher in Philadelphia.
So the thought of the state was that it was contributing one-third of the cost; is that right?
The total costs, including both stadium construction and whatever 11 RESOLUTION NO. 000325 infrastructure costs were necessary as part of the project.
Very good. Can you tell us what has happened as far as Pittsburgh is concerned? Are they more advanced, or are they at the same stage we are at?
Well, in the case of Pittsburgh, they are at this point on track, as far as we're aware. They plan to open both a football and a baseball stadium to be ready and functioning in the Year 2001. Now, as it turns out, the costs have in fact grown higher than were originally anticipated. But both of those stadiums will be constructed for what's now expected to be a combined cost of about $550 million.
Yes. The Pirates just by reference, the Pirates' stadium is now anticipated to cost about 262 million, and that's total costs, again, including the infrastructure improvements.
That's for a 38,000-seat baseball stadium in Pittsburgh. And the Steelers' stadium is a larger stadium to accommodate football, and that's going to cost approximately 284 million.
And you undertook this study as in your position on the Senate Appropriations Committee?
Okay. Thank you. Again, this is the second of these analysis that we have completed. The first one we did last summer, when we were discussing a proposed site at 12th and Broad. And, again, the Senator asked that the analysis be done because of the significantly higher costs associated with one location as opposed to another, given different circumstances around the city. The bottom line is that our analysis 13 RESOLUTION NO. 000325 at 12th and Vine was drawn largely, or many aspects of it were drawn, from the analysis that we had done at 12th and Spring Garden. But, in the end, the costs at the 12th and Vine Street location would be substantially above even those at Broad and Spring Garden. So that the total stadium costs, if we were to locate a stadium at the 12th and Vine site, would approach $685 million. (Audience reaction.)
You asked the initial questions about Pittsburgh, and it is a reasonable comparison. The fact is, a stadium at 12th and Vine would cost more than $100 million more than both stadiums will cost to construct in Pittsburgh.
Can you tell us the basis of your study and your analysis? (Audience reaction).
Mr. Albright, before you answer that, I would like to make an announcement. 14 RESOLUTION NO. 000325 The Fire Code allows 265 people in this room. Those that are standing, we have opened our Caucus Room, which is directly across the corridor. You will be able to hear the testimony as it's being presented to us in here. So please feel free to go into the Caucus Room. And if you are a witness, we will be more than happy to call you, your name, so that you would be able to come in here to testify. But we cannot allow people to be standing. We can only have 265 people in this room. So I would encourage all of you who are standing to please go into the Caucus Room. Thank you very much. Mr. Albright, please proceed.
You will hear in the Caucus Room. You can hear everything that's being said in the chamber. Thank you.
Thank you. If I might, what I would like to do is simply provide a brief breakdown of how we arrived at the approximate assessment of $685 15 RESOLUTION NO. 000325 million. The first cost item is the actual construction of the stadium. We are currently expecting the actual stadium construction to cost around $312 million. What I will simply point out as significant about this number is to underscore the fact that time is money. If you remember last year at this time, when we were talking about other stadium locations, the assumed actual construction cost of the stadium structure itself was expected to be in the neighborhood of $285 million. That cost, just due to the one-year delay in stadium construction, because we weren't able to come to a resolution about a site last year, is more than $25 million. So as I will get to later on in the report, one of the things that becomes more costly about the 12th and Vine location is the fact that other considerations will delay the ultimate construction of the stadium. And for each year in delay in the project, the cost will escalate by a factor of more 16 RESOLUTION NO. 000325 than $20 million. For the purposes of this report, we tried to conservatively use a 3 and a half percent inflation factor, or about 21 and a half million dollars a year, in additional costs. But, again, to use the illustration of just the increase in the estimated costs for stadium construction alone, that cost from last year to this year has already escalated by more than $25 million.
Did the state, when it authorized $85 million for each Philadelphia stadium to be built, did the state indicate in any way that if the costs ran higher, it would be willing to increase its share?
In fact, you rarely want to say something is etched in stone or something will be forever. But the only information that we have received at the state level from anyone, in any caucus or from the Governor, is that the state has always been adamant that its share was $85 million per stadium, and it was up to the teams and the locals if they were to exceed those costs, that the 17 RESOLUTION NO. 000325 state's share was to be a fixed cost.
So there is not much hope in looking stateward for additional funds?
That's correct. Now, there are some transportation and other infrastructure improvements that I will again allude to a little later when I go through the itemization. Some of those costs, for example, expenditures that SEPTA may make to upgrade transit stations, may in fact be picked up with partial state or even federal funding. But those are miniscule costs of the total cost estimates, as you will see when we go through the itemization.
One of the big cost factors for the 12th and Vine location is the actual acquisition, demolition, and site assembly. The proposed 12th and Vine site involves more than 150 parcels of land, involves about 15 acres, and involves dealing with more than 100 different property owners. 18 RESOLUTION NO. 000325 That process is expected to be long, there are legal impediments, there are process impediments, there are environmental IMPEDIMENTS, all of which COULD provide road blocks along the way and could provide delays in the process. And, again, I can't emphasize enough throughout this discussion that time is money. Our estimate conservatively is an expectation that when it is all said and done -- and we tried to optimistically assume that the site assembly process could actually be completed within a year -- that those costs won't exceed $85 million. I have to be honest and tell you that many of the real estate consultants that we talked to throughout our analysis have told us that that cost could be significantly higher. And, in fact, most of the estimates that we have received were in a range between 85 and 100 million dollars. But we tried to take the conservative end of that process in data gathering. But the bottom line is that we are doubtful that the site itself can be put together for less than $85 million in total costs. 19 RESOLUTION NO. 000325 And when I say, "total costs," I am including all of the real estate, relocation costs, all of the machinery and equipment for any operating business that has to be moved elsewhere, environmental remediation that might be part of that site acquisition process. So I am trying to simplify this as much as I can. But the bottom line is, to put all the parcels together, the costs at a minimum will probably range about $85 million.
The time factor, I mean, I have to be honest, it is more guesswork at this point than it is reality. The only thing you can look to from an historical basis here in the city is probably the site assembly for the Convention Center. And it is my understanding that that 20 RESOLUTION NO. 000325 was probably more closer to a three-year process. We, again, tried to be optimistic here and assumed that you're talking about a one- to a three-year period, and hopefully it can be done closer to one year from now.
What would that mean as far as construction and use of the stadium? When would it be built?
Again, we think that minimally, there is going to be a two-year delay in actually being able to begin construction. Now, that delay could result from the actual site assembly process, that delay could come from dealing with some utility issues that I will get to a little later, dealing with a PECO substation that has to be worked around, in the best case scenario, at the site. But we don't think we can begin construction at the 12th and Vine location for at least two years, until those things are taken care of.
The most optimistic 21 RESOLUTION NO. 000325 assumption that we could make was that the stadium would actually be ready for occupancy for the 2005 season.
That's the most optimistic scenario that we could come up with.
Now, there are a couple other -- I alluded to some environmental costs already that will likely be part of the site acquisition process. There are also some very -- some other unique environmental issues that will have to be remediated at the site. And I mentioned those separately and have a separate cost itemization for them. The viaduct from the old Reading Railroad that has to be removed from the site is a $10 million cost issue in and of itself. SEPTA also has a viaduct that runs through the site. And both of those via ducts would 22 RESOLUTION NO. 000325 have to be removed and remediated, again, before any construction can begin. We have again conservatively estimated those costs at $17 million. And I will be the first one to tell you, it wouldn't be the least bit surprising that additional environmental impediments are found once you are there. All we can identify and put costs on at this point are things that we are aware of. But minimally you will have some additional unique environmental issues that will have to be dealt with and paid for. And we have placed that cost at about $17 million currently. Parking, as it was at the proposed Broad and Spring Garden location, is another big cost factor at this site. There are --
There are currently a number of parking garages around the site. And the transportation, any transportation plan that's viable, will certainly depend on, actually, a majority of the people who are driving to the stadium actually parking and using lots that are 23 RESOLUTION NO. 000325 south of Vine Street, and then walking -- or even west of Broad Street, and then walking from those parking garages to the stadium. However, there is going to have to be some additional structured parking built, just like was proposed at the Broad and Spring Garden location, to accommodate staff, employees at the stadium, as well as the premium-paying customers. And if I might just say that those customers are really the life blood for any stadium project. If this stadium were to be successful anywhere in the city, and "successful" meaning that we're able to attract in excess of 3 million fans per year and the premium ticketholders that we are talking about that will really bring revenue, additional new revenue, to the city because of the construction of the stadium, it will really depend on the construction of additional structured parking to serve those customers. Now, the original Broad and Spring Garden proposal assumed the need for between three and four thousand additional parking spaces. There's one difference in the site 24 RESOLUTION NO. 000325 now as it's proposed at Vine and 12th. And that is that the Broad and Spring Garden location was located adjacent to the Philadelphia Community College, as well as SmithKline and other commercial users of parking facilities that could become shared facilities for a stadium site. In other words, the peak hours of usage for the commercial users did not conflict with the use of the stadium in the evening for paying customers for baseball. When you move the stadium down to 12th and Vine, you now don't have that same shared arrangement that will at least work for premium-parking facilities for the site. So we have assumed in this estimate that for the 12th and Vine location to work, you are going to need, at a minimum, to build an additional 4,500 structured parking spaces. We have estimated the cost of that to probably total about $20 million for site acquisition, and then the cost of each structured parking space is about $20,000 per space. That means that the total cost of structured parking for the facility is an estimated 25 RESOLUTION NO. 000325 $110 million. (Audience reaction.)
Some other costs associated with it. There will be some additional site improvements. What those site improvements are, I can't really outline for you in great detail at this point. What I can simply point out are that there are three essential needs that are going to have to be addressed at the site. The first need will be to provide some sort of an atmosphere that will actually be able to recreate, those of you that may be familiar with the Camden Yards in Baltimore, the scene along the outside of that warehouse that abuts the outfield of the Baltimore stadium along Utah Street, where they have a lot of commercial and retail activity. The assumption is that the Phillies would want to create some sort of similar atmosphere there to provide an area that looks both attractive and appealing to fans as they enter the baseball park. RESOLUTION NO. 000325 The second thing is that whatever pedestrian access is provided to the stadium site, something is going to be necessary to help move pedestrian traffic across Vine Street. And if we actually build a ramp, as had been proposed, again, as we compare it to the proposed Broad and Spring Garden site, that ramp would have to go fairly high above Vine Street to be able to cross it. And since the stadium footprint itself would locate the new stadium almost up against the back of Vine Street, you'd then have an architectural challenge to be able to bring that pedestrian ramp back down to street level, assuming you didn't want fans to enter the stadium directly at the second or third level of the stadium, and miss that whole Utah Street/Camden Yards sort of facade that we're assuming they want to create with the new Phillies ballpark. That will have to be addressed. And then the third issue is a PECO substation that I will get to in more detail in a little bit. But addressing all of those concerns, 27 RESOLUTION NO. 000325 we estimated minimally will present additional site challenges that will cost an additional $15 million. Utilities are a big issue at the stadium. One of the problems with the 12th and Vine site is the fact that PECO's main substation -- and I think it's commonly referred to as the Callowhill Station -- which serves all of downtown Philadelphia is currently located inside the footprint of the 12th and Vine site.
Is that the station that the Mayor said we would design the stadium around, we would not have to deal with it?
That's correct. There are several challenges associated with the substation. For our analysis -- and let me say, first of all, for our analysis we assumed that the Mayor is correct, that we can build a stadium at 12th and Vine and figure out a way to build the stadium around the existing substation, and not have to move it. I have to tell you that, in the end, if you do have have move it, the price tag for that 28 RESOLUTION NO. 000325 would be minimally another $100 million. (Audience reaction.)
But assuming it is feasible to build around the substation, you still need to figure out a way to relocate 35, 13,000 volt feeder cables and 138,000 volt transmission line that comes into and out of the substation. Now --
Let me just put it to you this way, put it simply: The cost of relocating those lines -- and let me first emphasize, to come back to this point again of how time is money, the time frame to relocate those lines around the perimeter footprint is probably a two-year process. The cost of that relocation process is minimally $25 million. And the biggest problem that still may face this whole hurdle is that PECO may not own enough right-of-way to relocate those lines around the perimeter of the footprint. If that's the case, and PECO would need to acquire more right-of-way to provide, you 29 RESOLUTION NO. 000325 know, some solution that keeps the substation operating at the site, then you are talking about additional costs, the costs that we haven't factored into our cost analysis. And, maybe most importantly, no 7 stadium construction can begin until these lines get relocated. So to once again go back to our assumption being, a stadium can't be ready until the year 2005, it is largely because, even in the most optimistic scenario, we need that much time to relocate these transmission lines before any stadium construction can actually begin. In addition to PECO, they are not the only utility that has lines there that have to be relocated. SEPTA also has its own substation that's located on the site that would have to be relocated. Now, SEPTA does have a Capital Budget authorization to accomplish that in several years from now that they may be able to expedite, but there is a $17 million line item in SEPTA's long-term capital plan right now to relocate their 30 RESOLUTION NO. 000325 substation facility. There are other utilities that are already operating that are located on site that would also have to be relocated. And, finally, there are backup generators for a telecommunications center that operates at 401 North Broad Street that would also have to be relocated outside their existing location, which is inside the proposed 12th and Vine stadium footprint. All of those costs combined will minimally add up to $45 million. And, again, I have to emphasize that we have not dealt with the issue of existing right-of-way if PECO doesn't have enough to relocate those transmission lines, as currently configured.
Have you dealt with each of the specific factors involved? Have you dealt with each of the specific factors?
I'm sorry. The rest 31 RESOLUTION NO. 000325 of the cost factors are -- and I hate to use the word "minimal" because we are talking in each case about millions of dollars -- but they are less dramatic. There are some street improvements. Callowhill, 12th Street, we would have to widen 13th Street. There may be some improvements to ramps that need to be addressed. Street improvements would probably cost an additional $15 million. There is a pedestrian walkway that would have to be built. It is our assumption that a minimum of one walkway would be necessary. And we have included a 7 and a half million dollar cost to accomplish that. There have been many people that have suggested more than one walkway may be necessary to cross Vine Street. There have been even those who have suggested that some sort of pedestrian ramp across Broad Street may be necessary, since, again, a substantial amount of the vehicle traffic is expected to park even west of Broad, and then walk to the site. 32 RESOLUTION NO. 000325 That may create too much congestion along those highways, particularly realizing that this is traffic coming to the stadium still during the fringe of rush hour. Then another land bridge would be built. But we have only assumed one would be necessary in this analysis. Upgrades at some of SEPTA's --
Excuse me. If a ramp were to be built, do you have any cost estimate for that?
Yes. 7 and a half million dollars was, again, based on the Broad and Spring Garden proposal, was a real estimate at the time, based on the construction of one pedestrian bridge across Vine Street to the Broad and Spring Garden ballpark.
Transit improvements would involve upgrades to two of SEPTA's local transit stations at an 8 and a half million dollar cost. There is an assumption right now that we would spend a million and a half dollars to 33 RESOLUTION NO. 000325 widen -- to add one additional lane along Vine Street. There is also a payment to Comcast Spectacor, and this requires a minute of elaboration. But when we built what's now the First Union Center, one of the ways we financed that is, we agreed that Comcast would receive all of the future parking revenue for all of the events that go on in South Philadelphia, including Phillies and Eagles games, with the promise to them that if the city ever allowed either of the teams to relocate elsewhere, that there would be a lump-sum payment to Comcast to make up for the lost revenue that would occur from that relocation. I will say, this is the one unique cost factor. That the longer we delay the construction of the stadium, the cheaper this cost factor gets. But it is the only one that the cost goes down the longer we wait. Again, assuming that what today is probably still a $10 million liability, reaches closer to $5 million if the stadium is not really built and ready until the Year 2005. But that still 34 RESOLUTION NO. 000325 will be a $5 million payout that would be necessary to Comcast. And the final two cost factors, again, one I have alluded to earlier, and that's the inflation factor for the number of years that we have to delay the actual stadium construction because of the other impediments that I have already talked about. We have used a three and a half percent inflation factor, again, which is probably fairly conservative, or a total cost of about 43 and a half million dollars, assuming we can actually get the stadium built by the Year 2005. And, finally, we put close to $20 million in here as a 3 percent contingency fund. Again, I have already referenced several cost issues that could drive these costs much higher, the need to acquire additional right-of-way to relocate those utility lines for the PECO substation, if we determined in the end that we truly did have to relocate the PECO substation entirely, if additional environmental remediation problems are found at the site once we get there and begin construction, the transportation access. 35 RESOLUTION NO. 000325 There are a lot of people that say just the existing Vine Street ramps themselves would have to be redone, that are simply not workable or capable of handling the volume that we would expect them to handle by combining stadium traffic on top of the existing rush-hour traffic. None of those additional costs have been factored into this analysis. Any one of those factors that I just alluded to could add far in excess of $20 million to the project, but we carry a $20 million contingency fund. When you add all those numbers, you get to $685 million.
And that's the estimate the Mayor said the other day that he knows the cost will exceed this estimate? So he seems to be in agreement with you?
I really don't know what his cost analysis may end up to be. I have to be honest and tell you that if you are asking me, is there a greater risk of the stadium being more expensive or less expensive than the numbers that I have just provided to you, I have to say that the risk is much greater on the up 36 RESOLUTION NO. 000325 side.
Thank you very much, Mr. Albright. The Chair recognizes Councilman Clarke.
Mr. Albright, during the discussion on the Broad and Spring Garden site, we had received some information about new stadium construction across the country, both for baseball and football. And if my recollection is correct, a substantial number of them were being financed based on an impending termination of leases, particularly in the decision-making process. And as we talk about comparisons to Pittsburgh stadiums versus the Philadelphia stadiums, what's the story on the Pittsburgh stadiums with respect to their leases between the municipalities and the teams? 37 RESOLUTION NO. 000325
I don't want to pretend that I have any expertise beyond the stadium analysis as in front of you. I think in Pittsburgh's case, they did have a lease that had to be broken and then renegotiated. But I'm not here -- and I believe you have some stadium consultants that are going to follow me. I think they are probably the more appropriate people to answer that question and give you any at least expert testimony in that regard.
All right. Well, I will wait until the professionals come up on that particular issue. Thank you, Madam Chair.
Thank you, Madam Chair. Good afternoon, Mr. Albright. The original state appropriation for stadiums, what percentage of project costs was being covered by the state? 38 RESOLUTION NO. 000325
Again, the original expectation or assumption at the state level was that we were providing $85 million for each stadium, and that $85 million in Philadelphia would represent one-third of the anticipated total costs of construction.
And what is the percentage of project costs anticipated to be covered now by the state?
The state's share, or the state's contribution, is not expected to increase. In other words, it is $85 million. And the more expensive the stadium becomes, the smaller the state's share becomes.
Mr. Albright, on March 2 this Council unanimously passed a resolution 19 establishing public benefit criteria for economic development projects with an investment of more than $1 million. Five days later, the state Senate amended Bill 1169 establishing a prohibition that reads as follows, "A contract for general contractor work in redevelopment assistance capital project may 39 RESOLUTION NO. 000325 not contain a provision which requires a specified percentage of a contracting party's work force be resident of a specific municipality." Is it the intention of the state to withhold state funding contingent upon Philadelphia not requiring a percentage of jobs for Philadelphia residents?
Again, I don't want to hold myself out to be an expert in anything that I am not. So I am not in a position to respond to what the state's expectation was or was not with that legislation.
We are here to discuss public financing of stadiums, which includes state financing. There is an amendment to Bill 1169 that says that no municipality can require a percent of jobs for that municipality. You have already said that the percentage of project participation is going down for the stadium. 40 RESOLUTION NO. 000325 Is the state going to withhold the funding if Philadelphia decides to require a percentage of jobs for Philadelphia residents?
Again, all I can say is that I am not here as a representative of the state to answer those types of questions. I mean, I am here solely as a representative of the Appropriations Committee staff looking at the cost factors involved with the construction.
To talk about cost without talking about public benefit is an empty discussion.
I think the point that you raise is a very valid one. But, again, as a budget analyst for the Senate Appropriations Committee, it would not be appropriate for me to offer an opinion that would be representative of that, of the Governor or the legislature.
So you just know that numbers are high. You still don't know whether that is a good investment or not.
Again, I don't want to even pretend that I am here to tell you whether the 41 RESOLUTION NO. 000325 investment is a good one or a bad one. I am here to simply tell you what the costs are. And it is to others, particularly people like yourselves, that have to decide whether that's a worthwhile investment of state, city, and team resources.
But if this project were to create 25,000 new jobs, which it won't, we decided to require 100 percent of the jobs to Philadelphia residents, those numbers might look a little bit different, might they not?
Again, the only thing I can tell you quantitatively is that the higher you drive total stadium costs, the lower you drive the state's participation.
But we definitely don't know the cost per job in terms of Philadelphia jobs because the state Senate has decided not to allow Philadelphia to require a percentage of the jobs to Philadelphia residents?
Again, from the state perspective, the state negotiated a state's share of the stadiums. And that was done in 1998 and 1999 based on assumed total construction costs at that 42 RESOLUTION NO. 000325 time. But clearly, like the agreement that Mayor Rendell brought before the city at the end of last year, it simply said that cost overruns were not going to be borne by the state.
Excuse me. Mr. Albright, nothing was brought before City Council by Mayor Rendell. I would like the record to be clear on that. I'm sorry. Please proceed, Councilman.
Should that amendment to Bill 1169 just apply to the state's share?
I don't know how many times I can answer the question. I'm not the person qualified to answer that question.
I am a Budget Analyst for the Senate Appropriations Committee.
Thank you, Madam President. Mr. Albright, I would like to go for a moment to the issue of stadium site orientation as it relates to the PECO substation. It has been reported and been agreed to, apparently for purposes of this analysis, that the PECO substation could remain, despite the fact that the feeder cables need to be moved. Is there not also issues of safety as it relates to the continued existence of the PECO substation and then, therefore, the orientation of the stadium in particular? And where I am going to is that, it is my understanding that we wouldn't want a situation where the stands that are filled with people are within close proximity to the actual substation. So in order to avoid that, we would have to really move, turn the stadium, rotate it, so that the open end of the stadium, where less people 44 RESOLUTION NO. 000325 were sitting, would be the area facing the existing substation?
That's correct. And, again, we aren't privy to what the Mayor and his committee may be planning or not planning at this point. We had to make assumptions for this cost analysis. And we had -- and we in every case tried to assume the least costly alternative. So what we assumed, as I alluded to earlier, some additional site costs involved to be able to allow the PECO substation to remain where it is, but figure out some way to safely have a stadium constructed on the site. If the stadium were configured in its original proposed location, that would place the substation directly behind the stands behind home plate. And I think there could be some concern that fans could literally be in a position to throw things or have some access to the substation from the stadium itself. So that the suggestion has been made to rotate the stadium 180 degrees, so it no longer 45 RESOLUTION NO. 000325 faces downtown, but instead faces more towards the Northeast, so that the substation would then be placed in the outfield, and then you could safely come up with a site plan that safely protects the public from the substation. And that's the assumed plan in this analysis.
Is not the aesthetic benefit to a downtown stadium, one of the issues of the aesthetics, is the ability to view the skyline of the city from the rear of the facility, therefore creating this urban feel -- and the city does have a beautiful skyline -- the skyline in the background that would be an attractive venue. Where would we be looking now, if I were sitting along the first base line based upon your analysis?
Again, the assumption is that now you would be facing more in a north or northeasterly direction. And, again, our committee is not suggesting that that's the preferable plan, but that is the least expensive remedy to figuring out how to build a stadium around the existence of the 46 RESOLUTION NO. 000325 substation that otherwise to relocate is going to cost $100 million.
But most, if not all, of the renderings that we have been shown and have been exposed in the press will show the orientation of the stadium with the beautiful city skyline in the background. I am sure you have seen these renderings.
And that's correct. But at this point it is our assumption that you can't actually build a stadium with that rendering in mind, unless you actually assume the $100 million cost to relocate the substation entirely.
Councilman, I am sorry. I don't mean to interrupt you. And, Mr. Albright, would you stay where you are. I know that you have to leave, also. But Cecelia Yep is here and has been asked to be given the opportunity to testify. She is being honored this evening, and I think she is going to have to leave very, very shortly. So with your permission, if we could just hear Ms. Yep. Just stay where you are. 47 RESOLUTION NO. 000325
Good afternoon and congratulations on your award tonight.
My name is Cecelia Moy Yep. As a founder of the Philadelphia Chinatown Development Corporation, I have come before City Council many times expressing the concerns of Chinatown. Most of you are aware that Chinatown is one of the most stable neighborhoods in this city, and it has been in existence for 130 years. Since I live in Chinatown, I have witnessed all the effects that Chinatown has experienced from urban renewal projects for the past 48 RESOLUTION NO. 000325 40 years. Our neighborhood is a constant construction site, and we are always asked to sacrifice for the betterment of these institutional projects. In the '60s, Chinatown faced urban renewal projects which tore down homes and businesses on the east side of 9th Street for Independence Mall Unit 4 and the proposed 9th Street ramp. In the '70s we were confronted by the Vine Street Expressway, which caused displacement of more homes and businesses on the south side of Vine Street and, more importantly, the state threatened to demolish the Holy Redeemer Church and School for highway ramps. In the '80s again more homes and businesses were demolished on 9th Street for the Center City Commuter Rail Tunnel. In the '90s homes, businesses, and parking were lost on the west side of 11th Street for the Pennsylvania Convention Center. As a result, the core of Chinatown has now been cut back to four blocks. 49 RESOLUTION NO. 000325 When they built the Convention Center, the community was advised to expand to the north, across the Vine Street Expressway. And with little or no choice we went north. PCDC took the giant step and crossed the Expressway and built a planned urban development at 9th and Vine Street with 51 new homes. This development took nine years to build. Hin Wey Yu is now known nationally as a development that won the Maxwell Aware for Excellence in community development from the Fannie May Foundation. PCDC has a comprehensive plan for the growth and development of Chinatown. We are now ready to start construction of more housing at 9th and Wood Streets as Phase 2 of Chinatown North. PCDC has started Phase 3, which is a community center at 10th and Vine Streets. 44 acres in Chinatown North has been rezoned by City Council from industrial to commercial and has been designated for the growth of Chinatown. Building a baseball stadium across the street with impede the implementation of our 50 RESOLUTION NO. 000325 plans. This in direct conflict with the Council's direction in rezoning this area. When pCDC started development to the north of the Expressway, it served as an impetus for development of the entire area, developers already investing in the area, with condo loft structures and other investments taking place. A charter school is planned for 1209 Vine Street. If the city builds the stadium at the proposed Vine Street site, one can easily understand why our neighborhood's growth will be stunted. We are not against building a stadium. (Audience reaction)
The union will get the jobs regardless. But, remember, the Phillies don't even want to be there. The community doesn't want them there. The stadium will, without a doubt, disrupt the community. This project will also stunt the growth of Chinatown and the traffic will be such 51 RESOLUTION NO. 000325 that no one will want to come near the area. Major street changes are planned. Callowhill Street and 12th Street will be closed. 13th Street will be widened to become a two-way street. Street closings and changes in traffic patterns will affect our already congested area. The cost figures we are hearing are astronomical. They keep growing to the point where they are double what they should be. Extra costs incurred for the three major factors involved with this site, the acquisition, the relocation, the environmental problems, and the Reading viaduct, and the PECO substation, the SEPTA substation, add approximately 373 million additional dollars at this 11th Street site. Someone has to pay. We believe that eventually the citizens of Philadelphia will end up paying. The average citizen is looking at the basic needs of our communities. The ballpark is icing on the cake for most people, as most families cannot afford the luxury of frequently going to games. 52 RESOLUTION NO. 000325 City Council should take careful consideration what actual cost figures will be. They should also take into consideration the taxes lost from the displaced persons and businesses on the 11th Street site. (Applause.)
The displacement and relocation problems will also cause a minimum of a two-year delay, which has already been stated, adding additional costs to the budget. And at the same time costs of inflation will be also added to the budget and can easily amount to well over $30 million more. Chinatown is constantly told that we will benefit greatly from the spin-offs. We doubt this very much. We foresee more traffic congestion in this area. The city must take into consideration that there are four new hotels in the immediate area and plans are underway for the expansion of the Convention Center on Race Street to Broad Street. Chinatown will become an accessory parking zone for the stadium. And, incidentally, Garage C in the plan, south of Vine Street, will be 53 RESOLUTION NO. 000325 built in Chinatown and cause more displacement. This will do nothing for the residents and businesses of our community and, in fact, cause people to avoid the area, resulting in an economic hardship on our businesses. Moreover, Chinatown is more than a collection of restaurants. Chinatown is a neighborhood with families, churches, temples, daycare centers, and more. (Applause.)
I as a taxpayer cannot understand why the citizens of Philadelphia, with all our needs an problems, should allow this to happen. I call on all Council Members to say no, we are not buying anything we can't afford. Furthermore, it should not be built on the most expensive site, with the most expensive price tag, that will cost the taxpayers twice as much as it should. We'd like to buy the Mercedes, but the fact of the matter is we can only afford the Ford. Thank you. (Applause.) 54 RESOLUTION NO. 000325
Thank you, Madam Chair. Mr. Albright, I want to take our attention back to the parking discussion. You mentioned that there would be $20,000 per space; is that correct?
Has there been any conversation with the Phillies to determine their specific or exact needs around parking spaces?
Again, for purposes of this analysis, all I can try to do is lay out for you what the questions are. But that's what I say. This is the life blood to the Phillies. In other words, if they don't have 55 RESOLUTION NO. 000325 adequate onsite or near-site structured parking, they can't in the end provide the kind of attractive site to the premium-ticket payer that they are trying to attract. So you need to ask the Phillies what it is they really need. All I can tell you is, assuming that that need is for something in the neighborhood of 4500 spaces, 20,000 is probably a reasonable cost estimate.
And assuming that the city makes the investment, where do those parking revenues go?
Again, I don't want to wade in where I don't belong, but that's a matter between the teams and the city to negotiate.
You are welcome. The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam 56 RESOLUTION NO. 000325 Chair. I just have one question. Mr. Albright, on or 3 of your testimony under Site Acquisition and Demolition, at the bottom, total estimated costs would include demolition and environmental remediation costs of $15 million, and business/residential relocation assistance another miscellaneous cost, an additional 7.5. As it relates to the residential relocation assistance, is there a formula that is being used in addition to what I assume, when the adjusters -- or the appraisers go out, rather, they would typically use a fair market value as part of their analysis. My experience with relocation mainly has to do with new housing construction in my district. And I know there is a government set of standards for what the property owners are entitled to do when it comes to relocation and how they are made whole. Is that same criteria used in the scenario where it is a commercial development, as opposed to federal acts that we are bound by, or mandated by? 57 RESOLUTION NO. 000325
The only thing I can say is yes, but we were probably conservative. And, again, I will be the first one to admit that in the end of the day, these costs will probably be higher than we anticipated them to be. But we didn't want to at any time be accused of overstating what the potential costs might be. And this is probably one of the biggest areas where we tried to -- if we were going to error, error on the conservative side. COUNCILMAN DiCICCO: So, again, if I understand you correctly, those numbers were gathered basically by doing strictly fair market value based on assessment of what comparables are in the community today.
Correct. COUNCILMAN DiCICCO: Not looking at what the potential for the development of that community is if stadiums weren't being built.
That's correct. And, again, the emphasis on today, not what they might be one or two years down the road. COUNCILMAN DiCICCO: Thank you. Thank you, Madam Chair. 58 RESOLUTION NO. 000325
You are welcome. Are there any other questions of Mr. Albright? Thank you very much, sir.
Please identify yourself for the record and proceed with your testimony.
Yes. Pete Matthews, President, AFSCME District Council 33.
I am Wayne Johnson, Secretary/Treasurer of District Council 33.
Thank you, Council President Verna, members of City Council, for allowing me to present testimony at this hearing. As I stated in testimony before City Council last March on this same matter, our unions are not opposed to building stadiums. I want to 59 RESOLUTION NO. 000325 make that clear from the start. I also want to make it clear that we are not here today to pick a fight with my brothers and sisters in the building trades union. I hope they get to build stadiums, housing, hotels, and anything else that needs to be built as a result of booming national economy and Philadelphia's resurgence as a vibrant and growing city. Nor are we hear to pick a fight with those who are opposed to building stadiums because of what they see as a negative impact on their particular neighborhood. These citizens also have a right to be heard, and we should give them respect by listening to their concerns. I would also hope that at some point in the future many more members of our union would be able to afford the cost of attending events at these sports facilities. As it stands right now -- (Applause.)
As it stands right now, with the sacrifices in wages and benefits that they have made over the last eight years, our union 60 RESOLUTION NO. 000325 members are more concerned with feeding, clothing, sheltering, and educating their children than they are in watching sports teams compete. (Applause.)
No matter where you locate a stadium, it is something that I believe should be made with strong input from the communities within the city and which are most likely to be directly impacted. Many of our union members live in the communities that are being discussed as possible locations. And I can tell you that there is little support for building a facility that will destroy the character of any neighborhood in the city. I commend you for holding this hearing in order to hear from your constituents. You probably will also hear testimony from stadium supporters about all of the economic benefits the city will derive from a new sports stadium. I have no way of verifying the validity of those claims. I hope they are true, though. Because anything that adds to the tax base of this city is obviously going to be something that 61 RESOLUTION NO. 000325 our union favors. It is on the matter of how to finance the stadiums where I have sincerest concerns. As you are no doubt aware, our union is in the process of negotiating what we hope will be a fair contract for city workers. The fact that the contract covering the members of AFSCME District Council 33 expires on June the 30th should be of concern to the citizens of Philadelphia and to City Council. (Applause.)
Nobody, least of all our members, want to see garbage piling up in the streets or vital city services like water and sewer stopped as the result of a strike by city workers as we approach the start of the Republican Convention in July. Our members would much rather have a fair contract and a very calm summer. The resolution of a fair contract with city workers, however, is dependent on the willingness of the Street Administration to acknowledge the contributions made by our members toward that economic recovery the city now enjoys. So far I have seen no evidence of a 62 RESOLUTION NO. 000325 willingness on the part of the city's negotiators to acknowledge the contributions made by our union members. In fact, the city's negotiators are acting like it is 1992, not 2000. (Applause.)
Just this morning we only had the fourth formal negotiation session since we entered into this process. The Administration's negotiators presented us with their first wage proposal for the first time. What they presented us was an insult to the dedicated and hard-working members of our union. In fact, the rate proposal was a disgrace. With the city enjoying a $200 million budget surplus, and the Mayor trying to figure out a way to spend a billion dollars to build sports stadiums, all they had to offer the members of District Council 33 was two $500 bonuses in the first two years and two backloaded raises of 2 percent in the last two years of the contract. (Audience reaction.)
That amounts to less 63 RESOLUTION NO. 000325 than 1 percent spread out over four years. This insulting offer comes after months, literally months, of our union's willingness to find a way to reach a settlement that would be fair to our members and for the taxpayers of the city. Now, after several years of wages, freezes, backloaded wage increases that are still lagging behind the rate of inflation, and work rule changes that save the city tens of millions of dollars, this is what they offer as a fair contract proposal. They have the nerve to tell us at the negotiating table that we can't ask for decent wages because they need $20 million for schools and another $18 million to solve management programs at the Philadelphia Gas Works, and God only knows what else. But a decent wage increase is out of the question. They must be crazy to think that I would bring this offer to our membership, or, worse yet, that our members would accept it. (Audience reaction.)
In addition to this 64 RESOLUTION NO. 000325 insulting wage offer, the Street Administration is still insisting that they want to take away our health and welfare fund. On a matter of turning over control of our health and welfare fund to the city, I only have three things to say; no, no, and hell no. 8 (Applause.)
No, because in the last eight years the city has already short-changed our health and welfare fund by over $50 million in contributions. Turning over total control to the city would only result in a cut of our benefits. No, because our union has spent the last three and a half years, since I took over as President, getting our financial house in order, solving the J.F. Kennedy Hospital problem so that it won't be a part of these negotiations, and it is not, and making sure that our members didn't lose any benefits in the process. And hell no, because we just don't trust this Administration, not to mismanage the funds to the point where our benefits our members now have as a result of bargaining for benefits in lieu of wages will be reduced our eliminated. 65 RESOLUTION NO. 000325 Given their record so far on the School District, PGW, Disney project, the piers on Delaware, and the stadium deals, we have to be insane to agree to let our benefits plan be managed by this Administration. (Applause.)
Given the actions of the Street Administration this last week, I can't help but wonder if the Mayor is deliberately trying to provoke our union into a strike. I can think of no other rational reason to explain his recent actions. We have said that we do not want a strike. What Mayor John Street evidently fails to realize, though, is that our union membership is united and we will strike if he continues to make these outrageous and insulting demands, instead of settling a fair contract. I expect before the end of these negotiations, the Street Administration will try to pit our public employee unions against the building trades unions over who should get a piece of the budget surplus in our negotiations, if our negotiations continue to insist it doesn't really exist. 66 RESOLUTION NO. 000325 Our members, through the sacrifices that they have made over the last eight years, have earned a right to a decent wage increase and a decent benefit package, just like our brothers and sisters in the building trades earned their wages and benefit. That is all we are looking to get in these negotiations. We must not allow any employer, public or private, to pit one group of workers against another against another. I was told early on in these negotiations -- (Applause.)
I was told early on in these negotiations by Mayor John Street himself, in fact, that the city was interested in settling with a fair contract, and that no part of the city's budget surplus was going to be used for stadium financing. I have wanted to believe the Mayor when he expresses the position. However, the demands that his negotiators have been making lead me to believe that he will say anything and do anything to get whatever he wants, and that his word 67 RESOLUTION NO. 000325 is definitely not his bond. (Applause.)
I would caution my brothers and sisters in the building trades and the members of the business community who support building stadiums to be very careful about making Mayor Street's promises -- about taking Street's promises at face value. This is why I am here today to remind City Council that they need to settle a fair contract with city workers before committing to any budget -- excuse me, before committing any of the budget surplus to financing stadium construction. As I told you back in March, our members of District Council 33 sacrificed wages, benefits, and work rule changes over the course of the last eight years to produce the city's $200 million budget surplus. They have earned the right to a fair contract. And that, above all else, should be a priority for this city. Our union is concerned that the Mayor's rush to put a financing package together to build sports stadiums will cause pressure on City 68 RESOLUTION NO. 000325 Council to authorize committing funding from the budget surplus for what appears to be a project that is escalating in cost every day. How can you rationally consider a stadium financing deal, when you don't know where it will actually be built and what the real figure for building it will be? The fact of the matter is, you can't. It would be fiscally irresponsible to commit any part of the city's budget surplus to a stadium deal before the location and actual costs are resolved, and our contracts are settled. In my view, there is no reason beyond the Mayor's self-imposed deadline for City Council to rush into a decision to commit to building to a funding plan for building a stadium. With that in mind, I would ask you on behalf of members of District Council 33 to hold off on making any financial commitments until the Street Administration has reached a fair contract settlement with our union and with the other unions representing city workers. Thank you for this opportunity to testify. And I would be happy to answer any 69 RESOLUTION NO. 000325 questions. Thank you. (Applause.)
Are there any questions from members of the committee? Thank you, Mr. Matthews.
Mr. Chung. Is Mr. Chung in the audience? Mr. Chung, may I ask you to wait just a moment until the people who are leaving can do so quietly, because we will not be able to hear you.
Just a minute, sir. Those who are leaving, please do so quietly. Thank you. Any private conversations to my left, please do so in the corridor. Mr. Chung please identify yourself for the record and proceed. (Mr. Leung testified through an interpreter.)
My name is Cheung Ping Leung. I am the President of the 70 RESOLUTION NO. 000325 Chinese Benevolent Association in Philadelphia Chinatown. CBA is an umbrella organization for ten family associations in Chinatown, as well as a major organization representing Chinese businesses in Chinatown. I am also the main organizer of the Philadelphia Chinatown Coalition to oppose the stadium, a coalition of over Chinatown-based 11 organizations s who have joined together to oppose 12 the destruction of our community. 13 On June 8, for the first time since 14 World War II, we called for a business shutdown of 15 Chinatown, and some 2000 of us marched to City Hall 16 to speak with one voice. 17 (Applause.) 18
I choose to testify in 19 Chinese today because the process of this city has 20 made it almost impossible for those most affected by those decisions to have any voice in these proceedings. Nothing has been translated for our people, even though a large segment of the most affected community speaks English as a second 71 RESOLUTION NO. 000325 language. But we refuse to be silenced. We will claim our right to speak. We say no to the stadium in Chinatown. We say no to the use of public money in this way. We are tired of the politicians and the media who try and make it sound like the businesses in Chinatown all support this insane proposal. Our community of 4,000 residents, one-quarter of them children, has no public school, no public park, no public library, no recreation center, no public health services, yet we have tax-paying businesses and taxpayers. (Applause.)
What public monies have gone into Chinatown? The only public money we have seen spent in Chinatown has been used to build the Vine Street Expressway, the commuter rail tunnel, the Independence Mall, the Gallery, and the Convention Center. All these projects are designed to make it more convenient for tourists and 72 RESOLUTION NO. 000325 suburbanites to get to the city and also to leave the city. What have you done for those who have stayed, put down roots, fought to maintain businesses and raise families in the face of this kind of onslaught? Before you build a stadium anywhere in Philadelphia, build a school for our children so they do not have to travel over one and a half miles simply to attend their so-called neighborhood school. Don't tell us that's different money from different sources. We know that this is a game of politics, of those with money making decisions informed by how much profit they can make, but not how much good it will bring this society, this city. (Applause.)
I am a simple man. I work in my restaurant about 14 hours a day, 6 days a week. I know what it is to sweat and to struggle and to dream. I struggle now, not just for my family or for myself, but for the entire community. 73 RESOLUTION NO. 000325 And the same perseverance that the Chinese people have always relied on to survive here in America will be brought to this struggle. To all the elected officials who must look at themselves in the mirror every morning and ask themselves have they done the right thing for the people of this city, I ask you to think carefully. In Chinese we have a saying, a person accused by a thousand people needs no disease to end his days. If you decide to spend money in this way, you will stand accused. Not by a thousand people, but by hundreds of thousands of people whose health and welfare you have been given the sacred charge to protect and to serve. The morale decision is clear. You must never allow the stadium to be built in Chinatown. (Applause.)
Excuse me, Mr. Leung, please. Would you conclude your statement. Because we have other witnesses that would like to be heard, and they have to leave. Thank you. 74 RESOLUTION NO. 000325 I think everybody would like the opportunity to be heard. Please proceed.
What we are trying to fight for is not only going to impact Chinatown; it is going to impact the rest of Philadelphia. And we want support from all of the rest of Philadelphians to stand up against this stadium thing. And I also want to mention that 10,000 signatures have been presented to Council President. And this has all been collected, and we are still collecting more. So I encourage everybody to sign those petitions. Thank you very much. (Applause.)
Professors Zimbalist and Rosentraub. Good afternoon, gentlemen. Please identify yourself for the record. PROFESSOR ANDREW ZIMBALIST: Andy Zimbalist. I am an Economics Professor at Smith College in Northampton, Massachusetts. PROFESSOR MARK ROSENTRAUB: Mark 75 RESOLUTION NO. 000325 Rosentraub, Professor at the School of Public and Environmental Affairs at Indiana University. PROFESSOR ZIMBALIST: If we may, we each have a brief introductory statement. Can we proceed?
Thank you. Please do. PROFESSOR ZIMBALIST: I am here to tell you that if your plan is to build a stadium anywhere in the city in order to expand your tax base or to create more jobs in Philadelphia, that you are going to be sorely disappointed. In the economics profession, it is very rare that we can generate a consensus of opinion amongst the people who have studied a particular issue. In the case of the economic impact of stadiums, we have not only a consensus, but we have a unanimity. Every single empirical study that has been done by independent economists has come to the conclusion that you cannot anticipate a positive economic kick from building a sports facility. It is difficult for some people to 76 RESOLUTION NO. 000325 accept that reality because sports, of course, plays a very large part in our culture. The fact of the matter is that sports teams are small businesses. And having a sports team in your city or having a new stadium in your city fundamentally restructures the nature of spending, it does not create new spending. The vast majority of funds that will be spent at a new Phillies stadium will be substituted for other kinds of spending that would happen in the greater Philadelphia area. People will go to the Phillies park and spend more money on more expensive seats, instead of going to bowling alleys and restaurants and movie theaters. It will be money spent in one part of the city, rather than another part of the city. It will also be true that of the tens of millions of extra dollars that go to the Phillies from a new stadium, that something like 60 percent of that money will go to the players, vast majority of whom do not live in the Philadelphia area. Another large chunk of the money will go to the owners, who are very high-income 77 RESOLUTION NO. 000325 individuals and spend a lot of money outside of Philadelphia and also have very high savings rates, where the money enters the world's money markets and does not get respent in the Philadelphia area. Therefore, the extra money that gets spent at a new stadium will leak out in much greater proportion, leak out of the Philadelphia economy, than would that money if it were spent in locally owned business activities, at bowling alleys, movie theaters, and restaurants, and so on. Finally, if the City of Philadelphia is being looked at to contribute hundreds of millions of dollars to this project, you also have to face down the road that there is going to be a budgetary hole created by the project. If you bonded in the initial period, you will have to finance that through sales taxes or other revenue sources. Those sales taxes and other revenue sources take money away from the citizens and lower their spending. That is offsetting any positive impact that could occur because of the stadium. On balance then, if you put these factors together, you discover that in every single 78 RESOLUTION NO. 000325 instance between the 1950s and through the 1990s, stadiums do not promote economic development. They could perhaps be justified on other grounds. They could be justified on social or cultural grounds, but they cannot be justified scientifically on economics grounds. It is also true that when there is a new stadium proposed by a team, invariably they assemble a coalition of people who want the stadium to be built. And they go out and they hire a consulting firm to do an economic impact study. And those economic impact studies, which are hired out, always come to the conclusion that they will generate thousands of jobs. Those studies invariably are flawed methodologically, they make unrealistic assumptions, and they are not to be trusted for a moment. Finally, there is the issue of whether or not, if there is no net economic activity generated for the larger metropolitan area, there is the issue about whether you couldn't relocate economic activity from some parts of the city to another. And you can do that in certain instances. 79 RESOLUTION NO.
000325 But you would have to bear in mind that when you are talking about building a baseball stadium, which is used 80 to 85 days a year, for 4 hours each of those days, and it takes up a large space, that's not the kind of area that somebody wants to place a restaurant next to or somebody wants to put a retail clothes store next to. Not a place that's being used for 4 hours a day, 80 or 85 days a year. ) PROFESSOR ZIMBALIST: You also have to bear in mind, in addition to the factors that have already been brought up this afternoon, you have to bear in mind the potentially negative consequences of congestion in an area. " That can hurt local businesses. ) PROFESSOR ZIMBALIST: I am not a resident of Philadelphia, and I don't pretend to tell you where the best place is to build a 80 RESOLUTION NO. 000325 stadium. And I don't even pretend you to tell you whether you should use public subsidies to build one or not. I only caution you that this should not be done if your goal is economic development.
Thank you. (Applause.) PROFESSOR ROSENTRAUB: Madam President, Council, I want to add a couple of points to a few other issues related to how one finances a facility in the value of a Philadelphia market. One of the points that's being lost in conversation is that Philadelphia is one of the best markets for sports in the United States. Both of the teams can earn more money in profits here than they can elsewhere. And before one even raises the question about whether or not a subsidy is needed from the City of Philadelphia, the issue has to be raised in terms of how the teams can perform and what their profits can be in this market. Because it really is the fourth to fifth largest market for professional sports in the United States. A great deal of what you hear from 81 RESOLUTION NO. 000325 the teams frequently involves the averages of what goes on across America. But you have to recognize that Philadelphia is not part of the average. This is not a city like Indianapolis or Nashville or Birmingham. This is one of the largest markets, with over 7 million people in the Metropolitan area, and this is where sports teams want to be. I raise this because it is an important question that always comes up when cities negotiate with teams, for the fear is that the teams might leave the area. I want to put to rest in a statement I prepared and left with Councilman Cohen's office that there is no market that the Philadelphia Phillies could move to that would permit them to earn as much money as they can earn in the City of Philadelphia. So the issue about whether or not the team would ever leave here should be taken off the agenda. That won't happen. And as regards the Eagles, if the lesson to be learned, for example, from the new England Patriot situation is, the Eagles themselves 82 RESOLUTION NO. 000325 can't leave Philadelphia. The bargaining doesn't have to take place in the context that, if we don't meet their demands and provide subsidies, that the teams themselves will leave the area. So that has to be --
Excuse me, sir. Would you mind elaborating why the Eagles could not leave? PROFESSOR ROSENTRAUB: The markets available right now for the NFL probably include, for example, Birmingham, which has on various occasions said that it would build a fully subsidized facility, or Los Angeles, which, of course, is the largest market without an NFL team. You do know, of course, that the City of Los Angeles refused to build a subsidized stadium for the team, the Council voted that down. As a result, the expansion franchise went to Houston. There is an effort underway right now being led by an individual to bring a team to Los Angeles, on the condition that he would have some role in the ownership of that team, because the facility will have to be privately financed. 83 RESOLUTION NO. 000325 That would mean, for example, if the Eagles were to go and accept the invitation, that would exists in Los Angeles, that Mr. Laurie would have to sell a portion of his team to this other individual, hence it wouldn't be as valuable to him as staying in Philadelphia. If he were to try to go to Birmingham, we would expect what would happen would be the same scenario that happened when the Patriots tried to move to Connecticut. It is no in the media interest for another NFL team to go to a very small market. 9 billion. And the media partners, the networks that purchased that, purchased that to have teams in the largest area. Moving from Philadelphia to Birmingham would obviously, from their perspective, be a loss of money. And, again, we have think about the question of the Phillies, the only markets open for major league baseball teams are much, much smaller than Philadelphia. 84 RESOLUTION NO. 000325 If the team, for example, were to do as the Minnesota Twins debated for some time, about moving to North Carolina, North Carolina as a state is smaller than the metropolitan area of Philadelphia, and it also does not have the same concentration of wealth. So there is just no other market that the teams could move to. And, again, this is a critical element in bargaining. Because there really becomes no reason to deal from the position of weakness or blackmail, because the city is in fact the desired location. And I have some tables that will take you through this, if you want to debate it. The other question that I want to make sure that people keep front and center here is, how much money the teams can earn even if, in fact, they don't receive any subsidy from the City of Philadelphia. And I think that's critical. There are two models that I present for you, one for the Phillies and one for the Eagles. For the Phillies, with payrolls, if they would elevate their player payrolls to as high 85 RESOLUTION NO. 000325 as $80 million, the models that I have developed still indicate that the team could earn in excess of percent per year on operating expenses, not to 5 imagine the capitalized expense, if they themselves 6 financed $275 million for a baseball stadium. 7 For the Philadelphia Eagles, they 8 could handle in excess of $215 million of the cost 9 of the stadium and still generate a double-digit 10 return. So, in effect, if the City of Philadelphia helped the teams, because the teams are important assets, and facilitated the development of plans and programs to have the teams here and build two new stadiums, both could be built without any tax dollars whatsoever from the City of Philadelphia. ) PROFESSOR ROSENTRAUB: And I want to underscore this to make sure that the Council keeps this mind. Both teams could still earn in excess of 10 percent per year returns on operations. This does not deal with what the return would be and the value of the assets when the teams in fact are sold. 86 RESOLUTION NO. 000325 Lastly, let me touch on one other point. 25 that you have increased the profitability that the owner of the team will realize when that team is sold.
In other words, if in fact you provide about $85 million in cash subsidy to the team, you can rest assured that that will mean about a $100 million increase in the value of the team which will accrue to the current owners. Both the Indians and the Rangers were sold within five years of the subsidies that those communities provided, and both of those owners recognized gains well in excess of $100 million as a result of the subsidies provided. When you realize, again, the strength of the market of Philadelphia, you tie it together with the points that Professor Zimbalist has made about economic development, you realize how much 87 RESOLUTION NO. 000325 return these teams are currently making, you add to that the fact that the state has already agreed to provide $85 million in subsidy for each facility, if you put any tax money towards it, which you are simply doing is increasing the value of the franchises for the owners, which will in turn create new profits for some of the most wealthy individuals in your community. We would be happy to answer any questions you have got.
Just for everybody's knowledge, I had a lot to do with picking these two witnesses because I wanted to have witnesses who were nationally and even internationally recognized for their objectivity and for their expertise. And I wish, Dr. Rosentraub, why don't you tell us a little bit about your background. Why should the people of Philadelphia be interested in your analysis? PROFESSOR ROSENTRAUB: I have been studying --
I understand that you are all very modest. Because Dr. Rosentraub 88 RESOLUTION NO. 000325 merely referred to himself as a Professor. But I think he has written enormous amounts. I was going to try to make a brief reference to it. I can't, because of the volume of it. And I wanted everybody to know that with respect to both Dr. Zimbalist and Dr. Rosentraub, that they are recognized throughout the world as the premiere economists, and with special expertise in the stadium field. And will you tell us a little bit about your background. How did you get interested in the sports stadium issue? What drove you to that? PROFESSOR ROSENTRAUB: I have been studying the issue of relationship between cities and sports, unfortunately, for years. I wish it 19 wasn't quite that long. 20 I began as a sports fan, interested 21 in it, tied it to my academic interests. I think 22 between Professor Zimbalist and I, we can safely say 23 we have published more books, probably about 50 24 articles, maybe more than that, on issues around the 25 country. 89 RESOLUTION NO. 000325 I have worked for several cities, including Los Angeles, Indianapolis, St. Louis at the current time in negotiations with the Cardinals, had opportunity to work with Seidel here and his staff. I have been involved in some national bids in terms of the International Olympic Committee.
Dr. Zimbalist. PROFESSOR ZIMBALIST: I would just say ditto. I have written a lot and consulted a lot with cities, and I don't care to go into the details of my publications.
Well, I could understand why, they are so voluminous and so widespread in the substance they carry. Thank you. Councilman Ortiz.
Yes. Professor Zimbalist, I am very impressed by your speech. And you said that usually the proponents of stadiums go out and get consultants to write studies that they make. The Camden Yards Stadium has been put forward as sort of a shining example of an economic engine and contributor to the job mechanism and 90 RESOLUTION NO. 000325 contributing to the tax base of the City of Baltimore. Is that the reality, or is that the fiction? PROFESSOR ZIMBALIST: There is a study in a book that I did with Roger Knowell on the Camden Yards situation, which concludes that it was not a good economic development -- a good economic investment. One of the things that you should bear in mind, if you hear anybody during the course of your deliberations on this matter refer in rosy terms to Camden Yards, is Camden Yards is the very first example of the new genre of ballparks, the retro ballpark with all of the new revenue-generating accoutrements. Camden Yards relocates the Baltimore stadium from the north side, in an area where there was no highway access at all, to the south side of the city, right off of the main highway access and artery to Washington D.C., a 40-minute drive from Washington D.C. By relocating the stadium from the north side, to the south side, they essentially 91 RESOLUTION NO. 000325 annex the sixth or seventh largest media market in the United States. That is not something that you are going to be able to do in Philadelphia. You are also not going to be able to build the first example of a new architectural genre; that was done by Camden Yards. You are also not going to be able to create the curiosity effect which brought thousands and tens of thousands of people from around the country to see Camden Yards as this new architectural example. And it was also done as part of a much, much larger economic redevelopment investment plan for the wharf area in downtown Baltimore. So you put all of those things together and you still find that Camden Yards wasn't a good economic development, a good economic investment. You are not going to get a good economic investment from a stadium, whether you build it in Chinatown or elsewhere in Philadelphia. And I repeat. If you want to do it for cultural or social reasons, then that's one 92 RESOLUTION NO. 000325 thing. Don't do it because you think it is going to generate jobs. (Applause.) PROFESSOR ZIMBALIST: By the way, if I might just piggyback quickly on something that Mark Rosentraub said. You know, Philadelphia is the fourth largest media market in the United States. The three largest ones in baseball all have two teams; Chicago, New York, and Los Angeles. Philadelphia is the largest media market in the United States in baseball that has one team. The Phillies are not going to leave Philadelphia. They would never even contemplate leaving Philadelphia. And if they tried to, Major League Baseball needs a three-quarter vote to permit them to, and would never let them. (Applause.) PROFESSOR ROSENTRAUB: Let me add one other point which I think sometimes gets lost when you deal with the conversation with the Phillies and the request for the subsidy. Is that the Phillies, as Andy pointed 93 RESOLUTION NO. 000325 out, are playing in the fourth largest market with no competition. And, yet, among their colleagues, other major league baseball teams, the Phillies are the poorest performing franchise over a period of -- (Applause.) PROFESSOR ROSENTRAUB: -- this is by straight won/loss records -- over a 100 year period. Now, if you say that that's a business that needs a subsidy, I want you just to think it through in economic terms. You are talking about a business that is largely a cartel, has free access to the largest market available to it, and has still been underperforming now for 100 years, but argues that it needs a subsidy to continue. Something, in effect, doesn't make sense. (Applause.)
And I know that I may not get to both of you in terms of to answer all the questions on here. But it says here from this study that was ordered by the task force of the Philadelphia 94 RESOLUTION NO. 000325 Convention and Visitor's Bureau, it says that the total impact of a Center City ballpark will be 417 million, an 82 percent increase over the current impact of Veteran's Stadium according to a study by Arthur Anderson, LLPD. Center City ballpark would generate an additional 11.8 million annually in tax revenues and 8.3 million for the Commonwealth of Pennsylvania, compared with Veteran's Stadium. Now, there is no sustaining data to this. They are just statements that be being made. A Center City ballpark would generate 5,644 new permanent jobs, 1,172 more than the South Philadelphia sport complex, according to the same study. Spending levels increase significantly in cities with downtown stadiums, as opposed to other locations. Baltimore, Denver, Cleveland, versus Arlington Texas. Fans would spend over $104 million annually outside the stadium in Center City, 35.3 million more than they would outside a new ballpark at the sports complex. The hospitality industry, lodging, restaurant, and retail, would be the primary 95 RESOLUTION NO. 000325 beneficiary of the 104 million in out-of-stadium spending. (Audience reaction.)
PKF reports hotel occupancy gains in Baltimore and Denver following the opening of the downtown stadiums, officials from Convention and Visitor's Bureau in Baltimore, Cleveland, and Denver, clearly note the impact of their new downtown stadiums on the industry. Can both of you comment on those statements? PROFESSOR ZIMBALIST: The last thing that you mentioned I think is noteworthy. You say, "officials clearly note." These are the same officials who sponsored the projects. All they are doing is saying that they were right to spend public money on them. You know, what one would have to do, Arthur Anderson is one of the main consulting firms that gets hired to do another, Deloitte and Touche is another, and Peat Marwick is another. What one would have to do -- I have done it in the case of Boston and I have done it for some other cities -- is to go through the study and 96 RESOLUTION NO. 000325 point out where they make assumptions that are unrealistic. The methodology that they use is an input/output methodology. It uses affixed coefficients from technology that existed in the 1980s. They make many assumptions along the way that produce these results. It is very hard a priori to project, to build any kind of a model to project what's going to happen. It is very easy, however, post hoc to look at a new stadium that's been introduced into a new city, control for other variables about the area of economy, and see whether or not, controlling for those other variables, the city received an economic boost from the stadium. And as I said before, all of the empirical studies that we have from the 1950s forward unanimously conclude that there is no 22 economic boost. So if people and the City Council are persuaded by these public relations proclamations about thousands of jobs being created, it is 97 RESOLUTION NO. 000325 possible to approach somebody like Mark or myself or other people to do a critique and to explain to you detail by detail why that study is unreliable.
Go ahead. PROFESSOR ROSENTRAUB: Let me add one point also to what Andy is saying. When you read your quote, I think the critical element is that they used the word "economic impact." And what people have to realize is that, in the business of economic analysis, the words "economic impact" and "economic development" are two very different things. So, for example, the example I give to my students, if you left this meeting today and went down to your car, and somebody threw a brick through the window, that's going to create economic impact. But I don't that you are going to conclude that it is economic development. What you have to realize, when people say, for example, if you build a downtown stadium, there will be $104 million in economic impact, a lot of the impact that they are counting are the meals that people eat. 98 RESOLUTION NO. 000325 Well, if the stadium is not built, the people are still going to eat those meals, but they may not eat them at that specific location. So it is a transfer of economic impact. Unless you were all going to commit to eating six meals a day, the fact that you are going to have economic impact of buying a shirt, eating a meal, spending money, it is moving it. Movement is impact. When I throw the brick through your car window, I will move money from your wallet to a glazier's wallet.
I hope you are not wearing a mask when you do that. PROFESSOR ROSENTRAUB: But I will not create any economic development. When you see in reports discussions about people staying in hotels -- and we have done these analyses -- there will be people staying in hotels. But there are people staying in hotels in Baltimore and in Cleveland all the time. In all the analysis that we have done, there will in fact probably be about a 10 percent rise in hotel occupancy. 99 RESOLUTION NO. 000325 That's good. No one here is telling you that it is bad. We want people to stay in hotels. What we are telling you is that, relevant to the tax money invested, this is a virtually negative return, it makes no economic sense. Especially when you ask the first question, are the teams profitable, can they operate and generate a profit without a subsidy. If the answer to that question is yes, they can, then why are we having this conversation? We ought to applaud -- (Applause.) PROFESSOR ROSENTRAUB: We ought to applaud and encourage the Eagles and the Phillies to build new stadiums. They ought to build them in Philadelphia because they can make a lot of money, and they will generate a lot of jobs. But it doesn't need to be subsidized. And if you subsidize it behind the mythology of economic impact -- I go back to the point, look at the sale of the Cleveland Indians or 100 RESOLUTION NO. 000325 the Texas Rangers -- will increase the wealth of the current owners by approximately $100 million. We have the evidence. We know what's going to happen. You don't have to do that analysis.
At $685 million in terms of stadium costs and climbing, as we have heard from before, the witness we had from the State Appropriations Committee, is that, in your experience, the most expensive stadium in the land, in the universe? PROFESSOR ROSENTRAUB: There is one in China that's actually -- PROFESSOR ZIMBALIST: I think the most expensive one build to date is in Seattle, Safeco Field, is about $540 million. And there is a big struggle going on right now because they signed -- the Mariners signed a deal with the city that any cost overruns above a $440 million projection would be covered by the team. The price tag came in at 540, and now the Mariners say they are not going to pay the $100 million because it was mismanagement by the City 101 RESOLUTION NO. 000325 Development Corporation, or its Stadium Corporation, that created the $100 million cost overrun.
That would never happen in Philadelphia. PROFESSOR ZIMBALIST: It wouldn't happen here, no. 8 So there is a litigation. That is still up in the air. That $100 million cost overrun is actually a $200 million cost overrun because the initial projections that were made about $340 million. You are at that initial stage. When you hear $685 million, you are at the same stage that Seattle was at when they heard $340 million.
If you hear the $685 million amount, what increment or percentage would it be at the end of the building process, if there is -- PROFESSOR ROSENTRAUB: Let me tell you a story. I built a house. And the contractor give me a certain price that it was going to cost. And then at the end, I had to come up with about 12 percent more. I just use that as a case study. 102 RESOLUTION NO. 000325
In your experience with stadiums, what -- PROFESSOR ZIMBALIST: to 40 cost 5 overruns above the initial estimates. 6 PROFESSOR ROSENTRAUB: There have 7 been some that have come in under. 8 But I think Andy is right, you have 9 to figure, this is a Herculean price tag that would 10 be very hard to, under any circumstances, to 11 justify. 12
Have you heard of 13 Philadelphia patronage? 14 Thank you, Madam Chair. 15
Thank you. 16 The Chair recognizes Councilman 17 DiCicco. 18 COUNCILMAN DiCICCO: Thank you, Madam 19 Chair. 20 I would just like to discuss the issue of stadiums, not necessarily location of 12th and Vine. Philadelphia, as you know, we have a stadium known as the Veteran's Stadium. There is some contractual agreements with the teams will have 103 RESOLUTION NO. 000325 to stay somewhere to the Year 2011. We have some obligations to continue to maintain that. Best estimates are that it will cost about $80 million for us to continue to maintain that. Comparing that to the cost of a new stadium, no matter where they are, it is relatively small in comparison. But I have heard some comments today from you that I am a little bit confused about. I think, Professor Zimbalist, you made mention of the fact that if we are going to do it for economic reasons, it doesn't really make sense to subsidize stadiums. But if you are going to do it for social and cultural reasons, is that such a bad thing to do? Doesn't the city get some public good, isn't there some public good that comes out of having a city the size of Philadelphia having major sports teams? Not everything we do, we can really put a price tag on, or to suggest that we will always get a greater return for our investment. 104 RESOLUTION NO. 000325 We subsidize many events in the City of Philadelphia. We subsidized the Mummers Parade, which I am a Mummer and I have been for 30-something years. I would venture to say that we probably don't get the return on that investment. But there is a certain amount of public good that goes with that that allows us to have some bragging rights, if you will, that we are a city. And cities have so many things going on all the time, that I think each of those components make this city a vibrant place. So cumulatively we may get a benefit, but we can't just put our finger on it and say, well, we got X amount of dollars because we did the stadium. It is the stadiums, it is the Academy of Music, it is the Art Museum, most of all that have some subsidies coming from us. And if you look at Fairmount Park, which I think it is the largest innercity park in the world, we the taxpayers fund that park system. (Audience reaction). COUNCILMAN DiCICCO: It is not free, 105 RESOLUTION NO. 000325 because the taxpayers are paying for it. But there is some good, that public good that comes out of that. (Audience reaction.)
Please. We will respect each other. COUNCILMAN DiCICCO: There is some public good that comes from having that park system. So the $15 million a year or so that Council appropriates for the Fairmount Park system, we really don't get any economic return on it in terms of saying it is profitable, but we get enjoyment from it. And if we are going to continue to promote ourselves as a city that has all kinds of things happening, cultural events as well as sports events, I think we also need to factor that in. And, again, it may not be a dollar return for a dollar investment. It may be -- I think there is a leak in a balloon around here. But, anyway, there may be some benefit to subsidizing sports facilities in general. I am kind of making a statement. And 106 RESOLUTION NO. 000325 I will ask you, one other thing, I heard you say earlier that it is draining money or taking money away from other activities by sports teams in general. According to everyone's estimation, 80 percent of the people who come to the teams are nonPhiladelphians. And I don't mean this to be sarcastic. But I heard you use the term saying, well, this is money that people would use to spend in other places, like going bowling. I just don't see somebody coming from Delaware County or Washington Township, coming to the City of Philadelphia -- and, again, I don't mean this to be sarcastic -- to bowl. But if they come to a game, they may go to a restaurant, they may take in something else in the meantime or during the time that they are here. I just don't see them not coming -- I don't see them coming to Philadelphia unless we have things to offer them. And I think sports facilities are another attraction for us to promote ourselves with. And I would just like some comment 107 RESOLUTION NO. 000325 on, do you take all of that into consideration when you make the statements that we, the city, shouldn't subsidize teams? I don't think you don't mean we shouldn't subsidize them at all. PROFESSOR ZIMBALIST: I don't think I ever made that statement. Let me address both of the comments that you make. I tried to be very clear that I was saying, you shouldn't do this if you think it is going to promote economic development. You might want to do it for social or cultural reasons. It is not for me as an economist to come and tell you what kind of cultural benefit or social benefit you get from the Phillies and the Eagles. I do think, however, it is important to realize that there is a big difference between the Art Institute and your parks downtown and a new baseball stadium. ) PROFESSOR ZIMBALIST: And it has to do with what Mark Rosentraub said a few minutes ago, which is that, if you build a new baseball stadium 108 RESOLUTION NO. 000325 for the Phillies, it is going to vastly increase the value of that franchise. And when it gets sold some day, it is going to sell for another 100 or 200 or 300 million dollars. In other words, the subsidy that you are making today is going to be privately appropriated some time in the future. That still doesn't say you shouldn't do it, but there is a major difference with the Art Institute because -- COUNCILMAN DiCICCO: Can't we make the same arguments about hotels when we do TIF financing, to say at some point they could be more valuable than they were at the initial stage of construction or when it was first built? And I am not suggesting that someone who goes to baseball games -- there are people that go to baseball games who never walk into the Art Museum, and vice versa. That's market driven. People will choose where to go. And I think this is about giving people more choices to come into the city to spend their money. 109 RESOLUTION NO. 000325 And this is not about 12th and Vine. And I know what you are all hissing about. This is about sports facilities in general. PROFESSOR ZIMBALIST: Look, you have to be much more specific.
You talk about TIF financing, you talk about tax credits that you might give to private industry, you talk about subsidies that you might give to some private industry. Most of the private industry that you referred to -- and we can go down it case by case -- is an activity that is going to actually generate jobs and generate development in the area, because they will produce things here that are sold elsewhere, they will bring new money into Philadelphia. That is not going to be the case for the Phillies. And I want to get to it that in a moment. I just want to say one other thing. When you are thinking about this issue of cultural and social impact, you should bear in mind that when you build a new stadium, you are gentrifying the stadium environment, you are creating a venue that will disproportionately cater 110 RESOLUTION NO. ) PROFESSOR ZIMBALIST: -- and corporate interests who will buy the club seats and the luxury boxes. Almost invariably -- we haven't talked about financing yet -- but almost invariably the main source of financing these ventures is sales taxes. And sales taxes regress, they fall more heavily on lower-income groups. So what you are going to be doing is engaging in a massive income transfer from low-income groups to corporate interests, to high-income Philadelphians, and to the baseball players and the owners of the Phillies who will profit handsomely from this. I want to just quickly address the last comment you made, because it ought to be very clear. First of all, with regard to this claim that you say everybody makes, that 80 percent of the money spent in Veteran's Stadium comes from outside of greater Philadelphia, I'd like to see the studies. 111 RESOLUTION NO. 000325 The studies I have seen are all done with very faulty methodology. I won't go into the details at the moment. But usually they come out with figures between and 30 percent, not 80 6 percent. So I am very, very curious about this 80 7 percent figure. 8 But beyond that, I would not 9 maintain -- and I am sure that Mark Rosentraub would 10 not maintain -- that people don't come into the greater Philadelphia area to see the Phillies. I'm sure that they do. And that is new money. And if that's all that happened, there would be some promotion of development. But the other thing that happens is that there are a lot of leakages. The money that gets generated at the stadium goes to -- 60 percent to the ball players, and a large chunk of the rest goes to executives. These are not normal Philadelphian citizens. They either don't live here, or they live here and have very high incomes; high incomes where there is a larger tax bite that goes to Washington; high incomes generating much higher savings rates, 112 RESOLUTION NO. 000325 which means again that the money enters into the world's money markets, it doesn't recirculate in Philadelphia; and high incomes which means that they own homes or live in fact outside of Philadelphia and they vacation much more outside of Philadelphia. ) COUNCILMAN DiCICCO: But the one thing we have going for us in this case is we have a wage tax, and we at least get part of their wages. Which is bad for everybody else, but good for us in terms of -- PROFESSOR ZIMBALIST: Look, the point is, first of all, you get the wage tax right now from the ballplayers anyway. COUNCILMAN DiCICCO: But we won't, if they leave; that's the point. PROFESSOR ZIMBALIST: The money is being spent at the ballpark and not being spent at restaurants. It means the restaurants have fewer employees and, hence, smaller base for wage taxes on restaurant employees and bowling alley employees and 113 RESOLUTION NO. 000325 theater employees, and so on and so forth. PROFESSOR ROSENTRAUB: Councilman, let me go back to a point. I agree with basically everything that you were saying about the cultural benefits, the value of getting people to come in.
And when you go through each of these projects, you are right, it does get in a sense very confusing about how one makes rules about how you should make decisions. Because there is a cultural benefit about the Philadelphia Phillies and there is a cultural benefit about the Philadelphia Eagles. And that's where I tried to get public officials thinking about. The question is being, I think, asked, I think you are framing it just a little incorrectly, because I turn it around. If we had a business in Philadelphia that could earn as much as 95 percent profit on investment, is that a business that needs to be subsidized to generate income? And based on documents that the Philadelphia Phillies presented to the City of 114 RESOLUTION NO. 000325 Philadelphia, it is possible to determine that the rate of return that they make varies between about percent and 95 percent. 5 So I would ask you this question, 6 Councilman: If a business can earn 20 percent 7 return per year, does it need to be subsidized 8 because it generates cultural benefits? 9 I think it is great. And let's take 10 it a step forward. 11 If the Phillies were to come forward 12 and say to you, "We want a subsidy. ) 20 PROFESSOR ROSENTRAUB: I agree. 21 COUNCILMAN DiCICCO: You do agree? 22 PROFESSOR ROSENTRAUB: I do agree that they do that. All businesses do that. COUNCILMAN DiCICCO: I just got 30 tickets for some senior citizens in district free. 115 RESOLUTION NO. 000325 All of us get 30. You don't understand what I am talking about, unfortunately. PROFESSOR ROSENTRAUB: And I agree with you. I don't have anything negative to say about that. But if the Phillies are making 9 percent return per year, that is a responsibility 10 they have to the community. 11 And again, put this in context. 12 Councilman, this is a cartel that has received 13 antitrust exemption from the Congress. 14 And part of the question I have when 15 I sit down with major league teams, I say to them, 16 let's look at everything that you have been given by 17 this society. 18 You have got antitrust exemptions, 19 you have got special legislation that's been passed 20 by the Congress that creates, in effect, problems 21 for the state. What's your responsibility back to 22 the society? And if any team owner could come in and say, "I am losing money. I am literally losing 10 percent a year, 12 percent a year," I think your 116 RESOLUTION NO. 000325 points are quite valid. And, in fact, I would then probably argue as a sports fan we ought to subsidize the team. But when, in fact, we can show from the best data that we have got that the returns are in double digits, when we know from the sale of teams that these owners will recognize gains of in excess of $100 million, these are not activities that need to be subsidized. ) COUNCILMAN DiCICCO: Somebody handed me something. I will ask you the question if I can read it right. Can the city structure the deal to realize a portion of any capital gains received via a sale of the teams? PROFESSOR ROSENTRAUB: That comes from the ninth chapter of my book. Which, what I have urged cities to do, is that if in fact you are going to provide the subsidy -- I don't know who planted the question. I thank you. COUNCILMAN DiCICCO: I don't know, either. 117 RESOLUTION NO. 000325 PROFESSOR ROSENTRAUB: But what I have called it is asset value. It is an increment asset value off of TIF financing. That if you say, for example, we will put in $50 million, in exchange for which, when the team is sold, we get 50 percent of the increment value. If that were on the table, then it is a reasonable investment for the City of Philadelphia to look at, because you have an ownership interest. COUNCILMAN DiCICCO: Thank you. I would like to thank both of you for your testimony. Thank you, Madam Chair.
Thank you. The Chair recognizes Councilman Kenney. And I would just ask that the interpreter for Mr. Leung please stay in the room. I would like to bring her up to the table again. Councilman Kenney.
Thank you, Madam Chair. I just want to go to the issue of 118 RESOLUTION NO. 000325 media market for a moment. But prior to that, I think what Councilman DiCicco was saying about the out-of-towners, so to speak, is that the way Philadelphia is set up, we have a great, as you may know or not know, is a great exodus of people from our innercity core into the surrounding suburban world and excerpts around the city. So that when we say out-of-towners, it is not as if I go, like I used to go -- and that was one of the points you made earlier -- to Baltimore every year when the stadium first opened. And now maybe I go every third year or every other year. These are people who you would genuinely consider to be metropolitan residence; however, because of purposes of county distinctions are really not Philadelphians for governmental accounting purposes. So I think what Frank is saying is, the numbers that come from the Eagles and Phillies is about 60 percent to 75 percent of their season ticket holders are in fact nonPhiladelphia residents, suburbanites. 119 RESOLUTION NO. 000325 And they are the people, again, higher income, they can afford the tickets, and they do come into the city. Anecdotally, I know many restaurant owners in South Philadelphia, just going on the issue of the Veteran's Stadium. And the argument being made by the Convention and Visitor's Bureau and others is that somehow a downtown stadium will generate this great synergy of spending in retail and other places, and restaurants. But the South Philadelphia merchant restaurateurs that I am aware of do get some benefit from the fact that Veteran's Stadium is in South Philadelphia. I mean, it is close to a place like Medora's Mecca, which is right almost on the grounds, to the Passyunk Avenue restaurants and those places. And I guess I think the same thing occurred to me during your testimony, was that these people are suburbanites who may be choosing, if not coming to a ballgame, to spend, to go to the mall in Deptford, and maybe patronize one of the restaurants 120 RESOLUTION NO. 000325 there while they are shopping. So while I agree with you that people are making leisure dollar choices, the fact that they come in on a Sunday for the game or come in on a Wednesday night for a game means that some of those leisure dollar choices are being made in Philadelphia, as opposed to in their own community. And I think that was the point. The media market question I have is one that hypothetically -- and I know there is a lot of issues relative to lease requirements, and the teams have ten years to go on their leases, and they can't get out of them -- if hypothetically the Eagles, for example, could find a way legally because of incompetence on the part of the city or things the city didn't do, to break that lease, to have that lease made invalid, hypothetically, if Governor Whitman were to say to the legislature, "Do you know what? These guys want to go. Why don't we see what we can do to sweeten the pot here in Camden, for example, along the waterfront, relatively inexpensive ground. " I agree with you that the Eagles and 121 RESOLUTION NO. 000325 the Phillies probably won't leave to go to Birmingham, probably won't leave to go to Indianapolis. But could they not in fact leave to go to Camden, and then still maintain the benefits of this fourth or fifth largest media market? And what happens with us is that, then I think we do lose the players' wage tax, the employees' wage tax, the sales tax, some of the other ancillary revenue that's to the city as a result of the fact that the stadiums, and more importantly the practice and duty days are conducted here in the city proper for wage tax calculation purposes. Couldn't they really move and have the best of both worlds, lower tax, more subsidy, and maintain the media market? PROFESSOR ROSENTRAUB: I think we both might want to touch on it a little bit. Let me take them in order.
For the Eagles it is a much -- it is more possible than it is for the Phillies. And I will get to that, why I conclude that. But that is a slight risk. I mean, 122 RESOLUTION NO. 000325 there is no question about it. " But, Councilman, now what we have to look at are some of the pragmatic issues that New Jersey faces. And when you analyze these questions, you can't analyze them in sort of a political vacuum like in a legal hypothetical. New Jersey right now faces a situation where the Jets and the Giants are both looking at different facilities and commitments that will have to be honored there. You are probably aware that the Mets are looking at building a new facility. The magnitude of the commitments that New Jersey is looking at relative to what they could do politically in this situation, I think we would fairly conclude that that's not really a very viable option. That, in fact, they might try to do something in infrastructure. But for you to enter into a negotiation with the Eagles saying, "Okay. I will buy what these academics say, they are not 123 RESOLUTION NO. 000325 going to pull out of here. I understand media contract," blah, blah, blah, but they are going to go to Camden without looking at all the pressures currently on New Jersey, and what the Governor in fact has said. And, in fact, if you remember back about months ago, she turned cold down the 9 proposal with the Yankees simply because she 10 couldn't deal with that and deal with current 11 professional sports teams that she is dealing with. 12 So again we come back and we answer 13 your question with regard to the Eagles. I don't 14 see a viable option in the real political context. 15 Because New Jersey now, having played with sports 16 game with New York, has lost so badly, that now is 17 in so deep with three teams, that they face a real 18 problem that they are trying to deal with. And they still have to deal with the Devils who you probably know have also asked for renegotiation and a new facility. So you bring the fourth team into it. Then to say, now let's deal with the Eagles also, I think you are probably well beyond what New Jersey tax payers would swallow. 124 RESOLUTION NO. 000325 Back to the Phillies for a moment. The Phillies -- because, again, when you look at the financing in professional baseball -- I know Andy will want to touch on this -- they are far more dependent on the luxury seating, access to that crowd, the people who are going to buy the suites and buy the club seats. They need a downtown location or a location that has good access to where those workers are located and where those businesses are located. Camden moves them too far away. They have 81 days. Not like football, we have eight to ten, where they will drive down on a Sunday afternoon so it doesn't matter, they have 81 days to deal with, in some cases 83, if they want to play an exhibition game or two. They need proximity to mass transportation, other elements that are going to bring this crowd in. Camden is not a realistic option. In fact, if we study very carefully the financial situation of the Texas Rangers, the most successful team that did not locate in a 125 RESOLUTION NO. 000325 downtown area, they face some very difficult challenges getting the business community from the two Dallas and Fort Worth downtown areas to Arlington, which is still reasonably conveniently located. So in that context, when I put the whole package together, what I would advise you in terms of your negotiations, realistically, no, not going to happen. )