COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, April 14, 2009 10:50 a.m. - - - PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILMAN DARRELL L. CLARKE COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN BILL GREEN COUNCILMAN WILLIAM GREENLEE COUNCILMAN CURTIS JONES, JR. COUNCILMAN JACK KELLY COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN BRIAN J. O'NEILL COUNCILWOMAN MARIA QUINONES-SANCHEZ COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO BILLS 090212, 090213, 090214, 090215, 090218, 090219, 090220 and 090221 RESOLUTION 090226 - - - V A R A L L O Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2
Good morning, everyone. This is a continued public hearing of the Committee of the Whole. We will hear from the Finance Department, please. (Witnesses approached witness table.)
Good morning, Councilperson Verna and members of Council. I'm Rob Dubow, Director of Finance, and I'm pleased to provide testimony on the Department's proposed Fiscal Year 2010 Operating Budget. The proposed budget for the Office of the Director of Finance supports a number of departmental divisions: The executive division, including the Administrative Services Center and the Contracting Unit; the Office of Budget and Program Evaluation; the Accounting Bureau; the Office of Administrative Review; Risk 3 4/14/09 - WHOLE - BILLS 090212, etc. Management. Joining me here today are representatives from these divisions who will be able to answer any of your questions. The FY10 budget as proposed includes reductions implemented as part of the Fiscal Year 2009 rebalancing plan, as well as further reductions proposed for the FY 2010 budget. The proposal presents challenges for the Department, but we're confident it provides the necessary funding for us to accomplish our objectives. 6 million from 2009 estimated obligation levels. The proposed budget includes $968 million in Class 100. 8 million from 2009. This funding is for our 141 employees and fringe benefits for all City of Philadelphia General Fund employees. Class 100 funding for Finance Department staff is projected to decrease by about $845,000 from 2009 as a result 4 4/14/09 - WHOLE - BILLS 090212, etc. of a net decrease of 28 positions, from 169 budgeted in FY 2009 to 141 in 2010. This includes a decrease of positions 5 which are being transferred to the Office 6 of Economic Opportunity, an increase of 7 six positions transferred from CPO and a 8 reduction of 15 positions as a result of 9 the FY09 budget rebalancing and 2010 10 planned position reductions. 6 million decrease from 2009. The 14 largest portion of this appropriation is 15 nearly $36 million for legal services 16 provided by the Defender Association and 17 Community Legal Services. 6 18 million decrease from the estimated '09 19 obligation levels results from about 500,000 in reduction in professional services contracts from the 2009 rebalancing, an additional $200,000 in reductions planned for 2010, the elimination of one and a half million for CORE Philly Scholarships, since that 5 4/14/09 - WHOLE - BILLS 090212, etc. 4 million in reductions for the Defenders' Association and CLS. We're proposing just about $450 million in Classes 300 and 400, which is a decrease of about 63,500, for materials, supplies and equipment. 8 million in Class 500 for contributions, which is a decrease of about million. 8 includes the City's 38 and a half million dollar contribution to the School District, which is an increase of 50,000 over the 2009 level; and a half 15 million for Community College; 18 million 16 for PGW; and 24 and a half million to 17 fund indemnities. That's a decrease of 18 about $11 million, and the proposed 19 decrease in indemnities is largely 20 because there were two large one-time 21 indemnity payouts this year. And we're 22 also proposing one and a half million in 23 Class 800, which is unchanged from the 24 Fiscal Year 2009 level, and that's to 25 supplement the projected 10 million in 6 4/14/09 - WHOLE - BILLS 090212, etc. fees and interest earnings that will be deposited into the Housing Trust Fund. The budget as proposed includes reductions made during the 2009 rebalancing plan, as well as additional reductions for 2010. Those reductions include the elimination of three vacancies throughout the Department, a reduction in eight filled positions, including two Destination fellows, reductions in professional services contracts such as that for maintenance of ACIS, reduction in risk management contracts, cancellation of the upgrade of Accounting's data warehouse and a reduction in Class 400 for the citywide equipment pool.
In addition to those expenditure reductions, the rebalancing plan included projected revenue enhancements related to an increase in alarm fee registrations and false alarm violation fines and increased recovery activity in Risk Management. Additional reductions in the 2010 budget include 7 4/14/09 - WHOLE - BILLS 090212, etc. elimination of the remaining three Destination fellows and further Class 200 contract reductions. Even with the proposed reductions, the Department will be able to perform its core functions at the levels proposed. Plan B for the Department, as included in the Five-Year Plan, includes an additional reduction of one and a half million. Plan B includes the elimination of an additional 12 filled positions for a savings of about $527,000. Those positions would be almost all divisions of the Department. The plan would also include further reductions of 587,000 in Class 200, about 37,000 in Class 300 and almost 300,000 in Class 400. The consequences of reducing the budget to this level include possible failure of the City's financial management system, potential loss of federal and state reimbursement, grant deposits not being made timely, delayed payments to vendors, possible delay in 8 4/14/09 - WHOLE - BILLS 090212, etc. processing payroll changes and even the potential declining revenue collections. The Office of the Director of Finance has an overall percent 6 participation rate in contracting 7 opportunities for minority and female 8 businesses, and for contracts related to 9 City bond issuances, the Finance 10 Department achieved a 28 percent 11 participation rate. 12 I appreciate this opportunity 13 to provide testimony and we're happy to 14 answer any questions. 15
Thank 16 you very much. 17 The Chair recognizes Councilman 18 Green. 19
My first question sort of relates to -- and I do understand that we're not going to get 9 4/14/09 - WHOLE - BILLS 090212, etc. General Fund help from the federal Recovery Act, but it sort of relates to a conversation we had yesterday with Mark Alan Hughes, who is in charge of gathering our requests, I suppose, and making sure they're submitted timely and then somebody is going to be in charge of having the money spent within a certain amount of time so that we don't lose it back to other municipalities or other things, and I think we can agree that when we spend money, whether it's for capital improvements, et cetera, it creates jobs, and I'm very concerned. And this now relates to your bailiwick because the Capital Budget Office is now part of Finance, so --
The Financial Unit of the Capital Program Office is in Finance. The operational portion is in Public Property.
Okay. Well, I'm still going to ask you this question, and, that is, in July 2008, we requested 10 4/14/09 - WHOLE - BILLS 090212, etc. from PICA 27 and a half million dollars for existing projects. We knew what they were. You went to PICA and said there were critical capital needs at fire stations and police buildings, requested 5 million to fund critical capital needs, installation of fire detection systems at 16 of the 30 fire facilities that PICA identified as not having fire detection systems. There were potential life-safety electrical corrections such as ground fault interrupt and circuit overload and also the repair of seven roofs that were in need of substantial replacement. Similarly, the Administration requested 5 million for critical capital needs at police facilities, including acute need to restore and upgrade mechanical, electrical and plumbing systems, take on potential life-safety concerns and repair of roofs in need of substantial replacement. And this is the Administration's request to PICA that I'm 11 4/14/09 - WHOLE - BILLS 090212, etc. quoting from. How much of that 27 and a half million dollars that PICA made available in July 2008 has been spent on these critical life-safety elements?
We have not spent any of that. That is something that we need to address quickly and to start moving on. You raise a very good point, and that's something we need to address.
And it's our understanding that you're going to have a critical role in supervising the money that comes in from the federal Recovery Act.
Finance will have a role, and we also, I think, through the Recovery Act, we'll look to bring in some outside help to make sure that we monitor 12 4/14/09 - WHOLE - BILLS 090212, etc. it appropriately.
Okay. So it's your testimony that not one dollar of the 27 and a half million dollars that PICA has made available to you has been spent on critical life-safety issues at police and fire stations?
As I said, that's something that we really need to get on, and we will. We'll give you an explanation of what we're doing going forward to make sure that gets done.
Okay. During a briefing for Council yesterday, Mark Alan Hughes stated that the proposed FY10 Operating Budget includes over a hundred million in anticipated funding from the American Recovery and 13 4/14/09 - WHOLE - BILLS 090212, etc. Reinvestment Act. Can you provide the Chair a chart indicating by department and class where this funding is located and for what purposes it will be used?
Thank you. Okay. So I'm at Five-Year Plan, Appendix 4, . If you look at the Five-Year Plan, it appears that the FY10 fund balance is going to be 96.7 million; FY11, 154 million; FY12, 175 million. In the FY09 to '13 Plan, the fund balance decreased each year, eventually stopping at 34 million in FY13. So the Administration's FY09 Budget in Brief noted that the large fund balance it inherited masks underlying issues that continue to endanger the City's fiscal stability. For example, the City's fund balance would have been substantially lower if the City had been making larger contributions to the pension system or had pursued prudent infrastructure investments called for by 14 4/14/09 - WHOLE - BILLS 090212, etc. PICA and the City Planning Commission. In light of the Administration's prior position regarding large fund balances, why are we proposing such large fund balances for the FY10 to '14 Plan instead of investing in infrastructure, et cetera, especially when we're calling for large tax increases?
I guess we have a different definition of a large fund balance. The GFOA recommends that fund balances be at least five percent of your revenues. For us, that would be at least $200 million. So we still have a fund balance that's lower than what the Government Finance Officers Association recommends. So I don't think of these as big fund balances. I don't think they give us a lot of room in terms of contingency.
Well, we had this discussion last year where I said that fund balance was going too low, and 15 4/14/09 - WHOLE - BILLS 090212, etc. the response to that was, we have to make our infrastructure investments and spend on things that will cost us more money in the long run if we don't spend the money now, and I'm asking why that rationale does not apply this year with respect to the critical infrastructure needs of the City. (Bell rung.)
Well, we're entering it with, I guess, a different point of view of what these fund balances are. I don't think these are large fund balances given what --
But they ended at 34 million at the end of the Five-Year Plan last time and now we're ending significantly higher. The rationale for the low fund balance last time was investment in infrastructure, et cetera. Why do we not continue to invest in our infrastructure? What's the rationale?
Well, again, we're 16 4/14/09 - WHOLE - BILLS 090212, etc. going back and forth on what a large fund balance is.
Well, no. 5 We agree that it's a small fund balance. The difference is, we chose to spend it last year on things like infrastructure, et cetera. We're not choosing -- we're choosing to have a much higher fund balance at the end. And we've heard testimony from Mr. Frank that if he had $20 million or so, he could save $17 million a year, and instead of using the fund balance to make that investment to get those savings much earlier in the Five-Year Plan, what we're doing is reinvesting savings over time and slowing down the whole process of efficiencies from technology, plus investment in infrastructure, et cetera, that save money in the long run.
So the question is, why are we choosing not to spend this money where we can get a huge 17 4/14/09 - WHOLE - BILLS 090212, etc. bang for the buck in the out years of the Five-Year Plan, including $17 million a year of savings in the technology?
Well, first of all, let's go back to the original point. I won't classify this as a large fund balance. Secondly, the Plan still does include investments in infrastructure, obviously not at the level that any of us would like, and it includes investment in IT. We are still working with the CIO on his plan and where appropriate investments may be. But I think we have a fundamental difference about what a large fund balance is.
No, we don't. Our fund balance is not high enough. We both agree.
The question is what we're going to do with that money sitting in the bank and whether we can get a better return by investing it in 18 4/14/09 - WHOLE - BILLS 090212, etc. technology than we can by sitting there in terms of having an ultimately higher fund balance at the end of the Five-Year Plan because we've invested in things that are going to give us a two- or three-year ROI.
When you talk about money sitting in the bank, I mean, you should know that one of the things that has driven our Plan is that we have fairly low cash balances throughout '09 and '10, and that often there'll be kind of a disconnect between where your fund balance is and where your cash is. So you can have a fund balance that doesn't look quite as healthy, but a cash flow that is more healthy. We're not in that position now. One of the things --
So one of the things that we had to do in this Plan was 19 4/14/09 - WHOLE - BILLS 090212, etc. ensure that we took enough steps to make sure that we didn't run out of cash, particularly in the early years of the Plan. So that drove a good deal of what we were doing.
Oh, okay. Thank you. We'll find that. Thank you, Madam Chair.
A couple of quick questions. Number one, this testimony assumes certain revenue changes such as tax consequences generated from a sales tax increase from the Commonwealth of Pennsylvania and a possible combination of real estate taxes and/or other municipal taxes that we raise?
It does. It also describes what would happen in the Department if we didn't get the state action, the sales tax and the change in the pension amortization.
It also assumes no increase in wage payments to the unionized labor that we employ?
That's true. It assumes no increase in wages and it assumes a $25 million annual reduction in benefits and -- through benefits and work rule changes.
In your testimony you also talk about savings realized through increased collections 21 4/14/09 - WHOLE - BILLS 090212, etc. under Risk Management recovery.
Sure. I'm going to ask Barry Scott, the Risk Manager, to come up and talk to you about that.
While he's coming up, can you explain the 11 positions being transferred over to, I 12 think it's, EOC and will they be 13 performing similar functions? 14
Sure. That is what 15 was formerly called MBEC, and it used to 16 report to Finance. Our view was that it 17 should be playing an economic development 18 role and that it more appropriately 19 belonged in the Commerce sphere. So it has been moved over and now reports to the Economic --
And you've 22 4/14/09 - WHOLE - BILLS 090212, etc. been able to achieve 28 participation in your bond work?
Nicely done. I say that on behalf of Councilwoman Blondell Reynolds Brown. And you've gotten an overall 9 percent participation in your department. 10 Can you describe what that participation 11 is, and what was it in the last 12 Administration? 13
We actually -- we 14 have a chart we can give to you by 15 contract, if that's helpful, to give you 16 the participation rate. For the last 17 Administration, I don't know. So we can 18 get you that as part of the response. 19
Council has 20 a reputation for beating departments over the head when they do things that we don't agree with, but I also need to pat you on the back when you do things that are laudable, and your participation rate of 28 percent for the bonds and 20 23 4/14/09 - WHOLE - BILLS 090212, etc. percent participation overall has to be commended.
Thank you. I think the Risk Manager decided it was too risky to be at the table. He left.
Wise man. So are you going to tell me about this Risk Management recovery? State your name for the record, please.
Yes. Good morning, Councilman. My name is Barry Scott. I'm the Risk Manager for the City. During the year, the City experiences a number of losses to its property, most commonly City vehicles which get damaged by crashes and also City equipment, most commonly light poles, traffic lights and fire hydrants. Risk Management has worked to recover monies from -- especially from insured parties who provide that damage. We are looking this year to enhance our ability to recover those funds, and that's what 24 4/14/09 - WHOLE - BILLS 090212, etc. we're looking at in terms of the revenue enhancements.
So aggressive collection efforts are what you anticipate?
Thank you very much. By way of vendor payment and processing these cuts, you caution us that any further cuts may impede your ability to pay people we owe as a municipality. Can you tell me what the processing time on average is now and what it may be jeopardized going down to if we cut any further?
I think we have to get back to -- we'll have to get back to you with that time.
Because that also impacts our competitive edge when vendors look at the City of Philadelphia and whether or not there will be prompt pay. 25 4/14/09 - WHOLE - BILLS 090212, etc.
A 15-day, 20-day, 90-day receivable impacts on our bottom line, because they actually put that in the price of the bid, the future value of money and the delay in payment.
We completely understand that. That's why we'd like to avoid having to do that.
All right. You have listed here $960 million in fringe benefits to fund all City of Philadelphia General Fund employees. Can you explain exactly what that means?
Right. That is our pension costs, our health benefit costs, our disability payments, our FICA payments. So it's all benefits that City employees receive.
And how far are you on this state-declared distressed pension fund plan alternative that you have?
We sent an 4/14/09 - WHOLE - BILLS 090212, etc. application to the Pennsylvania Employee Retirement Commission I think last week. It will probably be a couple of weeks before we hear back from them. (Bell rung.)
And what are your A, B, and C scenarios of that? If, A, they agree with you, what happens next?
If they -- we send an application asking that the fund be declared severely distressed, which is the highest level of distress. If we get that declaration, we're then required to take actions to reduce the cost of our plan, and we would then propose a changed plan that will reduce our costs and benefits.
What would that change possibly consist of? Give me a couple of --
I mean, potential changes would be reduction in -- your pension is calculated with a multiplier 27 4/14/09 - WHOLE - BILLS 090212, etc. for each year that you work. So a potential change would be reducing that multiplier.
What does that mean to persons contributing to that fund and then recipients of that fund that are actually retired persons?
It would mean -- well, another potential -- you're talking about contributions to the fund. Another potential would be increasing the size of that contribution that people make. So it would mean for participants in the fund, that there -- it has a different impact on different people. If you're vested, the only impact would be you might contribute more. If you're a new member coming into the plan, so you're a future City employee, it would mean that your benefits would be lower because the multiplier is lower. And --
So new people would have to pay more and get less at the end of the rainbow? 28 4/14/09 - WHOLE - BILLS 090212, etc.
Existing people would maybe pay more but get the same expected payout as they thought they would?
The other -- I mean, I think that's -- the other scenario would be layering some kind of defined contribution on top of that. And the part of this is that pension costs have been really eating our budget alive and we have to figure out a way to address that.
You're welcome. The Chair recognizes Councilwoman Krajewski.
Oh, 29 4/14/09 - WHOLE - BILLS 090212, etc. thank you, Madam Chairman. Good morning.
Your testimony on refers to two large one-time indemnity payouts in FY09.
One related to the Move settlement, and that was, I think, about $5 million, and the other related to strip searches at the prisons.
Strip searches at the prisons, and that was also about 5 million.
Could you please provide a breakdown of how the money is spent that is going to the Housing Trust Fund. If possible, break it down by Council districts.
Thank you. Thank you, Madam President. Good morning, Mr. Dubow.
On of your testimony in the second paragraph, you talk about the contracted services with the Defenders' Association and Community Legal Services. How exactly does the Finance Department use those two entities? What do they do?
We really are where their cost contracts rest, but what they 31 4/14/09 - WHOLE - BILLS 090212, etc. really do is, they provide representation for indigent defendants. So the Defender does -- I'm sorry; represents people charged with crimes who can't afford their own attorneys. They also provide representation for dependent children, for kids in the DHS system. CLS does some of that dependency work also. And there's another smaller contract with Support Center for Child Advocates that do the dependency work also.
So actually you add to the Defenders' Association's budget?
Well, really for the work that they do in state court, we're really their whole budget. They don't really have other funding sources.
They have a federal unit too that's funded separately from us.
Are they the only two legal contracts that you have?
Those two and the Support Center, I believe, are the only legal contracts, yes.
On 4, Section 12 of the Operating Budget, can you describe in detail what the $1.5 million in Class 800 appropriations are? I'm not sure, did Councilman Jones ask that same question?
The one and a half million in Class 800? That's the Housing Trust Fund money.
All right. And what exactly is Class 900 appropriations? What are they?
We actually don't have any here, but in the budget the Class 900 is our Convention Center 33 4/14/09 - WHOLE - BILLS 090212, etc. payment. So it's our payment over to the Convention Center.
Thank you. The Chair recognizes Councilwoman Brown.
I continue to receive letters in my office, mostly from seniors, who are distressed about the prospect of the increase in the property tax, and I've been struck by how the federal government; namely, the IRS, is making or taking provisions to accommodate extraordinary circumstances 34 4/14/09 - WHOLE - BILLS 090212, etc. of citizens around the federal tax returns. So have there been discussions in the Department as to how and if we figure out some type of, for lack of a better word, hold harmless situation for seniors who definitely can't afford it and other citizens who are on the fringe, knowing everybody has to pay something, but clearly recognizing they are hanging on by a toenail right now with their existing circumstances?
Yeah. There are programs in place for seniors, and I think we may have sent over a description of those, but we'll make sure we get that to you of what's in place for seniors now. We have had conversations about what to do for non-seniors who, as you said, are hanging on by a toenail. We haven't finished figuring that out, but that is something that we know is important and we're looking at.
I know we 35 4/14/09 - WHOLE - BILLS 090212, etc. discussed this once before, so the question becomes -- well, the follow-up question is the cut-off level in terms of income and how big is that pot. Because the pot is going to grow given this new proposal.
Okay. The employees that were transferred from MBEC to Commerce, as Councilman Jones stated, are strictly because? If you could finish the sentence.
Yeah. The whole function was moved over to the Deputy 36 4/14/09 - WHOLE - BILLS 090212, etc. Mayor for Economic Development.
Yeah. That person reports to Deputy -- to, I think, Kevin Dow.
Oh, okay. All right. An ongoing circumstance also with small organizations is because they are small, invoicing process from the City is complicated, typically delayed for reasons that you all would know better than us, and small organizations simply are not able to pay their workers while they wait for the reimbursements for the City. So to Councilman Green's continuing plea, are there discussions underway as to how to further use technology in a way that expedites those reimbursements to small organizations?
Yeah. I think there have been discussions with the CIO about that and about IT in general for 37 4/14/09 - WHOLE - BILLS 090212, etc. the Finance Unit.
Is the IT person here to give us an update on where those discussions are or what the plan is?
All right. So how do I get an answer to that question? You tell me.
We can get back to you with a description of what we're doing.
Please. A description as it relates specifically to further streamlining the process so that small organizations don't have to wait so long.
On of your budget, it shows multiple organizations that received funding in 38 4/14/09 - WHOLE - BILLS 090212, etc. FY08, but none in '09 and '10; namely, City Year, the Greater Philadelphia Film Office and the Greater Philadelphia Tourism Marketing Group. Were these programs -- why were they moved out of Finance?
No. I mean, what happens actually is, these come out of our Class 500 contributions and indemnities line and they're grouped in there. The payments are made during the course of the year.
They're made during the course of the year. So some of these groups will be getting payments again this year.
It's just -- it's not displayed well because they're in the larger 500 line. It's not broken out. If you'd like, we can get you a breakout of what those payments are. 39 4/14/09 - WHOLE - BILLS 090212, etc.
That would be appreciated. Also on of your budget you show an increase of $50,000 to the School District. And those dollars are specifically for?
Well, we are required under state law to compensate the School District for any reduction in the wage tax. The wage tax means there's a reduction in their income tax. So that's the value of their reduction in the income tax that we're compensating for them.
I see. Okay, then. Thank you. Thank you, Madam President.
You're welcome. The Chair recognizes Councilman Kenney.
Thank you, Madam President. Mr. Dubow, in prior hearings, I 40 4/14/09 - WHOLE - BILLS 090212, etc. had requested -- and this is kind of in the same realm of question that Councilwoman Brown has relative to the number of senior citizens, because that seems to be some of the biggest impact that we're hearing about.
The number of senior citizens that own property in the City, those that are eligible for PACENET, which would not experience any increase in real estate taxes, and those who participate in the real estate tax rebate program. Because unless we get that context, we really don't understand how many seniors are potentially hit and what their income levels are when they would really actually have to pay it. The other thing that would be really very helpful for me and hopefully the rest of Council and the public is to have a discussion about the impact that these regrettable requests for real estate tax increases would have on 41 4/14/09 - WHOLE - BILLS 090212, etc. commercial properties. I would suspect, without knowing the exact number offhand, that there is a very high number of commercial properties that would be paying this increase, proposed increase, in real estate tax.
Right. Straight residential properties, I think, are around 55 percent.
Everybody is asking for charts. I'm only asking for one chart here, a chart that shows how many people are impacted and to what level they're impacted and at what level they've become impacted if they're senior residential property owners and what is the amount of money to be generated, again, on the request for these 42 4/14/09 - WHOLE - BILLS 090212, etc. regrettable increases in real estate taxes, what does the business community pay. Because this whole argument has been couched that this is a burden solely on the residential property owner, which it is, but it's not solely on them.
So I would appreciate that context. The other issue is -- and I don't know if you've run any numbers and scenarios, because a lot of this is not known yet where we're going to come out yet. In the event you were forced to raise wage taxes in the City, despite whatever arguments we may have relative or suppositions we have relative to Harrisburg's reaction to that, could you give some indication as to what the potential increase in wage taxes would be and would you be forced to raise wage taxes on suburbanites as well as Philadelphia residents? 43 4/14/09 - WHOLE - BILLS 090212, etc.
We would increase both the resident and non-resident rate, and we can get you what that would look like.
Have you also driven some numbers relative to the possibility that because of a wage tax increase or proposed wage tax increase, we do not get our sales tax?
Yes. We've looked at numbers. We can get you those. We looked at what would happen if we lost the wage tax relief, the sales tax money and the pension amortization.
Now, you could argue one way or the other whether we would lose it or not, but you have to look at the worst-case scenario, and if we lose the sales tax, do you have any ball park figures on the increase in wage taxes if we lose the sales tax?
We have those numbers. I don't know off the top of my head. It's three hundred -- 44 4/14/09 - WHOLE - BILLS 090212, etc.
More than five percent, more than percent, more 4 than 20 percent? 5
The 8 Chair recognizes Councilman Green for a 9 point of information. 10
The sales tax increase brings in about $118 million a year. If we were not to get a one percent sales tax increase, it would be approximately three-tenths of one percent in the wage tax, raising both City residents and suburbanites.
And that also would include the possibility that we would lose -- could you also give me the scenario if we lose the pension 45 4/14/09 - WHOLE - BILLS 090212, etc. adjustments?
Could you please put them on some kind of chart so people can see them?
Thank you. The Chair recognizes Councilman Greenlee.
Thank you, Madam President. My question is sort along the same line as Councilman Kenney, the beginning of it, as a follow-up to 46 4/14/09 - WHOLE - BILLS 090212, etc. Councilwoman Brown, and I know you said you were going to provide us information, so maybe this question is slightly premature, but I just want to be clear. The seniors that you're saying you're going to be able to help, they're the ones that are eligible for the program as we speak?
So there wouldn't be any extension. Because, see, I think that's the concern with a lot of people, that those programs are great, but they kind of only hit the low, low income almost.
And there's a lot of people who are above that limit but still would have a problem obviously with a 19 percent, or something like that, tax increase.
So I 47 4/14/09 - WHOLE - BILLS 090212, etc. guess we're still -- and obviously that's one of the dilemmas we have, because the more people you include, the less money you get, I understand that, but I think that is what maybe all of us are hearing from, are those people that are not eligible for that but still would be under a real hardship to get a pretty sizable real estate tax increase.
Right. And that is part of what we're looking at. It's a legitimate question.
No. I understand. And the other part of that is, you're saying there's going to be other people included in trying to get in the information you're sending in response to Councilwoman Brown's question or have sent? Are there other people that are going to be included, low-income people?
That's what we're looking at. We haven't fully developed those plans yet, so -- 48 4/14/09 - WHOLE - BILLS 090212, etc.
So you don't have it yet. All right. I got you. All right. Thank you. Thank you, Madam President.
You're welcome. Mr. Dubow, the Administration has been saying that 58 percent of the General Fund budget is non-discretionary; is that correct?
Can you tell us the total amount that you have reduced and/or cut from the non-discretionary items?
Yeah. I mean, I'd have to go back and look, but, yes, we can do that.
How have you been able to achieve these savings if they are truly non-discretionary? 49 4/14/09 - WHOLE - BILLS 090212, etc.
Well, for each of them, we need cooperation or approval from someone outside the City's control. So, for example, we show reductions in our pension costs, but that would require approval from the state Legislature. We show reductions in our labor costs. That would require cooperation from unions or arbitrators. So there are a number of things that we show, but each of them are things we can't do by ourselves.
On of your testimony, you mention the potential consequences of Plan B reductions. If in fact these reductions could result in declining revenue collections, wouldn't you be increasing the deficit rather than reducing it?
We would be trying to manage so that that did not happen, but it is one of the threats of what could happen. So we will try to make sure it didn't. It's just a risk of some 50 4/14/09 - WHOLE - BILLS 090212, etc. of the cuts that we'd be making.
Can you tell us how were Plan B reductions determined?
Yeah. I mean, at that point, we were looking at each division and trying to just maintain core services, to the greatest extent possible, and the cuts were all things that we wouldn't want to do, but that we thought left most of the core intact.
Well, as we look at these reductions, we see that some of them could have revenue implications. Was that taken into consideration in determining Plan B reductions?
It was taken into consideration. It's why these things weren't in Plan A, and we know that each one of these creates a real challenge for us in terms of managing to make sure that they don't, for example, lead to a decline in revenue or that our financial 51 4/14/09 - WHOLE - BILLS 090212, etc. accounting system doesn't fail. So it would present some real challenges for us in making sure that these bad potential contingencies don't happen.
Thank you. The Chair recognizes Councilman Green.
Thank you, Madam Chair. To follow up on the question about Plan B, would you please -- and I'm asking every department this -- would you please provide the Chair with the exact positions in your department, exact 200 funds, whatever, that would be cut in Plan B so we can understand fully what the Plan B budget is. And if you don't have it --
No; we have it. What I'm concerned about is, because our department's positions is relatively small, there are exact people who are in Plan B who may not know that they're 52 4/14/09 - WHOLE - BILLS 090212, etc. there yet. So I'm worried about -- we can give you the numbers --
Well, you're asking us to approve a budget that's contingent, and I want to know what that is.
I guess what I'm asking is, can we give you the number by unit instead of each specific position?
Okay. So do you happen to know -- have you compared what a three-tenths of one percent increase in the wage tax means to the average family on the chart that the Administration provided on of the Five-Year Plan compared to, in terms of dollars out of pocket for a family, compared to the real estate property tax increase? 53 4/14/09 - WHOLE - BILLS 090212, etc.
We've done a number of comparisons and scenarios for what wage tax increases would mean compared to property tax increases, and when we provide the chart that Councilman Kenney asked for, we can include that information.
Would you be surprised to learn that the average Philadelphia family would pay $250 less per family to the City if we go with a wage tax versus a property tax, which would mean seniors who are retired pay nothing more?
Right. We know -- and we're going to go back to an area where we've had disagreement before. One of our big concerns about the wage tax is what other implications it would have in Harrisburg, and so when we look at scenarios, we look at other potential impacts, which would have a very different outcome for taxpayers here.
What 54 4/14/09 - WHOLE - BILLS 090212, etc. legislator has told you that we won't get our sales tax increase if we increase the wage tax?
What we've been told is that there would be a severe negative reaction. I mean, the first thing they told us is --
-- the gaming revenue was at risk. I'm not going to tell you names of people we had private conversations with.
Because we've all spoken to legislative leaders too, and they told us as long as we're building casinos, it's not a problem.
Would you ask the member to please identify who has 55 4/14/09 - WHOLE - BILLS 090212, etc. told him that there would be no 3 implications if we raise the wage tax?
Could the Chair please ask the member if he could identify which legislative leaders has told him there would be no implications if we raise the wage tax.
I've spoken to a number of caucus leaders and also people in the leadership in the state House.
Well, if Mr. Dubow is expected to give names, perhaps you should do the same.
Okay. Just wanted to know if we play on an even playing field here. Thank you.
Have you spoken to people in leadership that have told you that? 56 4/14/09 - WHOLE - BILLS 090212, etc.
Okay. And have they told you that since the Mayor announced that the casinos were going to be up and running in FY11?
So in the last four days you've had conversations with leadership?
The Mayor announced that the casinos would be up and running a couple of weeks ago, not just four days ago.
Okay. Well, I guess this is a point we'll have to disagree on.
The major point here is that we'll save Philadelphia families on average $250, 57 4/14/09 - WHOLE - BILLS 090212, etc. and for people who make $50,000 or less, which is most of this city, the percentage of their income, according to the chart that you have on of the Five-Year Plan, the percentage of their income that will be paid to the City in taxes will go from 1.2 percent to about half a percent of their household income, which is significant for families at that level.
And this, again, goes back to our difference in assumptions of what might happen in Harrisburg.
Okay. Well, we can resolve that one before May 31st, I imagine. The assumptions of stock market performance in the Five-Year Plan, so what assumptions is the Administration making about the performance of the stock market over the Five-Year Plan?
The Plan uses actually projections by the pension 58 4/14/09 - WHOLE - BILLS 090212, etc. fund's actuary and uses the fund's assumed return, which would be eight and a quarter if we get the change in amortization.
So what's the baseline in terms of -- my recollection is, when we looked at the rebalancing and when the budget stat sessions were held, was that you are basically holding the fund's earnings to zero throughout the Five-Year Plan.
We assume a 30 percent reduction in Fiscal Year '09, and it's been about percent through the 24 end of February, the loss. And then we 25 assume kind of a return to normal, which 59 4/14/09 - WHOLE - BILLS 090212, etc. I think some of we're actually starting to see, and that you get to about -- you get back to the fund's earnings assumption.
So just to close the loop on this, at the end of February the market was much lower than it is today.
So how much more money, assuming the market's at 8,000, not the end of February rate, how much more money does that add back in by year to the Five-Year Plan? And you don't have to answer that now. If you could get it to the Chair.
Well, no. What you have to look at actually is kind of where you end the year. In looking at it each month doesn't get you to where you'll be at the end.
And you would need 60 4/14/09 - WHOLE - BILLS 090212, etc. to have the actuary do another run. And the other thing to remember is that because of what was going on in the market in the pension fund, we did some shifting of our investments, so they're more conservative now. So that at least for this year, what the market does has less of a direct -- I mean, it still has a large impact, but what the stock market does isn't as determinant of what the fund does as it would have been in earlier years.
No. The pension fund, in terms of where new investments would go, switched its allocation to be more conservative.
Okay. But it's your testimony that you're basing it off a 30 percent decline. As of the end of February, we were percent down. 25
Maybe. We haven't seen -- I haven't seen our March numbers yet. I don't know where we are.
Okay. So what difference will that make if we assume percent down over the Five-Year 10 Plan and 25 percent down over the 11 Five-Year Plan and 15 percent over the 12 Five-Year Plan, if you could just provide 13 that to the Chair, because my time is up. 14
Thank you. The Chair recognizes Councilwoman Brown.
Thank you, Madam President. 62 4/14/09 - WHOLE - BILLS 090212, etc. I'm being very redundant, but I do want to underscore the fact that numbers really do tell the story for us. So when you've heard from a number of us that are deeply concerned about senior citizens, we look forward to that information that gives us the hard data, because that then informs us of how great the impact will reach.
Thank you, Madam Chair. So on the City's website is a chart called Efficiencies Service Enhancements for FY09 and FY10 Budget. Are you familiar with that chart?
I haven't seen the chart on the website, but I've seen charts that show our efficiencies. 63 4/14/09 - WHOLE - BILLS 090212, etc.
Okay. So many of these efficiencies are encouraging. However, for most items on the chart, no savings or efficiencies are put in in terms of dollar savings. So there's some identified which happened in FY09 that have specific dollar amounts, but the chart contains many items that don't have dollar amounts of savings, probably 30 or 40. Do you know what you're anticipated to save from those items?
I think those are all items that we want to implement, but that we do not have full plans of implementation yet for, so we don't know what the savings are.
Would you provide to the Chair your best guess of what those efficiencies will save the City?
For the ones where that's possible, yeah. For ones where we don't have an idea yet, there won't be 64 4/14/09 - WHOLE - BILLS 090212, etc. things for me to give you.
Well, you anticipate some savings or they wouldn't be on the chart.
I guess what I'm saying is, if we don't have good information, I'm not going to make something up, but we'll --
If you can't provide a number for an item that's on the chart in terms of savings, explain what information you need in order to come up with a solid number for savings in your response to the Chair.
Thank you. So the proposed FY10 budget includes 439,000 roughly reimbursement from the Philadelphia Parking Authority to the Bureau of Administrative Adjudication for processing of appeals and contested parking violations. I have several questions provided by the technical staff. 65 4/14/09 - WHOLE - BILLS 090212, etc. Is this an allowable cost for the PPA?
Okay. And how about under Philadelphia Parking Authority's bond covenants permit this?
Yeah. I mean, as far as -- yeah. This is a permissible cost for them.
And let the Chair know your response to that. 66 4/14/09 - WHOLE - BILLS 090212, etc. When we delegated authority to the Parking Authority, it authorized PPA to collect all revenues due to the City, except fines and penalties from contested on-street parking violations, and to pay the City said revenues in excess of costs incurred by the Authority. Because the PPA is not authorized to receive revenues from contested parking violations and does not incur any costs related to them, what is the basis for PPA paying the City's costs in collecting these revenues?
The basis is that this is still a function related to PPA activities.
Does the Administration proposal require, regarding the PPA reimbursement, require an amendment to the 1983 ordinance that delegated on-street parking authority to the PPA so as to provide for reimbursement of these costs?
It seems like what 67 4/14/09 - WHOLE - BILLS 090212, etc. would make sense for us, since you have this list of questions, is for us to -- it sounds like you probably want a legal opinion rather than a Finance Director opinion. So if you want to get us those questions, we'll pass it on to the City Solicitor.
Okay. That's great. And you may want to get back to the Chair about this. For the general provisions set forth in Section 16 of the Operating Budget ordinance, for each provision please describe the purpose of the provision and how often the provision is utilized, and then please identify any provisions that have been added in the past two years and the reasons for adding them.
Your testimony notes that reductions to the Finance budget in November 2008 rebalancing plan included reductions in 68 4/14/09 - WHOLE - BILLS 090212, etc. professional service contracts such as that for maintenance of the automated contract information system and cancellation of the upgrade to the Accounting data warehouse. How was the ACIS maintenance contract changed?
My name is Catherine Paster, First Deputy Director of Finance. The contract was changed in the '09 rebalancing. There were a couple of enhancements in the contract that we chose not to do. So the -- I'm sorry; in the system. So the system still functions. It's just some added benefits that we won't be allowed to have. I don't know what they are at the moment exactly.
Okay. Are you looking at, as part of the technology changes that are going to be proposed by Mr. Frank, going to the Oracle Systems Business Suite that the City owns and sort of getting rid of these Legacy 69 4/14/09 - WHOLE - BILLS 090212, etc. systems that cost a lot to maintain by outside contractors?
I know that's all part of discussions that we're having with the CIO.
Do you mean do we show savings from that in the Five-Year Plan?
-- do you plan to do it during the five years, whether or not you show savings?
That is what we've been talking about with the CIO. So we do hope to get that done.
And you anticipate no savings in your department as a result of this change?
We don't think that savings would be that large. We haven't quantified them yet.
Okay. I'm still waiting for reports from outside consultants and vendors with respect to the implementation of the technology changes that Mr. Frank is recommending, and I think a lot of the questions that were asked in the last two weeks, had we received responses when -- as far as I know, we've received no responses.
That's not accurate. We sent over well over 16 responses last week. 17 (Bell rung.) 18
That is, no 19 responses were provided to that question 20 other than the Deloitte report, which you gave us last year.
I think what the CIO said is that's the only report he had from last year.
That's not 71 4/14/09 - WHOLE - BILLS 090212, etc. correct. They just assumed that's what we were talking about, is what he said during his testimony. So I have many more questions on the topic of efficiencies in government, but first I need the response of Mr. Frank to all of my questions asked him last week. When can I have those, do you think?
Well, he sent a response over. I mean, I don't know what else to tell you. He did send a response.
He sent a response prior to his testimony. He sent a response to the questions that were asked during the Five-Year Plan.
Oh, okay. You're asking about the questions that were asked -- I'm sorry. I thought you were asking about that specific question. I don't know. I wasn't at his hearing. I don't know what questions were asked, but we can find out.
Okay. I 72 4/14/09 - WHOLE - BILLS 090212, etc. think Councilman O'Neill suggested sort of a kind of timeframe that we have for getting us timely questions, which was 5 hours. Is that something we can -- 6
Oh. 9 What kind of standard can we 10 expect so that we can be able to timely 11 ask different departments questions 12 based -- a lot of the questions that we 13 ask at the beginning, especially in the 14 Five-Year Plan, are necessary to ask the 15 department specific questions, and we 16 have a lot of departments appearing 17 before us. How long do we have to wait 18 to get answers to our questions? 19
It really depends 20 on the question. We try to get answers 21 over as quickly as we can. Some answers 22 require a lot of research and gathering a 23 lot of data and hearing back from people. 24 Those may take time. Some of them are relatively simple and we can turn them 73 4/14/09 - WHOLE - BILLS 090212, etc. around within a couple of days. But it really does depend on how much work is required to get the answer.
Well, it's just really not acceptable, because the questions that we ask now, especially of your department and other departments, will flow through to every question that we want to ask every department that's going to appear before us later. And, Madam President, we're going to have to have these departments back twice or three times until we get the answers to our questions. Thank you, Madam President.
I understand that we do get the answers as quickly as we can, but we want to make sure what we get you is accurate, too.
Last year I received most of the answers to my questions three days before we were required to vote on the entire budget, and it's just not going to be acceptable. 74 4/14/09 - WHOLE - BILLS 090212, etc.
Thank you. Are there any other questions from members of the Committee of Mr. Dubow? The Chair recognizes Councilman O'Neill.
On a more serious note, Mr. Dubow, since Councilman Green reminded me that hours passed a 16 long time ago, was that a complicated 17 request -- and if it was, I certainly 18 would understand, because it's eight days 19 now -- when I asked the Chief of Staff 20 and yourself for just a list of the 21 people under the Mayor, salaries and 22 titles and comparative to the last 23 Administration? You said some things 24 take longer.
I'm assuming that took longer, but I'm sort of having trouble with the complication of it. It seems pretty straightforward. Is that one of those sort of drag-your-feet answers?
No. We'll get that to you. If I could lip read, I would actually be able to tell you exactly what we're doing. They're trying to tell me where it is and I -- but we'll have that soon.
Thank you. Any other questions from members of the Committee? (No response.)
Seeing none, this Committee will stand in recess until o'clock this afternoon. Thank you. (Luncheon recess.) 76 4/14/09 - WHOLE - BILLS 090212, etc.
Good afternoon, everyone. The Committee of the Whole is now back in session. Our next witnesses will be? MR. McPHERSON: Is the Revenue Commissioner. (Witnesses approached witness table.)
Good afternoon. Welcome. COMMISSIONER RICHARDSON: Good afternoon.
Please identify yourself for the record and proceed with your testimony. COMMISSIONER RICHARDSON: Sure. Good afternoon, Council President Verna. Keith J. Richardson, the Revenue Commissioner. With me today is the Deputy Commissioner for Tax, James Haley, to my left, and Michelle Bethel, the Deputy Commissioner for the Water Revenue Bureau. We are pleased to be with you today to discuss the proposed FY 2010 77 4/14/09 - WHOLE - BILLS 090212, etc. Operating Budget for the Department of Revenue. The Department of Revenue is responsible for the collection of all revenue due to the City and for the enforcement of tax ordinances for the City and School District of Philadelphia. The Water Revenue Bureau is specifically charged with the collection of all water and sewer payments. The Department performs these duties while delivering quality customer service to all customers and taxpayers. The FY10 General Fund appropriation request for the Department of Revenue is 16,414,209. This is a decrease of 984,362 from FY09 estimated obligations of 17,398,570. This decrease is achieved primarily through reduced professional service contracts requirements, $270,000, along with reduced postage costs associated with eliminating business tax mailings for taxpayers who use preparers and through 78 4/14/09 - WHOLE - BILLS 090212, etc. elimination of certain mailings that have been identified as non-essential, 450,000. In addition, we will reduce full-time staff by eight positions through selected attrition, for a savings of 164,361, and eliminate a one-time non-recurring equipment purchase of $100,000. The Department is requesting 12,498,246 in Class 100, personal services, to fund 263 full-time and two part-time positions, $3,263,014 in Class 200, purchase of services, and 652,949 in Classes 300 and 400, materials, supplies and equipment. On the Water Fund, FY10 Water Fund appropriation request for the Department is 22,165,547. This is an increase of 1,645,146 from FY09 estimated obligations. The Department is requesting 10,990,857 in Class 100, personal services, which is an increase of 948,857 over FY09 estimated obligations. This funding will enable us 79 4/14/09 - WHOLE - BILLS 090212, etc. to fill as many as 34 current vacancies and reach staffing levels of 270 full-time positions in FY 2010. The Department is also requesting 9,873,851 in Class 200. This is an increase of 454,789 over FY09 estimated obligations due primarily to additional costs associated with enhancements of the new water bill 11 system, such as design of a new more customer-friendly bill, programming costs to implement interactive voice response applications to the Water Revenue Bureau's automated call distribution system and a postage rate increase expected to occur in May 2009. We are requesting 1,288,839 in Class 300 and 400, materials, supplies and equipment. This is an increase of 241,500 from FY09 estimated obligations due to increased requirements for computer and office equipment associated with full staffing of the Water Revenue Bureau. The FY10 Acute Care Hospital 80 4/14/09 - WHOLE - BILLS 090212, etc. Assessment Fund appropriation request is 145,000. This is the same as FY09 estimated obligations. The Department received Department of Public Welfare funds to support the implementation of a monetary assessment on the non-Medicare net operating revenue of acute care general hospitals located in the City. The new hospital assessment program is intended to generate additional revenues to fund Medical Assistance expenditures for hospital emergency department services in the City. The program is also expected to generate additional funding to support the City's public health clinics. The FY10 appropriation is 30,000 in Class 100, personal services; 100,000 in Class 200 for purchase of services; and 15,000 in Class 300/400, materials, supplies and equipment.
Enhancements and accomplishments: The Department has improved customer service performance 81 4/14/09 - WHOLE - BILLS 090212, etc. measures while closely monitoring costs to deliver these services. For the period July 1, 2008 through December 31, 2008, the Taxpayers Services Unit handled 21,100 walk-in customers, a seven percent increase over FY09 original projections of 19,750 for this period. The average wait time for these customers was 27 minutes, seconds, a full 2 minutes and 11 47 seconds less than the Department's 12 original projection of 30 minutes. For 13 the same period, the Water Revenue Bureau Customer Service Unit handled 37,037 and serviced these customers in an average wait time of 7 minutes and 51 seconds, 1 minute and 14 seconds less than the projected wait time of 9 minutes and 5 seconds. These performance improvements were achieved while reducing overtime costs on a department-wide basis versus the same period last year. For example, total overtime charged to the General Fund in FY09 for the period July 1, 2008 82 4/14/09 - WHOLE - BILLS 090212, etc. 8 percent decrease compared to the 340,000 in overtime used during the same period of FY08. The Water Revenue Bureau achieved similar results. Total overtime used for the period July 1, 2008 through December 31, 2008 was 263,777. 9 percent decrease compared to the 350,978 in overtime used during the same period in FY08. Increasing electronic transactions: The trend in using electronic transactions continues to increase. These transactions include credit card payment of taxes and water and sewer bills, ZipCheck or ZipPhone for direct payment from a bank account of water and sewer bills and debit or credit payments for those registering from the Automated Clearinghouse. In FY07, 1,198,177 electronic transactions were received. This number increased to 1,355,087 in FY08, and in FY09 it is projected the number will increase to 83 4/14/09 - WHOLE - BILLS 090212, etc. about 1,515,000. In the last quarter of FY09, the Department will install an additional remittance processing machine and add a second shift of workers to improve processing times of all incoming remittances. Council staff was given a tour last spring of the payment processing area and is aware of the challenges our staff face in processing payments during the annual tax season. 7 million machine transactions in FY09 and anticipates the full impact of the additional equipment will be felt in FY10 through reduced time to process machine transactions, resulting in quicker deposits of all receipts. Our Compliance Division hired five revenue examiner trainees to increase the number of business audits performed and to ensure all taxpayers are paying their fair share. In FY09, the Department expects to generate 16 million 84 4/14/09 - WHOLE - BILLS 090212, etc. in new audit assessments, a four and a half percent increase over FY08. The full impact of this hiring will be achieved in FY10, resulting in increased audit initiatives and increased ability to perform travel audits. It is anticipated that FY10 audit assessments will increase by percent over FY09 10 projected estimates. 11 In an effort to support our 12 Compliance Division initiatives, full 13 staffing of our Investigation Unit was 14 achieved. This resulted in a significant 15 number of audit and tax discovery leads 16 that resulted in increased tax 17 assessments in FY09 in excess of a 18 million dollars. New and improved water billing system: In January 2008, the Basis2 water billing system developed from Project Ocean began production. Since that time, it has successfully issued each of the approximately 480,000 monthly water bills. In April of 2008, the 85 4/14/09 - WHOLE - BILLS 090212, etc. system was turned on for automated delinquency and shutoff processing. During the first quarter of FY09, we completed our first year-end financial and audit reporting on the new billing system.
In the first quarter of FY10, we will introduce a new water bill design that is more informative and easier to read and understand. Enhanced public outreach: To ensure that taxpayers understand their financial responsibilities and the process involved with paying taxes, the Department of Revenue has expanded its public education and outreach efforts. The Department has sent representatives to community festivals to answer questions and provide literature to the City's taxes and made numerous presentations to tax practitioners and other interested organizations. In September 2008, the Department of Revenue launched ReveNews, a quarterly e-newsletter about tax policy and 86 4/14/09 - WHOLE - BILLS 090212, etc. administration in Philadelphia distributed via e-mail and available on the Department's website. It has nearly 600 subscribers and the list grows daily. In partnership with the Division of Technology, the Department of Revenue is also working on substantial improvements to its website to improve the ease of use and offer additional information. In FY09 the Department has contracts with the following MBEC/WBE/DBE certified contractors: Peripheral Systems, Pace Data Systems, Wendy Miller, Irina Sheynfeld. The Department also has a contract with Information Services Partner, Inc. in the amount of $425,920. While this contract is not a minority, the contract subcontracts 102,221 to Pace Data Systems, an MBE, and 55,370 to Peripheral Systems, a WBE. Thank you and this concludes my testimony. We are available to answer any questions. 87 4/14/09 - WHOLE - BILLS 090212, etc.
Thank you, Commissioner. The Chair recognizes Councilman Greenlee.
Thank you, Madam President. Good afternoon, everyone. COMMISSIONER RICHARDSON: Good afternoon, sir.
I just had a question, and I know that you talk a lot about staffing in here, because -- and I'll preface this by saying I'm not blaming any of you guys for this, but a lot of times people in my office tell me that when they deal with Revenue, they're told, Well, one of our problems is we don't have enough staff. They're told that by the people they deal with in the Department. Now, I know you talk about filling these current vacancies in Water Revenue. Do you feel comfortable that you have enough people to do the job, if 88 4/14/09 - WHOLE - BILLS 090212, etc. you will, or at least do it up to where you are now, or do you feel that there could be problems? I know that's a tough question for you. COMMISSIONER RICHARDSON: Right now I think we're giving C effort. I think with the additional folks we're looking to add to the complement, it will help us to move forward and provide a quality service to our customers.
And that's over all the services? Because I see you talk about filling those vacancies in Water, but then I see you say we reduced full-time staff by eight positions through selected attrition. COMMISSIONER RICHARDSON: Well, mind you that the tax side is General Fund. Water Revenue side is not General Fund money. So, again, we know with the General Fund side, we're losing folks to attrition and with the retirements that are coming in. So if we could replace them, that would be great, but we don't 89 4/14/09 - WHOLE - BILLS 090212, etc. foresee that happening within the next fiscal year.
You talk about generating revenues. Do you see your present position able to generate the same revenues as last year percentage-wise or more, if I'm making sense with that question? COMMISSIONER RICHARDSON: I have an idea what you're trying to say. Will the same revenue that was collected last year come in this year? I can't project that. Given the economy, as we all know, we can't forecast what the business privilege tax returns coming in hopefully starting tomorrow will be, because we know some businesses may be out of business or have generated less revenue in 2008 than they did in 2007. I can't say that. We, as a department, are trying to be more creative in working with our enforcement tools and generating especially within audits and discovery 90 4/14/09 - WHOLE - BILLS 090212, etc. more assessments on businesses that are not complying with the City of Philadelphia.
I guess what I'm getting at, do you feel that whatever revenue is generated, if it's less, it won't be because of staffing issues? COMMISSIONER RICHARDSON: No. 11
You do not? COMMISSIONER RICHARDSON: Not because of staffing issues, no. 15
Okay. Just to give you one example, but I've heard this a few times. People get notices from the Law Department saying you haven't paid certain taxes or whatever. They produce proof that they paid months ago, and the Law Department, lawyers for the City, have told us, Well, one of the reasons is, it takes Revenue a long time to give us that information. Do you see that? Is that how 91 4/14/09 - WHOLE - BILLS 090212, etc. you see it and do you see that -- if so, do you see it improving at all? COMMISSIONER RICHARDSON: I don't see it that way. However, again, we are working with the Law Department more in conjunction now to improve some things, improve reporting. Access to the system is a little bit better than we had in the past.
Okay. Because I guess just generally where I'm going with this is, if obviously the Department is a revenue generator, that it seemed if staff was cut back too much, that would hurt the generation of revenue. It's almost the old saying about penny wise and dollar foolish. But you don't feel that that is a problem? COMMISSIONER RICHARDSON: At the current staff level that we're at, I think we can continue to collect the revenue that is owed to the City, and, again, moving forward with the hiring of new auditors, again, we're being more 92 4/14/09 - WHOLE - BILLS 090212, etc. proactive now doing more travel audits, I think we will continue to create more assessments that will be owed to the City of Philadelphia. I think also because of our educational outreach to practitioners and to the business communities, I think that is telling folks they need to start getting compliant. I think also this fiscal year we've started with the delinquency of businesses on the website. I think that has started stimulating more compliance. We've been more proactive now doing audits with parking lots in the City of Philadelphia. Just, for example, today we had one business come in and comply and pay a very large sum of money that we didn't anticipate. So I think because we're out and about now, that will start stimulating compliance to --
Doing more outreach kind of thing. COMMISSIONER RICHARDSON: Doing more outreach. That's how it happens.
Good 93 4/14/09 - WHOLE - BILLS 090212, etc. enough. Good luck. COMMISSIONER RICHARDSON: Thank you, sir.
You're welcome. The Chair recognizes Councilman Rizzo.
Thank you, Madam Chair. Good afternoon. COMMISSIONER RICHARDSON: Good afternoon, sir.
Commissioner, I wasn't going to talk about this, but since you brought it up, Project Ocean. I thought we heard the last of Project Ocean, to tell you the truth, but now it sounds like we're asking for additional funds to complete the, how you say it here, additional costs associated with the billing system. 94 4/14/09 - WHOLE - BILLS 090212, etc. I understand this project has been very expensive to our city. How much of the money for Project Ocean came from your budget and this 454,000 additional? Could you give us the total cost of implementing the water bill, including the 454,000? COMMISSIONER RICHARDSON: Repeat your question again, please.
Project Ocean, the water bill, in your testimony you're asking for another 454,000 and, in your words, it is an increase because of the estimated obligations due primarily to the additional costs associated with enhancements to the new water billing system. The new water billing system is Project Ocean, correct? COMMISSIONER RICHARDSON: Yes.
So it sounds like we're still dumping money into this development of a water bill when I understand well in excess of $20 million has already been put into this project. 95 4/14/09 - WHOLE - BILLS 090212, etc. And I asked earlier I think to the Budget Director of what really did we spend, not just from your budget, from IT, from -- again, one of the confusing things about government is, the source of funds come from so many directions, we can never figure out what something costs us. So how much money did you spend on developing this water bill? Am I correct that this is additional money to bring Project Ocean to completion? COMMISSIONER RICHARDSON: Yes. When the system went live for Project Ocean, they were under budget by a million. So they spent about $5 million in 2007. Currently, we're asking for additional money because, again, the system needs enhancements for collection purposes. It's not built. You can't buy a system built with everything you need, so the system has continued to have enhancements that we need to help with collections, to help with municipal courts, to help with getting things to 96 4/14/09 - WHOLE - BILLS 090212, etc. the collection agencies as well.
Well, what I'd like to -- and the Budget Director doesn't need to come. I think one day we really need to know, we really need to know, because I just don't want to make up numbers. I hear that it could be 30 million. I hear it could be 40 million that we spent and eventually abandoned many of the parts of the project and got something that's very more basic than we originally anticipated when Project Ocean was still first put on the drawing board. We were trying to design something that we probably should have bought to begin with from a vendor. But my question again is, do you know how much the Revenue Department has kicked in to Project Ocean, your direct money? COMMISSIONER RICHARDSON: I'll get that information for you and get back to you.
And then the 97 4/14/09 - WHOLE - BILLS 090212, etc. Budget Director or the Finance Director, please, could we some day know what this -- I don't want to use the word "boondoggle," but what this project actually costs the taxpayers of the City of Philadelphia. The other issue that I'd like to take a minute to discuss with you is something before your time as Commissioner, is the police reimbursable overtime program. As you know, during this budget process, a few years ago we realized that police officers working off duty and the police officers were being paid, and the City was not doing a very good job, the Police Department at the time, of collecting the money from the companies or individuals that the police officers were working for. And I had this conversation earlier and I remember the number was about $6 million that was written off, and I understand that Revenue has come to the rescue of the Police Department, which I appreciate, 98 4/14/09 - WHOLE - BILLS 090212, etc. and has involved yourself in that process of managing oversight to make sure that the police do what they do well, fight crime, but the Revenue Department does what they do well, collect money. Is it safe to say that this police reimbursable overtime program is on track? I'm hearing that there was a time recently where we were starting to get into the hole again, and I hope that's not the case. COMMISSIONER RICHARDSON: As I expressed to you last year, I wasn't happy with the program. However, this year we've met with Deputy Commissioner Gaittens and Deputy Mayor Gillison. We're moving forward to make this a better program. We are looking forward to now trying to require the businesses that are in Philadelphia using the police or ones coming through the City to start making their payments go automatic to us thought ACH. So we're trying to set some parameters. Anything $5,000 and above 99 4/14/09 - WHOLE - BILLS 090212, etc. that they may owe us, we want our money cleared, not a check being mailed to us. (Bell rung.) COMMISSIONER RICHARDSON: So we're trying to also have the system that this is built electronically, so when you're going to go into the Police Department, you put your information in there, we want to also capture -- because the delinquency in the past, the corporate officers who were dealing with the company, how to reach them and contact them, so if they're going to go by the wayside and become delinquent, we have a way to reach them. But I'm confident to say with the Police Department we're moving forward being more progressive and trying to do things more in a 21st century of electronic Internet usage for these businesses and capturing the money faster, too.
Commissioner, we wrote $6-plus million 100 4/14/09 - WHOLE - BILLS 090212, etc. off. Am I hearing that we still don't have the full engagement of the Revenue Department in this process? COMMISSIONER RICHARDSON: We are engaged in this process because we're trying to change it to make the police do their job and us collect the money. We're trying to take it to electronic age. So that's where I'm trying to say we're going with this further. We've been meeting with them already to move forward with this.
Commissioner, this has been going on now for over a half a dozen years and I cannot believe what I'm hearing today, that we -- I was hoping to hear you say that this program is solid as a rock, and that's not what I'm hearing. COMMISSIONER RICHARDSON: What I'm trying to say to you is, I can't talk about the past. We are trying to change the ways of the past to make this a better program. 101 4/14/09 - WHOLE - BILLS 090212, etc.
Commissioner, we've been here now a year and three months, and I think in a year and three months, that's a significant amount of time and I think it's enough time to have this program on a solid footing. COMMISSIONER RICHARDSON: Well, as I said to you, I think this program is doing much better than it did last year when I started. Am I going to say are we on solid rock? Nothing is really on solid rock. I'm confident to say this program is moving forward. I'm not going to say that they wrote $6 million off in this program. We are moving forward to do a better job of collecting money automatically instead of by check to have the policemen do their jobs on the streets and, as you said, Revenue to check the money coming in. So we're doing things, again, in the mindset of the 21st century electronically instead of doing paper coupons, sending in a 102 4/14/09 - WHOLE - BILLS 090212, etc. check.
How much money do we have -- and I know I'm out of time. The next round I want to ask you the question. I'll ask it now so if you don't have the answer. How much money do we have on the street presently? And I'll end right now. I'll come back to you. COMMISSIONER RICHARDSON: To answer your question, thus far as the end of the third quarter, we've collected 10,571,632, and it's roughly to say about on the street there's about $4 million.
Uncollected? COMMISSIONER RICHARDSON: At this current time.
I think we're heading back into some trouble here. So we might have to have a hearing or have everybody in this Chamber to kind 103 4/14/09 - WHOLE - BILLS 090212, etc. of discuss this program, because I can't imagine that we have allowed this program to continue if we're not able to collect the money from the people that use the services of our Police Department. COMMISSIONER RICHARDSON: That's why we're working with the Police Department now to collect our --
Commissioner, again, no disrespect. A year and three months is a long time. This program should be really -- this program should be in better shape than it's in at this point. And I'm not going to beat it to death now. We might have to have a hearing on this. Thanks. Thank you for your indulgence, Madam Chair.
Thank you. Commissioner, can you tell us how long it takes your department to deposit a taxpayer's real estate payment? 104 4/14/09 - WHOLE - BILLS 090212, etc. COMMISSIONER RICHARDSON: It generally will take no more than a week to get a check into the bank. Again, I'm going to tell you the reason why I'm saying that to you, when the money comes in, we'd like to get it in within to 8 48 hours. Just in the last quarter 9 alone, we've had 69,942 exception payment 10 processing issues with real estate 11 payments coming from taxpayers in the 12 City. What that means is, a taxpayer is 13 probably sending us a check but no 14 coupon, send us a coupon and maybe didn't 15 send a check. So it takes us time away 16 from processing things when we have to 17 continue to move forward to take care of 18 these exceptions. 19
20 Commissioner, I am telling you without 21 any hesitation that we know of people who 22 have told us that they're waiting months 23 for their check to clear, and you're 24 saying that you deposit the check within 48 hours. Tell us what the process is. 105 4/14/09 - WHOLE - BILLS 090212, etc. COMMISSIONER RICHARDSON: Again, the process is, if a taxpayer sends in a coupon and a check --
What is the coupon? COMMISSIONER RICHARDSON: When you get your real estate bill, you have on your coupon 2009 real estate tax bill.
Oh, the insertion that you send back. COMMISSIONER RICHARDSON: Right. So once we have that, we can process that with the check through our billing system, our processing system. That doesn't take long at all. Again, we have a lot of folks -- again, I said over 69,000 -- that are sending in a check without the coupon, and that takes us time to pull it out of the process to research the information from an individual. So that may delay that timeframe of getting into the bank a little bit longer as well.
We 106 4/14/09 - WHOLE - BILLS 090212, etc. know someone, I think it's about two months now or close to two months. Perhaps something is wrong with the mail, and I'm going to suggest that he either call your office or call his bank. COMMISSIONER RICHARDSON: He can call me. As I said before, if anybody here has a problem with a taxpayer not getting their credit, please call us. So, I mean, we're here to try to service them. I haven't had any calls or complaints in regard to people getting their tax real estate payments paid, so this is news to me.
Commissioner, what steps has the Revenue Department taken to increase the delinquent collections? COMMISSIONER RICHARDSON: Right now, again, we're working with the Law Department on various initiatives. We as a department are, again, working with them on the delinquency as being posted on the website of businesses in the City 107 4/14/09 - WHOLE - BILLS 090212, etc. of Philadelphia. We're also looking to enhance our audit functions. We've increased staff. As I said, about five new auditors have come on board. Just in the two months they've been there, they were able to collect themselves from doing taxpayer assist over $215,000. So we're working that way. Again, we're looking to match wage taxes that are being paid by taxpayers that may not have business privilege taxes -- they're not registered for business privilege tax in the City of Philadelphia. We're working on various initiatives like the parking lot tax, and we're working on the initiative that we got here from Councilwoman Sanchez that's going to be pretty fruitful for us as well. Again, we're looking at using the data that we receive from the IRS to continue to help us with projects here in the City of Philadelphia. We're trying to do outreach again with regard to the school income tax that people say they don't 108 4/14/09 - WHOLE - BILLS 090212, etc. know about. So we're trying to make sure that we are proactive in getting that information out as well. So we are daily trying to think of programs that will help increase revenue in the City of Philadelphia. We're trying to be more proactive in tackling the delinquents that are currently on our books and trying to come to resolutions with the Law Department on those cases as well.
Commissioner, on -17 of your detail, you're requesting $152,000 for printing of business tax packages. What information is contained in the package? COMMISSIONER RICHARDSON: That's the business privilege tax returns that we're sending out to all the businesses in the City. It's their 2008, last year's, tax return information that they need to send in to us. That's primarily what the package is. If you want a copy of one, we can try to provide 109 4/14/09 - WHOLE - BILLS 090212, etc. you with a copy of one.
I'm not following. COMMISSIONER RICHARDSON: Kind of sort of you get in the mail your --
When you say "printing of business tax packages," I may be interpreting it one way and I think you're probably saying it's a bill? COMMISSIONER RICHARDSON: No, it's not a bill. It's your tax return for that year. For example, you get a tax return booklet from the IRS or from the state for your personal income tax. That's the kind of package that we're sending out to the various businesses in the City of Philadelphia.
Commissioner, are you telling me these 110 4/14/09 - WHOLE - BILLS 090212, etc. are forms that we're sending to people that could possibly be printed out on a computer at their end? COMMISSIONER RICHARDSON: Yes. That's what -- some of them are. Some people can't print these out. Again, we're looking -- for example, the long form for your business privilege tax, that's not being printed out currently on the system. We're looking to do that for next fiscal year.
So we're spending all this money and we could put the burden on the taxpayer to print the documents that they need to fill out rather than us send them blank papers? COMMISSIONER RICHARDSON: We are trying to do that for next fiscal year's tax returns, to do that so they can print them electronically or be part of software packages that they can get them.
Thank you, Commissioner. 111 4/14/09 - WHOLE - BILLS 090212, etc. Thank you, Madam Chair.
You're welcome. Commissioner, on -25 you're requesting an increase of $104,500 for mail center equipment. What equipment will you be purchasing? COMMISSIONER RICHARDSON: That is part of the Quantum payment processing equipment we're looking to purchase that will help us getting payments remitted faster through the system.
And how much is it going to cost? COMMISSIONER RICHARDSON: It's for an inserter and another mail machine.
I'm sorry. I didn't hear you. COMMISSIONER RICHARDSON: An inserter and another mail machine.
Again, can you tell us why you need this equipment now? Can it wait or be delayed for another year? 112 4/14/09 - WHOLE - BILLS 090212, etc. COMMISSIONER RICHARDSON: Again, we're doing over 480,000 water bills a year, plus tax return packages and other mail that we do for the City. We are the mail department for the City of Philadelphia pretty much. So we need new equipment to continue to move forward. Again, the mail department -- the U.S. --
Sometimes there's mail we don't like to receive. COMMISSIONER RICHARDSON: That's true. But that's what the equipment is for.
Thank you, Madam Chair. I'm sorry. Your first answer to the question was that you were 113 4/14/09 - WHOLE - BILLS 090212, etc. purchasing a Quantum software. COMMISSIONER RICHARDSON: My first response was incorrect. That's for the mail room, for mail room equipment, not for payment processing.
So payment processing, that will be an electronic payment processing system that you're putting in place? COMMISSIONER RICHARDSON: No. 12 That is a piece of equipment.
No, no. I understand. The information I'm seeking is, are you purchasing the software that you mentioned in your first answer to the Chair's question? COMMISSIONER RICHARDSON: We are talking with the CIO, Allan Frank, to start looking at that, for electronic portal for people to pay their taxes.
Are you aware that the Oracle Business Suite that we currently own provides for an electronic portal and electronic 114 4/14/09 - WHOLE - BILLS 090212, etc. payments? COMMISSIONER RICHARDSON: I don't know that, but that is probably what Mr. Frank is going to talk to us about so we can move forward for 2010 for April 15th.
We need to not spend money on new software when we own many of the packages we can implement in every department and save money. I also would say as a point of information that it sounds like a mail sorter, a piece of equipment, could perhaps be purchased under the Capital Budget rather than with general operating funds, and I make that suggestion. And if you could report back why that's not part of the Capital Program to the Chair. Thank you.
No. 24 I'm sorry. We have other Councilmembers -- 115 4/14/09 - WHOLE - BILLS 090212, etc.
You're fine. The Chair recognizes Councilman Jones.
Thank you, Madam President. Commissioner, I must say that this is my second year hearing your testimony and I have to admire your tie. COMMISSIONER RICHARDSON: Thank you, sir.
It is a definite upgrade over last year and hopefully indicative of revenues coming in to the City of Philadelphia. Let me ask you a couple of questions. One, in your testimony you mention that you're getting ready to fill 34 current vacant positions out of the Water Revenue Fund, I believe? COMMISSIONER RICHARDSON: Yes.
Help me to 116 4/14/09 - WHOLE - BILLS 090212, etc. understand how a department applies for Water Revenue Fund and is it specifically for collections for that department? COMMISSIONER RICHARDSON: It is for customer service and collections and some technology that we want to bring in some folks to manage the Project Ocean going forward.
So who determines whether your request for additional staff should be funded? Who controls that process of making your department eligible versus another department? COMMISSIONER RICHARDSON: We met with the Water Department in November to go over our budget for FY10.
So the Water Department has a board or how is that -- I'm trying to get my arms around who determines whether that specific set of revenue should apply to your specific department versus some other worthwhile departments. 117 4/14/09 - WHOLE - BILLS 090212, etc. COMMISSIONER RICHARDSON: Because it's Water funded, I guess we go through them for the request. That probably is vetted out between Council to approve the Water Fund.
So at some point, we actually approved these positions within another budget, particularly the Water Department, or we will? COMMISSIONER RICHARDSON: You have to approve the Water Fund, I'm pretty sure.
So as a subset of that, it will go then to you? COMMISSIONER RICHARDSON: Right. That's under the Water Fund that comes to us.
All right. As you requested this Project Ocean is $20 million investment in software, will that result in less outsourcing of collection activity by your department? COMMISSIONER RICHARDSON: 118 4/14/09 - WHOLE - BILLS 090212, etc. Hopefully it would, if everyone will pay their bills on a timely manner. However, for those that are delinquent, we will still probably be using collection agencies via through the Law Department.
Is that a goal of yours, to reduce the outsourcing and be able to do that internally? Because every time we outsource, we give a commission, I'm imagining, and that's less dollars in our treasury. COMMISSIONER RICHARDSON: It is less. However, within the Charter, the case will stay with us for 90 days, then they go into the Law Department. The Law Department is responsible for all the collection agency contracts.
So after you're done making your initial attempt, then it goes to them? COMMISSIONER RICHARDSON: Yes.
Okay. You, I see, did approximately $3 million in Class 200 contracting; is that right? 119 4/14/09 - WHOLE - BILLS 090212, etc. COMMISSIONER RICHARDSON: You're talking the Water Fund or the General Fund?
I thought it said that you did -- I see you have a list of MBEs and WBEs here within your testimony. COMMISSIONER RICHARDSON: Yes.
And that comes up to how much? COMMISSIONER RICHARDSON: That comes up to 870 -- well, all the contracts that we have comes up to $870,452.
So you've outsourced in Class 200 less than a million dollars? COMMISSIONER RICHARDSON: Yes.
And of that, your minority and female participation is what percent of them? COMMISSIONER RICHARDSON: Minority participation is 14 percent and women participation is 24 percent. 120 4/14/09 - WHOLE - BILLS 090212, etc.
Repeat that for me. COMMISSIONER RICHARDSON: Fourteen percent for minority businesses and percent for women businesses. 7
What was it 8 last year this time? 9 COMMISSIONER RICHARDSON: I 10 don't recall what it was last year. I 11 can get back to you with that answer. 12
I think that 13 that's -- again, I'm trying to, as best I 14 can, when departments do a good thing or 15 make an improvement, kind of put that on 16 the record, too. We have a tendency to 17 accentuate the negative and not kind of 18 underscore the positive, as Blondell 19 Reynolds Brown, Councilwoman at-large, 20 would say. So we're going to try to -- 21 so if you could give us last year's 22 participation numbers and then juxtapose 23 them with this year's, it would be worth 24 doing. You said the Law Department 121 4/14/09 - WHOLE - BILLS 090212, etc. should get that question on collections, correct? COMMISSIONER RICHARDSON: Collection agencies?
What is the average age of your receivables now and has it changed based on the recession? COMMISSIONER RICHARDSON: I have to get back to you on that, on the average age of receivables. Again, within our department, anything that goes past 90 days gets moved on to the Law Department for further collection activities.
Okay. But you would probably have a delinquency rate within that percentage of expected revenues, which I think will give us a lot of indication if this recession is going to get worse or getting worse and having a negative impact on our budget. So if you could provide that to the Chair 122 4/14/09 - WHOLE - BILLS 090212, etc. and she can distribute it to Council, what was the aging report from last year versus this year and is the number of delinquent accounts increasing. COMMISSIONER RICHARDSON: I can try to provide it to you.
You're welcome. The Chair recognizes Councilwoman Brown.
Thank you, Madam President. Good morning, everyone. Let me pick up and underscore where Councilman Jones left off. Background: Last year I sent a letter to the Mayor asking that every single department, when they come before us, tell us specifically their percentage of MBE/WBE. This year I'm augmenting that last by saying not only stipulate the percentage of MBE/WBEs, but also tell us of those, which are prime 123 4/14/09 - WHOLE - BILLS 090212, etc. contractors and which are subcontractors, because that gives us a better picture. And I'm going to augment that further and say in the presence of Mr. Dubow that we want to know '08 numbers, '08 numbers, so that we can really see what's happening from year to year. And I've been assured that I do not have to put that in writing, so I want to stipulate again -- can we ask Mr. Rob Dubow to come to the witness table, Madam President?
I just want to go on record again to say how important it is to us that we have the numbers, which you have here today, Mr. Revenue Commissioner, but you told us the percentages, and when we're reading 124 4/14/09 - WHOLE - BILLS 090212, etc. testimony, we'd like to be able to look at a grid and actually see the progress or not. And so I'm asking again that all departments come to us showing the percentages. The amounts are fine, but the amounts put up against the big picture tell us nothing.
Both years, as well as those who are prime and those who are subcontractors. Because more and more we're hearing from women and people of color, We're sick of being subcontractors, we are now at a capacity where we want to be considered for opportunities to be prime contractors. And so if we're going to move the needle, we need to know how and if department managers are seeking to raise the level of opportunity, if you will, for those who can qualify to be prime and subs.
Thank you. So enough on that for now. If you could, reflecting on the article that was in the paper dated November 13th, '08, just give us an update on where you are with the list of the top 50 business tax delinquents. COMMISSIONER RICHARDSON: Well, currently -- you're talking about the website delinquency listing?
Yes. COMMISSIONER RICHARDSON: 1.6 million has been collected and 1.6 million is set up in payment agreements currently.
So as a result of that tactic, there's clearly been some response. COMMISSIONER RICHARDSON: Yes. The goal of the tactic is, the folks that are going on the list are the most egregious people and are probably not going to pay you, but it's stimulating compliance with someone else saying, I 126 4/14/09 - WHOLE - BILLS 090212, etc. don't want to be on that list. So those folks are starting to come clean and get compliant and take care of their responsibilities.
Okay. Do you think there's any role for Council on our end to assist in that enterprise, or no? COMMISSIONER RICHARDSON: Sure. I think Council, for one, if you can get the word out to the businesses in your various districts, letting them know if they are delinquent -- you can view the website and see for public information if they're delinquent -- to come talk to us, set up a meeting, set up some payment agreements. I think also to follow up with a previous question, if anybody in your districts that you know that are sending payments into us or may have questions about do I send my payments in, what do I do with this tax return or this coupon, the more you can help us out, the better 127 4/14/09 - WHOLE - BILLS 090212, etc. it is for the City and for the Revenue Department.
Is that website broken down by councilmanic district with the listing of those businesses? COMMISSIONER RICHARDSON: No, it's not. We're hoping that as we move forward with the process, because we're still in our baby steps and infancy, that we can start getting more creative and looking at doing that or perhaps by zip code.
Okay. Because I know that would be a great service to district Councilmembers. On the last page of your testimony, last paragraph, you talk about how the Department of Revenue and the Division of Technology are working on substantial improvements to the website. Talk about what they are. COMMISSIONER RICHARDSON: Well, one, if you look at our website, it looks 128 4/14/09 - WHOLE - BILLS 090212, etc. different. Two, we're providing more information on our website for reporting on a monthly and a weekly basis what the collection efforts have been in the City. We're posting our regulations and rules on the website. You have more access and easier use to get to things now for tax credit applications. It's more easier to get to -- it's more easier to navigate than it was in the past, I will say. Our ReveNews, our newsletter that we do quarterly, is on the website as well. So it's more opportunities for people to go in and feel more comfortable as they're looking at the website and seek information a little bit more readily faster than they did in the past.
I do know of one constituent who was okay and able to complete the federal tax form and the state form, but when it got to the City form -- I wish I had that document with me -- the question was asked -- the City 129 4/14/09 - WHOLE - BILLS 090212, etc. form became very, very cumbersome for them and that they're computer literate -- (Bell rung.)
That is amazing. Sorry, Madam President. I've lost my train of thought. That bell went off. COMMISSIONER RICHARDSON: To help your question, if someone has a question in regard to their tax returns or forms, they can come to our 4th Floor in Room 430 for taxpayer assist. That is a service we provide to the taxpayers in City of Philadelphia for free. Also, if you're looking for them to do their filing electronically online, that's something we're trying to move forward to in the future, as you can do your federal and state online and send it through electronic portal that goes to them without sending a copy into us.
Can I wrap 130 4/14/09 - WHOLE - BILLS 090212, etc. up on this question, Madam President?
Please. Thank you. When filing online, the website asks you to fill in your income, and when calculating a tax due, it asks customers to multiply that by zero. Anything times zero equals zero. And this taxpayer knew for sure that they owed the City dollars, but on that specific form, it says whatever that number is times zero equals zero. COMMISSIONER RICHARDSON: If you want the taxpayer to call my office, we can talk to them.
Okay. All right. I'll leave it there for that. Thank you, Madam President.
You're welcome. The Chair recognizes Councilwoman Sanchez. 131 4/14/09 - WHOLE - BILLS 090212, etc.
Thank you, Madam President. I want to thank the Revenue Commissioner and his office. I know both Rob Dubow, my office and yours have been working on many different collection processes. So I want to thank you on the record for your willingness to indulge us as we try to seek out and improve our collections. That said, I wanted to echo what President Verna mentioned earlier, because this happened less than two weeks ago. We had a business owner who had about 44 different accounts and was coming in with $100,000, and we had quite a bit of difficulty finding a staff person that wanted to collect it, and even when I sent my legislative staff across the street, we went to one person and they said, Well, it's almost 3 o'clock, I don't do this anymore, you got to go to a supervisor. And it took us about half an hour to navigate someone 132 4/14/09 - WHOLE - BILLS 090212, etc. who wanted to take $100,000. So I think there's some room 4 for improvement there. I don't want to name names, but any time a Councilperson is sending over a business person to pay, we may want to think about how we do that, especially with multiple accounts. The other thing was that he had to write out multiple checks, because your department claimed that they did not have ability to separate it, and I think we ended up at like 20-something checks versus 44 checks. But that's a problem, so it's something that should be looked at. I don't know if we have a special supervisor, a point of contact in those types of cases. I would just hope that if I'm encouraging my businesses to come in and pay taxes because we need money, that that doesn't happen, because that's a problem. And I didn't call you personally because we got it resolved, but I just wanted to let you know that 133 4/14/09 - WHOLE - BILLS 090212, etc. there's a lot of room for improvement. One of the issues that came up in some of the community sessions I've been having is about our electronic bill 6 pay. What do we currently charge people who pay their bills electronically? COMMISSIONER RICHARDSON: 2.49 percent.
2.49 percent? Is there anything that we can do about that high cost? Because for some folks, for your average person and people on fixed incomes, you would think if we're encouraging them to pay it electronically so they don't get a dollar money order and a 40-something cent stamp, they almost -- what they've said to me is, I prefer to do it that way, which causes more labor for you because of the fee. COMMISSIONER RICHARDSON: We are trying to work with the group that we use trying to do a restructure of the fee. I will say to you that if any 134 4/14/09 - WHOLE - BILLS 090212, etc. taxpayer you have may have a bank account that they do electronically through their bank, they can do it free of service and pay their water bill, if that's what they're looking to do. If they're doing their tax returns, it's just a matter of sending a check in.
So if they do it through their bank fee, it's free of service, but if they do it on your online -- COMMISSIONER RICHARDSON: If you're using your credit card, you're going to pay for the service. But I will say they can use their bank accounts or do it by bank by phone or ACH payment that way as well.
If they do bank by phone? COMMISSIONER RICHARDSON: There's no fee for that.
So it's only when they use your website? COMMISSIONER RICHARDSON: When 135 4/14/09 - WHOLE - BILLS 090212, etc. they're using the City's payment organization, there's a fee for that.
Okay. COMMISSIONER RICHARDSON: To follow up on a question or back to your statement earlier, if there's a situation where you have a taxpayer that's coming in with that kind of money and those amount of accounts, I would like that you would call us and let us know in advance so we can set somebody to the side. And afterwards you can tell me who that individual was, please.
Okay. What would you say is our estimated outstanding debt in water right now, delinquents, really delinquent accounts? While they respond, why is it that we don't have an ability to take one check and split it? COMMISSIONER RICHARDSON: For tax payments?
Yeah. DEPUTY COMMISSIONER HALEY: I 136 4/14/09 - WHOLE - BILLS 090212, etc. would need more information as to whether court fees, sheriff's sales cost, why it would have to be split. If it was all tax, there's no reason to split.
Okay. I guess my question is, once we know what the outstanding debt is, if we've done an analysis of what -- if we did an amnesty for that Water Revenue piece of it, have we done them in the past? What have they generated? Because that number is going to be huge when they -- do you have the final number? DEPUTY COMMISSIONER BETHEL: Yes.
What is it? DEPUTY COMMISSIONER BETHEL: Good afternoon. My name is Michelle Bethel. I'm the Deputy Revenue Commissioner for Water.
Please pull the microphone closer to you. Thank you. 137 4/14/09 - WHOLE - BILLS 090212, etc. DEPUTY COMMISSIONER BETHEL: The outstanding delinquency is 163 million. And in reference to the amnesty program, it is my belief several years ago a program did take place, and actually we are in discussions with having a similar program, but we've just started, so we don't have any numbers or how we would roll that out at this point. (Bell rung.)
Of the 163, is most of that principal? Do you have the breakdown? Can you give that to the Chair? DEPUTY COMMISSIONER BETHEL: Yes.
So you're saying you're doing an analysis to determine whether an amnesty program makes sense at this point? DEPUTY COMMISSIONER BETHEL: Yes.
When do 138 4/14/09 - WHOLE - BILLS 090212, etc. you think you'll make some final decisions? DEPUTY COMMISSIONER BETHEL: We're hoping to make those final decisions quickly so we can roll it out at the beginning of the fiscal.
You're welcome. The Chair recognizes Councilman Clarke.
Thank you, Madam President. Good afternoon. COMMISSIONER RICHARDSON: Good afternoon.
Sorry I wasn't here for all the testimony. I don't know if this issue came up about the senior citizens tax relief program. COMMISSIONER RICHARDSON: Nothing came up about that.
And I know 139 4/14/09 - WHOLE - BILLS 090212, etc. I had some conversations with you actually earlier this year on the expansion of PACENET because of this whole real estate issue that has now risen to the top of the food chain as it relates to issues that have gotten people's attention. I think it was in 2001 or 2 when there was this significant assessment issue in the City of Philadelphia and Council was making all sorts of proposals about caps and all types of real estate protection programs, and I understand that at that time -- actually, I know Councilman Rizzo had worked with the former Mayor on putting together one of the programs. There are a number of programs that I understand are currently available for tax relief, not just to seniors but to other people, such as deferrals and installment plans, and, one, I would like for you to possibly get us through the Chair a list of every potential problem that's allowed under the existing code that does not 140 4/14/09 - WHOLE - BILLS 090212, etc. require state authorization. Two, can you talk to me about the marketing strategy for these various programs? Because it's my understanding that a lot of people either, one, don't know or don't take advantage of even the senior citizens relief program. We actually did a flyer. We were giving out flyers because we were hosting a meeting for the Mayor in Strawberry Mansion, and I actually -- I got to tell you, I included my little Darrell Clarke update along with the flyer. Since I was paying somebody to put flyers out for the meeting, I might as well put my newsletter out, too. Economies of scale. But I was surprised at how many people actually came to the meeting that had no idea that there was a senior citizens program that had been expanded to include more people. Can you talk to me about how your department markets or makes people aware of that other than just simply posting a notice? I think 141 4/14/09 - WHOLE - BILLS 090212, etc. they put an application in the mailer for the assessment. COMMISSIONER RICHARDSON: Yeah. Notice goes out every year with the tax bill November, early December. We really don't do marketing per se, because that's spending money. We're more on the enforcement side of trying to collect the money. Again, to let you know, there's about 20,680 people right now that currently are involved in our programs. We're involved in an installment program for low income --
Slow down. Slow down. Involved in what kind of program? COMMISSIONER RICHARDSON: The various programs that we offer --
Twenty thousand? 142 4/14/09 - WHOLE - BILLS 090212, etc. COMMISSIONER RICHARDSON: Twenty thousand six-eighty. Of that, we have the installment program for low income. We have the low-income senior citizens plan, which as of December of '07 is 12,235 folks who are in that plan as well. We also do provide for --
Is that in PACENET or is that PACE? Because I think we got the notices out late. COMMISSIONER RICHARDSON: Right. That's part of PACENET. We are still taking applications. We didn't stop that window for folks, because it came up kind of late this year. So that's still available. We also do provide a tax credit for anyone in the national corridor or the Reserve that's on active duty also.
Okay. So beyond -- because you say you don't do marketing, because I understand you're revenue, you're supposed to collect money, not give money away. Is there any 143 4/14/09 - WHOLE - BILLS 090212, etc. way that we can have some sort of strategy to make sure that people take advantage of these programs beyond simply asserting something that is -- maybe it's not your department since that's not your charge. COMMISSIONER RICHARDSON: We're working with the Administration to look at doing something that way right now currently for the programs.
Okay. Well, in the meantime, can you get us a list of all of the existing or potential programs as allowed under our existing code that don't require state authorization to the Chair? COMMISSIONER RICHARDSON: Yes, sir.
Thank you. Thank you, Commissioner. Thank you, Madam President.
Commissioner, with that same information, can you let us know just how many people 144 4/14/09 - WHOLE - BILLS 090212, etc. are enrolled in each of the programs? COMMISSIONER RICHARDSON: Sure.
Madam President, can I add how many people would be eligible versus how many are enrolled also. COMMISSIONER RICHARDSON: We can't quantify how many people are eligible. That's going to be real hard for us to quantify low income and seniors in the City of Philadelphia.
Thank you. When we initially proposed the bill, the Administration and former Revenue Commissioner did come up with a pretty accurate estimate, because at the time, they weren't supportive because it was going to cost the City a certain 145 4/14/09 - WHOLE - BILLS 090212, etc. amount of revenue in the middle of the calendar year. So somehow they were able to determine the eligibility of all of the seniors portion. So shouldn't you be able to know that? Because they gave me to the dollar. They said, This is what it's going to cost us. This is why we can't do it. COMMISSIONER RICHARDSON: I will go look for that information. I know currently within the state level for the property tax rebate program from citizens in the City of Philadelphia, there's 74,000 applicants, but, again, it could be more, it could be a number we're missing, but we will try to get that information for you.
Wait a minute. Say that again. COMMISSIONER RICHARDSON: Within the Commonwealth of Pennsylvania tax rebate program for renters or for property, there were 74,000 applicants from Philadelphia. 146 4/14/09 - WHOLE - BILLS 090212, etc.
Is that just renters or is that both renters and homeowners? COMMISSIONER RICHARDSON: For both.
Is it categorized in terms of renters versus homeowners? COMMISSIONER RICHARDSON: They can probably break that out for us, yes.
So the likelihood that the person that qualifies under the state rebate program is probably also eligible for PACENET, right? COMMISSIONER RICHARDSON: Possibly. But there could be more than that number right there that we don't know about. Some folks, as you know, are afraid to fill out applications and apply. We can try to quantify as best we can. It may take some time to come back with that data.
Thank you. 147 4/14/09 - WHOLE - BILLS 090212, etc. Thank you, Councilwoman.
Thank you. The Chair recognizes Councilman Green.
Thank you, Madam Chair. Good afternoon, Commissioner. COMMISSIONER RICHARDSON: Good afternoon.
You testified the Department has hired five new revenue examiner trainees and it's on track to generate million in new audit 16 assessments, a 4.5 percent increase. You also testified the Department is now, quote/unquote, fully staffed its Investigations Unit and that following up on audit and tax discovery leads will yield over million. I think I just heard you say that you, because of this group, have increased collection over just a couple months by $215,000, more than paying for these five auditors. 148 4/14/09 - WHOLE - BILLS 090212, etc. What is the cost per revenue examiner trainee? COMMISSIONER RICHARDSON: That's about 50,000.
I guess the question really is, what's the break-even point at which additional hires would not yield more revenue? COMMISSIONER RICHARDSON: The break-even point where they would not be generating more revenue -- what was your question again?
Well, my question is, hiring five seems to be very successful. What would hiring 50 bring in? They're all paying for themselves. I mean, why wouldn't we hire 50? COMMISSIONER RICHARDSON: I think we have to quantify that. I don't know. I couldn't tell you hiring 50 would it be a plus or minus for the City. We'd have to quantify that.
Well, how about hiring ten more? Are you confident 149 4/14/09 - WHOLE - BILLS 090212, etc. that would provide us with more revenue than the cost? COMMISSIONER RICHARDSON: Put it this way to you: Anyone or any additional bodies you want to give us for our department to collect more revenue, we appreciate it.
Will they pay for themselves? COMMISSIONER RICHARDSON: Yes.
Until what point? COMMISSIONER RICHARDSON: I can't tell you what fiscal year that it would not be paying for themselves. Again, I don't know.
In other words, if we gave you ten more, could you collect another 16 million that you weren't -- if we gave you 20 more, could you collect 32? If we gave you -- COMMISSIONER RICHARDSON: Keep in mind, it's not collecting. It's assessing. So we're assessing more 150 4/14/09 - WHOLE - BILLS 090212, etc. dollars on audits and discovery cases, not meaning the money is coming in.
Fair enough. COMMISSIONER RICHARDSON: But I can't determine and say if you give me ten, can we do 32 million more. Yes, we probably could. We could probably do more travel audits for the City, but I can't tell you if that's going to guarantee X amount of dollars in the equation.
Well, I mean, it seems to me that that's a very basic thing that a business plan for your department should have the answer to. You should know the break-even point where hiring more auditors will not provide a return. So, I mean, I don't even -- I don't know how to respond to the fact that you don't know the answer to that question. If you could please very quickly do an analysis and provide it to the Chair so that we can see what providing you with more bodies will do in 151 4/14/09 - WHOLE - BILLS 090212, etc. terms of assessments, and then I guess we can look at assessments, apply a historical collection rate on them and make sure people continue to pay for themselves, and provide you with the resources you need to increase our revenue in the City of Philadelphia. Will you provide that to the Chair, please? COMMISSIONER RICHARDSON: I will get that to her.
Is that something you can get to her in one week? COMMISSIONER RICHARDSON: No. 16
How long will it take you to get that to her? COMMISSIONER RICHARDSON: I can't quantify that for you. I will get it to her as quickly as we can.
How about two weeks? COMMISSIONER RICHARDSON: I will get it to her as quickly as we can.
Maybe it's 152 4/14/09 - WHOLE - BILLS 090212, etc. something we should have thought about this entire year, since I asked the same exact question last year, and also the Freshmen specifically raised this 6 issue six months ago. 7 So you prepared a memo last 8 summer summarizing various business 9 privilege tax loopholes, including ones 10 related to corporate structure and 11 unrelated business activities of 12 non-profits. Can you provide an update 13 on your efforts to close those loopholes 14 and what it has yielded the City, if 15 anything. COMMISSIONER RICHARDSON: At this current time, I cannot provide an update to you. We are still vetting the two regulations that we have out for it, and I have to make a determination. I do not want to talk about that publicly at this present time.
I'm sorry. Why don't you want to talk about it publicly? 153 4/14/09 - WHOLE - BILLS 090212, etc. COMMISSIONER RICHARDSON: Because I have to make a decision on both of those regulations that we have put out to the public and I have not made a decision yet. I can talk to you offline about what we are doing.
Are there any changes to state law needed to close these loopholes? COMMISSIONER RICHARDSON: No, there is not.
Okay. Do you have an estimate if we close them how much it will bring the City? COMMISSIONER RICHARDSON: No, we do not.
Well, then why do you want to close them? COMMISSIONER RICHARDSON: Because there are tax loopholes right now that businesses and some non-profits are getting through the system currently. You can't quantify them yet because we haven't been out to all of the various 154 4/14/09 - WHOLE - BILLS 090212, etc. organizations that may be taking advantage of these loopholes. So to quantify that, we can't say. We can discuss it offline of once the decision is made.
I think the Freshmen identified some of these 9 loopholes and put the potential revenue 10 on the order of -- Councilwoman Sanchez 11 worked on this -- over $10 million. 12 So it's your testimony that 13 whatever closing these loopholes will 14 bring into the City in terms of 15 additional revenue is not a part of the Five-Year Plan? (Bell rung.) COMMISSIONER RICHARDSON: Say your last part, please.
Closing these loopholes in terms of additional revenue is not a part of the Five-Year Plan currently? COMMISSIONER RICHARDSON: It is not quantified within the Five-Year Plan, 155 4/14/09 - WHOLE - BILLS 090212, etc. you're correct.
It is not quantified. So if you can quantify that for the Chair, we'll be able to add that revenue to the Five-Year Plan. COMMISSIONER RICHARDSON: Unfortunately, I may not be able to quantify that for her. Again, I appreciate the Freshman providing us 11 with the information of thinking it's $10 12 million, though. 13
Okay. Why 14 can't you quantify that within the next 15 two months? COMMISSIONER RICHARDSON: We'll attempt to put something together for you.
Thank you. I have more questions, Madam Chair, but I don't know if someone else --
Yes. We have other Councilmembers that want to be recognized. Thank you. 156 4/14/09 - WHOLE - BILLS 090212, etc. The Chair recognizes Councilman Rizzo.
Thanks, Madam Chair. Commissioner, you mentioned something a minute ago. Maybe you can explain the process. It has to do -- I think you said you handle the mail? COMMISSIONER RICHARDSON: Yes.
Just the mail that's mailed outside? Do you handle the delivery of mail to the offices? COMMISSIONER RICHARDSON: No, we do not.
The reason I'm asking that question -- and I think this is going to be a tough challenge for you, but I've collected for years now boxes of U.S. mail that came from the 7th Floor to the 5th Floor, from the 1st Floor to the 5th Floor, from MSB, all with postage on it, and I think the Freshmen 15 stole that one from me, 157 4/14/09 - WHOLE - BILLS 090212, etc. because I talked about that before they were even here. Isn't there something -- again, I don't even have a current list of where inner-office mail -- and I think the Department of Public Property handles that -- and how it even works. But why do we have so much mail that's being mailed via U.S. mail within our building? COMMISSIONER RICHARDSON: We don't do the mail for City Hall or City Council. I can't speak upon what mail is coming out. We can look into that, though.
City Council does a pretty good job of moving our mail around. I'm talking about when the 2nd Floor sends a Councilmember a communication, if it's not hand-delivered, guess what? It's got postage on it. COMMISSIONER RICHARDSON: We are looking at mail now currently being delivered within buildings that should 158 4/14/09 - WHOLE - BILLS 090212, etc. not be getting a stamp on it. I understand what you're saying. So our group is pulling those pieces out to make sure that they get hand-delivered instead of sending out the postage.
But I think what I'm hearing is that you need to coordinate -- I think Public Property handles inner-office mail and they deliver to the various City agencies throughout the City where they have a mail run or what. Maybe we ought to get it all on the same page and figure out why I have this box of mail that's got hundreds of dollars of postage on it that came from MSB or City Hall from one floor to the other. I mean, it sends such a terrible message to even employees during tough times that we're willing to use U.S. postage to deliver something two floors. So if you could figure out, maybe work with -- and give us some feedback. Maybe you can have a meeting 159 4/14/09 - WHOLE - BILLS 090212, etc. with the Public Property Commissioner to see if there's something we can do. Because what's that old cliche? Every little bit helps. COMMISSIONER RICHARDSON: Again, mail that's coming into our shop now that is from one floor going to the next, we're pulling out mail that can be hand-delivered or sent back to Public Property's offices, and now people are picking up the mail themselves in departments. So we're cognizant of that as we're trying to save money for the City to make sure that we're not sending things out that could be delivered or put in people's boxes.
Well, that's a good first step, but I hope the process isn't where you throw it in a box and it's something important and it sits for a week before it gets back to Public Property for hand-delivery or manual delivery. So the process really, I think, 160 4/14/09 - WHOLE - BILLS 090212, etc. needs to be reviewed, because that's one of the problems that people have told me. They say, The reason I put postage on it, because we really don't have a good internal delivery process in our government. So if you could work on that and maybe talk to Commissioner Schlotterbeck to see if coming together might make this a better process. And, again, at the end of the day, you might be able to pay for that new machine by just the money you save. Thank you, Commissioner. Thank you, Madam Chair.
You're welcome. The Chair recognizes Councilwoman Brown.
Thank you, Madam President. You mention in your testimony that you charge a two percent fee for filing paperwork online. Was that 161 4/14/09 - WHOLE - BILLS 090212, etc. accurate? COMMISSIONER RICHARDSON: For the payments.
For the? COMMISSIONER RICHARDSON: The payment by credit cards.
So those dollars are actually, I guess, going to the credit card service? COMMISSIONER RICHARDSON: Yes.
Because that's their requirement? COMMISSIONER RICHARDSON: Yes.
Thus, the City sees no yield in that? COMMISSIONER RICHARDSON: Yes.
So you're doing them a favor? COMMISSIONER RICHARDSON: Yeah. They're getting the fee.
But the yield is that you get -- the City benefits from receipt of those dollars? COMMISSIONER RICHARDSON: 162 4/14/09 - WHOLE - BILLS 090212, etc. Getting the money quicker, yes.
So you do believe then in your estimation that is efficient for those who opt to use that method of payment? COMMISSIONER RICHARDSON: I think it is, yes.
You're welcome. The Chair recognizes Councilwoman Sanchez.
Thank you, Madam President. To my colleague's point, if I have a debit card or let's say I have a mileage card, again, and I choose to use it, then I'm paying 2.49 percent of my bill payment, which is a problem for people on fixed incomes. While the options of people paying online is one for many seniors, because they're on 163 4/14/09 - WHOLE - BILLS 090212, etc. fixed incomes, how they transact with them means -- because they don't know when they can pay their bill. So they end up using their debit card, and therein lies the problem. That's where I'm getting it from, so that you understand that. As it relates to the $163 million outstanding, how much of that is fines and penalties and how do we determine fines and penalties on principal? DEPUTY COMMISSIONER BETHEL: That was a breakout that I said I would get back to you what the breakout of that is. So I don't have that readily available.
So how are fines determined? What's the level? If you owe a certain amount, when do fines and penalties start triggering, and interest? COMMISSIONER RICHARDSON: Fines would occur, one, if it goes to municipal 164 4/14/09 - WHOLE - BILLS 090212, etc. courts to pay for the court fee. Also maybe issues with the collection agencies on fees that they may be using as well. So that's when that would start. Your interest is going to start calculating once you start missing your first regular payment from the first 30 days.
How many companies do we have doing discovery work for us currently? COMMISSIONER RICHARDSON: Currently, there are -- I want to say none, because there are new contracts going out to collection agencies from the Law Department. So right now we'll tell you none.
So the Revenue Department has no one doing discovery work? COMMISSIONER RICHARDSON: We don't have a contract anymore. The contracts for any collection agencies will go to the Law Department now. 165 4/14/09 - WHOLE - BILLS 090212, etc.
They're all going to go through the Law Department; you won't handle it? COMMISSIONER RICHARDSON: Yes, ma'am.
So how are we going to determine which accounts get passed over to discovery or for collections? COMMISSIONER RICHARDSON: Once we send the cases to the Law Department or they tell us who they want us to send them to the agencies, we will know better then.
Isn't the collection rate the sooner, the better? So at what point are we sending those accounts for collection? Is it 120 days? Is it 60 days? COMMISSIONER RICHARDSON: I can't tell you that answer. Again, anything past 90 days goes to Law. We're trying to work on a parameter of when to start sending things that are fresher out 166 4/14/09 - WHOLE - BILLS 090212, etc. to the agencies instead of waiting for a longer timeframe.
Going to the point that Councilman Green was making, because of the way we can contract with these companies going to the issue of not committing to long-term staffing, what are we going to have in these new contracts to allow us to increase our ability to collect earlier? Because my understanding is from some of these collection agencies, they get the accounts six months, a year out, which makes the rate of collection less and less and less. If we're talking about efficiency and we're not willing to commit to the internal staff, what are we going to do differently in the new fiscal year to generate a larger percentage, which is that 60- to 120-day window? COMMISSIONER RICHARDSON: Well, again, we're working together in unison to start setting parameters for fresher 167 4/14/09 - WHOLE - BILLS 090212, etc. cases to go out to the agencies instead of waiting, as you said, six months, eight months to a year. So we're working right now with Law to make that determination.
How many companies was the City using prior to this new contract? COMMISSIONER RICHARDSON: For collection agencies or for discovery?
Both, collections and discovery. COMMISSIONER RICHARDSON: RCB was discovery, was one.
What kind of discovery work were they doing? COMMISSIONER RICHARDSON: 1099 work they were looking at.
One of the things in our work, we've discovered that there's a lot of business loopholes that obviously you don't want to talk about publicly. Have we considered in this new round adding some discovery work 168 4/14/09 - WHOLE - BILLS 090212, etc. as it relates to that? COMMISSIONER RICHARDSON: We haven't discussed that, but it's something to consider.
Okay. COMMISSIONER RICHARDSON: Again, probably the loopholes are businesses that are probably paying us or registered to pay some kind of BPT to the City. So it wouldn't be a discovery effort. A discovery effort is going to be on a case, for example, that may be registered as a business but not paying BPT or not having a wage account with the City, somebody that you've discovered and you've brought into compliance. A loophole business probably has been around for years, is registered with the City, may be paying some sort of tax but not paying their fair share.
Right. But my point is, with contracting of these discovery companies, we're not losing anything and we're potentially 169 4/14/09 - WHOLE - BILLS 090212, etc. finding revenue. So my issue is, why aren't we being more aggressive with it for both of those that you mentioned? COMMISSIONER RICHARDSON: Well, for the loopholes is because that will be more of an audit situation than a collection agency, because there may be some rules and regulations and things that they may not be cognizant of that an auditor may be.
But these are contingency fees based on if they find something. So there's less cost for us for the work. So why aren't we being more aggressive? COMMISSIONER RICHARDSON: Again, with the loophole companies that we're talking about, again, some of these companies are already in business, already in place, may be paying us some form of BPT but not paying us what they may owe us. A collection agency could do discovery work on that, but then the question may be, What are you assessing 170 4/14/09 - WHOLE - BILLS 090212, etc. us for, what is this. They may not know all of the ramifications of the various rules and regulations set up by the fiscal code to say it is a tax loophole. So that's not really there laying the work per se.
But there's some discovery companies that also do collection, who can also collect, that can do the discovery and then also collect, and we can contract with them on a contingency basis. COMMISSIONER RICHARDSON: That's possible.
I'm concerned, for instance, in the list that we forwarded over to you around lawyers and out-of-town lawyers. That could be profitable if we're aggressive with it, because it's a timely situation. If we're not on this on a timely basis, then we're going to recover less and less of that. COMMISSIONER RICHARDSON: You 171 4/14/09 - WHOLE - BILLS 090212, etc. weren't here earlier. I gave you kudos for sending that to us --
I heard it. I was listening from upstairs. COMMISSIONER RICHARDSON: And I kind of didn't want to put that out there publicly what the list was from. So we know that. We recognize it. That was a program we did years ago, but we appreciate it, and it's something we're moving forward with now within our discovery group.
So what's the timeframe on that? COMMISSIONER RICHARDSON: On the project working?
Mm-hmm. COMMISSIONER RICHARDSON: We're starting to implement that now. Again, because the list is very big, we're doing it in increments. We're looking at doing potentially sending out 50 letters every couple of weeks.
Do we 172 4/14/09 - WHOLE - BILLS 090212, etc. have to do it internally or can't this be something that we give to a company and say, Go out, find us what you can? COMMISSIONER RICHARDSON: Because it's fruitful, we would like to do the project first instead of paying the fee on top of it. So if you send it out, we lose percent of what we could 10 have kept in-house. So we have it and 11 we're going to work it first. 12
So when 13 you say it's fruitful, what are we 14 talking about? 15 COMMISSIONER RICHARDSON: It's 16 potentially fruitful because, as you 17 know, there are probably a lot of 18 counselors that are from outside of Philadelphia that aren't registering or paying us. So why would we want to give it out to someone and them charge a fee and we're losing out? So if you owe me $100, we're only going to get $81 instead of the full hundred.
I guess 173 4/14/09 - WHOLE - BILLS 090212, etc. my concern is the issue of timing again. The further dated this material comes, it's less likely you're going to get 100 percent anyway. In some cases because we're dealing with an industry that is contracting, because of the economy they may be out of business by the time we get to them. This is a judgment call. It's not something that we counted on before, so it's easy enough for us to give to someone and say, Come back and give us what you can off of this list. I'm just worried that -- again, I think institutionalizing how we do that moving forward I think is an important piece of revenue, but this list is dated already. So I'm a little concerned that we're going to miss out. COMMISSIONER RICHARDSON: We can look at that once the collection agencies are in place working with them on the list.
What's 174 4/14/09 - WHOLE - BILLS 090212, etc. the timeframe for the new contract? COMMISSIONER RICHARDSON: I don't know. You have to talk to Law about that. I defer that to them.
Okay. In terms of if we go up on our sales tax, one of the loopholes or one of the areas where we'd have to monitor is if people begin to travel outside of Philadelphia to purchase goods that then end up in Philadelphia. Are we looking at what things we're going to have to ramp up to make sure that on the manufacturing cars, those types of areas where people could potentially go to Delaware and purchase, how we make sure that we collect our portion? COMMISSIONER RICHARDSON: Unfortunately, I can't give you our response to that, because that is a state tax that's being collected. So a use tax form would probably be sent out from the Department of Revenue in Harrisburg. That wouldn't be our bailiwick to deal 175 4/14/09 - WHOLE - BILLS 090212, etc. with that.
So we depend on them to do that search and that analysis? COMMISSIONER RICHARDSON: The Bureau of Trust Fund Taxes collects our sales tax for the City, so they would look at doing analysis for that. We couldn't determine that analysis for you.
Thank you, Madam Chair. Just following up on Councilwoman Quinones-Sanchez's question about -- how many people are on the list that she was referring to? COMMISSIONER RICHARDSON: How many people are on the list?
Yeah. What's the number of -- COMMISSIONER RICHARDSON: I'll 176 4/14/09 - WHOLE - BILLS 090212, etc. get back to you, because I don't know the number off the top of my head.
It's over a thousand, would you -- COMMISSIONER RICHARDSON: I will get back to you. I'm pretty sure it is. I don't know the number off the top of my head.
Let's just assume it's a thousand, then. Why would we send out 50 a week, which would take weeks, 50 every two weeks versus 14 sending out a thousand? 15 COMMISSIONER RICHARDSON: Then 16 the staff has to deal with the thousand 17 potentially calling in at one time, plus 18 the other projects we're doing. So then 19 the question is going to be, Well, I left 20 a message, they couldn't get back to me. We're juggling about six or seven projects now waiting for people to call back. It's not realistic when you have a staff to do that at one time.
So if you 177 4/14/09 - WHOLE - BILLS 090212, etc. had the staff to do that, it sounds like it would pay for itself. COMMISSIONER RICHARDSON: Possibly, but, again, that project may come to an end eventually also. So back to your question about when does it become a break-even. We can't determine that.
That's a great point. So why not collect 81 percent very quickly in the current budget year when we need the revenue as opposed to going weeks into the year 15 at some point starting when? 16 COMMISSIONER RICHARDSON: As I 17 responded to Councilwoman Sanchez, I said 18 we will look at that. 19
Okay. Do 20 you have any estimate of how much you believe is outstanding just on the list Councilwoman Quinones-Sanchez provided to you? COMMISSIONER RICHARDSON: I cannot tell you that because I do not -- 178 4/14/09 - WHOLE - BILLS 090212, etc. I can't quantify how much is owed because you don't know how much an attorney is getting paid per hour or what their rate is. So I don't know.
But you can make some assumptions. So why don't you assume the average rate is $250 an hour and that they were each in Philadelphia three hours every single day and just -- which is a very conservative estimate, in my view, if you have people coming in from out of town, and provide to the Chair what that total revenue number would be. Okay? COMMISSIONER RICHARDSON: (Commissioner nodding head in the affirmative.)
Thank you. The reason I say is because I believe this number will be in the millions of dollars, and we'd like to -- I'd certainly like to include it in this year's revenue. A lot of people talked about 179 4/14/09 - WHOLE - BILLS 090212, etc. the 2.49 percent fee for paying with a credit card as opposed to -- and you said you can pay ACH. So can I go on the website and pay directly from my bank account? COMMISSIONER RICHARDSON: What are you trying to pay?
My property tax bill. COMMISSIONER RICHARDSON: If you set it up that you want the check to come to the City, you probably could.
No, no. On the City's website. COMMISSIONER RICHARDSON: No. 17
So I can't do an ACH payment like I can do with my American Express bill or Visa bill, and you're trying to set it up for that? COMMISSIONER RICHARDSON: We're trying to set it up towards like an e-TIDES that you can electronically send through a portal for the future.
How much 180 4/14/09 - WHOLE - BILLS 090212, etc. does it cost you to process all of the checks you receive every year; do you know? Have you like taken that function? COMMISSIONER RICHARDSON: For each check it takes us to process, about 41 cents.
Forty-one cents per check? COMMISSIONER RICHARDSON: Yes.
Okay. And that's all the employee time, their fringe benefits, which are in the Finance Department, et cetera? COMMISSIONER RICHARDSON: I'm not quantifying what's in the Finance Department.
Could you provide the Chair with a breakdown of exactly how you reached that figure? COMMISSIONER RICHARDSON: Mm-hmm.
The Acute Care Hospital Assessment Fund, how much revenue is that fund expected to generate 181 4/14/09 - WHOLE - BILLS 090212, etc. in FY09 and '10? COMMISSIONER RICHARDSON: I'll get back to you. I think it's about to 5 million, but I'll get back to you with 6 that number. 7
Will this funding, which is dedicated to emergency room-related medical assistance expenditures, have any impact on costs incurred by the City in the Health Department or otherwise? COMMISSIONER RICHARDSON: No, it should not.
Okay. Why not? COMMISSIONER RICHARDSON: The costs that -- we are being paid by the Department of Public Welfare, so it's not money that -- we'll be using that money to take care of the transactions, the information technology side of things. So it wouldn't be a situation that's going to be costing us. We're budgeting that out properly. 182 4/14/09 - WHOLE - BILLS 090212, etc. (Witness approached witness table.)
Yeah. There's a piece of the Hospital Assessment money that goes to the Revenue Department to cover their costs. I think that's what the Revenue Commissioner is talking about. There's another piece that will go to the Health Department to cover some of their costs, and I think when they're here, they can describe to you how that will be used.
Okay. Have you looked at the revenue assumptions in FY10 and throughout the Five-Year Plan? 183 4/14/09 - WHOLE - BILLS 090212, etc. COMMISSIONER RICHARDSON: Yes.
Do you agree with them? COMMISSIONER RICHARDSON: My responsibility is to collect the money. I can't say anything else than that.
Well, were you consulted during the estimating process?
As the Revenue Commissioner said, that's not what he does. He doesn't look at projections. There are people in his department who help us do analysis of collections. That's part of what forms our projections. But he does not do projections.
So just for the record, the Commissioner of Revenue was not consulted with respect to the revenue assumptions in the Five-Year Plan?
That's correct. His job is to collect revenues. 184 4/14/09 - WHOLE - BILLS 090212, etc.
His job is not to figure out growth assumptions in the economy. That's not what he does. We talk to other people about that, like economists.
Okay. Councilman Clarke touched on this. Under Section 19-1307 of The Philadelphia Code, the Department of Revenue is authorized to grant deferrals, in whole or in part, of increases in real estate taxes. Deferrals may be granted for any increase or portion thereof of real estate taxes due to an increase in assessed value of real estate that is greater than 15 percent in any given year. There's a bunch of factors that are laid out in the Code there. Is this program publicized in 185 4/14/09 - WHOLE - BILLS 090212, etc. what you send out with the tax bill every year? COMMISSIONER RICHARDSON: It's not within the tax bill, sir.
So how does the public know about this? COMMISSIONER RICHARDSON: Again, we have to do more outreach to let folks know about the payment plans and deferral payment plans that they have an opportunity to be afforded to.
I thought your response to Councilman Clarke was that all of these programs are in the final tax bill. But this one is not? COMMISSIONER RICHARDSON: In the final tax bill?
In the tax bill or like -- yeah. When we send a tax bill, do we let people know about every program that's available to offset costs? COMMISSIONER RICHARDSON: That's not in the tax bill.
It seems to 186 4/14/09 - WHOLE - BILLS 090212, etc. me that might be a good place to -- a good use of that stamp would be to include information about these programs for people. How often does the Revenue Department --
Councilman, I'm sorry to interrupt you, but we do have other Councilmembers waiting.
How often has the Revenue Department granted deferrals under this program? How many did you grant in 2008 and 2009? COMMISSIONER RICHARDSON: I can't quantify for you yet. We will get you numbers for 2008 and 2009.
Thank you. COMMISSIONER RICHARDSON: Again, as I said, as of 2007, there was 12,235 folks that were in the senior 187 4/14/09 - WHOLE - BILLS 090212, etc. citizens program. In totality, we have 20,680 who are in the programs that we offer.
I don't think any of those are the program that I'm discussing, though. Thank you.
Thank you. The Chair recognizes Councilman Rizzo.
Thank you, Madam Chair. Commissioner, I think that maybe you ought to look at what we were discussing earlier, taking credit cards for City payments. I'll tell you why. There are a lot of companies, big companies, that don't charge a convenience fee, and I learned that the reason is that in most cases, the next day, the next day the money is in their bank account. Many big companies do not charge a convenience fee. There's still 188 4/14/09 - WHOLE - BILLS 090212, etc. a few. But I think we really need to look at what is the upside and the downside of doing it, because I'll tell you that I know a lot of people that have sent their tax payment in, and I'd like to know what departments or what bills are paid that the Revenue Department handles. I don't know. Do you handle the water bill or Water Department's bills, the payments for the water bill? But I really think you should look at the convenience fee issue, because if you get your money within a few hours after the transaction is completed -- I know some folks that pay their real estate taxes. Twenty days later the check still hadn't cleared. So I'd like you to comment on both of those, and why does it take so long for the City of Philadelphia to post a payment for real estate taxes and other bills that a physical check is sent in. COMMISSIONER RICHARDSON: Again, the Department takes all taxes and 189 4/14/09 - WHOLE - BILLS 090212, etc. Water Revenue bills. As regard to individuals sending checks in for payment that's taking days, again, are they 5 sending in the coupon with that check as 6 well? 7
Everything 8 is right. Everything is right. 9 COMMISSIONER RICHARDSON: I 10 will look into it. Again, I haven't 11 heard a problem at all people getting -- 12 their checks taking that long. 13
Well, nobody 14 is going to call and complain that their 15 check took 20 days to cash, but I think 16 we need the money, and to have it out 17 there and not in our account is not a 18 good thing. 19 COMMISSIONER RICHARDSON: I 20 understand that, and we're trying to make sure that the money gets in the bank faster than what it has been getting into. So I will take a look into that as well.
What about 190 4/14/09 - WHOLE - BILLS 090212, etc. the convenience fee again? What are you going to do? COMMISSIONER RICHARDSON: Convenience fee, again, we will talk with the various departments in the City that are working with that to look at that moving forward as time moves on with the contract. So it's not just Revenue that's involved in that. So there are other departments.
There could be an indirect savings of not having to handle the payment, that it's posted right into the account, you have the money immediately. So just to say that you're paying the credit card fee to the credit card company, there may be some indirect savings that you haven't identified that could make that a very good way for people to pay their bills. So you will follow up on that? COMMISSIONER RICHARDSON: We will follow up on it.
Thank you, 191 4/14/09 - WHOLE - BILLS 090212, etc. Commissioner. Thank you, Madam Chair.
Thank you, Madam Chair. Commissioner, I want to first compliment you on your aggressiveness, because I think you've been aggressive. We've had a number of conversations relative to collection of revenue that's due the City in a number of different areas. Some of the things I brought to you privately and we've talked about and you followed up on. So I do believe that the will is there to do the best you can to get our money in. One of the things that continually arises during the course of 192 4/14/09 - WHOLE - BILLS 090212, etc. this budget crisis discussion is this mythical $300 to $400 million in real estate tax that's owed the City. And I'm constantly getting letters from people or phone calls or people on the street, Don't cut one ounce of service until you collect that $300 or $400 million in real estate taxes. Could you give us a little kind of description or narrative as to the condition of those tax bills and how old some of them are and what the cost is to collecting some of them relative to being held in estates, in different states, where the people who had owned the property originally had passed on, the kids are scattered throughout the country or we don't know where they are. Could you talk a little bit about the reality of the real estate tax collections on the arrears. Because I remember -- just one extra thing. I remember the last couple Administrations we've had these kind of tax sales and lien sales and all that 193 4/14/09 - WHOLE - BILLS 090212, etc. kind of stuff, and it seemed to me that during the course of those activities, the property tax that was really collectible is what we sold off or what we gave to companies to collect. Could you talk a little bit about the reality of collecting $400 million in back real estate taxes? COMMISSIONER RICHARDSON: To be honest with you, Councilman Kenney, I don't really want to comment on it, because, again, the Law Department is more proactive on working with the delinquencies in the real estate. Is the beast realistic that it's about 250, 300 million or more? Yes, it is, unfortunately. The Law Department is proactively working --
That's on paper? COMMISSIONER RICHARDSON: On paper, yes. The Law Department is more proactive on working with various 194 4/14/09 - WHOLE - BILLS 090212, etc. agencies and within their own offices to collect the money that is owed on real estate taxes. Again, unfortunately, we're not really involved in that process with the real estate side on collections, because, again, with the processing going past the 90 days, it's going to them. But it is a real issue.
So it's mostly Law Department responsibility? COMMISSIONER RICHARDSON: Yes, sir.
That's correct. It's mostly Law Department. But it's important to note that when you look at aging of bills, anything that gets beyond a few years becomes very difficult to collect.
People are gone. They've moved away. It's hard to track 195 4/14/09 - WHOLE - BILLS 090212, etc. down the original taxpayer. The number on real estate tends to look bigger in other areas because we're much slower to write off because there's a property there.
Or a vacant lot, right. But the Law Department has more details. But you're right, that a lot of that number is not really collectible.
You were in the government I believe in some form or another when I think we did something in the Rendell Administration, we did something in the Street Administration relative to trying to accelerate the collection of real estate taxes as a result of real estate tax bills that are actually collectible, and aren't those the ones that these companies or lien sales really gravitate to? I mean, they kind of pick up the low-hanging fruit or the medium-hanging fruit, but the stuff 196 4/14/09 - WHOLE - BILLS 090212, etc. on the top they have no interest in either?
Right. And even that didn't turn out too well, because that was the tax lien sale, and a lot of that turned out to be not collectible.
But as far as the Law Department being able to collect $400 million in back real estate taxes or $300 million, whatever the number is, because the number gets bigger every time I hear a complaint, that's not a realistic --
At least realistic both in accomplishing it and doing it at a cost that doesn't exceed the cost of the lien?
Yes. I 197 4/14/09 - WHOLE - BILLS 090212, etc. wanted to ask a question in light of what we are reviewing could be a potential property tax hike. Other than the deferral programs, what would be the cash flow impact if we allowed people to spread out their bills over a longer period of time, say six months to a year, if we went up to a percent increase, 10 which is what is being requested? 11 COMMISSIONER RICHARDSON: I'd 12 have to try to quantify that for you. I 13 couldn't tell you today. 14
Okay. I 15 don't know if Rob wants to add to that. 16 Rob? 17
In light of the fact that we're being asked to vote on a potentially 20 percent real estate tax increase, what would be the cash flow implications or impact if we allowed people to spread out their 198 4/14/09 - WHOLE - BILLS 090212, etc. taxes over six months or a year, depending on the financial situation, and lifting our current deferment for our income qualifications?
If people were able to pay later, the issue for us, particularly in 2010, is that our cash position is fairly weak. It's one of the reasons that we might end up having a fund balance that's as high as it is, is to make sure that we don't run out of cash. With those deferrals, there would be a heightened risk that we would actually run out of cash during the year.
Thank you. The Chair recognizes Councilman Green.
Thank you, Madam Chair. Mr. Dubow, while you're there, what is the portion of the real estate 199 4/14/09 - WHOLE - BILLS 090212, etc. tax owed that is delinquent within the last year, last two years?
I'd have to get back to you on that. I don't have that with me.
Okay. Because you would agree that there is some significant portion, on the order of $20, $40, $50 million, of real estate tax that is collectible?
There is definitely a portion that's collectible, and we are aggressively pursuing that.
How much does the Five-Year Plan or does FY10 calculate from a revenue assumption that we will collect in what are currently delinquent real estate taxes?
In 2009 it assumes 42. 200 4/14/09 - WHOLE - BILLS 090212, etc.
Yeah. In 2008 -- let me finish. In 2008 it was 36 million. And the original budget for 2009 was 36. So we took it up from last year and the original budget by $6 million.
Okay. And maybe we can do even better in 2010 if we hire staff either in Revenue or in Law and go after some of these people.
Well, the other thing that happens when you look at delinquents going up from 36 to 42, some of what you've done is captured people who then become part of the current. So if you have six for two years in a row, it means that there's actually an increase in the number of delinquents you're bringing in, because you have a portion that's staying delinquents and a portion that go up.
Sure. So we've consistently heard discussion about 201 4/14/09 - WHOLE - BILLS 090212, etc. how Revenue doesn't have enough bodies to accept more payments from people, so --
Well, for example, with respect to the collection of money from attorneys who do business in the City but are out of town, we're only going to send out 50 every two weeks because we don't have enough people to answer the phone calls when those numbers come back. I just think we need to be more aggressive with collecting this money. I see the Mayor on TV out there, but maybe we ought to behind the scenes build up the back-office operation that will let this happen.
We are being more aggressive, and as the Commissioner said, we have given them more staff to be more aggressive in going after delinquents.
Okay. So you'll provide the Chair with the aged 202 4/14/09 - WHOLE - BILLS 090212, etc. accounts receivable for delinquent taxes?
That's okay. So, Commissioner, you've testified that after 90 days you lose control of the collection of -- is that any kind of tax or is that just Water Revenue? COMMISSIONER RICHARDSON: Water Revenue and all taxes.
And all taxes. So if somebody is 90 days late on their real estate tax, it leaves you and it goes to the Law Department? COMMISSIONER RICHARDSON: Let me rephrase that. With real estate, no, 203 4/14/09 - WHOLE - BILLS 090212, etc. you have a year to pay your real estate tax bill.
Okay. So it's a year and 90 days for real estate. So for one year real estate stays in your department? COMMISSIONER RICHARDSON: Real estate stays in our confines for a year, and then after that --
So can you describe to me what happens from a systems and a workflow process operation in your department if somebody's real estate tax bill is 30 days late. COMMISSIONER RICHARDSON: Well, first of all, you have up until February 28th to get the one percent discount. So you're going past 30 days. Then you're due by March 31st. If that is the situation, our department is not built to continually try to call them via phone or something. What happens after December 31 of the current year, they are then in the process to go to get a lien against 204 4/14/09 - WHOLE - BILLS 090212, etc. them and a certified letter is sent out for the delinquency.
So the answer to the question is, from March 31st when it's due to December 31st, even though it remains within the jurisdiction of your department, nothing is done, no 9 mail is sent? COMMISSIONER RICHARDSON: We continue to bill them. That's really about it.
How often do you bill them? COMMISSIONER RICHARDSON: We bill them on a monthly basis.
So if somebody hasn't paid, every month you send out a bill? COMMISSIONER RICHARDSON: Yes.
I'm sorry. I couldn't hear your response. DEPUTY COMMISSIONER HALEY: We would bill quarterly a reminder notice, but they're sent out on a month -- 205 4/14/09 - WHOLE - BILLS 090212, etc.
Oh, quarterly, not monthly? DEPUTY COMMISSIONER HALEY: Yes.
So you bill 7 quarterly or monthly? COMMISSIONER RICHARDSON: You as an individual would get a quarterly, but we're billing monthly to all the taxpayers that are delinquent for real estate.
I'm confused. You send out notice quarterly? DEPUTY COMMISSIONER HALEY: Yes. They're cycled. There's actually bills that go daily.
So you're billing monthly in your system in terms of calculating interest, but you're only sending out bills quarterly? DEPUTY COMMISSIONER HALEY: Yes.
No phone calls are being made? 206 4/14/09 - WHOLE - BILLS 090212, etc. COMMISSIONER RICHARDSON: We are not built for phone calls, sir, outbound calls rather.
You're welcome. The Chair recognizes Councilman Kenney.
Thank you, Madam Chair. Just relative to real estate tax collection, if you live in a house and don't own it, the property owner gets the bill or the tenant gets the bill? COMMISSIONER RICHARDSON: The property owner should be getting the bill, not the tenant.
So in order to get a property tax bill, you have to actually own the property in the City? COMMISSIONER RICHARDSON: Yes.
And if you don't own the property in the City, you 207 4/14/09 - WHOLE - BILLS 090212, etc. don't get the bill? COMMISSIONER RICHARDSON: If you don't own the property, no. 5
So it's not mailed to the house; it's mailed to -- COMMISSIONER RICHARDSON: It should be mailed to the property owner. So you may be living in Florida. The bill should be going to your mailing address in Florida, if you change your address.
Does it make any sense to mail it also to the house? COMMISSIONER RICHARDSON: Not really, because then the taxpayer confidentially is being taken away, because my bill you should not know about.
But the same process is followed quarterly with the out-of-state owner when it's a tenant-occupied residential property? COMMISSIONER RICHARDSON: Yes. 208 4/14/09 - WHOLE - BILLS 090212, etc. The tenant -- the owner is the one accountable for the bill, not the tenant.
Any other questions from members of the Committee? (No response.)
Thank you very much. COMMISSIONER RICHARDSON: Thank you, Madam President. MR. McPHERSON: The City Treasurer is next.
Thank you. Madam Chair, with respect to the discussion about real estate taxes and other delinquent taxes, given the responses that we received today, that it's really not within the control of the Department of Revenue, I would expect that the City Solicitor will arrive prepared to answer the questions that 209 4/14/09 - WHOLE - BILLS 090212, etc. we've asked of the Department of Revenue today that he said only the City Solicitor can answer. Thank you, Madam Chair.
Good afternoon. Welcome. Please identify yourself for the record --
Rebecca Rhynhart, City Treasurer. Good morning, Council -- can you all hear me?
Good morning, Council President Verna and members of City Council. I am Rebecca Rhynhart, 210 4/14/09 - WHOLE - BILLS 090212, etc. City Treasurer of the City of Philadelphia. I am pleased to provide testimony on the proposed Fiscal 2010 Operating budget for the Office of the City Treasurer. The Office of the City Treasurer is responsible for the distribution of checks and electronic payments and the investment of bond funds and operating funds not needed for daily disbursements. In addition, the Office is responsible for new bond issuances and the management of 8 billion of outstanding debt, including debt issued for the General Fund, Water Department, Aviation Department and Philadelphia Gas Works. The Fiscal 2010 budget as proposed provides the necessary funding for the Office of the City Treasurer to accomplish these core responsibilities. The Office of the City Treasurer assumed the responsibility of debt management during Fiscal 2009. The 211 4/14/09 - WHOLE - BILLS 090212, etc. Office has managed to bring this function into the budget and reduce the Office's proposed budget over the Fiscal 2009 budget when the Office of the City Treasurer was responsible for only cash management. The highlights of the Fiscal 2010 budget request by proposed expenditures are as follows: The $653,801 in Class 100 funds represents 80 percent of the Office's proposed budget and funds 13 positions. In order to accomplish a Class 100 expenditure reduction despite the addition of a position transferred from the Finance Department to handle the debt management responsibilities of the Treasurer's Office, one accountant position was cut from the budget. In addition, a vacant position was lowered in title. In total, $84,191 in savings was realized in Class 100, which represented over ten percent of the total Office's Fiscal 2009 budget. This 212 4/14/09 - WHOLE - BILLS 090212, etc. resulted in $25,791 in savings after taking into account the transferred position. The $73,088 in Class 200 funds is unchanged from Fiscal 2009 and includes funding for a study to examine authorized depositories' lending practices. The contract for this study represents 65 percent of Class 200 expenditures. The combined Class 300/400 amount is $24,224 for supplies and equipment. This is unchanged from the Fiscal 2009 budget. The City Treasurer's Office is focused on efficiencies in the distribution of payments, as well as efficiencies in the deposit of revenues into City bank accounts. Direct deposit for City workers and pensioners is encouraged, and we have seen a steady increase in participation, from 70 percent in Fiscal 2004 to 75 percent in 2007 to 78 percent in March 2009. There 213 4/14/09 - WHOLE - BILLS 090212, etc. is an even higher participation among pensioners, as about 85 percent of pensioners receive payments through direct deposit. In addition, the Office has been focusing on reducing the amount of check payments received and increasing the amount of revenues received through direct deposit as this increases interest earnings. Interest earnings on invested funds are down this year because of the low interest rates. However, the Office has not experienced any losses on its investments despite the tough market conditions, which is considered a direct result of a prudent investment policy. Because of the market turmoil and bond insurer downgrades which occurred over the last year, the Office of the City Treasurer has restructured or refunded over 750 million of debt, resulting in lower interest rates paid by the City. In addition, the Office coordinated the issue of 350 million of 214 4/14/09 - WHOLE - BILLS 090212, etc. tax and revenue anticipation notes in November and 165 million of general obligation bonds in December to fund capital projects throughout the City. The Office continues to work on restructuring and/or refunding existing debt issuances which are experiencing problems in the market.
The Office commissions an annual study that analyzes the lending practices of the authorized depositories in the City. The most recent study for calendar year 2007 was delivered to members of Council in mid March. The Treasurer's Office issues an annual Request for Information to be completed each year by the authorized depositories in which they must state their community reinvestment goals, respond to the annual lending study and address any disparities in lending. Fiscal 2009 appropriations supported one Treasurer's Office contract with Econsult Corporation and MFR 215 4/14/09 - WHOLE - BILLS 090212, etc. Consultants in the amount of 47,500. The Office had a 50 percent participation rate in contracting opportunities for MBE/WBE firms. I appreciate this opportunity to provide testimony regarding the proposed Fiscal Year 2010 budget for the Office of the City Treasurer. I will be happy to answer any questions that Council may have regarding my testimony.
Thank you. The Chair recognizes Councilwoman Brown.
Madam President, I'm going to yield to Councilman Jones, who has a pending calendar schedule, and I'll come back on my round.
Thank you, Councilwoman Blondell Reynolds Brown, and 216 4/14/09 - WHOLE - BILLS 090212, etc. thank you, Madam Chair, and thank you, colleague Green for yielding so that I can make this. I have one quick question. Last year and as a part of a cost-savings measure submitted, we had talked about electronic transfers from Revenue's checks to various departments to the City of Philadelphia, and I wanted to get an update a year later as to when we could expect the elimination of paper checks generated by the Commonwealth of Pennsylvania which are to the City of Philadelphia, which loses annually $1 million in interest payments that we could receive a year that goes a long way to deal with a lot of the vital services that we're considering cutting. Where are we in working out a protocol relationship with the Commonwealth of Pennsylvania to eliminate paper checks?
Sure. We identified $135 million of paper checks 217 4/14/09 - WHOLE - BILLS 090212, etc. that we had been receiving from the Commonwealth of Pennsylvania. We have enrolled about 60 million of that to date in direct deposit. We have 75 million remaining. We've broken that down, looking at payments of checks of over $1 million, and there's about checks over 9 $1 million, which the Treasurer's Office 10 staff is working on right now converting 11 those to direct deposit. And then we 12 will look at those of 500,000 and greater and go from there.
So out of the how many checks annually we get? Number of checks, not amount.
So we are at the percent mark, 50 percent mark? 22 Where are we? 23
Well, in the 24 amount, the dollar value, we are 25 almost -- we've transferred over about 40 218 4/14/09 - WHOLE - BILLS 090212, etc. percent of the checks. And I think now that we've identified what the larger checks are, I think it can happen -- we can at least get it down to about 30, 40 million in checks pretty quickly, I would say over the next month. Once you get down to checks that are pretty small and a few thousand dollars, they're harder to identify, but I think we need to take care of the big ones.
Well, Treasurer Rhynhart, that's real progress. So I will spare you the sermon I was going to give you about what a million dollars buys. It broke down into 17 firemen, approximately 25 policemen. It 18 was about 66 percent of the after-school 19 programs and about all of the Recreation 20 Department's sports and athletics budget, 21 and it was about -- we went through -- 22 I'll spare you what a million dollars 23 buys, because we're 40 percent there, and 24 I appreciate the effort. If we can get a 25 hundred percent there. As we start to 219 4/14/09 - WHOLE - BILLS 090212, etc. plug the leaks, we can take care of the big things and have a confidence that we're at a high peak of efficiency. So, Madam Treasurer, I am pleased to hear that 40 percent is better than no percent, but I don't want to come here again next year where we aren't at least double that, to 80 to 90 percent of the checks. Now, I understand some of the smaller checks present a problem because it's hard to get an account. It may be a one-time, two-time payment. That doesn't make sense. But we can achieve a greater efficiency of beyond 40 percent, and I'm going to look forward to that progress report. Thank you, Madam Chair, and thank you, colleagues, for allowing me this opportunity.
And thank you for bringing it to our attention, Councilman Jones. 220 4/14/09 - WHOLE - BILLS 090212, etc.
Thank you, Madam President. Good afternoon. Let me commend you on the, I guess, percentage of the participation rate of MBE/WBEs. If I'm reading your testimony correctly, that amounts to just two companies, one being Econsult and the other being MFR Consultants that helps yield that 50 percent?
The Treasurer's Office has one contract in the budget, and MFR is a minority and women-owned firm.
And they have a rich track record of service. Discuss, if you will -- you write in your testimony "efficiencies in the distribution of payments and deposit 221 4/14/09 - WHOLE - BILLS 090212, etc. of revenues." Just discuss what that means.
Sure. I think in the deposit of revenues is what I was just discussing with Councilman Jones. The faster we get revenues deposited into the bank accounts, we can earn interest on that money. So paper checks of large amounts that take a week or two to process into the system, it's lost interest earnings. So that's what it means, the focus on that.
Are you at liberty or willing to say what City agency has been the most egregious in not doing the check deposit turnaround in a way that meets your goals, and specifically -- I'll leave the "who" out. Is there any particular City department where you've seen improvement, let's put it that way?
Yeah. I think it's not department by department. It's more just the method of paying. 222 4/14/09 - WHOLE - BILLS 090212, etc.
What type of incentives, information do you offer to employees and pensioners to participate in direct deposit? I'm amazed often times those who still do not -- have chosen not to use that method of handling their business.
Right. We actively encourage participation in direct deposit. We've spoken to central personnel to encourage employees to enroll in direct deposit. On the pension side, I know the pension -- maybe Pensions could speak to this as well, but I know that they have sent out information in their newsletters for people to participate in direct deposit, and their numbers are up to 85 percent.
What is the number? 223 4/14/09 - WHOLE - BILLS 090212, etc.
And what would you attribute the factor that caused that increase?
I think we've seen a steady increase year over year, so I think people are moving towards direct deposit. I think they probably agree with what you said, that it makes sense. There's some people, though, that obviously don't.
I think that's it for me. Thank you, Madam President.
You're welcome. The Chair recognizes Councilman Green. 224 4/14/09 - WHOLE - BILLS 090212, etc.
It's been a tough year for you in this job, and we thank you for everything you've done for the City this year. I know it's been -- you're a new Treasurer and it was a very difficult market with respect to everything we're trying to do. So I want to thank you.
So following up on Councilwoman Reynolds Brown, have you examined giving people electronic pay stubs or the option of electronic pay stubs in addition to the option of direct deposit?
We've discussed it. I think in order to do that, we would need to create some sort of Internet server for people to log in and get that information. It's something 225 4/14/09 - WHOLE - BILLS 090212, etc. that I think we'll continue to talk to DOT about, Department of Technology about.
Well, how much what would save, though? Doing electronic pay stubs instead of --
Which the federal government does, state government requires.
It would save some money. I think, though, when we're looking at it, we're also looking at there's the up-front cost of creating the system, and also if we went only to electronic pay stubs, there might be additional issues with people that don't 226 4/14/09 - WHOLE - BILLS 090212, etc. have access, Internet or e-mail access.
Sure. That's true. And the federal and state government have hardship exemptions. Okay. So if you could provide the Chair with what it would cost to do that and basically a reason for why we're not currently at least offering it as an option to people who receive direct deposits electronically currently anyway.
And how many 227 4/14/09 - WHOLE - BILLS 090212, etc. actually have received deposits during your tenure?
Wachovia, PNC, Citizens, First Republic, Commerce, United and Mellon Bank of New York.
I know we are trying to hold less in cash deposits and have more in investment, which is smart strategy, but in terms of even the cash deposits, of those depositories which have received money in the five or six, is a lot of the money concentrated in one or two institutions?
Well, Wachovia is the main, I would say, is our main account. 228 4/14/09 - WHOLE - BILLS 090212, etc.
And Wachovia still exists in terms of its local organizational structure even though it was taken over by Wells Fargo?
Well, what I've been told is that the Wells purchase or the merger between Wells Fargo and Wachovia, Wachovia still has the name Wachovia and they're looking and analyzing their systems, but it looks like, from what I've been told, that it won't be until 2011 or later when they 229 4/14/09 - WHOLE - BILLS 090212, etc. actually have some system changes. So they're going slowly in terms of any changes that occur.
If Wells Fargo went under, would Wachovia then disappear?
I don't know if it would disappear, but it would definitely negatively impact them, yes.
So it would impact the fact that a majority of our deposits are there?
And what's the current status of the agreements we 230 4/14/09 - WHOLE - BILLS 090212, etc. have with Wachovia? When were they updated? Are they still binding?
Sure. We have a payroll contract, which is almost done being negotiated and should be submitted for introduction to Council within the next few weeks for the session.
And are we looking to, in addition to that contract and authorizing Wachovia as a payroll depository or continue that relationship as payroll depository, for the record, are we looking at having some backup in terms of other institutions that might be qualified because we don't know what's going to happen out there in terms of Wells Fargo and any other institution?
I understand we're looking to go to contract with one, but the question is, are we looking to authorize others as payroll depositories and are we setting up a back-up plan? Because when Wachovia got in the 231 4/14/09 - WHOLE - BILLS 090212, etc. business, it was said on the record by the previous City Treasurer it was because they were the biggest and, therefore, they were thought to be able to withstand anything that would happen in the market. And, therefore, in retrospect, we don't know what's going to happen, and, in fact, it's some of the larger companies, the national banks, that are struggling even more so than community banks. So I guess the question just is, should all our eggs be in one basket or as we move forward in this process, are we going to look to at least have back-up plans in terms of other depositories for payroll purposes?
I mean, I think that there's risks. There are risks with any bank, so -- I would say that there's risks. There is a requirement, a state law that requires the banks to collateralize at 102 percent of our deposits. So whatever we have in deposits, they have at the fed or another 232 4/14/09 - WHOLE - BILLS 090212, etc. nationally recognized bank in collateral. We are -- on the pension bank accounts, which have been held by Bank of New York Mellon, we do have an RFP out right now, which is due back later this week from banks, to see for a competitive process. So I think we keep looking to the different banks and do have a competitive process.
I'll ask the question in a different way. How many authorized City depositories are qualified to hold payroll deposits?
Oh, just for payroll? I believe it's just Wachovia, but I'm not -- that is correct, yes.
If you want to approach the witness table, that's fine. (Witness approached witness 233 4/14/09 - WHOLE - BILLS 090212, etc. table.)
He doesn't know. MR. DiSILVESTRO: Could you repeat the question? I'm sorry.
How many authorized City depositories are qualified to hold payroll deposits? MR. DiSILVESTRO: Good afternoon. My name is Mark DiSilvestro, Assistant Treasurer for Cash Management. I was part of the RFP review process, and we narrowed it down to about five that were qualified and then we ranked them. So I would say five are qualified.
Okay. I actually heard it was further narrowed to maybe two or three, but it's definitely more than one? MR. DiSILVESTRO: Yes.
So the question really is, if there's more than one authorized depository which is qualified to hold payroll deposits, while 234 4/14/09 - WHOLE - BILLS 090212, etc. I can understand that we may be only going to contract with one, what process are we taking to make sure the others are certified as payroll depositories and that systems are in place or we at least know what we need to do in case something happens with that one institution, Wachovia, which inherited the account from First Union, which inherited the account from CoreStates, which inherited the account before that? Essentially, it just shows the track of this. And I'm not saying that Wachovia shouldn't have the business now, but in this fiscal crisis in terms of the markets, Wachovia has already been taken over because it went under, and I'm pretty sure that as Wells Fargo goes, Wachovia goes, that it will not exist if Wells Fargo goes under.
And I think we'll stay on top of it to make sure that we have options. Wachovia -- Wells Fargo is one of the most strongly rated banks right now, just so that you know, but I 235 4/14/09 - WHOLE - BILLS 090212, etc. think we will continue to make sure that we're prepared for anything that does happen.
Well, they owe the federal government a little bit of money which they're having trouble coming up with right now.
Thank you. Any other questions from members of the Committee? (No response.)
The Committee will stand in recess until tomorrow, Wednesday, April the 15th at 10:00 a.m. 236 4/14/09 - WHOLE - BILLS 090212, etc. Thank you. (Committee of the Whole recessed at 3:30 p.m.) - - - 237 CERTIFICATE I HEREBY CERTIFY that the proceedings, evidence and objections are contained fully and accurately in the stenographic notes taken by me upon the foregoing matter on April 14, 2009, and that this is a true and correct transcript of same. ______________________________ MICHELE L. MURPHY RPR-Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)