Point of information. Chair recognizes Councilmember Jamie Gauthier.
I was interested in the answer to Member Harrity's question about if you have mixed items. So when I'm ordering from Instacart, I'm rarely just getting like one thing. I'm getting a host of things that some may be exempt and some are not? COMMISSIONER McCOLGAN: So in the example of Instacart, I think I'd like to just follow up with our technical team on that. But in general, if there's a delivery that includes a nontaxable product and a taxable product, then the tax would be applied.
Then we would probably see a lot of orders that just add a nontaxable one so that people didn't have to pay.
We'd probably see a lot of orders that at the end would add let's find a nontaxable thing to throw in.
Okay. I got you. Thank you. But you're going to confirm that for us? COMMISSIONER McCOLGAN: Yes.
Thank you very much. Chair recognizes Councilmember Jeffrey Jay Young.
Thank you, Mr. President. The question I have is for water revenue. The testimony says that revenue will implement an adjusted penalty forgiveness policy for allowing TAP participants to earn incremental penalty forgiveness each month as their TAP bill gets paid. And also, you also talk about the delinquent water collections and enforcement tools that you have, which includes making phone calls, sending letters, administering payment agreements, placing liens on properties, financing collections, filing suits, shutting off delinquent accounts, conducting Sheriff sales and landlord sequestration. So you have all these enforcement mechanisms in place for delinquent water bills. What is water revenue's position on a bill that we introduced that would eliminate late fees and penalties and interest on our water bills for our Philadelphia residents? Because I think when you look in your testimony as well, it says that there's about $2.6 million collected in TAP arrearage, excuse me, forgiveness, just in penalty alone. Just from July to 18 December of 2025, right. 19 And so, that's $2.6 20 million that's real money to 21 Philadelphians and is a small number compared to our budget overall. So what concerns or issues are there with eliminating these late fees and these penalties on our water bills when we have all of those other enforcement mechanisms in place as well to collect on that principal? COMMISSIONER McCOLGAN: Okay. So the first part of your question you wanted me to explain the penalty forgiveness, right?
I'm sorry. The? COMMISSIONER McCOLGAN: You wanted me to explain the penalty forgiveness first?
Yeah, to estimate what that is. And then the second part is regarding the proposed bill that we have. COMMISSIONER McCOLGAN: Okay. So what's in our testimony refers to those that are enrolled in TAP. Right now for principal forgiveness, when they pay a monthly installment towards their TAP bill, there's principal forgiveness that happens each month. Penalty forgiveness for those TAP customers does not happen until they've completed the 6 months in total. So we are 7 proposing to make that change to 8 also give penalty forgiveness at a 9 monthly rate for the TAP customers. 10 The second part of your 11 question, I believe, is related to 12 an ordinance regarding penalty 13 forgiveness for all customers. 14
For 15 all customers essentially, because 16 right now it's only for those 17 customers that are on TAP. And 18 from the testimony, it says maybe 19 only 35% of those customers even 20 qualify are enrolled in TAP or 21 something like that. So we're just 22 trying to figure out what is the 23 Administration's position on just 24 allowing the forgiveness for all residential customers when you have these enforcement mechanisms already in place to go and get the principal. If the city owns this utility, the city shouldn't be placing people in further debt. That's just the belief that I have. And so, we want to be able to allow the residents to benefit from this public good and not have this public good put us in debt. COMMISSIONER McCOLGAN: I appreciate that. So we've discussed that bill with PWD, and I'll get the number for you and what we estimate the penalty impact to be. But in the meantime, penalty is widely used as a collection tool to collect revenue timely. And our mission is to collect funding for PWD to sustain their operations, provide clean water to the City of Philadelphia. And not having a penalty in place would really undermine our ability to predict the revenue that is collectible to them. It could incentivize people who do pay on time to no longer pay on time.
I think we do have those penalties in place, all the enforcement mechanisms that I mentioned, making phone calls, placing liens, all these things that are there, filing suits in court. These things are there. These things are real, because I know that the city does take people to Sheriff's sale for water bills, right. It has happened before. If we are --
Councilmember Young, I'm sorry. Can I just pause you for a second?
Councilmember Phillips wanted a point of information. Chair recognizes Councilmember Phillips.
Hi. Thanks, Councilman Young, for bringing up this very important question. The real penalty is your water potentially being shut off.
So I mean, once your water is shut off, you're going to know I need to pay my water bill, you see what I'm saying. I think Councilmember Young is right. It's already a burden to pay the water bill. The idea of being shut off, they're going to eventually pay it. So I think putting money back in their hands actually makes sense. So I'm trying to figure out are we really losing revenue? Is it that big of a deal? That's what he's trying to say. I want to get that clarified for myself. Because if we have to vote on that one day, I just really want to understand what revenue are we really losing if we don't have these late fees? COMMISSIONER McCOLGAN: I will get that number for you. I know that we had already conducted that analysis, so I'll get that number for you. But in relation to shut-offs, I just want to talk a little bit about all of the protections that we've put in place over the years. Before COVID, our shut-off threshold was significantly lower. I think in an average year there was approximately 40,000 people who were eligible for shut-off. Since then, we raised the threshold to $1,000 or higher. And we also have protections put in place for people who have -- we have a Raise Your Hand Program. If somebody has children or seniors in the home or somebody with a disability, we will take them out of shut-off status and put them into protection. The TAP program also provides them with protection from shut-off. And so, our shut-off numbers are each year about 2000-ish, 3000 a year versus the 40,000 that we had before COVID. And we can put all of this information in writing to you with our stats and who's protected so that you have a comprehensive look at the entire picture there. But as I said, we've seen behavior change, for example, in payments when there's a moratorium. Some people know that there's not going to be a shut-off from December to April and they will allow their bill to accumulate. And then one shut-off starts again April 1st they pay. That's just a behavior that we see sometimes --
It's a savings plan for a lot of people in my community. So I mean, that's just how they have to operate, right. I mean, that's just how they maneuver and I understand that. But when you have these enforcement mechanisms like a shut- off, as my Councilmember alluded to, I think that's the real I gotchu, right, when it comes to penalties, because no one wants to be without water. So I really think that we should take a hard look at how we are penalizing our residents when we are already going to be asking them for an increase in the water bills in the very, very near future. So that's just something I just wanted to put on the record. Thank you, Mr. Chair.
Thank you. I'm going to resist. Chair recognizes Councilmember Driscoll.
Thank you, Mr. Chair. This was really a question for yesterday and we never really got to it. So, Rob, I don't know if you can respond to this or we just, you know, figure another way to answer it. But I'm scratching my head trying to figure out, this legislative body is being asked to consider passing a budget by, we usually get it done by mid-June, and yet we're relying on enabling legislation from the Commonwealth of Pennsylvania, which traditionally is done by June 30th, but as we know practically doesn't always happen. Are we able as a body to pass something in anticipation?
Yes, we've done that in the past. We can definitely do that, anticipation of --
And if it doesn't happen, we don't have a balanced budget then though, right?
Well, we don't have funding through the hotel fund for it. It's actually not coming into the General Fund.
So how do we cure it if we pass it and it doesn't get passed by the Commonwealth?
So we would probably have to come back in the fall and work on how to fund those programs within a balanced budget.
I was trying to figure out how that would work. Thank you.
I think the concern is also the Five Year Plan. So if you can elaborate as well, because your projections have the hotel tax revenue bringing in about $111 million maybe over the next five years. So just in the same line of Councilman Driscoll's question, if you can elaborate on an impact not just immediately in the next fiscal year, but also discuss what the strategy will be over the Five Year Plan because that will be $111 million in revenue that we don't get? And how do we get PICA to approve our Five Year Plan if it counts on that revenue? So I just want to add that to Councilmember Driscoll's questions, if you could support with a few answers.
Yeah. And it does go back to the question yesterday about, you know, things we're asking the state for and the fact that we'd have to go back into the budget and make some really painful choices about how to pay for that.
Yeah. And I just want to be clear, it's not just over one year. It's over five years because it's baked into the Five Year Plan, which is very risky.
Right. So we would have to figure out really how to get that 20 million in a year and that would be recurring, so it would flow through the Five Year Plan.
Okay. Thank you. I don't see anybody in the queue and I want to adhere to Council President because I'm sure he has a couple questions too. But before I go back to Councilmember Young, let me just put a little exclamation point on the issue around water and water revenue, right. I live in the 9th Councilmanic District. I'm one of those people that complains to Councilmember Phillips, myself and my neighbors, because we have found that there have been some things that have taken place that we feel like are not necessarily supportive of constituents. And when you're a resident and you have all these different things happen, right, government is asking you to slow down on Broad Street, right, we're also asking you to be patient around potholes and be patient around snow, we're asking people to entertain a new tax and people are seeing all types of other things happen in both D.C. as well as in Harrisburg. And now, as a resident when I get these retroactive requests from any level of government, right, what you're feeling from Councilmembers is us regurgitating the frustration that constituents give us based on decisions that you all make that we have absolutely no control over, but they believe that we're a part of this bigger conspiracy, which I spoke of before, that's trying to displace them and move them out of their house. So I know I have a meeting coming up with some folks in leadership there. I think that it's important that you understand our frustration, but I also think that there needs to be some system changes, right. So, number one, I think that we should limit how we retroactively charge people for things that they don't control. If you don't know what I'm talking about, you guys will say my meter is wrong, it's not reading correctly and it hasn't been reading correctly for a year. And so, then you'll say, okay, well, since your meter wasn't reading correctly for a year, you now have this back pay. You guys will also come to residents and say, your sewage is wrong. If you don't fix your sewage in 30 days, the city is going to come in and fix it for you. Even though I've been living here for 30 years, all of a sudden randomly one day my sewage is wrong. And if I don't fix it myself, the city will fix it and bill me thousands of dollars. These are some of the things that the members are frustrated about and these are the issues that constituents communicate to us. And in this climate that we're in, it's just not right. So hopefully, before this budget dialogue ends, we have some systemic changes that you all can communicate to us so that as we continue to try to address people being nickel and dimed here and there, we can put the Water Department as a place that we've crossed off that list and we're no 21 longer going to give people retroactive payments or random bills that they have to pay within 30 days or get on a payment plan and it cost them thousands of dollars. Chair recognizes Councilmember Young.
Thank you. And along the lines of the need for a penalty, well, the performance targets aren't particularly aggressive, you know, 85% of bills paid within 90 days, 32% of delinquent accounts in payment agreements for TAP. That's not really an aggressive approach if you're really trying to collect the funds and trying to get people on a program that can provide that relief to them. So I really hope that -- why should we accept some of these flat targets if you're also requesting higher funding and promising better use of the data and technology? COMMISSIONER McCOLGAN: To the point of customers saying that they feel as though they're trying to be put out of their properties, I just want to say that that is the -- the goal of our outreach is to make sure that residents are aware of all the assistance programs that are available to them. As I mentioned earlier, for owner-occupied properties, they do not get taken to Sheriff's sale. And properties for water debt that get taken to Sheriff's sale, that's only for commercial and vacant properties. We don't do that for owner-occupied properties. And we feel that the enforcement that we have in place really plays a dual role in, one, getting those to pay to do so, but then also getting those who cannot pay into the assistance programs that are available to them. So it plays a dual role. Especially for water because there's forgiveness, it's very important that they get into those programs when they're eligible. So that is the fine line that we walk. And the dual I'd say goal mission that we have of the department to collect revenue to support city services, but also to make sure that residents who are entitled to programs are enrolled.
And the question I have is what are the qualifications to be enrolled in some of these programs, right, because there are a lot of income- restricted programs which are helpful, but there are people who may not qualify, right, for some of these programs. But again, they use the winter months as a way to kind of save a little bit. So -- COMMISSIONER McCOLGAN: We can give you all of the qualifications in writing. We can submit that to you.
Thank you. If you can please submit it to the Chair for the record, I would appreciate that. Thank you. COMMISSIONER McCOLGAN: Sure.
And just one more question. I guess this is just for Finance in general. It seems like throughout some of these departments we're asking for increases, and there are particular increases in professional services while the small and local minority business participation like Falls, can you tell us what's happening here? We're expecting to spend more money but spend less money on small and local business enterprises. Ever since we had to change to this small, local versus minority, women, disadvantaged enterprises, it seems like the spend number is actually becoming lower. And when you know that happens, we know the types of businesses that are going to be impacted I'll say more inequitably, right. So can you describe to us what's happening here and why do we see that trend?
I can give you an example. I did it earlier today with the Pension Fund, right. There's a projected $25 million spend, which is the highest that we've had. But when you look at the small and local number from the past three fiscal years, that number in real dollars has gone down each year. When you look at revenue --
What I said was that we're over 50% MBE there. So I don't think those numbers have gone down.
So I'm looking at the chart here that was provided to us. When it comes to some of the professional service contracts, it's that projected spend of a $27 million or $25 million, but we did not have the data for small, local for Fiscal Year '26. It wasn't there. But each year -- I'll show you the page. I can point the page out to you, if necessary. So this is a trend --
We can get you the specific numbers on pensions because that's not what's happening with pensions. So we will get you that information.
Okay. But here with revenue, for example, there is projected professional services contract of 23.8 million, but the small and local participation falls to 26% down from 33%. Why? And I've noticed that throughout some of the departments. So what's happening here with that, if that's a trend?
Yeah. We'll get back to you on the revenue one, but we're not seeing that across the board. So we'll have to take another look at the data. And if there's something there, get back to you.
Now, I'm going to go to the Treasurer's Office then. The Treasurer projects a 40% small, local business enterprise participation in FY27 professional services. It says exactly matching that goal, but the office's participation rates have fallen materially from prior years, 63% in FY23, 57% in FY24. So why did this decline happen and what's preventing that further?
I mean, the Treasurer's Office has a pretty aggressive program of making sure that they include MBEs in their deal. So every deal has participation, sometimes as the people running the deal, sometimes as co. They also do that for counsel and their FA is local, so they have a lot of participation.
They can have participation, but the numbers for the participation is going down, right. So I'm just asking is there -- when you see a trend, I think that there is something that is systemically wrong or happening here. So if I see that's a trend happening in these departments, I'm just trying to figure out what's causing that, right and how can we address that trend and reverse that trend?
Yeah. And I can say that for all of us, it's something that we really work on all the time and try to make sure that we have appropriate levels. Fran is going to come up and talk about pensions.
Councilman, you talked about professional services. Professional services are very, very small amount of the Pension Board's spend. The largest amount of the Pension Board's spend are the fees for the investment managers. That local percentage has gone up each of the last four years. Professional services is something that's separate, like the actuary, like the auditor. The vast majority of the spend that we have is for our investment managers who get paid a percentage of the assets under management. Our assets under management are over 50% diverse investment managers. But as far as local, it's now close to 12% --
And I hear that. I'm just looking at of the Board of Pensions and Retirement Plan testimony that they sent us. That's the page I was referring to when I mentioned that there's a projected $25 million spend for contract summary, professional services only; projected is $25 million for FY27. Now, for FY23, '24 and '25, the small and local business amount has been about roughly a quarter or so of what's happening. But that amount has been lowering every year, 5.6 million in FY23, 4.5 and '24, 4.2 in '25, but then not available for FY26. And so, the question is -- and it's not just for pensions, specifically this is a trend that I'm seeing in other departments as well where that small and local amount is decreasing, right. It went from 26% to 20%, 19%. Now, is it going to keep decreasing? And I want to see why. I guess as we're asked to approve this budget, we should know why we see those trends happening across departments where there is a lower percentage going to small and local business enterprises.
And just to be clear, again what you're seeing in professional services is a small portion of what the Pension Fund does. The larger expenditures --
The larger expenditures are in the fees we pay to our investment firms. And what Mr. Bielli was talking about is that those numbers, which are much larger, are actually showing consistency, if not a little growth. So where our spending really is looks much better than the numbers that you're looking at.
So these numbers are not real spending? That's what I'm asking. This says --
And what we're talking about is that most of the funding -- most of the spending for the Pension Fund that goes to firms is not captured in that professional services category.
Okay. Even if it's not captured here, right, what this says here is that it's trending downward. That's all I'm saying --
No, I understand what you're saying. But we're telling you that's not the full picture of Pension spending and we have documents that have that spending --
So can you give us the full picture of the spending I guess for every other service department as well where we're noticing that this same trend is happening, right? This is not just for Pensions. This is I guess more of a finance question.
Yeah. Well, from Finance, and you'll probably hear the same thing from the Treasurer, that a lot of what our folks spend and what we do that really gets money to businesses is not captured in professional services. So you can ask the City Treasurer to also explain how it works.
Thank you. Jamie Gauthier, just a brief remark.
Yes. I just wanted to tack onto this conversation that we've been having about helping people to relieve the burden of utility cost in this moment that they're facing so much, especially from the federal government, and expanding relief, particularly as it relates to people's water bills. And you guys are kind of pushing back against the legislative package that I'm trying to move forward by saying that it's too expensive. Your estimate is that it's $23 million. But I just wanted to point out that PWD's budget testimony said that the 2025 and 2026 rate increases, which were substantial, were needed partly to fund expanded TAP enrollment. So every water customer in our city is already paying for some expansion of TAP. And so, I would love to know what percentage of the current TAP expansion -- what percentage of that revenue increase does the current TAP expansion reflect and how? And I think we really have to hone in on that before we say that we cannot go further.
Yep, we can get you that. We can also show what it would mean for the rate to go forward with the set of proposals, the water proposals. We can get you all that.
Thank you very much. Thank you, Council President.
Thank you, Council President. I think my question is along the same lines as Councilmember Young here. He talked about professional services. But when I looked at the budget, there's also one of the largest increases in the budget is purchase services, right. And in that category, it is growing by over $49 million and that reflects a significant reliance on external vendors, consultants, contract services, rather than looking internally to figure out how we can get those services at a lower cost. Why are we increasingly relying on outsourcing services instead of building internal capacity through city labor? And what analysis has been done to determine whether these functions could be performed at a more costly effective inhouse or the comparison to outsourcing?
The biggest portion of that increase that's showing purchase services is actually debt service on the H.O.M.E. bonds. Since that's being done through an authority, it's showing in our Class 200.
So the way the H.O.M.E. borrowing is structured, it's going through an authority that actually shows up in our Class 200, which shows here as purchase services. So it's not using an outside contractor. It's actually debt service as the biggest thing that's driving that increase.
Thank you. Any other questions or comments from members of the committee? (No response.)
Hearing none, the Chair recognizes Councilmember Isaiah Thomas for a motion that the public hearing and meeting on the bills and resolution before the committee today stand in recess until Tuesday, March 31, 2026, at 10:00 a.m., Room 400, City Hall.
It has been moved and properly seconded that the public hearing and meeting on the bills and resolution before the committee today stand in recess until March 31, 2026, at 10:00 a.m. in Room 19 400, City Hall. All those in favor signify by saying aye. (Aye.)
The ayes have it and the motion carries. This committee will stand in recess until Tuesday, March 31st at 10:00 a.m., at which time we will reconvene in Room 400. Thank you all very much. (Committee of the Whole concluded at 2:35 p.m.) C E R T I F I C A T I O N I, hereby certify that the proceedings and evidence noted are contained fully and accurately in the stenographic notes taken by me in the foregoing matter, and that this is a correct transcript of the same. ________________________________ TANEHA CARROLL