Do you know what the total dollar-amount is? COMMISSIONER BRUNWASSER: Yeah. I could tell that you in a second. This year, we expect to spend $19.6 million.
And how much do you pay -- do you know the dollar-amount you pay for electricity? COMMISSIONER BRUNWASSER: It's -- well, I'm -- give or take a million or two, we're about a $20 million- a-year user of electricity. We --
And that 286 4/7/08 - Whole - 080022, 157, 160, 164, 165 involves operating the facilities to make clean water? COMMISSIONER BRUNWASSER: Yes.
And then also pumping? COMMISSIONER BRUNWASSER: Yes. The pumping is probably the single most expensive part of our operation.
Okay. So it's roughly $40 million if -- as Councilman Jones is pointing out, if we could -- what is real -- if we were to repair the infrastructure so that we don't lose percent of our water a 16 year, how much would that cost? 17 COMMISSIONER BRUNWASSER: Uh -- 18
What's a 19 realistic number to get down to, 5 20 percent loss, a 10 percent loss? 21 COMMISSIONER BRUNWASSER: This 22 is a big controversy within the water 23 industry. We have on hand -- the head of our system for distributing water, he is the quintessential expert in the 287 4/7/08 - Whole - 080022, 157, 160, 164, 165 U.S. There's a limit to what we can do, but there's leakage in every system.
Sure. COMMISSIONER BRUNWASSER: Even new systems. And there's an engineering --
I'm not being -- I'm just asking the question. COMMISSIONER BRUNWASSER: No. 12
What's realistic to get down to? Is there an investment we could make that could lower our leakage? And what is it? COMMISSIONER BRUNWASSER: We are investing, but what that investment dollar is, I don't know.
Okay. It just seems we could save 9 million a year roughly in chemicals and electricity if we got down to zero leakage; that's unrealistic. But what is the most efficient system in the country; do you know? 288 4/7/08 - Whole - 080022, 157, 160, 164, 165 COMMISSIONER BRUNWASSER: No, because most of the water utilities have varying ways of reporting unaccounted-for water. Some utilities account for one hundred percent of their water, but -- which -- and none of it is leakage. So it's a -- the -- our people have tried to get the American Water Works Association to adopt a standard of what leakage means. And I would say that it would be wonderful to lose only 10 percent of your water. Remember, now, some of the water losses that we have are in firefighting or in legitimate uses of our hydrants.
Sure. COMMISSIONER BRUNWASSER: But it would be a tremendous investment to try to really bring down the leakage. And it's a amazing 'cause --
Do you know if it would be a tremendous investment, 289 4/7/08 - Whole - 080022, 157, 160, 164, 165 or is that a -- COMMISSIONER BRUNWASSER: Oh, we're --
So what's it on the order of? COMMISSIONER BRUNWASSER: We go through 1500 miles of water main inspection each year, but -- just for inspecting, and it's not as obvious as one would think, but it would be a large number to try to, for example, to say we're going to replace all of the lydite pipes in our distribution system; this is pipe that was laid about 60 years ago. Probably because of the war, we did not have the best materials at that time. That's a group pipes we'd love to replace. And we have pipes that are over a hundred years old in the system, some of which are doing perfectly well. But if you were to replace all of that and somehow go into all the old parts of the City, especially the 290 4/7/08 - Whole - 080022, 157, 160, 164, 165 parts that have, you know, subway cars near them or heavy truck traffic, et cetera, that would be a monumental task. (Timer bell rings.) COMMISSIONER BRUNWASSER: It costs us, I think, per one mile of sewer main -- about $3 million in miles per sewer main and about 1 million per water main per mile. So we have 3300 miles of water main and --
And how much of the kind you're talking about, lydite and over a hundred years old? COMMISSIONER BRUNWASSER: I don't have that percentage. I would say that our average age of pipe is about 75 years.
Okay. Does anyone else have questions? (Councilman Clarke assumes position as Committee Chair.)
Yes, 291 4/7/08 - Whole - 080022, 157, 160, 164, 165 Councilman.
Thank you Mr. Chairman. You know, you guys are pretty innovative. I heard from one of my contacts in the suburban company that you're -- in trying to deal with this leak issue, you've done something very -- or you're considering -- you're going to lower the pressure in certain areas when the pressure is not needed to minimize the amount of water that's lost, you know. And I think that's a pretty smart thing for you guys to even think of. So there's a perfect example of thinking out of the box and being able to reduce the loss of water when water pressure's not required. Good thought there. One of the things that really 292 4/7/08 - Whole - 080022, 157, 160, 164, 165 bothers me, and I've talked to this issue before, is the permits that we give to contractors, landscape gardeners, or whoever, to come to a -- to come to a hydrant and fill up a tanker truck and pay only a few dollars for that water. I mean, I saw personally -- not recently, but in the recent past, a tanker truck pulling up to a City limit hydrant, Northwestern and Germantown Avenue, loading up many thousands of gallons of water and heading right back to the suburbs with it. I would hope that we are scrutinizing as carefully as possible, especially -- you know, when water was cheap, I guess it wasn't a big deal, but more people, I think, are taking advantage of those construction permits and taking water to wash down driveways at their facility or whatever, and that's not the purpose 293 4/7/08 - Whole - 080022, 157, 160, 164, 165 of that permit for them to take water without -- it's blanket. They can take, from what I understand, as many gallons of water as they want with that permit and have to self-report on how much they take? COMMISSIONER BRUNWASSER: Well --
I don't know how it works, but could you please send a copy to the Chair of how many of those type of arrangements we have and the purpose of them and if we need to refresh the requirements for those, I'd appreciate it. Do you have any knowledge of that right now? COMMISSIONER BRUNWASSER: Well, I can say, Councilman, I know you have raised the issue in the past, and due to you raising that issue, we made sure that we raised the cost of these permits to reflect what we believed were accurate, true costs of the 294 4/7/08 - Whole - 080022, 157, 160, 164, 165 department.
How does a suburban contractor come to a Philadelphia hydrant and take thousands of gallons of water someplace? How do we get compensated for that? I mean, tell me, how much is this permit? Maybe I'll buy an old used truck. I don't know. COMMISSIONER BRUNWASSER: I'm not sure this guy had a permit.
How much is the permit? Somebody knows. COMMISSIONER BRUNWASSER: I do know we raised the cost significantly. It's $200 for a one-week permit and $2,000 for a six-month permit. Now, believe it or not, our water, as you say, it's not as cheap as it used to be but it's still very cheap, and it's less than half of Philly's -- well, Aqua, Pennsylvania and Pennsylvania (indiscernible).
That's my 295 4/7/08 - Whole - 080022, 157, 160, 164, 165 point. That's why a particular contractor got the permit, had his business in Montgomery County, came to Philadelphia, filled up 5, 6,000 -- I don't know how many a truck, took it back, and they're watering the lawn with it. So I really think that there should be a better way. COMMISSIONER BRUNWASSER: Right.
If they want our water, they should pay for it by the gallon, just like any other commercial customer pays. I mean, for 2,000 bucks for six months, they can take a lot of our water. COMMISSIONER BRUNWASSER: I agree with you, Councilman. If you see him again, if you could, you know -- of if you give us the location, we may take -- you know, we have people who live up that way, and we'll look for him and see --
I just think 296 4/7/08 - Whole - 080022, 157, 160, 164, 165 the whole process should be as tight as humanly possible. It's got to have real justification for it. Just a person to just show up with 2,000 bucks and to give them six months, especially during the summer months, a blanket access to a hydrant, that if a policeman shows up, I mean, that's how I learned about it, I called the police on this guy. And they went over and he showed 'em a permit and drove off to Montgomery County. So I really think it's too loose, and I'd appreciate your revisiting it. COMMISSIONER BRUNWASSER: We will, and we will check all of our existing permits. And it's not as many as one would think, but -- so we'll be able -- should be able to pin down who this is.
Good. And do you have any comments on that lowering the pressure thing? I forgot 297 4/7/08 - Whole - 080022, 157, 160, 164, 165 to ask you about that. Have you started to do that yet? COMMISSIONER BRUNWASSER: Yes, yes, we have. As I said, we have one of the foremost experts in the water industry on unaccounted-for water, or lost water, as some would say. And we isolated -- we were able to isolate a piece of our area, our service area in one of the neighborhoods. And so we get good readings going in. We actually have a meter of the water going into feed this neighborhood. And we know, with AMR now, what all of the meter readings are on any given day. So when we play with the pressure, for instance, perhaps after midnight till 8:00 a.m., or what have you, we are able to tell -- have a pretty good idea of what kind of leakage there is in the system. (Timer bill rings.) COMMISSIONER BRUNWASSER: -- 298 4/7/08 - Whole - 080022, 157, 160, 164, 165 and then test as to water pressure. I think our water pressure is approximately 55 pounds per square inch. If we lower that to 30 or something like that during these offpeak hours, we get an idea of how much is getting lost, you know, and how much is not getting lost, so...
Thank you, Councilman. Councilman Green, Councilman Kenney was here earlier.
Thank you, Mr. Chairman. I just have a -- I have a question about your testimony and about the explanation for why rates are going up that you provided. One 299 4/7/08 - Whole - 080022, 157, 160, 164, 165 of my staff members was at your meeting the other day. I don't understand how pension health care and other fringe benefit costs are causing your rates to go up in the future because, you know, if we do the pension obligation bond, those costs are going down for the city as a whole, and that would presumably include you. COMMISSIONER BRUNWASSER: We will adjust -- I mean, the budget can be adjusted if that actually happens. I'm assuming it can happen, but I have not -- we have not heard exactly what the parameters of that will be for us.
So these rate increases assume that the bond's not issued; is that correct? DEPUTY COMMISSIONER CLARE: It --
In other words, it assumes your contribution to the MMO. 300 4/7/08 - Whole - 080022, 157, 160, 164, 165 DEPUTY COMMISSIONER CLARE: It assumes a roughly percent increase 4 over Fiscal '08 costs. In the last 5 four years roughly, our pension and health-care costs have doubled. So what was provided in the last rate case is roughly one half of our current costs. So we're -- although we've saved money in our areas, you know, the current rates do not have enough even to cover what our Fiscal '08 pension obligations are.
Madam President, Steve Agostini, Budget Director. Councilmember, we will go back and look at those rates as they are affected by pension. It's our anticipation that if we do move forward with a pension obligation bond that, indeed, there will be savings that will accrue not only to the Water Department but to the Airport 301 4/7/08 - Whole - 080022, 157, 160, 164, 165 Commission as well, and they will get reflected in rates.
Thank you. Along the lines of what Councilman Rizzo was asking, it's come to my attention that we have deals with surrounding municipalities, counties, water authorities, et cetera, where we charge them for our water far less than we charge our own citizens. Can you explain why we do that, why we don't charge them the same thing we charge a business in our jurisdiction or a citizen? COMMISSIONER BRUNWASSER: Basically, it's -- this is -- these are wholesale rates. We are not allowed to retail to the suburbs. We don't have individual homes or businesses that are our customers in the suburbs. So what we do is, we bring, for instance, the water to our border, where it is then taken by Bucks County 302 4/7/08 - Whole - 080022, 157, 160, 164, 165 or Aqua, Pennsylvania, and distributed into their system, into their series of water mains, et cetera. And they are the ones that collect from their retail customers thereafter. So what we're doing is, we're providing wholesale water at -- for example, Bucks County, it's one pipe, one pipeline at a reasonably steady amount of flow 24/7, and there's a cost associated with that, and we have fully captured all of the costs associated with providing water to Bucks County. And when their current contract, which was signed in 1966, when that contract expires in 2011, we will also be charging them a management fee over and above the cost of service rates.
We only charge for the cost of service; we don't make a profit on that? COMMISSIONER BRUNWASSER: We 303 4/7/08 - Whole - 080022, 157, 160, 164, 165 have on virtually all, I think, all of our other wholesale contract -- wholesale contracts, most of which are the waste-water side, we do charge a management fee of at least percent. 7
Were those 8 contracts -- are those contracts 9 required -- was that 1966 contract 10 approved by City Council? DEPUTY COMMISSIONER CLARE: We have an ordinance that enables us to wholesale both water and waste water.
But any contract over a year requires the approval of City Council? DEPUTY COMMISSIONER CLARE: No, not based on the enabling legislation from Council, which allows to enter into long-term agreements.
That's a Charter provision; we can't overrule a Charter provision, I don't think. COMMISSIONER BRUNWASSER: No, these are -- I think the Charter 304 4/7/08 - Whole - 080022, 157, 160, 164, 165 provisions were written for the expenditures, not for -- not for receiving revenues --
Okay, that's true. COMMISSIONER BRUNWASSER: -- from outsiders.
Yeah, okay. Well, who sets the wholesale rate? COMMISSIONER BRUNWASSER: The Water Department.
So why is our wholesale rate not making us a, you know, at least a percent internal 17 rate of return like private industry 18 would require? 19 (Timer bell rings.) 20 COMMISSIONER BRUNWASSER: I think most of the water industries in Pennsylvania are probably not making much more than 10 percent currently.
Okay. Why aren't we making a 10 percent internal 305 4/7/08 - Whole - 080022, 157, 160, 164, 165 rate of return? Why don't we set wholesale rates at a point that lowers the cost of operation to the citizens of the City of Philadelphia who subsidize this every year with capital expenditures, floating bonds, et cetera? COMMISSIONER BRUNWASSER: Yeah, the citizens of Philadelphia do not subsidize the townships, neither do townships subsidize the City. What we are able to do through these contracts is to spread the large fixed costs of our -- of our water plants, our waste-water plants, and the appropriate -- the appropriate water mains and sewer mains that we have servicing, you know, both the City and the suburbs; in other words, they also pay for capital separately.
To us. COMMISSIONER BRUNWASSER: Yes, yes. They get a capital charge in addition to their operating charge. 306 4/7/08 - Whole - 080022, 157, 160, 164, 165 Now, this brings us about $35 million in annually in revenue. And, obviously, that -- the owners of the system, the citizens of Philadelphia, the government of Philadelphia owns us. That accrues to our benefit. And I should say that they have already received notice of the rate increase, and they will begin paying new higher rates beginning July 1st.
Can we, by ordinance, set what rates minimum for that you are required to charge? COMMISSIONER BRUNWASSER: I don't believe so, I don't believe that's in the Charter.
If we've enabled you to enter into these contracts, can't we set a floor on rates?
I don't think so. 307 4/7/08 - Whole - 080022, 157, 160, 164, 165 COMMISSIONER BRUNWASSER: I think you can set standards, certain standards. We set rates -- the Water Department sets rates within the standards set by City Council. In other words, City Council has told us, We want eligible seniors below a certain income level to get a 10 percent discount. So when we set 11 rates, that is part of our standard, 12 the standards that the Council has set. 13 So I think in the Charter, it 14 says that the Department sets rates 15 subject to the standards of the 16 Council. But the Council does not set 17 rates. 18
Okay, 19 Councilman Green, if you have other 20 questions -- 21
-- 24 you're going to have to wait for the 25 next go-around. 308 4/7/08 - Whole - 080022, 157, 160, 164, 165 Thank you. The Chair recognizes Councilman Kenney.
Thank you, Madam President. I was in my office, listening to the testimony, and the time I was up here, I was listening to all of the things that you do wrong. I figured I'd come up and tell you about something you're doing right. I think in the last years 14 I've been here, I think the Water 15 Department has been one of the more 16 professional and competent departments in our government. But I want to compliment you on one particular effort that you've made, and that's relative to the flooding conditions and situations in South Philadelphia, especially during heavy rains. First of all, I think that the seminars or meetings that you have 309 4/7/08 - Whole - 080022, 157, 160, 164, 165 held, the town meetings, have been extremely informative, extremely helpful in helping people understand how a lot of these issues started with the angle of their outflow pipes and all of these things that I sat actually for the first time and learned a lot myself. So I think it's done a great deal of education in getting people to be less -- not less annoyed about their flooding problems but more understanding of what the physical and engineering issues are surrounding it. Secondly, on your capital program, your capital projects in that South Philadelphia area, especially the huge water mains, storm drains, and storm mains that you've been reinstalling and refurbishing and fixing down there have gone a long way in reducing the number of complaints that I know I get and for sure that Councilman DiCicco has gotten over the 310 4/7/08 - Whole - 080022, 157, 160, 164, 165 years 'cause he's gotten slammed as heavy as the rain has slammed us in the area. So a lot of these capital projects that have been completed, that are ongoing, and that are planned have really calmed down the real serious concerns that people had. We have a little way to go, but I just want to thank you for your attention to this issue because, as you know, a flooded basement can ruin a couple years of your life in trying to get your house back together. So I want to thank you for that and thank you for your professionalism that you've always shown here and in conducting your mission. And that's all I have to say. COMMISSIONER BRUNWASSER: Thank you.
Thank you, Councilman. 311 4/7/08 - Whole - 080022, 157, 160, 164, 165 The Chair recognizes Councilman Jones.
I just thank you for your endurance, having sat through these many hours of testimony. And I would just ask real quick: Your Water Ways Restoration Team, I understand that you've dedicated a crew to remove large debris from streams and tributaries. Can you give me some idea where you've decided to focus your efforts? COMMISSIONER BRUNWASSER: Well, Councilman, I think we have six water ways -- I mean, we have watersheds in the City and so, you know, obviously, Fairmount Park everyone is familiar with, but we have water -- we have a number of watersheds and we have Pennypack Park and Cobbs Creek and places like that. I think they go where they believe is the most -- is the most problematic spot, but they're working 312 4/7/08 - Whole - 080022, 157, 160, 164, 165 their way through the park, and they've removed a tremendous amount of tonnage. I believe we may be reporting this in Philly Stat, you know, from now on how much debris has been removed from waterways inside the City. This goes all the way from abandoned vehicles to the usual shopping carts and trash. And this is the -- the group that does this is very energetic and very happy to do this kind of environmental work. So we're going to see whether or not we can augment them in the future as well. We'll see what the need is.
It says you have five new projects. I just -- for purposes of -- if you could give to the President those projects, that would be helpful to me. COMMISSIONER BRUNWASSER: Okay. 313 4/7/08 - Whole - 080022, 157, 160, 164, 165 Great.
Thank you, Madam Chair. Back to this issue of what we charge the suburbs. Isn't there one place where you sell water directly, to Philadelphia Park? DEPUTY COMMISSIONER CLARE: There is one building. We do waste water directly on City Line Avenue, the GSB Building, I believe, and the Friends Select Building.
I thought in the '70s, when Philadelphia Park was built, we put a water line right into that property. COMMISSIONER BRUNWASSER: There 314 4/7/08 - Whole - 080022, 157, 160, 164, 165 may have been a pipeline at one time, but since the late '70s, Philadelphia Park has been a customer of Bensalem.
You might want to check on that. COMMISSIONER BRUNWASSER: Okay, we will.
Maybe that's where percent of our water's going. 11 I don't know. But there was a direct 12 line from us to them, I believe. I 13 could be wrong. 14 But in this time, when we're 15 -- yes? 16
Point of 17 information. 18 COMMISSIONER BRUNWASSER: The 19 Chair recognizes Councilman Jones. 20
Thank you, Madam President. That's percent of our fresh 23 water that we lose annually to leaks from breakage.
Thank you, 315 4/7/08 - Whole - 080022, 157, 160, 164, 165 Councilman Jones. So I note -- can you tell me -- I'm trying to figure out what we can make by having different wholesale rates. And we're making a lot of tough choices in this budget year for us. I don't know whether we can recapture, as the owner of the Water Department, any revenue or profits you have or whether we can place a tax on water that's put outside the City. We can't do that? COMMISSIONER BRUNWASSER: That was -- there was a time in the 1970s, when the Water Department was charged a payment in lieu of taxes, and that was thrown out by the State Supreme Court.
Well, we can tax water that crosses the City line from Philadelphia to Bucks County or place a tax in addition to the wholesale rate? Has that ever been tried? COMMISSIONER BRUNWASSER: I 316 4/7/08 - Whole - 080022, 157, 160, 164, 165 don't know if that would be legal or not. I mean, that would be a question, obviously, for the Law Department, I suppose.
I just note that we're charging our -- for water charges, we're charging our residential customers here in the City of Philadelphia $20.36; I don't know what that is per -- what is that per thousand gallons? COMMISSIONER BRUNWASSER: No, that's a typical customer. That's 7,000 gallons.
That's 7,000 gallons, okay. COMMISSIONER BRUNWASSER: Or, excuse me, 7,000 cubic feet, which is much, much more than 7,000 gallons.
For 7,000 cubic feet. And what would we charge, say, Bucks County for example? COMMISSIONER BRUNWASSER: I don't have that number at my 317 4/7/08 - Whole - 080022, 157, 160, 164, 165 fingertips. But, again, it's --
Yeah, I understand your point. They charge their customers, what; do you have any sense? COMMISSIONER BRUNWASSER: I think Bucks County, they may be in the table.
They're not -- they're in the table for sewer charges at 49.76 compared to our 18. COMMISSIONER BRUNWASSER: Yeah. I think Bucks County Water & Sewer is a wholesaler. I think Aqua -- well --
So we sell to Aqua in Bucks County? COMMISSIONER BRUNWASSER: We sell -- we sell to Aqua, we sell to Bucks County.
Well, I can tell you Aqua, Pennsylvania, charges its customers in Bucks County 46.51 for the water that we're selling them for 5, 7, 8. They don't have any of the 318 4/7/08 - Whole - 080022, 157, 160, 164, 165 production costs associated with that. It seems to me, you know, with no risk, they're just a resaler, and they're marking us up 4, 5, 600 percent; that doesn't make sense for the City of Philadelphia to do that. COMMISSIONER BRUNWASSER: Yeah. They -- they -- they provide -- there's a provision -- somebody's providing the service of -- you know, most of the cost in the utility is providing the other services associated with providing water, you know, and --
What is the cost of production, including all of the, you know, fixed costs of water? COMMISSIONER BRUNWASSER: It's --
Compared to the -- COMMISSIONER BRUNWASSER: I don't have that number, but the number is quite a bit less.
Well -- 319 4/7/08 - Whole - 080022, 157, 160, 164, 165 DEPUTY COMMISSIONER CLARE: They're charged at full cost of service plus a depreciation and return on investment that exceeds what our retail customers pay. And in addition to that, on top of all that, they pay a 8 percent management fee. 9 (Timer bell rings.) 10
Not currently. Maybe they will start to in 2011. DEPUTY COMMISSIONER CLARE: (Inaudible) ... permitted by contract so most of our. COMMISSIONER BRUNWASSER: Aqua pays that because they're a recent -- they're a relatively recent customer of ours. They signed an agreement, I believe, in 2001.
Well, I would just suggest that I think this is something that we ought to consider hearings on because there seems to me to be the opportunity to capture 320 4/7/08 - Whole - 080022, 157, 160, 164, 165 revenue that we're not capturing that would allow us to avoid some of the other taxes we're considering or increase services to the citizens of Philadelphia and other areas. And I don't hear you guys suggesting that, Hey, that's a good idea, that we should be capturing more money. I don't understand that. COMMISSIONER BRUNWASSER: I think we're charging appropriately to the townships, and I know we've had these discussions in the past. What we'd like -- beginning in 2011, we'll certainly be charging more appropriately for Bucks County. Remember, this is an old -- it's a contract that's been in force for over 40 years now, and, you know --
Can you just provide to the Chair a comparison of other major-city water departments, what they charge surrounding areas for their water compared to what we do. 321 4/7/08 - Whole - 080022, 157, 160, 164, 165 And let's look at best practices around the country and see whether or not your guess is correct. COMMISSIONER BRUNWASSER: No, I'm not guessing about what other utilities charge suburbanites, for example.
No, no. I'm saying, you know, I'm sure Detroit's water system, maybe Atlanta's water system, other people that treat a lot of water, sell to surrounding areas, and we ought to look at that and see what their margins are on that and see whether or not within the industry we're charging appropriate rates or not. Unless you already have that researched. COMMISSIONER BRUNWASSER: Okay. That would be a good piece of research.
Okay. Thank you. No more questions, Madam Chair. Thank you. 322 4/7/08 - Whole - 080022, 157, 160, 164, 165
Are there any other questions from members of the committee? (No further questions.)
Seeing none, thank you very much. MR. McPHERSON: Our next department is the Board of Ethics. (Witnesses come forward.)
Good afternoon. Please identify yourself for the record and proceed with your testimony.
Good afternoon, Council President Verna and members of City Council. My name is Richard Glazer. I'm Chair of the Philadelphia Board of Ethics. Thank you for this opportunity to speak on the proposed budget for the Philadelphia Board of Ethics. With me today at the table is Shane Creamer, who's the executive director of the board. 323 4/7/08 - Whole - 080022, 157, 160, 164, 165
The Ethics Board's FY '09 total appropriation request is $1 million. This amount is the same as the amount specified in Section 2-300 of the Charter, which states that the Ethics Board's budget shall be at least $1 million for the first two fiscal years following the effective date of the Charter amendment. FY '09 is actually the Ethics Board's third fiscal year because the Ethics Board was installed approximately halfway through FY '07, and that was on November 27, 2006. Therefore, this is the first fiscal year that the Ethics Board's budget is not set by Section 2-300 of the Charter. The Board believes its FY '09 budget is the key component in meeting the Administration's ethics priority. If Philadelphia wishes to demonstrate that City government is trustworthy, 324 4/7/08 - Whole - 080022, 157, 160, 164, 165 then the Board's education and advice are the cornerstones of our efforts to create an ethical culture for the City's officers and employees. The Ethics Board's proposed operating budget for FY '09 includes: $835,000 for personnel. $125,000 for services. $13,000 for materialities and supplies. And $27,000 for equipment. Needless to say, these allocations are based on our best estimates of staff needs and operating requirements as the Board continues to meet the mandates established by the Charter and Code. Since the Board was sworn in on November 27, 2006, it has accomplished much: The Board is open and renovated a new office, hired its executive director, office administrator, general counsel, and 325 4/7/08 - Whole - 080022, 157, 160, 164, 165 deputy executive director; Administered an election with the first-ever contribution limits for candidates for city elective office; Implemented electronic filing of campaign-finance reports with exceptional support from the Records Department; And approved regulations for electronic filing of campaign-finance reports and enforcement proceedings. The Board has issued nine advisory opinions, five advices of counsel, and more than 50 informal responses offering guidelines guidance on the City's ethics and campaign-finance laws. Training seminars were provided for candidates and treasurers on the campaign-finance law, and the Board is actively engaged in enforce. The campaign-finance requirements. Perhaps most important of all of its accomplishments, the Board has 326 4/7/08 - Whole - 080022, 157, 160, 164, 165 provided live and in-person ethics training to more than 25,000 City officers and employees in the past year. To our knowledge, no other city has accomplished a live ethic-training program of this magnitude. The assistance of the Personnel Department was critical in meeting this goal. These many accomplishments are set forth in more detail in our first annual report that has been filed with the Mayor and City Council. The budget for FY '08 anticipated nine full-time staff members; however, due to the demands of the 2007 election cycle and the complexity of launching a completely new agency, the Board was only able to hire four of these positions. We expect to add four new full-time staff members in the next few months, including two who will start within the next three to four weeks. The Board's FY '09 budget 327 4/7/08 - Whole - 080022, 157, 160, 164, 165 represents a commitment to expand the staffing level to 11; to increase the Board's capacity to meet three major goals; to provide advice; to conduct training and adjudication; and to ensure compliance with the City's public-integrity laws. More staff will enable the Board to provide more specialized training for City officers and employees to prevent ethics problems before they occur. New public outreach programs and materials will enhance citizens' opinion of City government, and a new business education initiative for vendors will supplement and reinforce broader efforts to eliminate the perception of a pay-to-play culture.
It should be noted that the Board relied heavily during its first two years on pro bono legal counsel to support its litigation activity. The Board can no longer assume that such 328 4/7/08 - Whole - 080022, 157, 160, 164, 165 volunteer legal services will always be available to support its growing volume of litigation activity. The Board has, therefore, requested an additional hundred thousand dollars for its FY '09 budget to meet the need for outside legal representation. Philadelphia has worked long and hard to establish the essential elements of a robust ethics program. With its FY '09 budget, the independent Board of Ethics will continue to build the infrastructure necessary to implement and promote the City's public integrity laws. The Board will continue to work diligently and fairly to restore and maintain public confidence in the integrity of City government. Thank you.
At this time, either I or Mr. Creamer to my left or 329 4/7/08 - Whole - 080022, 157, 160, 164, 165 other staff members who are here with us today would be policed to answer any questions.
Thank you very much, Mr. Glazer. You mentioned in your testimony that you will be implementing a new business education initiative for vendors. Could you share your thought as to how this program will work?
A few particulars, yes. In fact, we have started some of the outreach already in terms of going to the ABA, to the Chamber of Commerce. And recently, I attended a board meeting of the Philadelphia contributionship. But essentially, the idea is to sensitize people who do interact with the City as vendors to the provisions of 17-1400, the laws that relate to noncompetitive bidding contracts, as well as those things 330 4/7/08 - Whole - 080022, 157, 160, 164, 165 that affect City employees when vendors interact with them, such as, for example, gifts at Christmas, conflicts of interest, resolving door, et cetera. Those things not only need to be addressed with the City employees but also with businesses that interact with City employees.
Thank you very much. The Chair recognizes Councilman Greenlee.
Thank you, Madam President. Good afternoon, gentlemen.
I guess this is kind of a general question. And I know you -- and I'm well aware of the ethics training you've done. And in your testimony, Mr. Glazer, you talk about the non-advisory opinions, advices of 331 4/7/08 - Whole - 080022, 157, 160, 164, 165 counsel, and you said more than 50 informal responses. I guess my general question is: Has there ever been what I would call like a written dos and don'ts sent -- do public employees, have they ever been directly informed like that? 'Cause I know the training sessions -- I'm sure there's things you cover in every single one, but they're all, I guess, somewhat different, depending on questions, whatever. Has there ever actually been -- I guess I can't say it any other way -- a dos and don'ts that each employee has?
I'm not sure exactly what you're talking to, but I think I can address it in some respects.
On our website, at a minimum, there are a series of 332 4/7/08 - Whole - 080022, 157, 160, 164, 165 questions and answers with respect to the ethics laws. The City Law Department has also regularly published information on particular issues. The Board itself provides newsletters as well as the training that has been implemented for City employees. And perhaps there's other things that I'm not thinking about.
Yes. There -- we have on our website a list of what we call "Ten Things Every City Employee Should Know About the Ethics Rules."
And I think in terms of topic, it covers about 80 percent of the Ethics Code. It's not exactly what I think you're contemplating in dos and don'ts.
But that may be something that we can consider doing in the future as part of our education and 333 4/7/08 - Whole - 080022, 157, 160, 164, 165 training mandate.
I guess what I'm getting at -- and I you and I had a conversation a while back, and you used the term even before I had a chance to say it, that you didn't want to play "Gotcha," and I appreciate that and I understand that.
But I still think there are questions sometimes that people have, and maybe they're Councilmembers, employees, employees elsewhere, and they're not quite sure, you know. And I know -- I guess it's impossible to cover every single thing that somebody might think about, but there's still seems to be a lot of questions out there. And I guess when I see 50 informal responses, you know, obviously, there's things that come up that people think about. And, again, 334 4/7/08 - Whole - 080022, 157, 160, 164, 165 in fairness, I'm not saying you're out there trying to just catch people, you know. And, you know, I think you have in many ways worked on the education aspect of it, and I appreciate that. But I still -- like I said, I know this is sort of vague and general, and I understand what Mr. Glazer said when he said he wasn't quite sure where I was going, and I'm not totally sure I'm going on this. But I'm just -- I guess I still have a little discomfort, you know, sometimes that people maybe have no idea that they could be doing something at least -- I won't say it's wrong, maybe you guys consider it wrong okay? And that's where I'm kind of asking.
Okay. 335 4/7/08 - Whole - 080022, 157, 160, 164, 165
And that is, there are a relatively finite number of rules for people to follow.
And it is in everyone's interest to make them as clear as possible. But having said that, the fact of the matter is, as our general counsel always says, these issues are fact-sensitive. So the slight changing of a fact, as it relates to conflict of interest or resolving door or gifts or any of these other things, affects the conclusion.
So the bottom line is that we would hope to sensitize people to, when there is doubt in their mind, to ask, to come and ask. And we will be as responsive as we possibly can as promptly as we can, because it's very, very hard to anticipate every 336 4/7/08 - Whole - 080022, 157, 160, 164, 165 imaginable scenario that might arise.
If I could also address your concern. I think the overall mission of the Ethics Board is to enhance and promote public confidence in City government, and there are many ways of doing that. Playing a "Gotcha" game, I think, is not the only to way to do it and it's probably not the best way to do it, and that's why I would --
That's not what we're about. Education and training is another way that we can publicly demonstrate that people are interested in learning about the rules, they are leering about the rules, and we are answering questions about the rules. But there are also other ways 337 4/7/08 - Whole - 080022, 157, 160, 164, 165 that we can exercise our discretion. We can enter into resolutions, which we've done in the past. Even when people are not in violation, where they've been technically out of compliance, we've encouraged them to come to compliance, and they have. And we can demonstrate to the public that these individuals and committees are following our advice and recommendations to come into compliance, and I think those are all important ways to enhance publication public confidence in City government.
Okay. All right. Thank you. Thank you, Madam President.
You're welcome. The Chair recognizes Councilman Kelly.
Thank you, Madam President. Gentlemen, I just want to go 338 4/7/08 - Whole - 080022, 157, 160, 164, 165 back no our ethics bills relating to campaign finances. Now, I voted for those bills, incidentally. I just want to go back and find out if there has been any changes to the effect -- to the effect that contributing limits to any person, any candidate running for office.
Yes, there has been. And there has not been a change by legislation, but the legislation that was originally passed, I'm not sure -- there have been several amendments to the campaign-finance law. I'm not sure whether it was in the original law. I think it was. There's a cost-of-living increase that's built into the contribution limit that goes into effect every four years. The first cost-of-living increase occurred in January of this year, and so individual contribution limits are now $2600 for PACs; and for firms, it is 339 4/7/08 - Whole - 080022, 157, 160, 164, 165 now $10,600. And those will be the limit for the next four years.
I'm not sure I know what you mean by "multiple partnerships."
Well, I mean someone that really is -- it's more or less a person with like common ownership, various ownership with one common company.
That would certainly depend on the circumstance, and we'd look very carefully to see what the sources of the money --
Well, in other words, is it perfectly legal for multiple partnerships with common ownership to make the contributions up 340 4/7/08 - Whole - 080022, 157, 160, 164, 165 to the limit of $2600 -- or 10,600?
10,600 now. I think it would depend on how those contributions were made, what the source of the money was, who authorized the --
Well, according to the ethics bills that we passed, multiple partnerships are limited to $10,600. Now, are they not or are they?
But if someone were to contribute that, what would you do? What advice would you give them?
Well, I'd like to get the question first; that would be the start. We haven't had such a question. We could issue an advisory opinion if we did get such a question, but after the fact, we're left with an enforcement situation, and it would 341 4/7/08 - Whole - 080022, 157, 160, 164, 165 depend upon whether's a violation, it would depend upon whether --
Mr. Creamer, I don't want to disagree with you, but you did have that question, and it was October of last year, and you replied the way you just did now. You replied that it was perfectly legal --
I beg your pardon, Councilman, but I did not answer that question that way. And that was at a training session. I have clarified that.
Well, let me ask you another question: If someone were to contribute above the limits by the ethics bills, what happens there?
Well, if -- it would depend on when it occurred. If it -- and when we've discovered it. If we've discovered it quickly, before the 342 4/7/08 - Whole - 080022, 157, 160, 164, 165 money was spent, we might be able to resolve the matter by having the money returned.
Now, what I'm asking about is, what is the penalty? Is the penalty against the person contributing, or is the penalty against the candidate or the campaign committee?
That's a good question. They're actually both violations. So let's say an individual gives an excess contribution to a candidate for City office; it's a violation of Section 10-102. I think it is Subsection 6 for the candidate to receive it. And it's a violation of Subsection 2 for the individual to make that contribution. So it's both a violation to give and a violation to receive.
Well, what penalties does a person contributing receive? How do you do that? Are you 343 4/7/08 - Whole - 080022, 157, 160, 164, 165 responsible for putting the fine in?
Well, we can recommend fines, yes. The violations are punishable by a fine of $1500 in 2007 and $1900 in 2008.
This would be an adjudication proceeding that either would be done in accordance with our internal adjudication procedure and the Board would make those findings, or by going to Common Pleas Court to seek the enforcement. (Timer bell rings.) 344 4/7/08 - Whole - 080022, 157, 160, 164, 165
But you're still responsible for sending out the enforcement. If someone were to -- well, I'll ask that in the next round.
Very well. The Chair recognizes Councilman Green.
Thank you, Madam Chair. Good afternoon, Mr. Glazer and Mr. Creamer. How are you?
Good. I was looking for -- I'm not really following up on Councilman Kelly's line of inquiry, but I was looking for 10-102. Is that a Charter or a Code reference?
10-1026 and 10 -- 345 4/7/08 - Whole - 080022, 157, 160, 164, 165
So it's section 10 1002, Subsection 6 for candidates and Subsection 2 for individuals.
Excuse me for a second while I get rid of my Water notes. Could you just talk -- you mentioned that the mandate of the Ethics Board is to increase public confidence, and I agree that that would be the end-result of the Ethics Board doing the job well. But the mandate of the Ethics Board is to administer and enforce the 346 4/7/08 - Whole - 080022, 157, 160, 164, 165 ethics provisions of the Charter on the Ethics Code; would you agree with that?
I agree with that. I guess that was really sort of our larger mission, is to increase public confidence in government.
No, your mission is to administer and enforce the ethics provisions of the Charter and the Code.
Okay. I just -- and then, if you do that effectively, I'm confident that people in government -- or the citizens will view government more favorably. Just the fact of your existence probably helps out in that to a great degree. Also, I would say the rest of us in government also have that same broader mission.
That we 347 4/7/08 - Whole - 080022, 157, 160, 164, 165 could all, you know, claim that as our mission, but it's how we conduct ourselves also in public office or the civil servants and the other people you have jurisdiction over. It's how every individual employee conducts themselves can increase confidence in government. And that's certainly a part of the training sessions that you have, and I just wanted to say that that's a role far bigger than the Ethics Board. Everyone in City government --
And the people outside of government have a role in that, too.
I agree. So can you just briefly describe -- in your testimony, you mentioned a number of sort of new areas where you're going to go 348 4/7/08 - Whole - 080022, 157, 160, 164, 165 forward, advice and training to -- new-business education initiatives, I know the President mentioned that. And can you describe at what point in the process -- what is the process of your investigatory function; in other words, the enforcement? Everything that's sort of mentioned in here is proactive and it's not really discussed. The enforcement side or the investigation increase side is not really mentioned in your testimony. And it seems to me that there's a lot of work that can be done on that side. Could you discuss how you intend to do that or what your plans are for the trees, not the forest?
Certainly. The testimony does mention the additional requests for $100,000 for outside counsel, which is necessary due to enforcement matters primarily. 349 4/7/08 - Whole - 080022, 157, 160, 164, 165 The budget details also include some investigatory staff and also a director of enforcement, who will be joining us on April 22nd. So that's in the information as well.
Well, it just seems like we're heavily weighted towards policy in the Ethics Board in terms of -- versus enforcement investigation and inquiry. For example, there's -- I can't remember how many members of boards and commissions there are in the City of Philadelphia, plus public officials. Each one of them files financial-disclosure forms, other statements, both with the City and with the State. You know, obviously you're a part of that filing system. People file campaign-finance reports during campaign season. Vendors, you know, are looking to do contracting with the City. Sometimes people on boards and commissions work 350 4/7/08 - Whole - 080022, 157, 160, 164, 165 for City vendors. There's a lot of just sort of work that has to be done going through each of those filings to see if conflicts have arisen that were not disclosed, or make sure people are properly abstaining from votes. And I'd like you to talk about that aspect of what you do, how much you've done to date and you plan to deal with that in the future.
No, with the enforcement, investigation, inquiry side in general. I mean, the thing that's going to really in theory help you, you know, let people know that you're doing that side of your job. (Timer bell rings.)
Let me start off, and then I'll hand it off to Shane. I'm not sure I totally agree with the thrust of your statement, 351 4/7/08 - Whole - 080022, 157, 160, 164, 165 which seems to suggest that enforcement's the key. We like to think that education, training, and those sorts of things are the more important thing. But, as we did say -- as I did say in the testimony, the Board is actively engaged in enforcement of the campaign-finance requirements today. And I'm sure you know that all of our investigations are confidential until there's a resolution of them. So there are many, many things going on behind the scenes right now on campaign finance. And I don't know if that's responsive directly to your inquiry.
I'm just talking generally proactive behavior in the enforcement, inquiry, and 352 4/7/08 - Whole - 080022, 157, 160, 164, 165 investigation side, like looking at financial-disclosure statements.
You know, comparing those to people's voting records on that board of commission, seeing if they had any salary from somebody that they, you know, voted on. That's sort of -- that's a lot of grunt work, and it may not be very -- you know, a lot of fun, but that's -- in theory, I think we've assigned that task to you guys.
With financial disclosure -- I'll start there -- we really only have jurisdiction over the City financial form. That's in the Ethics Code; it's required in Section 24 20-610 of the Ethics Code. The other two forms -- the 353 4/7/08 - Whole - 080022, 157, 160, 164, 165 Mayor's form exists by executive order. We don't have jurisdiction to enforce executive orders. And then the third form is, of course, the State form. We advise everybody who has to file any combination of all three forms on what they have to file, but we only have jurisdiction to enforce the City form. And so, what we did last year with very limited staff -- there were two of us -- is first to identify who we think has to file the City form, and it's kind of easy and hard at the same time. There are basically about 48 individuals in City government that have to file. All elected City officials, all department heads have to file. And then the third category is all board and commission members. And that's the hard piece to figure out. There are 81 board and commissions of 354 4/7/08 - Whole - 080022, 157, 160, 164, 165 the City, and all of them have to file 3 the City form. Some of them have to also file the State form, depending on their authority. And others still have to file the Mayor's form, and some have to file different combinations of those three. We have had a very difficult time identifying who are on the boards and commissions. Last year we reached out to all of the chairs of the boards and commissions and asked them to notify their membership that they had to file whatever forms we had determined they had to file. But we -- and we're working with the new administration to identify who's on these boards and commissions. The problem is that when these people get assigned to or appointed to boards and commissions, the boards and commissions tend to go off and do their work, and some of them get are related to different departments and 355 4/7/08 - Whole - 080022, 157, 160, 164, 165 get tracked better. And others work more independently. And so, when there's turnover, there may be new appointments, but the administration may not be capturing that turnover and change and identifying the new members and eliminating the old members from their list. It's my understanding that the new administration has someone who's working on gathering up more information, getting better control over the boards and commissions so that we'll be able to better identify who those people are. So the first cut last year with financial disclosure forms was to first check to see who filed, who we know have to file, and we did that. The second cut is to check the forms to see whether there are obvious errors. Frequently -- this happens every year -- people fill out the form 356 4/7/08 - Whole - 080022, 157, 160, 164, 165 and they'll check -- in the box for income, they'll check "none," or source of income, they'll check "none," even though the instructions say that you have to declare your City income as a source of income. So that would be an obvious mistake that we could capture by just looking at the four corners of the report. The third cut would be to do what you're suggesting, is to sort of look outside the four corners of the finance disclosure statement and see if you can find some conflicts or other violations. And we don't have the capacity to do that, nor would we, I think, even with the 11 staff members that we are hoping to get by the end of Fiscal Year '09.
So, basically. I'm sorry, Madam Chair. My time was up; I don't know if other people have questions. 357 4/7/08 - Whole - 080022, 157, 160, 164, 165
So if you don't mind waiting until the next go-around. The Chair recognizes Councilman Kelly.
Thank you, Madam President. Mr. Creamer, I just want to go back to the penalties process according to the ethics. You mentioned in your testimony that if anyone gives a contribution above those limits, 10,600 or the 2600 for an individual, you mentioned that they can get fined; is that correct?
And that's either the person giving it or the person receiving it.
Mow, is there any other penalties involved with a person giving more? Suppose it's a business; would there be another penalty that you know of?