COUNCIL OF THE CITY OF PHILADELPHIA BUDGET HEARING BEFORE THE COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, February 17, 1998 10:10 a.m. - - - BILL NO. 980003 - An Ordinance adopting the Operating Budget for Fiscal Year 1999. - - - PRESENT: COUNCILMAN JOHN F. STREET, Chair COUNCILWOMAN ANNA C. VERNA, Vice-Chair COUNCILWOMAN HAPPY FERNANDEZ COUNCILWOMAN AUGUSTA A. CLARK COUNCILMAN DAVID COHEN COUNCILMAN FRANK RIZZO COUNCILMAN FRANK DiCICCO COUNCILWOMAN JANNIE L. BLACKWELL COUNCILMAN MICHAEL A. NUTTER COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center Plaza, Suite 600 Philadelphia, PA 19103 (215) 561-2220 197 I N D E X BILL 980003 Gregory S. Rost, Chief of Staff, Office of the Mayor----------------------------------- 200 William Grab, Director, Labor Relations-------- 207 Ben Hayllar, Director, Finance Department------ 236 Dean Kaplan, Deputy Director, Finance Department---------------------------------- 334 Vincent J. Jannetti, Secretary, Sinking Fund Commission---------------------------------- 351 Ben Hayllar, Chairman, Board of Pensions & Retirement---------------------------------- 354 Nancy A. Kammerdeiner, Commissioner, Department of Revenue---------------------------------- 365 Denise Garrett, Assistant Finance Director, Chief, Water Revenue Bureau----------------- 368 Dominic M. Cermele, Executive Director, Office of Administrative Review-------------------- 391 David B. Glancey, Chairman, Board of Revision of Taxes------------------------------------ 408 Thomas A.K. Queenan, Treasurer, City of Philadelphia-------------------------------- 418 Louis Applebaum, Commissioner, Procurement Department---------------------------------- 450 James A. Roundtree, Jr., Deputy Finance Director, Director, Minority Business Enterprise Council--------------------------- 460 Joseph R. Perrello, Deputy Director of Finance, Risk Management------------------------------ 477 Barry Scott, Director, Safety and Loss Control, Risk Management------------------------------ 486 Jane Lewis, Director of Claims, Risk Management- 488 Stephanie Franklin-Suber, Solicitor, City of Philadelphia--------------------------------- 500 - - - 198 BILL 980003
Good morning, ladies and gentlemen. This is a Public Hearing of the Council Committee of the Whole. Today we will hold public hearings. We will not conduct a public meeting. We have in front of us several bills. Bill No. 980001, An Ordinance to adopt a Capital Program for the six Fiscal Years 1999 to 2004; Bill No. 980002, an Ordinance to adopt a Fiscal 1999 Capital Program; an Ordinance No. 12 980004, an Ordinance amending Chapter 19-1500 of the Philadelphia Code entitled "Wage and Net Profits Tax" by decreasing the rates of the tax; and Bill 15 No. 980005, an Ordinance amending Chapter 19-2600 of the Philadelphia Code entitled "Business Privilege Taxes" by decreasing the rates of the tax based upon gross receipts and by clarifying the activities which will subject a person to tax for engaging in business within the City of Philadelphia. Now, we will have public testimony today primarily on Bill No. 980003, an Ordinance 23 adopting the Operating Budget for Fiscal Year 1999. Now, at this time we do not have a quorum in the Council chambers, and, therefore, we 199 BILL 980003 are asking Councilmembers who may be in the building, in your offices, to please come to the chamber. We need a quorum of at least nine members in order to start the Public Hearing. We thank those of you from the Administration who are here to testify for coming. We express our regrets that we are delayed in starting this hearing. We did not have a stenographer at 9 o'clock. We have not investigated it, but I would be willing to wager that she thought the Public Hearing was to start at 10:00. We probably didn't make it clear enough. But she is here, does a good job, and we appreciate her coming. And owing to the fact that we still don't have a quorum, even if she were here at 9 o'clock, we wouldn't have been started anyway. So if we could have Councilmembers come to the chamber, we would appreciate that very much. (Short recess.)
A quorum is now present in the chamber. The Chair recognizes Greg Rost, Chief 200 BILL 980003 of Staff, Office of the Mayor, who will give us a brief overview of his testimony and be available for testimony. Good morning, Mr. Rost.
My name is Gregory S. Rost. I am Chief of Staff to Mayor Edward G. Rendell. I am pleased to be here this morning to present testimony concerning the Fiscal Year 1999 operating budget for the Mayor's Office. The total amount requested from the General Fund for the Mayor's Office is $2,452,162. This represents an increase of 22,672 over our Fiscal Year 1998 appropriations. Of this amount, $1,833,678 is requested in Class 100 to cover 44 positions, three less than was included in last year's budget. In Class 200, we are requesting $371,209. The bulk of these funds were devoted for dues for the National League of Cities, the National Association of Counties, and the city's subsidy to the Delaware Valley Regional Planning Commission. Our Class 300 and Class 400 requested amounts are the same as were appropriated last 201 BILL 980003 year: $32,331 in Class 300 for office materials, supplies, and stationery; and 10,000 in Class 400 for office equipment. And the balance of our Fiscal Year 1999 General Fund request is for 200,000 in Class 500 for the City's Scholarship Program. This amount will enable us to provide scholarships of between 1000 and 1600 dollars to approximately 200 Philadelphia students who will attend college in the Philadelphia area. In addition to the General Fund, the Mayor's Office budget includes $2,159,537 from the Grants Revenue Fund. These are, essentially, pass-through dollars from the state and federal governments, principally to the Mayor's Commission on Aging and the Mayor's Commission on Literacy. The Fiscal Year 1999 amount is $38,232 less than was included in last year's budget. We are also requesting $470,164 from the General Fund in FY '99 for the Office of Labor Relations. As you know, this office was established by executive order in November 1996, and 202 BILL 980003 is charged with coordinating the city's relations with its municipal unions. The bulk of the money, those monies, $408,364, is Class 100 for the eight people who staff the Office of Labor Relations. I note that Council will be hearing directly from the Mayor's Office of Community Services concerning its proposed Fiscal Year 1999 budget later in these budget hearings. This concludes my testimony, and I would be pleased to answer any questions that members of Council may have.
Thank you very much. The Chair recognizes -- Councilwoman Verna, is your light on?
I thought I saw you hit your light. Councilwoman Verna.
Thank you. Mr. Rost, the Office of Labor Management, they were in the Personnel Department, and they were transferred over to the Mayor's Office; is that the 203 BILL 980003 same?
Councilwoman, that's partially correct. There were people that were in Personnel. There were some other people that were outside Personnel. There was a Labor Relations Task Force that was headed up by Mike Nadol, who at that time was in the Mayor's Office. Mike subsequently, after the conclusion of the 1996 negotiations, went down to the Water Department, where he is Deputy Water Commissioner. And the Mayor created by executive order the Office of Labor Relations to pool together the disparaged people within the Administration who were working on labor relations issues. It is, basically, a single point of contact for people both within the Administration, in the government, in Council, and also our municipal unions, so they know who to contact if they have issues pertaining to the city's collective bargaining agreements or labor relations at large.
Mr. Rost, with respect to the Office of Labor Relations, when the city entered into a contract with, say, District Council 33, and as part of the contract there was a wage increase granted to employees over a scheduled period of time, was that the final word with respect to wage increases? Or is there some machinery whereby each department bargains after the District Council agreement, each department bargains with its units and has the right to withhold the wage increase until that department has achieved the labor contract? I was always under the impression when we settled, say, District Council 33, that all employees covered by 33 would get a wage increase on the date scheduled. But that's apparently not the interpretation. We had it recently with the Register of Wills. And we all thank everybody involved in clearing that matter up, because we think an injustice was cleared. 205 BILL 980003 But the same thing is happening in OHCD.
Well, can you help us on that? Because we are just mystified.
Well, as I understand it -- and Bill Grab is in the gallery today -- Bill 10 is the Director of Office Labor Relations. As I understand it, the locals have to ratify the larger agreements. And in this instance Local 1971, which has approximately 35 members, they have not come to terms yet with OHCD. As I understand it, there are four issues that are still remaining. Councilman Nutter recently inquired about this, as did Council President Street, in an interest of trying to bring this to some sort of closure speedily. So, I mean, that's basically where they are. There is a state-appointed mediator from the Pennsylvania Board of Mediation, who is overseeing the negotiations. As I said, Mr. Grab is involved. We 206 BILL 980003 are trying to bring this to some sort of closure sooner rather than later. But the fundamental issue from the Administration's perspective is that we don't see any reason why 35 members of one local should receive benefits appreciably different than the 13,000 members of District Council 33.
Well, I would probably agree with your statement. My understanding of the issue is that the management is trying to take away from this group of 35 -- all of whom are relatively low-paid employees, clerk typists, and lower-ranked program analysts, something like that -- the city is trying to take away rights from them that have been accorded to, for example, in Local 1971, into the city is trying to take away rights from this third unit. There are two other units that Local 1971 has, and for these reasons these 35 workers are being offered less.
Councilman, it is my understanding that what OHCD is asking for is the same thing that the other 13,000 members in District 207 BILL 980003 Council 33 are receiving. There is no interest, from our perspective, in taking away any benefits or giving any benefits in excess of what we have provided.
Well, does this citywide Office of Labor Relations have jurisdiction over that matter?
I am Bill Grab. I am the Director of Labor Relations. To back up a little bit, the Office of Housing and Community Development is a separate --
-- is a separate bargaining unit from the District Council 33 master agreement. They have their own contract. It is a separate and distinct contract from the 33 master agreement. They have been negotiating --
Is that different, or is that the usual standard in government?
Most people think we have four major collective bargaining units, and that's 208 BILL 980003 the city's collective bargaining units. We have them, and then we have the smaller units like OHCD. We have the deputy sheriffs, which is six. We deal with Traffic Court, we deal with some other court employees represented by District Council 47. This unit has been certified by the Pennsylvania Labor Relations Board as its own unit. We negotiate separately with them. Their contract differs from the 33 contract in several ways. What we are doing now in negotiating, they have some interests which they are trying to get us to agree with, and we have some interests in changing the contract which we are trying to get them to agree with. Right now negotiations are under the supervision of the state mediator. The mediator has been doing shuttle diplomacy, basically, between the two parties and is trying to work us to agreement. What the city is seeking, basically, is to bring the agreement more in line with the master agreement in the light of layoffs and promotions and things like that.
Well, we get a 209 BILL 980003 different version. I don't want to go into the detail of the differences. But we are getting the version that the city is trying to take away rights from this group, rights that are generally accorded to everybody else. But irrespective of that, it just seems that the city has a policy when there are relatively low-paid employees, that don't seem to have much clout, of using this wage increase that we thought was granted to everybody. I just don't understand the policy.
The policy is to try to treat our employees in a similar manner, as they are situated in different --
But they are not being treated the same way; they are being treated differently.
But they want us to treat them the same way in the wages. We would like to make some changes in some of the other areas. And 210 BILL 980003 there is where we are.
This has all the earmarks of the one we went through that doesn't make sense on the surface. And the more explanation just makes it even harder to understand. I don't know why you don't give the wage increases that the whole public was told, and bargain out your differences on the other issues.
Councilman, it is my understanding they did receive the $1100 bonus in the summer of 1996.
But they didn't get the increase that I think went in December.
That all other employees got. It is nothing as far as the city budget is concerned, yet you create a situation in which many people feel the city is being very unfair to them. And you, Mr. Grab, I have to tell you, seem to be the person that's being blamed for it by everybody I have spoken with from the agency. 211 BILL 980003 And I don't want to get involved in that. I have no idea of knowing at this point whether there is any merit or not to that. But why doesn't the city just pay the money and do the negotiating on the other things?
Because we are trying to deal with a package, basically. And they have their interests and we have our interests.
Mr. President, I think if that's the Office of Labor Relations, I have to submit that it is not worth funding. Because it is creating more problems, and it is not solving them. And I would think with the citywide Office of Labor Relations, those things would have been smoothed out and you would say, don't take advantage of low-income workers, give them the increase. Let's continue to argue, keep the mediator, if you need him, and so forth.
Councilman, if you will agree and if the Chair would agree, what we could do is provide you with a brief summary of where we are in the negotiations in terms of the outstanding 212 BILL 980003 issues, so you could see precisely what we are talking about in terms of the District Council 33 master agreement, and then where 1971 is, and then where OHCD is. We will have three columns.
I would ask that you supply it to Chairman of the Council's Labor Committee, Councilman Mariano, and then he can make it available. Because I know he has also been involved. I am sure most members of City Council by this time have been involved, and we don't have any answers that make any sense.
If that meets with the Chair's approval, then I would be happy to do that.
If you send it to the Chair of the Council Committee of the Whole, I will make sure that every Council member gets it.
Councilman Cohen, if you don't mind, I would like to pass on to another Council member at this time.
Thank you very much. The Chair recognizes Councilman Nutter.
Thank you, Mr. President. Since we are in this area, why don't we stay here for a few minutes longer. If I could just go over two or three things, and you can respond that they are either correct or incorrect. In this Local 1971 matter, there seems to be a debate about the term of the contract. Local 1971 says that rather than beginning immediately after the termination of the former collective bargaining agreement, CBA, which would be July 1, 1996, OHCD wants to begin on the date of ratification of a new contract. Whereas, District Council 33, the Parking Authority, the Housing Authority all began immediately after the termination of the former collective bargaining agreement. Is that true or not true?
That has been changed in 214 BILL 980003 the last negotiation session. The city is willing to do the retroactive agreement.
With regard to promotion lists, OHCD wants to limit the amount of seniority used in ranking the employees on a promotion list to a maximum 10 percent, down from the current minimum of 30 percent and maximum of 50 percent. OHCD allegedly does not want to meet with the union to discuss the allocation of factors comprising the promotion list. This is as compared to District Council 33, Philadelphia Parking Authority, and PHA, no employer attempt to revise promotion language, no 21 change. Is that correct or incorrect?
The city is seeking change in the promotional language to bring it more in line with those of the 13,000 people in the Civil Service 215 BILL 980003 unit of District Council 33.
So are you saying that there was a change for District Council 33?
There was no change for District Council 33. We are trying to bring OHCD language to be more similar to the language.
What is the provision for the 13,000 District Council 33 members on the promotional list?
Well, the union is not wrong. The union is using a different sample there. They are talking about the Parking Authority; they are not talking about the other 13,000 employees.
They actually were talking about D.C. 33, PPA, and PHA. But you will get us the information, and we will go from there?
On a totally different topic. Mr. Rost, last week in the Capital Budget hearings, there was a great amount of discussion -- and I think you were not in the room. Mr. Kaplan was here -- and this was regarding the libraries and library renovations. As I recall the exchange, Mr. Rost -- I am sorry, Mr. Kaplan came back to the table after the library people gave their testimony and indicated that there was going to be a meeting some time late last week between, I guess, either the Mayor and Mr. Shelkrot. I don't know if Mr. Kaplan was going to participate in the meeting. But we were supposed to get a definitive answer with regard to, I believe, upwards of $900,000 to complete and fully fund the Library Renovation Project. Can you give us an update on the status of that?
Councilman, I'm not sure if that meeting has been arranged. What I will do is, when I conclude my testimony, I will check with the Mayor's scheduling 217 BILL 980003 office to determine if that meeting has been scheduled. If it hasn't been scheduled yet, I will make sure that it is scheduled, and then I will report back to you when it is scheduled.
Okay. But somewhere in the course of today -- because we are going to be here for a while -- you will be able to report to us what the status is?
Thank you, Mr. President. Mr. Rost, even though it was not mentioned in your testimony, I just wanted to note for the record that I think your office and the office of Finance and the Law Department and the Revenue Department did a spectacular job, even though it was a long and arduous process, for the tax lien sale. And I think looking back, that was a 218 BILL 980003 major project for last year. And the fact that $31 million came in from taxpayers who, you know, had gotten a notice and thought they better come forward, plus the money that went both to the School District and the city as an up-front lump sum. And then when we heard from the School District that their tax collections have been up, and the School District deficit might be down a little bit because people have been paying their real estate taxes, I just think that was such an important project. I just wanted to note for the record I think you all did an excellent job, through a very long and arduous process, to reach an agreement that would be satisfactory.
Thank you, Councilwoman. I would also add the help that we received from the Council. The tax lien process took place long before I became Chief of Staff to the Mayor. And I know that there were a lot of people both on the fourth floor and on the second floor, and in Finance and Budget and Revenue, that worked very, very hard to make that happen. 219 BILL 980003 But thank you very much for your comment.
Thank you very much. The Chair recognizes Councilman Mariano.
Thank you, Mr. Chairman. My question is to the gentleman from Labor Relations. Your name escapes me.
Thank you. Back to what Councilman Nutter and Councilman Cohen were talking about, Local 1971. I don't want to get into the particulars of this negotiation, but, in a nutshell, is this local that far ahead of their brothers and sisters in the big union, that you are negotiating them down? Are you asking for any give-backs here; is that what the holdup is?
We are asking for some 220 BILL 980003 revision in their contract language, yes, which is different than the larger 33. I mean, and they have some interests also that are different than were in the larger 33 that they are asking, they are seeking from us.
They have some things that are different that we would like to bring in line. I don't know whether it is far ahead.
Mostly they're work-rule-type things that we are interested in, yes.
Do you think this is something we can work out within the next 19 days? 20
Yes. The mediator has another session scheduled in about a week, week and a half.
Could we possibly do this without a state mediator? You are talking about 34 people.
No, mediation isn't binding. But it is important to the union and us that we follow the impasse procedures provided in the act. When we don't do that, the union limits its options, also.
Because it is real difficult for us, when a labor organization comes to us and tells us one thing, and it seems like people are out there swinging in the breeze by themselves, and then you get here and we hear something different. It has been my experience in labor management negotiations that there are three sides to every story: Our side, your side, and the truth. So somewhere in between your side and their side is the truth. 222 BILL 980003 I don't think that the union or the city would purposely tell a City Councilman an untruth. But I think that sometimes in negotiating a contract -- and, again, I don't want to get into specifics of the contract, but we just went through this with the Register of Wills and the Sheriff's office, we had to do a hearing. Hopefully that was taken care of, maybe, because of a little pressure with Council, maybe not, but it was done. Now, 34 people, can't we just do one big master agreement? I mean, if I was in the management side, I would want to divide everybody and take them into different negotiations. If I was in labor, I would want everybody to be together.
It works to both sides' advantage. Back to your analogy, I guess, of labor, management, and the truth. There is labor, management, and there is settlement. And there is room for settlement here, I believe, with both parties working.
My last question is, how did 1971 get so far ahead of the master 33 223 BILL 980003 agreement? When did that happen, years ago? 3
Over the past 20 years of 4 negotiations, when the government was a little less 5 coordinated, which is why we have the Office of 6 Labor Relations now. 7
Now that we are 8 funding, this should never happen again, if we are 9 putting all this money into the Office of Labor 10 Relations? 11
So the next time 14 this comes around, we don't have to wait a year or 15 two years down the line for 34 people? 16
I'm sure you 19 would, because then you wouldn't have to sit here 20 and listen to questions from Cohen and Nutter.
The Chair 224 BILL 980003 recognizes Councilwoman Blackwell.
Thank you, Mr. Chairman. I would only like to add that I, too, don't understand why we have so many problems with this one local, and that I, too, was given the impression there were give-backs which were the issue, and that this arbitrator who was coming in was really, really going to slow down the whole process to get anything done. Most of us know the members of this union, and we have for a lot of years, and we have found them to be honorable. Of course the union always represents people in trouble, so they have no interest in a prolonged agreement. And there seems to be no interest in saying that they were told there would be give-backs, unlike other similar unions, unlike their sisters and brothers across the board, that they specifically have been targeted for some give-backs. So I don't know where the rubber meets the road, either. But I am certainly 225 BILL 980003 concerned, as are my colleagues, about what we need to do to have a speedy resolution of this issue. We are all concerned. After this we'll do the OHCD budget, and we would certainly hope that this issue will be resolved in short order. So I look forward to receiving the information and, hopefully, news of a settlement.
Thank you, Councilwoman. We share your concern with this being brought to closure promptly.
The Chair recognizes Councilman Cohen. I remind Councilmembers that we are running a little bit late.
Mr. Rost, the reference to the scholarship fund, you say we cover 200 students in the amounts that you have indicated.
Do we have any idea of how many of our high school seniors go on to college? 226 BILL 980003 I mean, what percentage is 200 of the graduates from the public schools, the parochial schools, private schools?
Well, could we find out? Because I just have to tell you that out of a two-and-a-half-billion-dollar, even more than that, budget, plus maybe another billion and a half or two billion that doesn't come under the General Fund, $200,000 for Philadelphia graduates in the scholarship fund is almost laughably small. And I think that figure ought to be revised, you know, unless there is some evidence that, really, Philadelphia students can all afford to go. Could you get some more information on what that's based?
Because I think students and parents throughout all of Philadelphia are very heavily pressed to make it possible for the 227 BILL 980003 youngsters to go off to college. If we can get information. Thank you. Thank you, Mr. President.
Thank you very much. Councilman Cohen, you shouldn't feel compelled to mention that this Council has over the years been very committed to Community College. Part of our commitment to providing an education to the young people of this city actually is involved in their funding. And our support for Community College, which, you know, I mean, we are very, very supportive of Community College and intend to continue to do so. I just don't want anybody to think that this $200,000 is all we do as a city to encourage people and to support people in their pursuit of higher education in this city. We do a lot more.
And that just seems to me to be terribly small. Because that also includes students that may graduate from Community College and may be headed for two more years if they do well at Community College. So it seems like 200 pupils is a terribly small number, unless there is some explanation.
Well, if I could piggyback on the Council President's comments. I think we provide in excess of $18 million per year to Community College. We also provide water and sewer discounts, charitable discounts for a lot of our large nonprofit institutions who are tax exempt. So we provide a variety of services to higher education in the City of Philadelphia above and beyond the $200,000 that we provide through the city's Scholarship Fund.
I am talking about the families, Mr. Rost. It seems to me a terribly small amount, painfully small amount, to be applying. Families are in a real squeeze. Not 229 BILL 980003 only in Philadelphia, but throughout the nation. And it seems to me we ought to do far better. I didn't want to get involved with Community College. We will do that on the budget. But the President knows that my views have consistently been that we don't give enough support to Community College. And I recognize that we do better than many other groupings do. But education is the kind of thing you have to keep fighting for or somehow it gets lost.
And I would just urge that you re-examine it so that before these hearings are over, we can have an evaluation and maybe a reconsideration. Thank you, Mr. President.
Just following on that. Mr. Rost, could you provide to the members of Council and the Chair, could you list out 230 BILL 980003 what you estimate, your best estimates, of what the city is investing in education? We already have the public schools, but all the higher ed, plus Community College.
I think that might be good to know. I think it is a good figure.
Thank you, Mr. President. Mr. Rost, I have a question about the salaries and salary increases of those individuals that work for the Mayor's Action Center. Do they routinely get salary increases, or what? Because I know someone there that's had the same salary.
I am aware of this issue, as well. It was brought to my attention recently that there are seven or eight people, I believe, who work in that office who have not had a salary increase. 231 BILL 980003 We will be processing salary increases for them within the month.
Mr. President, I would just like to follow up and ask Mr. Rost if when he makes the corrective action, he intends to make it retroactive so as to heal whatever harm was done.
Councilwoman, those raises will be retroactive to August 25, 1997, which was the time that we made increases for a number of exempt people in the Administration. So they will be retroactive until August 25, 1997.
And so does it heal but for the failure to? They are just where they would have been if they had gotten their raises on time, with everybody else?
That is my 232 BILL 980003 question, will they be made whole. And your answer is yes?
Does anyone else have any questions? The Chair recognizes Councilman Cohen.
Just one. I am a little troubled by the arithmetic. $200,000 covering 200 students would be an average of a thousand each, yet your sentence says it goes from a thousand to 1600 per student. Can we assume that the average grant is just the 1,000? Because if the minimum is a thousand, and there are 200 students, the figure has got to be well above 200,000 if, say, even half of the students get the higher figure of 1600.
Councilman, in my testimony I used the word approximately 200 Philadelphia students. I would be happy to get the precise number for you.
And could we get a 233 BILL 980003 breakdown by district?
Following up on the comment that Councilman Cohen made. It is clear we do know how many scholarships are presently in force; is that correct, Mr. Rost?
Have we looked at the adequacy of your minimum grant?
I don't know the answer to that question. I can certainly find out from the person.
$1,000, if tuition is $5,000, is percent. $1,000, if the tuition is 6 25,000, is considerably less. 7 I understand where you are going. 8
But I am saying 9 that the range ought to accommodate an increasing 10 number of students and it ought to make a 11 significant impact on the ability to go. 12 And, yes, you need books in order to 13 do well in college. But $1,000, the historically 14 black colleges, which are generally low tuition, 15 $1,000 doesn't help very much there these days. 16 About the only place $1,000 makes a 17 lot of difference could be Community, if you lived 18 at home and lived within walking distance. 19 So we do need to talk about, if the 20 President says education is the major item on the addenda, and that this Administration agrees that it is the major Philadelphia concern, then we need to treat it in a major way, instead of throwing tips at it. It seems to me that $200,000 in the 235 BILL 980003 year of education is little more than a tip, considering the number of students who are already admitted to Community College. When you graduate any Philadelphia high school, you are automatically admitted to Community College. That's not much encouragement. I mean, any general high school will graduate 200 students. So we are doing a small, we are doing a little bit of good to an infinitesimally small group of students. And it can't be seen as a major encouragement, is all my comments are intended to say.
Thank you, Mr. President. I think I know for the other scholarships that go to Penn, a whole package is put together for the student. So it may be helpful, that may be 236 BILL 980003 some way to tackle it, to see if this grant is supposed to be in conjunction with the financial aid package, or if this is just a grant that's given to different students from our city. So that might be helpful, if we understand that, as well.
Thank you very much. Are there any other questions? Gentlemen, thank you for coming.
Good morning, Council President, members of Council. I am Ben Hayllar. With me is Lynda Orfanelli, Deputy Director, and Dean Kaplan, Budget Director. You have my written testimony on the FY '99 Operating Budget. Therefore, unless you object, and prefer to have me read it, I would 237 BILL 980003 prefer to summarize the high points, in the interest of time. Traditionally at this point the office takes this opportunity to inform Council of where we are with a number of major initiatives that were discussed last year and some of the major initiatives being undertaken this year. As Council is aware, and has pointed out to Finance people for a long period of time, Philadelphia has a reputation for being a very slow pay to its vendors. This causes the city to pay more because the vendors must add on the cost of money to their bids. The Accounting Bureau has been building on the new general ledger accounting system by adding a computer-based payment system designed to pay vendors within 40 calendar days of receipt of an accurate invoice once a contract is signed. Today, ten departments are on this system. In the fall of '96, when we began this exercise, the average payment time was 68 days. The departments on the system now average 46 days from receipt of the invoice to issuance of the 238 BILL 980003 payment. This year, the Office of the Director of Finance and the Treasurer's Office re-bid the contracts for money management firms to manage the city's billion dollar consolidated cash and capital accounts. As a result of this, for the first time two minority-owned firms have been added to the list to manage a portion of these funds. The Revenue Department continues to upgrade the systems in which it collects taxes. It was this upgrade that made it possible for Revenue to handle the tremendous volume of business that was required during the tax lien sale last spring and summer. It also will allow the Revenue Department to handle the changes that are being made to the Business Privilege Tax that we proposed both last year and this last. The Office of the Director of Finance, with Public Property and the Capital Program Office, is overseeing the consolidation of city leases in the Central Business District. In cooperation with Councilwoman 239 BILL 980003 Clark's committee, we are almost at an end of this process. This summer 1900 employees will move from various locations, to the newly renovated One Parkway Building. Legislation is presented to Council to lease up to 70,000 square feet for the remaining 350 employees, who will go into the Land Title Building at 100 South Broad Street. We also intend to move about 269 employees who do not have to be downtown to the old Packard Press Building in a development that's taking place at 990 Spring Garden Street. 6 million savings in lease costs for FY '99. As Council knows and has brought to our attention repeatedly, the ever-increasing cost of funding the city's pension, because of its historic unfunded liability, threatens the economic stability of the city in future decades. I will discuss this at more length during the pension testimony, but I wish to point out that today the General Fund annually pays 240 BILL 980003 approximately $194 million into the Pension Fund. Of this amount, 170, the vast proportion of it, is for the unfunded liability. Between now and the Year 2019, the city's costs for eliminating the unfunded liability will escalate each year until the Year 2019, when a total of $508 million is projected to be paid. To reduce the growth of payments for the pension obligations in 1997, the city proposed and the state enacted an amendment to Act 205 that allows the Pension Fund to change the way the unfunded liability is calculated once the pension is 70 percent funded. We are currently 52 percent funded, and expect the pension to be 70 percent funded in approximately 2012.
At that point the new law will allow the city to annually set a ten-year payment schedule for the remaining unfunded liability. This extends the payment schedule out past 2019 and reduces the huge spike in costs that the General Fund will have to pay after that date. We will, as I will discuss in the pension discussion later this morning or this 241 BILL 980003 afternoon, also be discussing with Council and evaluating the practicality of doing a pension bond to reduce the unfunded liability. There are risks inherent in this, and we need a tremendous amount of analysis to determine whether it can be recommended. The Bureau of Administrative Adjudication has assumed responsibility for the regulation of individual burglar alarm systems. And while Mr. Cermele will have more to say about this, we continue to see a reduction in false alarm rates because of the stewardship of that program. False alarm burglar alarms has reduced by 15 percent since the project began. Despite continuing legal challenges, the Minority Business Enterprise Council continues to ensure that businesses owned by minorities, women, and disabled are given equal access to business opportunities with the city. 4 percent. This was due in part to the effects of the legal challenges and also because of the 45 percent reduction in the amount of 242 BILL 980003 total contracts bid by the city. In addition to working on city contracts, Minority Business Council looks at special projects to make certain that they are -- that women and minority-owned businesses are included. They assume responsibility for making certain that minorities and women participated in the reconstruction of One Parkway Building, for example. 5 million by the end of November. And of this, 14 percent went to minority and women contracts. 15 In terms of employment for all hours 16 worked on the project, 51 percent were to minority 17 and women employees. 18 Finally, the Accounting Bureau will 19 place the city's annual financial report on the 20 Internet this fiscal year. 21 Normally we get some 500 requests for 22 copies of our financial report. The cost of issuing 23 it is probably 10 to 15 dollars apiece. So while 24 this moves us into the technological age, it also 25 saves us a few dollars. 243 BILL 980003 The office of the Director of Finance's FY '99 budget request for all funds totals $822,952,914. General Fund budget request is $635,561,343. The largest component of the budget is employee benefits, which is budgeted at $559,243,187. Of this, $502 million is from the General Fund, where a $22 million increase is budgeted. The increase is attributed to increases in the city's contribution to the Pension Fund, primarily, health care, and disability and FICA. A large element of the Finance budget is legal services, witness fees, Hero Awards, and the Community College. Many of these entities will testify before Council in separate testimony. But I would note that the Administration is proposing to provide the Community College with $18,267,000 in the budget. And this includes the increase of a half million dollars resulting from the challenge grant given to the college last year, because it was able to raise an additional half million dollars from the 244 BILL 980003 state. Direct appropriations from the General Fund for FY '99 is $14,040,690. Most of the entities of the Finance group will testify separately. That concludes a summary of our testimony. We would be happy to answer any questions.
Thank you very much. The Chair recognizes Councilman Nutter.
Thank you, Mr. President. Mr. Hayllar, I have a number of questions which I will not get through in this first round. But for the moment I would like to focus on parts of your testimony from , 3, and . Let's start with, actually, first. This has to do with employees and consolidation of -- it looks like a combination of consolidation and expansion of office space. 245 BILL 980003 I am fully familiar with the One Parkway building renovation and the turnkey proposal. We did that in Public Property some time ago. Tell me a little bit about the 70,000 square feet at the Land Title Building, which I think that bill is over here, may have already had a Public Hearing?
No, we have not. It has been read. I don't know that it's been introduced.
Court reporters, the Sheriff's Office, Women Against Abuse, Literacy Council, and there will probably be a few other small offices that are not necessarily part of city government for whom we traditionally have provided space, and I don't have the complete list with me.
Are these people going to this location because they can't fit at One Parkway?
Yes. They do not require the same quality of space as the One 246 BILL 980003 Parkway, which is the same quality of space which has been established at the new Municipal Services Building. As you recall, we wanted to be a factor --
No. 14 Some of them will be of higher grade than the others. Court reporters, for example, require, basically, an open space in a well-ventilated, well-lit office, but it does not require a great deal of amenities. And that's one of the larger, that would be one of the larger, users in the building. The Sheriff's Office, clearly, requires a higher grade of space. If you go back a number of years, we wanted to still remain, even though we were purchasing buildings and renovating them, we wanted 247 BILL 980003 to be a factor, particularly in the B and C office area, where we could still help a rentor in those areas. This -- I say 70,000; it will probably be less than that -- allows us to still do that in offices that have been vacated.
Let me ask this question, then. I mean, is it now a component of your testimony that a part of our decision-making process about where we put our people or who goes where is also a function of the impact that the City of Philadelphia can have on the rental office market, the B and C spaces, and that becomes a factor in our decision making, versus what's in the best interests of our employees and where they are located?
We believe we can accommodate both ends. We have, for the most part, moved our people into buildings, taking them out of a wide variety, I believe 27 different leases, and put them in buildings that we will own and operate. The remaining --
Well, we are not 248 BILL 980003 going to own and operate the Land Title Building.
No. But the remaining we propose to have a longer-term lease for that B and C office. We didn't want to lose our ability to help in that end of the real estate market.
Okay. And the One Parkway Building, the maximum capacity is 1900 people?
Let's talk about 990 Spring Garden. I am generally familiar with Spring Garden Street, just from travels. And I understand that we try to, in your words, at least, help the real estate market in Center City. Who is it that we are trying to help at 990 Spring Garden, and why are we going over there?
There are some offices that were currently located in downtown Philadelphia that did not need, because of their function, to be downtown.
I frankly don't know the details of their operation. But the Commissioners felt that they did not necessarily need to be downtown. They needed office space, but they could be outside the downtown area. That saves a little money. This is an effort, as I understand it, that if we took two floors in this building, there would be the rehabilitation of the building on Spring Garden Street. We need the office space. I believe the rent is in the $10 area, but you will see that when the legislation comes to you. And we would be proposing to put --
Is 990 Spring Garden in the same legislation as the Land Title Building?
Well, I guess all things being equal, one, if the people don't necessarily have to be in Center City, and they can 250 BILL 980003 just about be anywhere else, then why don't you put them out in some neighborhood locations?
You can help the real estate market out there, if we are getting into helping people with their real estate problems.
It was the feeling of Public Property that this was a good location, it had convenience for those operations, and they felt it was appropriate.
The developer is Grasso, I believe. I don't know if he owns it now.
Is that the same company that owns the building where the City Commissioners is? Is that U.S. Realty?
I believe so, but I am now answering questions on supposition and not hard knowledge. This is legislation you will receive when these details are finalized, so that these 251 BILL 980003 questions would be thoroughly answered, and answered by Council.
Why does the Grasso name ring a bell with me? Did they have some previous dealings? Are there some issues with this particular company?