Not to my knowledge. That's a very broad answer. I am not aware of any.
Is there knowledge of anybody else at the table or in this room? Do we know anything about this company that might give us any reason to have a concern?
There was a Michael Grasso that over the years has appeared, and the name has appeared, at various hearings as an owner and as a developer, as a real estate operator and a developer, and the name has not always appeared under favorable circumstances. But I recollect the first name was 252 BILL 980003 Michael. I don't know the person, and I don't know whether this is the same person.
Councilman, do you know what the unfavorable circumstances may have been?
Councilman, before -- and I certainly don't want to interrupt your line of questioning -- but before we go too much further on who Michael Grasso is, whether this is the right Michael Grasso, and whether or not he is a good citizen, perhaps we should wait until we have the legislation in front of us. I brought this out in my testimony only to point out that the work in the downtown consolidation group is nearing an end, we have found space for the city employees, high-quality space, far better than what they have been used to. If something in this package does not 253 BILL 980003 suit Council, Council can always do something else. And it goes before Council prior to any final moves.
I think it may not only be the Council that would have concerns about it, but you might want to check that out.
I understand. Who are the people moving into the building?
Some police training, some L & I field work, some Streets field work. We also have some -- I think that's the extent of it.
From the police department, you said only a training operation?
We can ask the police department about that. All right. The Mayor announced in the budget message, and it has been much discussed in the press, the extension of the Business Privilege Tax to suburban-based businesses that 254 BILL 980003 conduct business in Philadelphia. The one thing that intrigues me about that is, how will you enforce that?
There is a lot of discussion underway on how that will be done. A lot of it can be done by the source, the customers within the city, tracking backwards. A lot of it can be done by observation. I don't think even in this day and age that we can abandon the notion that people who are aware that they owe a tax will, as businesspeople, step forward to pay it once that loophole is changed. The Revenue Commissioner can discuss, I think, at greater length the techniques that they would use to develop this. Clearly it will take a number of years to have the full effect of this in place. We don't believe we will collect more than $3 million this year from the extension of that definition. In five years we hope it will be as much as $9 million. So there is a learning curve that is built into our budget assumptions. 255 BILL 980003
Okay. I will further explore that with the Revenue Commissioner. Lastly, on you talked about, the office has completed their fourth review of depository banks, lending records in low and moderate income areas of the city.
I am going to estimate I did, maybe about two months ago or so, about December or so, I guess, maybe, you sent the most recent report around?
Maybe I have been carrying it that long. Could you share with us, given the current concern about some of the banks in Philadelphia, where does First Union rank in your analysis?
It doesn't. Because the analysis is for -- the most recent HUMDA data is 1995. They were in a serious -- they are very slow, the government is very slow, in providing that information. 256 BILL 980003 First Fidelity was, for that year, home repair and mortgage lending in Philadelphia's low and moderate income neighborhoods, First Fidelity had about $8.1 million. PNC had $17 million for that year, in comparison. Mellon was very high that year, at 26. As a group --
CoreStates, in terms of dollar volume, was and a half million. But in 13 terms of number of loans, they were the first, with 14 1126 for that year. 15 CoreStates has been traditionally, 16 since we have been doing this analysis, has traditionally been, year after year, if not the leader, one of the leaders in lending in low and moderate income neighborhoods in Philadelphia. I would also point out that as an industry, each year that we have done this, the number of mortgages and the dollar volume of the mortgages as an industry has gone up in Philadelphia. For example, in the year previous, 257 BILL 980003 $83 million was lent. In the last year for which we have data, $94 million was lent in low and moderate income neighborhoods. So that as an industry, Philadelphia banks have done a good job.
Okay. Thank you for this round. Thank you, Mr. President.
Thank you very much. I am going to have to leave the chambers. But before I do, I would like to ask a question that I know Councilwoman Verna is going to ask, so I will fully credit this question to her. But since I may not be here when she gets the floor, I need to hear the answer to it. When we start talking about taxpayer information and processing and leaking tax systems and the like, recently, Councilwoman Verna, to her credit, pointed out that there were some people, landlords, who had contracts with the city to provide Section 8 housing and the like, and some of these people were woefully delinquent in their payment of a variety of city taxes. 258 BILL 980003 I know you were fully prepared for this question and you are ready to give us an answer. Can you tell us where the department is in making sure that those people that we do business with, we give contracts to and the like -- and I don't want to limit your answer to a Section 8 question -- but tell us the progress we are making in making sure that people aren't having contracts and making money on us, on the one hand, and then withholding their lawfully due tax payments in a variety of different ways on the other hand.
I am so close to being able to answer that question that I can almost touch it, but I can't. For some months, since the Section 8 issue was raised, the Finance Department and the Revenue Department have been trying to come up with an accurate list of Section 8 landlords who are tax delinquent. It sounds an awful lot easier than it has been. It has been an arduous process of getting data from the Housing Authority, comparing it to tax data. Because ultimately when we have the list, we 259 BILL 980003 want it to be 100 percent accurate. There is no question that there are a good number of landlords -- not a large percent of all who have Section 8 certificates, but there are a good number of them, and a good number of them have multiple properties -- that don't think paying their taxes is important. We have -- the Law Department has opined that we cannot attach the Section 8 check directly, which we hoped we could do. The contract with Section 8 says that the money must go only for rent. However, the contract with HUD says that the landlord must keep their taxes current. So we intend to take the list, once it is completed -- which I believe we are days away -- and once we have a fully accurate list, and take that to HUD and see if we can use that to get these landlords to pay off their delinquencies. It is a sizable list. It is well in excess of a million five dollars in principal owed. There are some multiple names on there, obviously landlords with multiple properties that have not thought this was part of their 260 BILL 980003 responsibilities. And I believe we can collect that money by going to HUD.
I will make that available when we are satisfied that it is accurate. I don't want to put out a list that has people on it who aren't delinquent, because that's -- this is a high-power subject.
I understand that. And I don't want a list that's not accurate. We would all like to have a list.
Mr. Hayllar, I am real impressed by "days away," but how many days? I mean, there are 365 days in a year. I mean, are we like days, as in before the end of the budget period, before the end of the 261 BILL 980003 week? Those are all days away. See, when somebody says to me that, "We are days away," I think then there are a number of days that are less than a week, or else a person would have said, "We are weeks away."
Since the person doing it is not here, I will pro offer the last day of February as the day we can deliver that.
I think that would be a good time for me. Councilwoman Verna.
Mr. President, thank you. Will that also include the water delinquent bills?
No. Once we have this list, we can check to see what they owe in gas and water. It has been tough enough doing the simple, this one that's simple. But once we have this list, we can determine what the water delinquencies are. I'm sure they are there.
Now, the one 262 BILL 980003 owner who has 27 Section 8 properties, owes $54,000 in water bills. Shouldn't we be checking into something like that?
Yes, we should. And that sounds fairly accurate, from what we know.
And are we also checking to ascertain if, in fact, he has obtained the necessary rental permits?
As soon as we have perfected the list. These will be the steps afterwards.
Mr. Hayllar -- and I, unfortunately, have an obligation that I have to keep -- in my mind, this raises, and I am very concerned about, people having contracts and then making money. Because some of the Section 8 landlords probably do pretty good. I wouldn't want to say for sure, but some of them probably do all right on those residences. The rents are high. You know what I mean? 263 BILL 980003
And when we get to the Office of MOIS, I am concerned about the use of technology in the government in a way that enables us to be efficient, to just know. Do you know what I mean? To just know. And I believe I have some small idea how difficult it is, because it isn't easy. And, you know, sometimes the things that we think should be readily available, just right at our fingertips, when we make requests here at these budget hearings, we say, give us this run or that run, and then when you go back -- and I know what happens when you go back, because I sometimes talk to the people that you talk to -- and they say, "We just can't do that." And it is not -- they want to do it. It is not that nobody wants to do it. People really want to do it. What I would like for somebody to do, somewhere, at some time, is tell us where we are failing, whole era of information technology that would enable us to do this kind of stuff. I mean, how do we get so far behind? 264 BILL 980003 Or are we behind? Or does it just look like everybody else is ahead of us? Do you know what I am talking about? Does it just look like everybody is ahead of us? I just don't know. Can you comment on that?
I can give you -- the one thing I can give you -- and I'm not sure you want to hear it -- is an excuse as to why it is taking so long. Because every week I get it. I can repeat back what I have heard. The reality is, there are two different agencies, Housing Authority who runs Section 8, and the city who has the tax information. And blending that information has not been easy. On the city's end, landlords will not necessarily file the same name. If they have multiple properties, they don't use the same name all the time. So it might be John Jones, it might be J. Jones, it might be John W. Jones. And it takes a while to figure out, because you are looking now at their business address, that this is the same 265 BILL 980003 landlord. There are inaccuracies in the file, and that's what we have been most afraid of. The excuses can go on. I don't want to take up your time with them. Nobody is happy with how long it has taken to get what we think is fundamental information. But we will get it. And all the things that Councilwoman Verna has pointed out will be followed up on, and we will collect from these folks because we know they are getting the money.
And I am almost furious with this. Is this the case where the left hand doesn't know what the left hand is doing?
No. I think it is a case of having a limited number of people with the technical ability to do this work, with a tremendous volume of work to do. Because they also do everything else for the departments. It is more a case of technical skills being in limited supply.
It is partially, but 266 BILL 980003 you can work through those. It is really a talent pool problem. It is not that these people aren't talented --
Councilwoman Clark had a point on that. And I would like to recognize her and ask Councilwoman Verna to come get in the Chair. (Councilwoman Verna assumes the Chair.)
Mr. President, I am having difficulty accepting the answer to a legitimate question. If we were gathering this data by people hunched over desks with green eye shades, I could see how we could not have a precise date or range of dates within which to expect the answer. It seems to me that we have computers that can't talk to each other, that the data is not comparable; so, therefore, you can't pull it out and draw the same conclusions. 267 BILL 980003 It seems to me that this is not a technical problem; this is a very simple systems problem. But we need to have a system where everything uses the same formatting system. So you go in the computer, and you take it out, and you spreadsheet it the way you need it. That's not really a very complicated thing to ask of computers that can go to the moon and drop within 50 feet of the drop zone. And computers are not new to us.
You are correct. That's what Revenue has taken six years to do for just its own systems. As you recall, each tax in the city Revenue Department had its own file card system, that we are now integrating that into one database so that we can do exactly what you talked about. The problem we have is, the data came from another unit of government. In fact, a unit of the federal government. So that data was hard to integrate. We have done a tremendous amount on the city side and the Revenue side to do exactly 268 BILL 980003 what you said. Our problems are when we get data from the outside, making sure we can manipulate it. It will get done.
But inside our own system, inside the City of Philadelphia's MOIS, we do not have systems compatibility. Therefore, we shouldn't take documents out of a shoe box and then go through all the various stages. You can do it wrong. We should all have one standardized format so that all anybody who has access to the database has to do is, ask for a spreadsheet the way they want it. That's not a real hard system design problem, sir.
I agree with you. And let me just say parenthetically that I see an opportunity here to blame MOIS for this problem, but I can't honestly do it. The problem is within the Finance and the PHA ability to integrate this data. MOIS has not been a primary player.
MOIS will do 269 BILL 980003 whatever you tell them to do. They will make the computers do whatever you tell them to do. But somebody at the systems design level has to design what you want it to be able to do. And the confusion as to what we want to be able to do manifests itself in the kinds of reports that we get.
I am not going to argue with you. We are a long way from where we were, but we still have a ways to go, and this demonstrates that.
It is my understanding that the problem is just far wider than Section 8, that contracts have been given by the city to people who have owed the city water, 270 BILL 980003 sewer, real estate tax. That nobody is really minding the store at all. That they are two separate operations, the giving of contracts is a separate, totally different operation from collecting. That there is no system for checking out each person that does business with the city.
I now get to do the unheard of, I get to compliment the City Controller. In recent years, the city has required every contractor to sign a certificate saying they owe no taxes. We can and do check often on their tax status. But when the check is cut to the contractor, the Controller does make that check. And we get contractor checks held by the Controller all the time because they owe gas, water, or taxes. So, again, is it a perfect system? I am sure it is not. But the Controller -- as a Council member, I am sure you have gotten calls from contractors that say we are slow pay. Very often it is not that we are slow pay, it is that their check is being held by the 271 BILL 980003 Controller because of a tax problem, and that does get resolved, it does get results.
In many cases, particularly with small contractors, why can't that kind of system be employed in the Section 8 cases, through Philadelphia Housing Authority?
We had no involvement with Section 8 up until the issue arose and somebody asked us to check the tax status of the Section 8.
And you are now going to recognize the existence of PHA, and have some kind of relations with them?
We look forward to better cooperations, there is no question.
I would like to go back to the question that my colleague Michael Nutter raised. Is there any correlation between the size of city dollars deposited and those banks providing funds for mortgage and rehab loans? And can you spreadsheet this data? I would like to see it formatted this way: The name of the bank, the number of city dollars deposited, the number of dollars invested in the community in the form of loans or mortgage loans or rehab loans, then I want the number of transactions.
Okay. The answer to that is, yes, we can do it. But please remember, the fundamental thing is that we don't keep our money in banks. Our money is managed independently in the consolidated cash account. We only put money in banks on payday, when we take the exact amount of money that we need to pay our employees, we put it in CoreStates. And knowing our employees, it is out of that bank 273 BILL 980003 account probably by noon the same day. Same when we pay vendors. We put the exact amount that we need to pay vendors for that day, deposit it in the disbursement account. It is not there for more than, in that case, a few days. We have virtually no deposits in any banks, except some very small ones, where we do keep CDs, more to show support for a small institution. United Bank comes to mind. So the deposits are not what our business relationship with banks are. It is a transaction-fee-based relationship. It is a million-dollar relationship. And the decision on who gets the business has been based, frankly, on the technical ability of the bank to provide it. Not every bank can handle our payroll. You have 30,000 folks that need to be paid. They would like to do it correctly. We have, I believe, some to 30 22 percent of them on direct payroll deposit. That 23 requires a sophistication that only the larger banks 24 can handle. 25 So the first is technical ability. 274 BILL 980003 Second is the fees. And the third is, frankly, we have always preferred to do business with a Philadelphia-based bank. So those have been the criteria. All things being equal, we would always go with the Philadelphia-headquartered bank, if we could do so. And I can spreadsheet that for you and show you, on the data we have, what that looks like. I am not sure you can draw a conclusion from it, other than that some banks are fee efficient and have the technical ability to handle our work. But we do not keep money in banks.
Perhaps deposits is not just the best example. Doing business with, is maybe a better heading.
But even take the simple act of deposits. There is some advantage to banks if your money butterflies there and stays there just a few seconds, there is some advantage to them. So I do understand the time value of money. And if it were not so, banks wouldn't 275 BILL 980003 care if we took it out. So there's got to be some advantage. Whatever the advantage is, I would like to see that advantage shown in socially conscious banking procedures and efforts. And by those, I have mentioned mortgage loans and rehabilitation loans. But if you know of other ways the banks can be socially responsive, tell me those.
The trick is the data. From HUMDA we can get data on home repair and mortgage lending. And there is a correlation between CoreStates and the -- they have been Philadelphia's premiere -- our primary bank because they have depository and payroll accounts. They also have been, over time, the major lender. But the banking industry, all four primary banks and all the other banks, have done a remarkably good job in Philadelphia in terms of not only lending in low and moderate income neighborhoods, but increasing that amount each year.
Well, then, that 276 BILL 980003 will make a very pretty graph when you show it on a graph.
Right. You know, I won't disagree with you that there is more investment in the innercity and in low-income neighborhoods. But as Mr. Cohen points out to me, when the numbers are small, if you go from 1 to 2, that's a 100 percent increase. So let me see what they are, and then let me see how we can either express appreciation for the trend or give them some encouragement to do more faster.
Mr. Hayllar, we are going back to the area that Councilwoman Clark, and I think before that Councilman Nutter, were discussing. I am intrigued by the language in 277 BILL 980003 your statement on , second or third paragraph -- I don't know how you designate it -- "This office completed the fourth review of depository bank lending records in low and moderate income areas of the city." Fine. No problem with that. Now, then you go on, "The city will not utilize a bank that refuses to lend to credit-worthy citizens because of the neighborhood they reside in." I think that's a wonderful sentence. It says absolutely nothing. It doesn't tell us, does the bank have to refuse every credit-worthy citizen to get a black mark from the city, or an unfavorable mark from the city? Is there a percentage of credit-worthy citizens that the bank rejects? Do they have to meet a certain percentage before you classify them as being no good or good? It is a wonderful sentence, sounds good, says absolutely nothing. Then you go on to the next one, "Philadelphia banks increase the amount of home mortgages and repair funds lent in these 278 BILL 980003 neighborhoods. In the most recent year for which data is available, Philadelphia banks lent 94," maybe even say 95, "million in low and moderate income neighborhoods." Now, was that figure limited to home mortgage and repair funds?
Yes; because that's the only data we have available from the Federal Reserve.
It has nothing to do with the small loans, say, for auto loans?
No; because that data is not available. I have no way of determining whether it is accurate.
Well, it would be available if you wrote to the banks and asked for them to furnish it.
They would send me 279 BILL 980003 something, yes. I can't tell you that it would be accurate. They may do a car loan differently.
Mr. Hayllar, the city seems awfully good in finding techniques to absolve itself of any responsibility. For example, if the city says it doesn't have any power to deal with the banks because we only use them, you know, for this one process, then it means the city has adopted a procedure which it thinks insulates it from public criticism for failure to use its relationship with banks to benefit citizens in low income and moderate income neighborhoods. Why do you say you are not even going to inquire of the banks? Why don't you inquire, and then use some testing methods to determine whether you are getting correct information?
There is a question of how much resources we can dedicate and our ability to determine whether one type of loan given by a bank is done the same way as a different loan. 280 BILL 980003
Would you incorporate this question I am raising with you. I say the real question is, what effort is the City of Philadelphia making to make loans really available to low-income and moderate-income neighborhoods? Don't give us all of the reasons why you can't do it. Why don't you give us reasons that would enable the city to do it? You certainly can do much better in getting results from the banks than we're getting. Don't adopt procedures that make you weak and puny, so that you have no leverage with banks. Adopt policies that will help our citizens in the low-income and moderate neighborhoods.
I would recommend that you take a look at this document, which you have, 281 BILL 980003 and then we can discuss what you would like added to it. But it is very obvious to me, sir, that you don't know what we are doing, and that this would help you determine what we are.
Well, I would say what we are doing, in complaints we get to neighborhoods, what amounts to maybe a little more but not much more than zero. What you are doing is a pitifully small amount, and you are seeking credit by comparing it with other cities which may also be doing pitifully small. But that's not the criteria. The criterion is what can we do in Philadelphia and how much of it are we doing. And I submit to you the record of Philadelphia is very, very poor by that test.
I would recommend that we discuss what we have prepared and sent to you so that you know exactly what we are doing.
I followed this area over the years. I followed Philadelphia's activity 282 BILL 980003 over the years, and it has always been low. I am not saying the current Administration is any worse than any previous Administration. But the fact is that we don't have adequate banking facilities in any of the low-income areas.
Very few banking facilities available in moderate-income areas. And the city does nothing to help the citizens in those areas.
For example, this department, the Treasurer's Office, and the Police Department have been visibly putting AMT machines in police stations in low-income areas solely because the only banking option in many of those areas is check cashing.
Why don't we require the banks to behave as they ought to? They are given special privileges by 283 BILL 980003 government which enable them to make huge profits, as all the financial statements show of banks today, yet you are not making any demands on them to put an end to this terrible increase in these check cashing agencies that charge anywhere from 2 percent to 10 percent for the cost of checks. You have given blessings, apparently, to banks that leave neighborhoods. You don't put any pressure on them, really, to remain in. You are putting no pressure currently. The ordinary citizen has very little use for many of those machines. What they need is a little place, like these check cashing agencies, that perform at least fundamental basic bank activities. And I don't see any sign that the City of Philadelphia as a government body is doing anything to help the citizens procure those kinds of services.
But putting those automatic teller machines in police stations, we are putting competition on the check cashing operations and give them an alternative. That is something we have done, at our cost. 284 BILL 980003
That is a very, very poor alternative choice. Councilwoman Clark raises an interesting question. Most of our families, certainly, in the low-income area don't have money in the bank. What is the value of having an ATM machine in the police station, which many citizens fear after, from any point of view?
I am sorry, how do you want me to address that? There are people in low-income areas that have checking accounts.
There are some, but the overwhelming majority don't have bank accounts. And the city does nothing except come up with excuses why you have no bargaining power with banks.
I don't know how to answer that. If people don't have bank accounts, it is very hard to --
Well, have you had a serious discussion with the banks? 285 BILL 980003
Yes. They get privileges from government. They don't have a right to be a bank; you have to go through very elaborate procedures before you can get to be a bank. It is a privilege extended by government to businesses to enter. Now, why aren't banks required, and why doesn't the city move in the direction of saying, you can't just skim the top and get all the cream; you have got to service the entire community? Why do you compel the lowest income people to have to pay these exorbitant fees to cash checks? They have so little money to begin with, and then you put this extra burden on them of making them pay these high fees to these private check cashing agencies.
We are trying to combat that by putting ATM machines in police stations.
Well, we would like to see evidence. And I would like it if you 286 BILL 980003 would send to the presiding office of the President of City Council a report on what the city Administration has done to try to give some form of basic bank services to the low and moderate income areas of the city. Would you do that?
And please take a look at this, because it does address a lot of those issues.
Thank you, Madam Chair. My question is regarding the same issue as Councilman Nutter, Clark, and Cohen. On the spreadsheet, could you identify the number of individuals by zip code, the neighborhoods by zip code?
You said you 287 BILL 980003 were going to do a spreadsheet.
It is done by census track. If that's adequate, that's how we do it.
Well, that would be okay. Because I would like to see just where various neighborhoods are falling in the numbers.
That is concluded in this, but it is done by census track because that's how it is reported.
And the other thing, you don't have information, you said, on other than home mortgages and home repair? You don't have commercial lending?
No, we do not. Simply because we don't have the information available to us in a uniform fashion.
Because I would be interested in getting information.
I have people that have businesses in some of the districts, business districts, and can't seem to get a loan or a remortgage or a refinancing or any of that. 288 BILL 980003 So if you have it, I would appreciate receiving it.
Mr. Hayllar, as convenient as an ATM machine is, it provides you instant access to cash which you have in the bank. It does not meet the problem that Councilwoman Miller just raised of small businesses who need loans. All of the full range of banking services which a branch would offer have been taken away from the neighborhoods and consolidated back downtown, or they have gone past our neighborhoods to suburban and outlying communities. To follow up on Mr. Cohen's comment, is there something, is there some way, we can leverage our muscle as the city, through deposits or through other banking services with banks, that we could request and require that a certain minimum level of bank presence, above ATM machines, be 289 BILL 980003 maintained in communities?
I don't want to be in a position where I defend the banking industry. Banks across the country are reducing the number of branch banks that they have because people don't bank that way anymore. It is very unfortunate, but that's a fact. But I don't want to be in a position where I defend the banking industry. Council has asked us, and we have complied, by preparing for the fourth year a report on what we considered to be the most important lending a bank could do in the city, and that's mortgages and home repair. If we can get the data to extend that to other loans, we will do it, because that's something that's in our capabilities. It is a matter of getting that information in a uniform fashion that we have confidence in. If we can get it, we will certainly include it.
Do I construe that to mean that you will fight for the services, but you think it inappropriate for you to tell banks 290 BILL 980003 when and where to put their branches?
Could you tell me the name of the blue report that you referred to, so that we can know what it is when we get to our offices? I don't have it here.
Bank Mortgage and Home Improvement Lending Record, it is dated July 1997.
I will just circulate it to all of Council again, since that's the easiest way.
Mr. Hayllar, does every police district have an ATM machine?
How many police districts do, do you know? We can check with the Police Department. 291 BILL 980003
We just put six in in low-income neighborhoods where there is a police station. I am sure that there are many that we missed. And nobody can say that there are huge neighborhoods that are underserved. But we also didn't see much point in putting them in police stations that were in wealthier neighborhoods that had a bank nearby or an ATM nearby. ATMs don't get put in low-income neighborhoods for a variety of reasons. We thought a police station was a safe and secure place where they could be put, where people would not be threatened, where the people who service the machine would not be threatened, and that's where we started out. Is it the answer to the problem? Heavens, no. Is it a modest step to address the issues that Councilman Cohen raised? Yes, it is a modest step forward.
Madam Chair, I have a question on that, or I can wait.
The Chair 292 BILL 980003 recognizes Councilman Nutter for just one question.
Mr. Hayllar, on the ATMs in public facilities, including the one that is in City Hall, are you aware as to whether or not the ATMs charge a surcharge fee to users who are foreign to that particular bank?
And isn't it primarily left to the discretion of the party that has contracted with a particular bank as to whether or not there will be a surcharge on those machines?
I think it is -- I'm not sure I understand the question, why don't you try it again. I am not sure I understand what you mean.
It is my understanding that it is usually a matter left between the bank and the facility where the ATM is being installed as to whether or not there will be a surcharge on that particular machine, in that some machines have a surcharge, some don't, and it is a function of the deal that's cut between the bank and the landlord of the particular facility. In this case we are the landlord, 293 BILL 980003 whether it is in City Hall or at the police stations. Why is it that we allow a surcharge on machines that are on public property?
Okay. I am not sure that you are correct. But let's a assume that you are. We went out with an RFP to all the banks in Philadelphia, gave them locations of police stations, plus City Hall, because we thought City Hall would be a good place to have an ATM. They require a certain volume of transactions, or they lose money. And the banks did or did not respond. The bank that got the contract, United Bank, had the lowest fee and -- with the lowest fee to the public and the best terms in terms of what would come back to the city, if anything. We don't expect any revenue from this. But they have the lowest fee for usage. Had we not had the fee imposed, I don't think any bank would have put their machines in those locations. Either you have them or you don't. We wanted them there. 294 BILL 980003
I will extend the discussion on my own time, because that virtually makes no sense, given the fact that Wawa cut a deal with PNC to have no surcharge. Now, are you telling me that the banks in Philadelphia would rather cut a deal with Wawa to have no surcharge, than to have ATMs in City Hall, police stations, and other public facilities that, by your testimony, are theoretically safer, that they not put any machines in public facilities just so they can get the surcharge, but they would rather have no surcharge at Wawa; is that your testimony?
In a location in a low-income neighborhood, where there is also no 17 Wawa, we can assume, there would have been no ATM in that location had we not allowed them to charge a fee. It was either not having the machine there and trying it, or allowing United Bank to have a small fee. And there is no Wawa in those neighborhoods, either.
I would like to 295 BILL 980003 see the RFP. But your characterization of the various neighborhoods as low income or any other characterization that may go with them seems to be countered by the fact that the ATM is in a police station. It doesn't get much safer than walking into a police station to access your money.
It is traffic. We are hoping over time in those neighborhoods people will learn to go into that police station because they know there is a MAC machine. In Wawa there is traffic, people coming in and out for various things, so the machine has --
Wawa, not Wawa? The issue is, the City of Philadelphia engaged in a relationship that allows people to be charged to access their money. And all I am asking is, why did we do that? Now, we can continue the discussion on my own time. I thought there would be a shorter answer to it. I am sorry, Madam Chair. 296 BILL 980003
Thank you. The Chair recognizes Councilman Rizzo. Were you finished, Councilman Cohen?
For the record, I dispute very strongly your statement that the reason banks are moving out of neighborhoods is because of the habits of people in the neighborhood not changing their banking practices. That has nothing whatever to do --
I don't think I said that, nor will I defend the practice of banks.
I thought clearly I heard it, that you were saying that banks are moving out because practices are changing in the neighborhoods, and they don't need banks.
Branch banking as an industry is declining in the number of branch banks.
Yes, but it is declining because the banks have decided it doesn't produce enough profits. It isn't even that the 297 BILL 980003 banks that they have in neighborhoods are not producing profits; they are just not producing enough profits. Because, apparently, the banking industry is very greedy, as most people will tell you when they examine their monthly statements and see all of these fee charges. So I just want to correct the record. Neighborhoods are fighting for banking facilities, and the banks' practices of leaving neighborhoods is a major cause in the decline of neighborhoods. It is very difficult. When CoreStates first announced that it was closing the Broad and Olney, it threw panic in the entire area. Communities had spent years building up the business strip from just Tabor Avenue, north to about Champlost Avenue. And in one fell swoop, CoreStates was throwing that all down the river. That happened to be one successful fight by the communities and the business groups working together to save banking. So that it is not a fact that banks are leaving neighborhoods because it is 298 BILL 980003 unprofitable. It is just not profitable enough. Secondly, when we talk to banks, do we ever say to them, "We have examined your records, and we don't think you are loaning enough money in the neighborhoods," or are we just so polite always to the banks and so friendly that they feel that they can freely throw thousands of Philadelphians out of jobs by going into this horrible merger of CoreStates and First Union? I mean, are we so friendly to banks that they feel they can get by with anything, and Philadelphia is so weak that we are going to be grateful for any little crumbs that they offer now and then?
Well, I submit to you, I think they think that. Tell me of an unfriendly action that the City of Philadelphia has taken towards any bank or a demand that Philadelphia government has placed upon any bank saying, "We don't think you are doing well enough, you ought to do a little better." Do you know of any instance? 299 BILL 980003
I would rather not say in public. I would be happy to tell you in private. I don't want to damage their reputation.
Well, you know, if what they are doing affects and hurts the public interest, I don't see why we are interested in protecting them. The only way you get corrective behavior, in many instances, when you are dealing with the public interest, is by informing the public of what the problem is and asking for their help. I submit to you that there is an overwhelming warmth in the relationship between banks and the City of Philadelphia, and that it is hurting, not helping, the City of Philadelphia. We don't even know today whether the Mayor is going to agree to protest by vote of the 15,000 shares of the Pension Board, when the issue comes up later in the month on the merger between CoreStates and First Union, even though 7,000 to 8,000 people in the Philadelphia area -- about half 300 BILL 980003 of them I understand are supposed to be Philadelphians -- may lose their jobs. What's the hesitancy in the city proclaiming, "We think this is bad for Philadelphia, and we think we are getting a bad end of a deal"?
Because the law requires that the pension trustees act only for what benefits the retired and active participants in the pension. In other words -- it is not the answer you want to hear, but the answer is -- because the law requires its fiduciaries, that we look at it solely in terms of whether it benefits the pension. That's the law.
If the level of the legal staff -- and I can't believe that -- is that the city employees are so low that it feels that the only requirement of the Pension Board is to produce maximum return, no matter how many Philadelphians lose their jobs, that's a wrong legal interpretation. The City of Philadelphia has a responsibility for providing for the Welfare of all of the its citizens. 301 BILL 980003 And you mean money from workers and money from taxes, all of which support the Pension Board, mean nothing? That the only thing the Pension Board is concerned about is investing in corporations that deal the highest profits of the city, even if it costs thousands of jobs? Philadelphia is going to lose huge amounts of income when three, four, or five thousand workers lose their jobs if this merger goes through. Isn't that of concern to Philadelphia?
Certainly it is a concern. But as fiduciaries, our requirement is only what benefits the Pension Fund. I was correct, I knew it was not an answer you would be pleased with, but that is an answer.
When we first talked of investment long before you came to Philadelphia, when we talked of this investment with South Africa, we were met with that same argument that we cannot disinvest. And when it came to the 302 BILL 980003 tobacco stocks, to a lesser extent, but the argument was still there. I submit to you that fiduciary as a word is being totally misinterpreted by the city government because it wants to be friendly with big business. That it is big business that seems to be the sole concern of the Rendell Administration, when the concern ought to be, how do we use our various relations to improve the life of Philadelphians in the low income, in the moderate income areas of the City of Philadelphia. And I submit to you that you are misusing the word fiduciary. The best use of those pension funds would be to promote jobs in the Philadelphia area, so that more of our citizens can live in dignity. So you don't ask any questions of banks about, you never have told a bank they haven't done enough in the neighborhoods?
When you have had an opportunity to read the report we sent you --
Can't you answer this question, has the City of Philadelphia -- 303 BILL 980003
We deal with this issue all the time. We have made it clear to the banks that we do business with that they must loan in low and moderate income neighborhoods.