COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE OF THE WHOLE - - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, June 10, 2004 5:30 p.m. - - - - BILL 040640 - an Ordinance amending Chapter 19-2600 of the Philadelphia Code... BILL 040601 - An Ordinance adopting the Operating Budget for Fiscal Year 2005. BILL 040602 - An Ordinance to adopt a Fiscal 2005 Capital Budget BILL 040607 - An Ordinance Amending Chapter 19-1500 of the Philadelphia Code... BILL 040608 - An Ordinance amending Section 19-2604 of The Philadelphia Code... PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL L. CLARKE COUNCILMAN DAVID COHEN COUNCILMAN FRANK J. DICICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JACK KELLY COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN BRIAN J. O'NEILL COUNCILMAN JUAN RAMOS COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO I N D E X BILL 040640 STUART EBBY, Center City Owners Association....................... NANCY KAMMERDEINER, Revenue Commissioner...................... JOYCE WILKERSON, Mayor's Chief of Staff.................... 3
This is the Committee of the Whole regarding Bill No. 4 040640, 040601, 040602, 040603, 040607, 040608. I would ask Mr. Auerbach to read the titles of the bills, please.
Bill 040640, an ordinance amending Chapter 19-2600 of the Philadelphia Code entitled "Business Privilege Taxes" by establishing a program under which a job creation tax credit will be given to certain businesses creating new jobs in the City of Philadelphia, all under certain terms and conditions. Bill No. 040601, an ordinance 17 adopting the Operating Budget for Fiscal Year 2005. Bill No. 040602, an ordinance to adopt a Fiscal 2005 Capital Budget. Bill No. 040603, an ordinance to adopt a Capital Program for the six Fiscal Years 2005-2010 inclusive. Bill NO. 040607, an ordinance 25 amending Chapter 19-1500 of the Philadelphia 4 Code, entitled "Wage and Net Profits Tax," by decreasing the rates of the tax, by making technical amendments changing the effective dates for rate changes, and repealing certain provisions, all under certain terms and conditions. Bill No. 040608, an ordinance 9 amending Section 19-2604 of the Philadelphia Code relating to tax rates, credits, and alternative tax computation for the business privilege tax, by reducing certain tax rates, all under certain terms and conditions.
Thank you. Councilman Goode, I'm led to believe you have two witnesses that would like to testify on Bill 040640.
Yes, I do. First is Stuart Ebby who have been waiting for awhile and then the Revenue Commissioner will testify.
That's fine. Please approach the witness table. Hello. Welcome. 5 06/10/04 - WHOLE - BILL 040640
That's not a problem. My name is Stuart Ebby, E-B-B-Y, and I'm here today on behalf of the Center City Owners Association to testify in favor of Bill 9 No. 040640, which we call the "Keep Philadelphia Competitive Jobs Creation Tax Credit." I'd like to -- well, let me say at the outset that I know that people were here very late last night. I know you have a lot of business, and so I will be as brief as I can. This bill really originated in connection with the KOZ matter. The Center City Owners Association has opposed the KOZ at 17th and JFK for reason which this Council has heard over and over again. When we met with the Administration fairly early on, one of the things that the Administration said to us was, "It's easy to be against something, but this is the only 6 06/10/04 - WHOLE - BILL 040640 tool we have. And why don't you try to develop a reasonable and meaningful alternative." And so with Councilman Goode, we set to work to do exactly that. We started by looking at the KOZ, which strikes me as probably the best tax break since William Penn set foot on the shore down there in the summer 1863. And we asked ourselves, "What is it intended to accomplish?" And the answer that kept coming back is jobs, we need jobs, we want jobs, we have to do something for jobs. It seemed to us that the KOZ program has certain dangers and pitfalls. And I don't propose to now rehash arguments you've heard many times. But the KOZ gives tax breaks in anticipation of jobs creation, jobs which may or may not the happen. It hurts building owners by syphoning tenants or potentially syphoning tenants out of existing buildings into space which is tax-free. And, of course, as you've heard and the thing that concerns me personally most is as these buildings lose tenants, the existing buildings, they will 7 06/10/04 - WHOLE - BILL 040640 rush to the BRT for reduced assessments and the result could be something close to a disaster for the School District. Essentially, it's trading real estate taxes for wage taxes and, as I said, that could be a disaster for school funding. The "Keep Philadelphia Competitive Jobs Creation Tax Credit" works in an entirely different way. We think it will help to create jobs for the following reasons: First all of all, this tax credit rewards employers not in anticipation but for jobs created if, as, and when they are created. Second, it doesn't hurt anyone. Third, it could be a very substantial help to the School District. And fourth, unlike the KOZ, this bill should be revenue neutral to the City. I would like to just take literally a minute to give an example of how this works. If we assume that an employer pays an average of $100,000 -- I know that's a high number, but it makes the arithmetic very easy to 8 06/10/04 - WHOLE - BILL 040640 follow. And if we also assume that that $100,000 wage would generate wage taxes of $4,000 -- and, again, we're not getting into is it somebody in the City, outside the City, to make the arithmetic easy -- that would produce $4,000 in wage taxes that the City did not have the year before. As a result of that, the employer would be entitled to deduct $2,000 against the business privilege tax. The City would make a grant to the School District of $1,000. And the remaining $1,000 would remain in the City Treasury. So we think it's a good bill. We think it will encourage jobs, job creation. We think it rewards job creation. It rewards results. And so we are very much in favor of it and urge City Council to adopt the bill. I'll stop there and try to answer any questions if there are any.
Thank you. Are there any questions from members of the Committee? (No response.)
Thank you 9 06/10/04 - WHOLE - BILL 040640 again for coming in to testify. Commissioner, hello. Please identify yourself for the record and proceed with your testimony. COMMISSIONER KAMMERDEINER: Good afternoon, Councilwoman Verna and Members of the Committee of the Whole. I have testimony that was prepared for yesterday and I'm not sure if it was ever distributed, so I have some copies here for you. I won't read the whole thing. I'll highlight a couple of things. You already have heard a little about what this bill will do, and I would just indicate that there are a couple of other things you should be aware of. The credit for the job creation is to be claimed on the business privilege tax return, however, if that credit exceeds the BPT due, the credit would be carried forward to the next year or applied to any other Philadelphia tax liability the employer might have. Also, as you've already heard, the 10 06/10/04 - WHOLE - BILL 040640 City would be required under this legislation to make a grant to the School District equal to 1 percent of the employer's average wage paid for each credit granted. This legislation is to take effect immediately and would expire in years. 8 My testimony was drafted based on 9 the legislation as it was originally 10 submitted. I understand that you will be 11 receiving some amendments to this legislation 12 that address many of the concerns that I've outlined in the written testimony but probably not all of those concerns. As a result, I would still request that you hold this bill so that we can further discuss some of the issues and concerns about the proposal with the hope and expectation that the legislation, if and when approved, would provide a program that we can all support and implement effectively so that it can achieve the results that were suggested.
One moment, Commissioner. The Chair recognizes Councilman 11 06/10/04 - WHOLE - BILL 040640 Goode.
The Revenue Commissioner, for clarity of the record, meant that we should accept the amendments that have been offered by the Administration but that there may be further amendments beyond this as we work out the tax credit program.
Commissioner? COMMISSIONER KAMMERDEINER: That would be an appropriate amendment to what I was saying. I maybe phrased it incorrectly, but I think we do support and want to see a number of amendments, but because of the timing here, our concern that there may be a few other things that, as we work it through, we would want to suggest.
Are there any questions of the Commissioner? (No response.)
Seeing 12 06/10/04 - WHOLE - BILL 040640 none, thank you. COMMISSIONER KAMMERDEINER: Thank you very much.
Is Ms. Wilkerson on her way? Ms. Wilkerson, would you please come up to the table to testify, please? Please identify yourself for the record and proceed with your testimony.
Thank you. My name is Joyce Wilkerson. I'm chief of staff to Mayor John Street. What I propose doing today is incorporating by reference the testimony that's been provided to City Council over the course over the last several months on the budget bill transmitted by the Mayor on March 18th. What you have in front of you today is built than upon that budget. There were changes made that were transmitted to City Council in May. Those changes that are part of the bill currently in front of you reflect a reduction in revenue as a result of PGW's inability to pay and a loss of a portion of the City scoop payment. I will focus solely 13 06/10/04 - WHOLE - BILL 040640 on those changes and the impact those changes have on the FY '05 to FY '09 budget. In order to balance the plan, the City made the following adjustments: In FY '05, as suggested by Council President Verna, we proposed moving 4.5 million in funding for the Board of Revision of Taxes Technology Improvement the General Fund to the Productivity Bank. The technology improvements are a crucial component of the BRT assessment improvement process. In addition, in order to help PGW to meet his debt coverage requirements, we include a $18 million payment to PGW in FY '05 budget and each year of the FY '05 to FY '09 plan. At the same time, we include an offsetting $18 million payment from PGW to the General Fund so that the City does not either provide PGW a net subsidy or receive a net payment from the company. In FY '06 we propose to make a 3.4 percent across-the-board reduction in Class 100 cuts. The only departments exempted from those cuts are the Law Department, the Revenue 14 06/10/04 - WHOLE - BILL 040640 Department, and Licenses and Inspections so that they will be able to continue with their revenue generating activities; the Board of Revision of Taxes so that it will be maintain its new, more accurate assessment system; the Fire Department in order to avoid making reductions that could jeopardize public safety; the Department of Human Services because its cost are heavily reimbursed by the state and federal governments; and the Philadelphia Prison System because the system's costs are largely driven by its census and the original FY '05-FY '09 plan had already assumed that the growth in the prison census would flatten out after years of rapid growth. The proposed across-the-board cuts would lead to painful reduction in City services, including the likely closing of additional recreation centers, the potential closing of branch libraries, cutbacks in street cleaning services, and a reduction in the number of police officers on the streets. These are not choices the Administration is 15 06/10/04 - WHOLE - BILL 040640 making lightly, but after already reduced the City workforce by well over 800 positions in the last eight months, continuing with administrative service clusters that will eliminate about half of all administrative positions and replacing no more than half the people who leave through DROP, the Administration did not see any options other than making cuts that will have an impact on service. While these cuts are painful, the plan proposed maintain strategic investments such as 375 million in tax reductions, the beginning of financing for the new economic development fund, and the start of the scholarship fund while maintaining core services such as public safety and trash collections.
Thank you. Are there any questions or statements that any of the Councilmembers would like to make of Ms. Wilkerson? (No response.)
Seeing no 16 06/10/04 - WHOLE - BILL 040640 one, thank you. Do you have anyone else to testify on these bills? (No response.)
Since we have no other witnesses, the Chair recognizes Councilwoman Blackwell.
Thank you, Madam President. Mr. McPherson is circulating --
Councilwoman, I would like to conclude the public hearing first. Thanks. This will conclude our public hearing. - - - - 17 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING COMMITTEE OF THE WHOLE - - - - Thursday, June 10, 2004 - - - - Public meeting conducted by the Committee of the Whole, held in Room 400, City Hall, Philadelphia, Pennsylvania, on the above date, to consider action on the following: BILLS 040640, 040610, 040602, 040607, 040608. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL L. CLARKE COUNCILMAN DAVID COHEN COUNCILMAN FRANK J. DICICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JACK KELLY COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN BRIAN J. O'NEILL COUNCILMAN JUAN RAMOS COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO 18 06/10/04 - WHOLE - PUBLIC MEETING
We will now go into our public meeting. Apparently there are amendments that are being circulated, so I will give everyone a chance to get a copy of the amendments. The Chair recognizes Councilwoman Blackwell regarding Bill No. 040601.
Thank you, Madam President. Mr. McPherson is now circulating an amendment to Bill No. 040601. (Pause.)
Madam President, a proposed amendment to Bill No. 17 040601 has been circulated adopting operating the Operating Budget for Fiscal Year '05.
I have a point of information. The budget amendment that was circulated by Mr. McPherson is different, I assume, from a budget amendment that was 19 06/10/04 - WHOLE - PUBLIC MEETING circulated, I think, by a staff member of Councilman Clarke earlier.
Councilman Clarke, is that a staff person of yours that was taking the stack around of amendments?
I want to make sure we all understand what set of amendments --
Councilman Mariano is introducing them, the amendments to Operating Budget, tax bills, and the Five Year Plan.
And I'm sorry not to speak through the Chair, but the packet that your staff person circulated? 20 06/10/04 - WHOLE - PUBLIC MEETING
I just want to make sure. There's a lot of paper around here. I just wanted to make sure we all understand what the paper is.
I have not seen a copy. Apparently they've been circulated, but I have not seen them.
The amendments that were just circumstanced, if you look on the ordinance, the General Fund total will be $3,386,784,000. That's all typed. You will not see any hand marked up. Those were the amendments that were handed out. And then what the other handout was was a little worksheet that shows you what the pluses and minuses or what the transfers are. On the first line, you will see that in the City scholarship program $4 million was added to City Council Class 200; and out of the Mayor's Scholarship Program, $4 million was transferred from the Mayor's Office to City Council. The total of the General Fund 21 06/10/04 - WHOLE - PUBLIC MEETING adjustments is a net increase $1,907,000. The total adjustments to the General Fund are $1,907,000. The adjustments to the Water Residual Fund is a transfer of $125 million from Class 200 to Class 100. The net impact on the total of the fund is zero. In the Aviation Fund 12,148,000 was deleted from Commerce; $15,902,000 was deleted from the Sinking Fund Commission for a total reduction in the Aviation Fund of $28,050,000.
I understand that the court system is concerned about the fact that an additional cut of some $4 million --
They had one cut and then I think a day or two ago they learned of a second cut. Has the Chair any information about the court's response? I know I got a call from my son who raised questions about it. He said the court 22 06/10/04 - WHOLE - PUBLIC MEETING had willingly accepted the first cut -- not willingly but had managed to figure out how to deal with it. And suddenly news came of a second cut. I don't know whether that's an accurate report or not. I was listening carefully, and I saw nothing was contained --
We're not aware of a second cut. When the courts testified, they did indicate, I believe, that their budget --
I'm sorry. I think when the courts came in for their budget testimony they indicated, I believe, that their budget had been reduced approximately $9 million. If they had gotten notice of a second budget cut, we're not aware of it.
No. They have not contacted -- we have not cut the court's budget. The court's budget that is in this package is the same budget that the Administration proposed for the First Judicial District. 23 06/10/04 - WHOLE - PUBLIC MEETING
Same amount as originally proposed by the Administration?
That seems to be contradictory to the information I had. And it would solve the problem if that that's the case. Thank you very much.
Councilwoman Blackwell, you did make a motion. I don't know if you did, but you said you were offering --
Okay, Madam President, a proposed amendment to Bill 040601 has been circulated, and we request that this amendment be adopted. (Duly seconded.)
It has been moved and seconded that the amendments being proposed by Councilwoman Blackwell 24 06/10/04 - WHOLE - PUBLIC MEETING regarding Bill No. 040601 be adopted. All in favor of the adoption of the amendments as proposed by Councilwoman Blackwell will signify by saying aye. (Aye.)
Councilman 06/10/04 - WHOLE - PUBLIC MEETING Kelly.
06/10/04 - WHOLE - PUBLIC MEETING Councilwoman Reynolds Brown.
Councilwoman Verna. Aye. The ayes are 10, the nays are 7. The amendments are adopted.
The amendment has been approved. Councilman Mariano.
Thank you, Madam President. Now I have amendments to Bill 040601. I think they've been circulated. I hope everyone has it. 27 06/10/04 - WHOLE - PUBLIC MEETING
I just received a copy. Can we have an extra copy, please, so that Mr. Erickson can look at it?
I make a motion to amend Bill 040601. (Duly seconded.)
Your amendments would undo the previous amendments and replace them with what you're offering.
Which they'll probably lose but we want to go through the motions.
It has been moved and seconded that Councilman Mariano's amendments be adopted. Councilwoman Blackwell.
Councilman 28 06/10/04 - WHOLE - PUBLIC MEETING Cohen.
Councilman 29 06/10/04 - WHOLE - PUBLIC MEETING Nutter.
Councilwoman Verna. No. 21 The ayes are 7, the nays are 10. The motion fails. So the Chair again recognizes Councilwoman Blackwell regarding Bill No. 25 040601. 30 06/10/04 - WHOLE - PUBLIC MEETING
Madam President, I move that Bill No. 040601, as amended, be reported out of Committee with a favorable recommendation, and also recommendation for a suspension of the Rules so as to be consider at our last Session of Council. (Duly seconded.)
It has moved and seconded that Bill No. 040601 be reported out of Committee with a favorable recommendation, as amended; also a recommendation that the Rules of Council be suspended so as to permit consideration at our next Council Session. All in favor will signify by saying aye. (Aye.)
The ayes have it, and the motion carries. The Chair recognizes Councilwoman 31 06/10/04 - WHOLE - PUBLIC MEETING Blackwell regarding Bill No. 040602. The bill that we voted on was the Operating Budget. This is to adopt Capital Budget.
Your microphone is not on and I cant' hear I cannot hear a word you're saying.
Can you have that vote over again please, the vote out of Committee?
I think the Councilman wasn't aware that this was the motion for the bill to come out of Committee and I think he's requesting another vote. Maybe he wants to change his vote.
Yes. I wasn't 32 06/10/04 - WHOLE - PUBLIC MEETING aware.
This is for Bill No. 040601, as amended, which is the Operating Budget.
Again, the 9 Chair recognizes Councilwoman Blackwell 10 regarding Bill No. 040602. This is the 11 Capital Budget. 12
Thank you, 13 Madam President. I move that the amendment to 14 Bill NO. 040602 regarding the Capital Budget 15 be adopted. 16 (Duly seconded.)
The two amendments to the Capital Budget were the following: The adjustments were that $7 million in CN funding was added to the Recreation Department and $275 million was deleted from XN self-sustaining new loans in the Aviation Fund Commerce Department. So the total of them, 35 06/10/04 - WHOLE - PUBLIC MEETING because of taking out 275 million and adding back 7, the total of the Capital Budget for Fiscal '05 is being reduced from 1 billion --