COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING - COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, March 30, 2004, 10:10 a.m. - - - RESOLUTION 040160 - Resolution confirming the appointment of Pedro A. Ramos as City Solicitor BILL 040157 - An Ordinance creating the 436 Walnut Tax Increment Financing District, being the area generally bounded by Walnut Street on the north, Fourth Street on the east, Fifth Street on the west, and Spruce Street on the south and approving the project plan of the Philadelphia Authority for Industrial Development ("PAID")for the redevelopment of the 436 Walnut Tax Increment Financing District and making certain findings and declarations, all in accordance with the Tax Increment Financing Act, being the Act of July 11, 1990, P.L. 465, No. 113, as amended, and authorizing the Director of Finance and other offices of the City to execute documents and do all things necessary to carry out the intent of this Ordinance. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DAVID COHEN COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JACK KELLY COUNCILMAN JAMES F. KENNEY COUNCILMAN JUAN F. RAMOS COUNCILMAN FRANK RIZZO COUNCILMAN FRANK DI CICCO COUNCILWOMAN JANNIE L. BLACKWELL COUNCILMAN MICHAEL A. NUTTER COUNCILMAN DARRELL L. CLARKE COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN BRIAN J. O'NEILL - - - 2 Whole - 3/30/04 - Res. No. 040160 P R O C E E D I N G S - - -
Good morning, everyone. This is a public hearing of the Committee of the Whole. I would ask Mr. McPherson to please read the title of Resolution Number 040160. MR. McPHERSON: Resolution 040160. Resolution confirming the appointment of Pedro A. Ramos as City Solicitor.
Mr. Ramos, would you take the witness table, please. Good morning and welcome. I certainly would like to say that I think the Mayor has made an excellent choice in selecting you as the City Solicitor. I would just like to ask one question, if I may. Under the Charter, the City Solicitor represents both the Administration and City Council. How do you intend to resolve any conflicts that might arise in representing both branches of City government?
Good morning, President 3 Whole - 3/30/04 - Res. No. 040160 Verna. And before answering, I'd just like to ask whether you'd like me to formally submit my testimony for the record and offer it or answer questions, and then...
What are you offering in testimony, your background? I think we're all very familiar with your background.
I know you rather well. And if you feel it's necessary.
Absolutely. Absolutely. First of all, I don't plan any departure from the way in which City Solicitors before me have handled the intention established by the Charter. I think that the intention established is one that creates a potential conflict but not a conflict in itself. We're lucky in the City to have an extraordinary team in the Law Department 4 Whole - 3/30/04 - Res. No. 040160 who are very experienced in managing the multiple parties involved in our representation of the City: the Mayor's office, the City Council, boards and commissions. However, when a real legal conflict does arise, as the City Charter provides, we would work with the President of Council and Council to engage where -- engage outside Council for a separate representation.
Thank you. Are there any questions from members of the committee? The Chair recognizes Councilman Ramos.
Good morning, Madam President. Madam President and fellow colleagues, for your information, I must admit I am closely related to the City Solicitor designate. Therefore, I have to, per the Philadelphia Code, recuse myself from the confirmation process of the City Solicitor 5 Whole - 3/30/04 - Res. No. 040160 designate. I will not be able to speak of his qualities, nor will I be able to vote for him. However, I can be present for this extraordinary moment in my family history. Madam President, I request to speak after the confirmation process.
Thank you. Again, I would ask, are there any questions, members of the committee, of our witness? (No response.)
I just took for granted that everybody knew Mr. Ramos's background. I didn't think that it was necessary, but if people feel that they want him to give a brief summary of his background, I'd be happy to entertain that.
Just a point of order. I know that Councilman Ramos also meant that he would not say anything disparaging or be able to say anything disparaging as well. 6 Whole - 3/30/04 - Res. No. 040160 Being that he's a brother, he knows both sides of the applicant, as all brothers do, even in a very warm way. But the process itself, and I'm just -- I know we have our Solicitor here, but I don't want to put him on the spot. The process is actually, I believe, final when we vote on Thursday. So, I think you may not want to speak until that process is over. I think we're still in the middle of it up till Thursday. I'm not sure what your intent was, but I think --
All right. Thank you. The Chair recognizes Councilman Clarke.
Thank you, Madam President. I just wanted to ask a brief question of the nominee as he's getting briefed.
What Council 7 Whole - 3/30/04 - Res. No. 040160 District do you live in?
I know you won't show any preference to your particular District Councilperson.
I'm also a former proud resident of the First District, and I'm sure we'll continue to be well served in the Fifth District.
Thank you. In general, what will your strategy for attracting and retaining a highly qualified staff that reflects the diversity of the City be?
Certainly with the fiscal challenges that the whole City faces, we don't have the flex -- don't have 8 Whole - 3/30/04 - Res. No. 040160 as wide a flexibility as my predecessor, Judge Diaz, had in being able -- in his hiring ability. However, I do think that there is turnover, and it's incumbent upon not only the City Solicitor but every manager in the Law Department to attract the best attorneys to public service to the City, and to do so in a way that brings a diversity of opinions and a diversity of experiences to the City and to the Law Department. I believe that there's a whole lot to the notion that the more diverse the population, the opinions, the more rigorous the debate, the better the product.
Thank you. Is there something that your counsel is pointing out to you that you would like to mention?
No. I'm going to ask Louis Rossman, who's our legislative representative to Council, to come up and consult on the issue raised by Councilman 9 Whole - 3/30/04 - Res. No. 040160 O'Neill.
Good morning. Please identify yourself for the record.
Good morning. I'm Louis Rossman. I'm a senior attorney in the City Law Department. I'm the appeals and legislative unit of the Law Department. I'm sorry. The question is with respect to the procedure on the resolution?
Well, I would imagine that you're going to make -- Committee of the Whole will make a recommendation to the Council as a body as to approval of the resolution. I guess resolutions are formally approved at Stated Meetings of the full Council body.
So that at the end of this hearing, I would imagine you'll hold a meeting of the Council of the Committee of 10 Whole - 3/30/04 - Res. No. 040160 the Whole and vote on a recommendation on the resolution, and then Thursday vote on the resolution itself.
Correct. I think we all know what the procedure is. But Mr. Rossman, I think Councilman O'Neill's issue was somewhat different.
I don't mean to prolong the hearing. I just wanted to make sure that my freshman colleague, who stands in the unusual and unprecedented position, I think, of having to even consider an abstention on such a vote. All I can say is that in an analogy dealing with legislation -- I don't know how close the analogy would be interpreted -- I from to time have had to deal with an issue of conflict, although not one as nice as this one. And it clearly has been stated to me that at each public hearing or time of Council meeting, that I am to state the conflict or potential conflict and not able 11 Whole - 3/30/04 - Res. No. 040160 to speak on the matter one way or the other. And I just wanted to, taking that same analogy after the process may be on Thursday rather than -- rather than today. And I just didn't want to --
Councilman, I think we would all agree with you, and I'm sure that Councilman Ramos clearly understands the issue.
I stand by the Law Department, so that I adhere to the decision of the Law Department.
I appreciate both Councilman's comments, first that the new Councilman will adhere to the advice of the Law Department; secondly, the footnote by Councilman O'Neill, that given the relationship between an older brother and a younger brother, I wouldn't presume that all that the older brother had to say would be positive. 12 Whole - 3/30/04 - Bill 040157 (Laughter.)
Very good. Any questions or comments from members of the committee? (No response.)
Okay. Since I do see that we have a number of members of the City Solicitor's Office, perhaps we ought to consider this at this point. (Public hearing recessed at 10:18 a.m.) (Public hearing reconvened at 10:20 a.m.)
Okay. We will now resume our public hearing of the Committee of the Whole. And I would ask Mr. McPherson to please read the title of Bill Number 040157. MR. McPHERSON: Bill Number 040157, an ordinance creating the 436 Walnut Tax Increment Financing District, being the area generally bounded by Walnut Street on the north, Fourth Street on the east, Fifth 13 Whole - 3/30/04 - Bill 040157 Street on the west, and Spruce Street on the south, and approving the project plan of the Philadelphia Authority for Industrial Development for the redevelopment of the 436 Walnut Tax Increment Financing District.
All right. The record will indicate that... Councilwoman Brown.
Thank you, Madam President. I would like to be recorded as voting a big aye, underscored, capital letters, with exclamation points, on Resolution 040160.
The record will so indicate that. To the committee members, I would just like to say that we will hear from all of our witnesses; and after their presentation, we will then have a question and answer period. Good morning. Welcome. Please identify yourself for the record and 14 Whole - 3/30/04 - Bill 040157 proceed with your testimony.
Good morning President Verna and members of City Council. My name is Stephanie Naidoff; and I am the City Representative and Director of Commerce. I'm appearing here today to testify in support of creating the 436 Walnut Tax Increment Financing District. With me here are Susan Rivera, President of ACE INA and Mark Schweiker, President and CEO of the Greater Philadelphia Chamber of Commerce, and my colleagues from PIDC, Robert Fina, and Sam Rhoads. Approval of this Tax Increment Financing District or TIF will leverage a $74 million investment in 436 Walnut Street, and is critical to retaining ACE INA's headquarters in the City of Philadelphia. As you will hear from Susan Rivera and Mark Schweiker, ACE INA is a very important corporate citizen to the City of Philadelphia, providing employment for 15 Whole - 3/30/04 - Bill 040157 1,000 people within the City and making significant contributions throughout the community. Without the TIF, we run the serious risk of losing these valuable jobs, as well as the opportunity to encourage additional job growth and significant capital investment in an underutilized office market. Philadelphia is facing intense competition from adjacent states, as leases for several large corporations all come due. While I believe that the efforts to create broad based tax reform may ultimately be the best tool for retaining major employers of the City over the long term, those benefits cannot be put in place in time to address the immediate challenges. In the current competitive environment with our neighboring states putting multi million dollar incentive packages on the table to encourage our 16 Whole - 3/30/04 - Bill 040157 businesses to relocate, tax increment financing is one of only a few tools to help us retain these businesses. Tax increment financing is a very appropriate tool to support this project because it requires significant private capital investment that translates to increased property value and incremental tax revenues for the City and the School District. 5 million in private funds as part of a total project budget of $74 million to purchase and rehabilitate the building at 436 Walnut Street. This investment is a strong vote of confidence in Philadelphia that will have enormous direct and spillover benefits. We commend ACE INA for its support and look forward to a continued partnership with this longstanding Philadelphia company and good corporate citizen. We've added language to our agreement with ACE INA that would require 17 Whole - 3/30/04 - Bill 040157 the TIF revenues offered by the City to be reduced in the event that ACE does not maintain the current level of employment. In addition, we've structured the TIF to minimize the impact on the School District by excluding the Use and Occupancy Tax from this transaction. All UNO taxes received by the City as the result of ACE INA's growth will continue to be made available to the School District. This project is part of a comprehensive strategy to retain major employers in the City of Philadelphia. Our business retention program has involved the collaboration of many partners critical to the success of a thriving business district. The Commerce Department, with its economic development agency PIDC, hosts a bimonthly strategy meeting with these private and public partners, including the Greater Philadelphia Chamber of Commerce, PECO, the Center City District, and the 18 Whole - 3/30/04 - Bill 040157 Governor's Action Team. The group identifies impending lease expirations and provides outreach to ensure that these companies renew their investment in the City of Philadelphia. 6 million square feet. We plan to continue these successes in 2004, and have started the year by announcing the retention of the ARAMARK Corporation. ARAMARK is one of just seven Fortune 500 companies located in Philadelphia, employing 1200 in its Center City headquarters facility alone.
The legislation before you today will allow us to retain one of our largest private employers, and positions that company to continue to grow in the City. I'm confident that once you hear the testimony provided by ACE INA on the 19 Whole - 3/30/04 - Bill 040157 company's challenges in retaining its headquarters operation in Philadelphia, and from my colleagues at PIDC who helped to structure a financial package addressing those concerns, you will agree with me that the legislation deserves the strong support of the City. I thank you for your consideration of this important legislation, and I ask that you hold your questions until you've heard the testimony from ACE, the Chamber, and PIDC. Thank you.
Good morning, President Verna and members of City Council. My name is Susan Rivera. I am the President of ACE INA headquartered here in Philadelphia. ACE INA is a growing, global commercial, property and casualty insurance company. ACE INA can trace its roots back to the founding of the Insurance Company of North America at Independence Hall in Philadelphia in 1792. 20 Whole - 3/30/04 - Bill 040157 For over 200 years INA has been part of the City's business landscape and a prominent contributor to its philanthropic and social needs. ACE is proud to continue this trend today by giving back to the City in many ways. As part of our strong commitment to the City, in the past five years alone ACE has donated millions of dollars and many thousands of volunteer hours to various Philadelphia based charitable organizations, focusing on support for Philadelphia public schools and educational programs. As a company, ACE benefits from what Philadelphia has to offer, as much as the City benefits from ACE. With its outstanding colleges and universities, theaters and art museums, diverse base of potential employees, broad business community support, and convenient mid-atlantic location, Philadelphia remains very attractive to ACE. For these reasons, having our headquarters in Philadelphia 21 Whole - 3/30/04 - Bill 040157 helps ACE recruit and retain high quality employees. With this as a backdrop, you can understand our desire to stay in the City, but as an executive officer of ACE INA, I have a responsibility to maximize returns to our shareholders. Since our lease at Two Liberty Place expires in 2006, we have an obligation to find a solution that enhances our shareholder value by decreasing operating costs in today's increasingly competitive environment within the insurance industry. As a result, when we began our real estate review process, our main objective was to decrease our overall occupancy costs. Although we had a desire to continue our long relationship with the City of Philadelphia, we needed to open our search of potential properties to the entire Delaware Valley. We viewed numerous properties and held discussions with several public 22 Whole - 3/30/04 - Bill 040157 entities. In our search, we identified the 436 Walnut property as a suitable site that would allow us to stay in Philadelphia. However, we came to realize that without governmental incentives and assistance, this would not be the best choice economically. The challenge is to find a way to fill the financial gap between our board approved maximum investment of $52.5 million and the actual costs of staying in Philadelphia. To their credit, the funding packages offered by the Commonwealth and the City of Philadelphia meet these criteria and can potentially allow ACE to remain in the City. The purchase of the 436 Walnut building and related renovations represents a significant investment on our part. This is a major change for ACE which has historically leased its headquarters. The total incentive package, including the TIF, makes buying the 23 Whole - 3/30/04 - Bill 040157 building at 436 Walnut economically acceptable to ACE and our board of directors. Our decision and board approval to buy the property and remain here, as compared to leasing a facility out of the City for our U.S. headquarters, is influenced wholly by the inclusion of the Commonwealth's and City's total incentive package. As I stated earlier, ACE has a long business and philanthropic association with the City of Philadelphia. We look forward to playing a major role in the City's continued growth and success through our long-term capital investment of $52.5 million, and our commitment to the implementation of the Economic Opportunity Plan. We are, therefore, asking for your consideration and support of the TIF presented to you today. I thank you for your time and support. 24 Whole - 3/30/04 - Bill 040157
Thank you. Mr. Governor. GOVERNOR SCHWEIKER: Good morning, President Verna. For the record, I'm Mark Schweiker, President and CEO of the Greater Philadelphia Chamber of Commerce. I'm pleased to come before you today in support of City Council Bill 040157, creating the 436 Walnut Tax Increment Financing District for ACE INA. And as you now know, ACE INA has been in Philadelphia for over 200 years and is a major employer in the City of Philadelphia, with over 1,000 high paying jobs which generates $3 million annually in Wage Tax revenue alone to the City. I do not think I have to convince anyone here that the City cannot afford to lose this revenue stream. Much to ACE's credit, they have chosen to stay within the City limits, despite having been offered hefty incentives to leave, as previously 25 Whole - 3/30/04 - Bill 040157 mentioned by Ms. Rivera. In addition to a being a great corporate partner, ACE has been and continues to be a pillar of strength in our community. The ACE Foundation contributes significantly to the Constitution Center, the Police Athletic League, Philadelphia Cares, the Fairmount Park Conservancy, The Pennsylvania Ballet. And friends, take a good look at the American Red Cross banners flying around town. Yes, that's the ACE INA logo on the bottom. I thought this worth mentioning, as Miss Rivera was very modest in her presentation of community based initiatives, funded through the ACE INA foundation. In my capacity as President and CEO of the new Chamber, as a result of the merger between the Greater Philadelphia Chamber of Commerce and Greater Philadelphia First, I am charged with Whole - 3/30/04 - Bill 040157 conducting a very ambitious regional marketing campaign called Select Greater Philadelphia, the Place to Prosper. This is a $16 million four-year initiative to market the greater Philadelphia region nationally, as well as globally, to successful businesses and ambitious entrepreneurs. It is incumbent to the success of this business branding campaign that we retain and grow businesses in the City. That is why I felt it important for me to personally appear here today in support of ACE and its 1,000 employees, to urge you to pass Bill 040157, thereby creating the tool that will guarantee this great company and outstanding corporate asset to remain in Philadelphia for at least the next 20 years. The City cannot afford to lose ACE. ACE has demonstrated a significant commitment to this City, by pledging approximately $52.5 million of its own money to fund this project. It will be one 27 Whole - 3/30/04 - Bill 040157 of the few if not the only corporate owner occupied headquarters in Center City. Put another way, ACE has talked the talk and walked the walk on this proposal and certainly is deserving of your consideration. We're in the economic fight of our lives. And if we are to win, we must be competitive and retain companies like ACE INA. Thank you so much for this opportunity, President Verna.
Thank you. May we hear from PIDC at this time? Good morning. Please identify yourself for the record and proceed with your testimony.
Good morning, President Verna and members of City Council. My name is Robert Fina. I'm Senior Vice President at Philadelphia Industrial Development Corporation, PIDC, and I'm here today to testify on behalf of creating the 436 Walnut Tax Increment Financing 28 Whole - 3/30/04 - Bill 040157 District. With me today is my PIDC colleague, Sam Rhoads.
The proposed TIF consists of a single building of approximately 365,000 square feet known as 436 Walnut Street. The building is 50 percent occupied, underutilized, and requires significant capital improvements. 6 million. Creation of the 436 Walnut TIF will enable ACE, which employs 1,000 in its headquarters location, to retain and expand, growing here in the City of Philadelphia. Without it, the opportunity for enormous capital investment in the TIF District, and the developer's current jobs and future employment growth, will be lost. Many of the points I'll make you've 29 Whole - 3/30/04 - Bill 040157 already heard, but I believe they're very important to get on the record. The investment ACE is undertaking is substantial, $74 million to acquire and renovate 436 Walnut Street. A significant portion of this funding is private. 5 million by incremental tax revenues. Incremental increases in real estate and Business Privilege taxes shall be used to pay the TIF note over a 20-year term. To minimize the impact on the School District, no Use and Occupancy tax will be used to pay the TIF note. ACE's current lease term expires 2006. ACE has decided to vacate its current location. Therefore, the only question is whether they relocate inside the City or outside the City. ACE has undertook a cost analysis of several regional sites, and has determined that the purchase of 436 Walnut, with the 30 Whole - 3/30/04 - Bill 040157 associated public benefit package, including the TIF, is the only option that can accommodate its needs within the City of Philadelphia. The project is expected to create approximately 206 construction jobs, and retain and create 950 full-time equivalent permanent jobs. The balance of 200 other employees will be retained in either scenario and are not at risk. 6 million. 9 million over the 20 years from within the District. 4 million would go to the School District. 5 million over years, after 4 subtracting the TIF funds. 1 million to 8 the School District over the next 20 years, 9 which will be lost if the TIF District is 10 not approved. 11 In addition, the improvements and 12 increased occupancy of 436 Walnut will 13 further stimulate the Independence Mall 14 area, leveraging other recent public 15 investments and cultural attractions and 16 associated amenities. 17 Since introduction of the bill, PIDC 18 has met with the City Council staff, the 19 School District staff, the School Reform 20 Commission, the Department of Revenue, the Controllers Office, PICA, and the Minority Business Enterprise Council to review the project plan. With the exception of the Controllers Office, these representatives 32 Whole - 3/30/04 - Bill 040157 have been overwhelmingly supportive of 436 Walnut TIF. And the School Reform Commission approved its participation in the plan at its meeting on March 17th. Based on these discussions, we have made three changes to the project plan which were circulated to Council members last week, and are offered here today as a revised exhibit to the bill. We have made a change to the project plan to clarify ACE's schedule, with occupancy commencing 2006. Based on our feedback from the Controller and requests of the Administration, we have added a clawback, whereby TIF revenues are reduced to the extent that ACE's Philadelphia employment drops below 920 employees.
Several improvements to the economic opportunity have been made based upon input from MBEC and the City Council technical staff. In closing, I would like to note 33 Whole - 3/30/04 - Bill 040157 that today's hearing is required by the Pennsylvania Tax Increment Financing Act to create a TIF District, and that the Act requires City Council to wait at least three weeks for final consideration. Under the State Act, Council will not be able to act on this bill until their regularly scheduled meeting on April 22, 2004. In order to expedite this project, however, I am requesting your approval of Bill Number 040157, creating the 436 Walnut Tax Increment Financing District at your meeting of April 22nd. I would be happy to answer any questions you may have now. Thank you.
Mr. Fina, the TIF has been valued at $8.5 million. What is the funding source of the $1.5 million City funds reflected on -A?
The $1.5 million of City funds is economic stimulus dollars that City Commerce has approved, as well as the Mayor's office.
What is 34 Whole - 3/30/04 - Bill 040157 the source or sources of the State's share of $11.5 million, and what is the status of that funding?
There is a letter from the Department of Community and Economic Development providing these dollars. And that letter stipulates that $10 million would be a PIDA loan, a Pennsylvania Industrial Development Authority loan that would be conduit through PIDC. Then there was a $1.5 million grant from the State.
You're absolutely certain of receiving those dollars? My question is, what happens to the project in the event that the State's funding is not forthcoming or reduced?
Well, those funds have been committed in writing, so I think there would be some action that ACE would take or a negotiation at least that ACE would take with the Commonwealth to find those dollars. Nothing is certain, but we're fairly sure, since it is in writing, that the 35 Whole - 3/30/04 - Bill 040157 Commonwealth will honor that. They've been very much part of the process to maintaining ACE in the City of Philadelphia.
And when is it anticipated that the new jobs will be created?
Those jobs... It's over three years projected at this point, starting in 2008.
150. Thank you. The chair recognizes Councilwoman Tasco.
I have some questions, Madam President, but my questions are for the MBEC program, and I think they're on their way.
Yes. They are on their way. Thank you. The Chair recognizes Councilman Goode.
I was pleased to see this actually defined as a retention project, rather than a job creation project because it is primarily a retention project; is that correct?
On the retention and creation, it's $10,000 per job for the TIF.
Would it be 37 Whole - 3/30/04 - Bill 040157 $98,331 per job created?
Well, Councilman, that's probably the math. However, as you noted, it is a retention project. These jobs will be lost to the City of Philadelphia if the TIF is not approved and ACE leaves the City.
Councilman, you could look at it that way. But as I said, since you and I both agree that this is a retention project, all these jobs would be lost to the City. And so the math is better put forth that it's $10,000 per job created and retained.
So in your calculations, in terms of public cost per job, are you always going to loop in retention and creation?
That's not the case, unless we know the jobs will be absolutely lost if the business does not receive the public benefit. 38 Whole - 3/30/04 - Bill 040157
As part of the document submitted to Council on this TIF, you also do an examination of all the TIFs. And you say you have retained or created over 30,000 permanent jobs. What's the breakdown, in terms of retention and creation of that 30,000 jobs?
We have that information, Councilman. If you bear with me, I could get that for you.
Okay. But while we're waiting for that, what should be the cost per job created, in terms of public dollars?
What should be the cost per job created, in terms of public dollars?
You don't mean just for 36 Walnut; you mean the program at large?
In terms of the economic development strategy for the City, what should be the cost per job created, in terms of public dollars? 39 Whole - 3/30/04 - Bill 040157
Well, that varies with the source of funding. That requires a different amount, such as HUD requirements --
I'm saying, how much should it cost the public sector to create jobs on average? You can give me a range.
Between $25,000 and $50,000. Are you familiar with job creation tax credit that's available on a local level?
Well, certainly ACE availed themselves of that, if they 40 Whole - 3/30/04 - Bill 040157 qualify.
That is 150 times $1,000 per new job over five years. Next question is: I'm assuming that you still consider tax financing to be part of the City's economic development strategy.
That's difficult to say what the future will bring us, Councilman. If there's huge tax reform, obviously the tax increment financing may not be applicable.
What's the net job creation since the City started using TIFs?
That's the third question we're looking for an answer for, all related to job creation.
Councilman, you're very 41 Whole - 3/30/04 - Bill 040157 insightful, and you always asking very penetrating questions. And we can't always prepare for every question that you may have.
Let me ask this question: As part of the qualification for TIF to fulfill the but for requirement, we're dealing with just a lack of economic competitiveness of the City. So, wouldn't everyone qualify for a TIF, every business?
We're talking about the but for requirement. Part of what you... Can you give me the definition of what qualifies someone under the but for requirement?
You actually forwarded it in testimony. I just can't find it. I was looking for it. You forward a new definition of the but for requirement.
There's basically two 42 Whole - 3/30/04 - Bill 040157 categories. One's regional competition. So, we try to meet that regional competition. And at this point the competition, as we understand it, working with ACE, is that the differential between Philadelphia and other sites is $35 million.
I'm asking a general question about who qualifies in the but for requirement, just as a matter of policy, not as it relates to the specific project.
That there are not other funds available that will fill the gap between what the private capital markets are providing to retain or create jobs and what the total cost of a project is.
That's one. You listed three of them. And I just can't find the documents, as there are about 50 documents sent over. You listed three definitions of what qualifies, in terms of the but for. This may be it. 43 Whole - 3/30/04 - Bill 040157
Yes. Oh, here it is. One, the project has insufficient cash flow to support the project cost; two, the lender's collateral loan policies and equity terms prohibit providing amounts necessary; and three, the cost of doing business in the City are disproportionately higher or competing jurisdictions offering subsidy. My question is: If those are the three qualifications, couldn't just about every business in the City qualify for a TIF? Because the cost of doing business in the City is disproportionately higher, and competing jurisdictions can offer anybody they want a deal.
Well, in their policy too, Councilman, we talk about -- we use TIF as the last resort. We try to use other economic development programs first. First we determine there is a gap, look at other economic development programs. And then if no other program is 44 Whole - 3/30/04 - Bill 040157 readily available or the company does not qualify, then we'll consider TIF. And we try to limit the amount of TIF to exactly what the gap is.
Going back to the earlier question, have you found information yet? Of the 30,000 jobs you claim to have created or retained through TIFs, how many jobs were created and how many retained?
So roughly 25,000 were retained and only 5,000 created. So, what do you think the cost per job is for those 5,000 jobs?
The 30,000 jobs is not all the -- That's all the TIFs that were approved, not all the TIFs that have gone to settlement.
The question is, what do you think the cost per job is for the 5,000 jobs created through all the TIF projects? 45 Whole - 3/30/04 - Bill 040157
If you bear with us, we'll do the math and tell you that exact...
Okay. While you're looking for that, figuring that out, can you tell me why the clawback provision is on jobs created and retained, as opposed to just jobs created? Why won't we have a clawback on just the jobs created?
Because the whole purpose of this TIF is to retain ACE here in the City of Philadelphia.
I understand that. And the TIF will allow them to do that. But why not put a clawback still on the jobs created, as opposed to jobs created and retained?
Because we think it serves the City better because there's a larger number of jobs. If we did 80 percent of 150, they'd only need to create 120 jobs. And we'd rather have all these jobs.
I wasn't suggesting 80 percent of 150. I was suggesting you come up with a formula, in terms of clawback provision, that just directly relates to jobs created. I mean, we can give away tax dollars for years just trying to keep companies here, and never have a net job gain. And I ask you the question again, if you found the answer by now, what's the net job creation from all the TIF projects?
No, I'm not talking about from the projects. I'm talking about what is the... Since we've 47 Whole - 3/30/04 - Bill 040157 been doing TIFS in the City, have we lost jobs, gained jobs? Is job creation flat?
Our information indicates that we've created 5,000 jobs from the TIF projects that have gone to settlement.
I understand that, Bob; and you understand what I'm asking also. You started doing TIFs in what year?
Okay. What has been the City's experience, in terms of job creation since 1996?
Well, you recall, Councilman, that we looked at most TIFs on a project-by-project basis.
And that's the problem. There is not an economic 48 Whole - 3/30/04 - Bill 040157 development strategy --
Well, Councilman, we believe we would have lost substantially more jobs. If you take the PSFS Hotel --
Well, I understand that. That's why you're employing a retention strategy. And I'm suggesting that you not have a job creation strategy that's aggressive, just in terms of job creation, which is part of the reason why you wouldn't do a clawback on just the jobs created. It's also the reason why you wouldn't pursue a job creation tax credit because you're pursuing a retention strategy which will never put us in a position of net job creation.
Councilman, we believe that if we don't retain these jobs, it would be devastating for the City of 49 Whole - 3/30/04 - Bill 040157 Philadelphia. If all the commercial tenants in the City of Philadelphia leases expired and they left, it would be devastating.
No. We haven't. This is the first of 60 some businesses that have renewed leases that we're providing a TIF for.
We'll still have net job loss as you continue to give away tax dollars.
That may be true, Councilman, but there are other economic factors that cause that.
So you actually do not believe that the clawback provision should just deal with job creation.
You actually believe that -- Well, let me ask you this because I didn't do the math on this: What percentage of the retained and created 50 Whole - 3/30/04 - Bill 040157 jobs... What percentage of the created and retained jobs reflects just retention? It's a total of 950, I believe, and 150 are new jobs. The 800 are retained, I'm assuming. Is that...
We'll do the math. I don't have a calculator with me either, but...
Let me ask one more question, Bob. Would you consider putting a clawback provision that just 51 Whole - 3/30/04 - Bill 040157 relates to job creation?
Thank you, Councilman. The Chair recognizes Councilman Clarke.
Thank you, Madam President. Madam President, I also had several questions about the participation plan, but I know Councilwoman Tasco was in front of me, as it related to that. And I do believe Mr. Roundtree is here. Okay. I'll defer to her on that. I did have another question with respects to the analysis on the revenue associated with the creation of... well, the retention of these particular jobs. And I wanted to know, when you did the analysis on that, did you take into account -- Well, let me ask a question 52 Whole - 3/30/04 - Bill 040157 first. This particular company is moving out of a building, and they have approximately how much square feet in the existing operation?
All right. Will there be any revenue to the City and the State lost as a result of them leaving that particular space?
Councilman, we believe -- They're leaving that space. They -- They -- We have one opportunity to retain them in the City. If we don't retain them --
All right. I understand that. Can you just answer the 53 Whole - 3/30/04 - Bill 040157 question?
Well, I mean, that's a private landlord there, which certainly PIDC would provide whatever economic development tools we have to assist that landlord. But it really depends on how fast that landlord can rent up the space there.
Do we have any sense that there is a possibility of renting that space?
Well, we're very positive with what the Chamber and the Commerce Department are doing to select Philadelphia, that they'll be lots of opportunity.
So do we have a policy in place that when we offer a TIF or any other financial incentive for a company to maintain its presence in the City or create jobs in the City, that we do in fact take into account the space, the leased space or the building that they're vacating? Is that a part of the process? 54 Whole - 3/30/04 - Bill 040157 Do we automatically trigger something within the government that looks at ensuring as best as possible that that space is quickly leased?
Councilman, you passed legislation where you've asked the Finance Department and the Commerce Department to look at different tax incentives and other programs to retain office tenants here in Center City. And PIDC in Center city District is participating in that very action.
All right. I haven't gotten a status report. I wasn't sure.
I understand. You have a full plate. So the answer to the question... 55 Whole - 3/30/04 - Bill 040157 And I'm not sure... I'll ask the question again. Is there, through PIDC or Commence or any other entity in the government, when we offer an incentive, be it a TIF or any other government incentive, do we immediately trigger a process within the government that looks at helping the owner of the facility, building, lease out the space that will be vacated as a result of this company moving to another location?
As you know, we have a number of funding sources, a number of programs. And we contact landlords on a continuing basis to assist them in --
I'm asking about a particular landlord, a landlord who now is losing a tenant.
All right. So we have a process in place that -- When we offer a TIF -- And I understand that -- You know, I support TIFs, obviously. But my question is... I'm going to keep asking it 56 Whole - 3/30/04 - Bill 040157 until you give me a straight answer. Is there a process that's triggered by us offering any kind of incentive from government that immediately contacts the existing property owner that loses the tenant? And he would probably lose it anyway, potentially, because this particular company has indicated that it will probably leave the City. But do we automatically contact that property owner and say, look, we have some things in place. We want to help you lease out this facility, because to simply move jobs around doesn't really create what we're trying to create, additional jobs.
You're absolutely right, Councilman. But this is the first time that we've had this circumstance, that we've been involved with a TIF or other large financing program over the past year. Because we're dealing with all these commercial tenants who have leases expiring in the next couple years, to retain them. So, we're looking at this. We're working 57 Whole - 3/30/04 - Bill 040157 with landlords and tenants.
So as we move ahead and possibly entertain additional TIFs or KOIZs, there will be a policy in place to address the potential loss of tenants and substantial loss of tenants from the existing buildings.
We have met with many landlords who potentially may lose tenants by the actions you're talking about.