Yeah -- No, it's... 58 Whole - 3/30/04 - Bill 040157 There is a group of folks who meet regularly to look at these issues. And it includes the Center City District, it includes the Department of Commerce, it includes PIDC, it includes the Governor's Action Team. So it's a group that meets regularly, and to confront exactly these issues.
So if and when the KOIZ legislation reaches City Council, I can expect that we will be able to have the conversation with this team or you as the point person about the potential loss of tenants in the existing properties.
First let me personally thank the leadership at ACE for your commitment to remain in Philadelphia. And with all TIFs, my principle interest is what the impact will be on the Philadelphia Public School System. To that end... But let me first follow up on Councilman Goode's question regarding the targeted tax credit. When companies come to you looking for tax credit opportunities, procedurally what do you do in-house with regards to the options available to them? What happens?
Well, Councilwoman, we have a number of programs. And we first analyze what the company's telling us. We look at their numbers, look at what costs they have, and we find out how sincere they actually are about their alternatives.
Two years ago the legislation was passed regarding targeted tax credit. Procedurally, what happens within your shop, if it comes to with regards to ensuring that at least this 60 Whole - 3/30/04 - Bill 040157 option is available to them?
Well, we refer them to the City Commerce Department or to the Finance Department, who provides -- who can explain that much better than we can. It is a City program. It's not a PIDC program.
So PIDC is in no way responsible for ensuring that the connect happens with the Commerce Department? You simply refer them. Is there any subsequent follow-up once the connect happens at the School District -- I mean, at the Commerce Department? I yield to Councilman Goode, Madam President.
Yes. Under the State law 61 Whole - 3/30/04 - Bill 040157 it has to be an IDA or IDC that recommends it to the legislature and the School District. So the answer is yes.
So, there is an development... Sorry for taking this -- There is an economic development incentive at the Revenue Department, that you're going to refer people to the Revenue or Commerce Department, because it was not specifically suggested in legislation that PIDC first try to offer just $1,000 per job?
We inform our clients of every economic advantage they have a right to, Councilman, that they have a right to, such as a ten-year tax abatement. We tell them they have a right to that but they must pursue it.
I don't want to take any more of the Councilman's time. I'll follow up later. But you package these deals.
You don't just 62 Whole - 3/30/04 - Bill 040157 hand people a menu.
So with that said, PIDC is not responsible for ensuring that perspective candidates for tax credits are aware of all -- of the options to them. You punt that to the Commerce Department. Is what I'm hearing?
We work very closely with the Commerce Department and the Finance Department, when appropriate, with a client, just like we refer people to L & I to get their ten-year tax abasement. They must provide it, so we can't do that for them.
So then we should look to the Commerce Department to ensure that programs like the targeted tax credit are accessed and utilized; is that what I'm hearing?
Who is responsible, ultimately? 63 Whole - 3/30/04 - Bill 040157
Ultimately the City is responsible for that program. PIDC is not. But we certainly package it and refer our clients to take advantage of every opportunity that they can, that's available to them.
I understand that the School District, according to your testimony on Pages 2 and 3, will see a net increase of $7.1 million over the 20-year lifespan of this TIF. That plus the $30 million to the City will make for a convincing argument on why we need to keep this corporate citizen here. Help me understand how you arrived at those numbers.
Yes. We calculated the amount of Use and Occupancy tax that will be generated from the TIF District when the improvements are completed, and we ran that 64 Whole - 3/30/04 - Bill 040157 through for the term of the TIF. And the aggregate amount was $12,130,000. And we subtracted the actual base, which is being paid now, of $137,000 from that. And that's the amount of... over years that 7 the School District will receive. 8 And then we subtracted the amount 9 that they're receiving now from the 10 property. And so the aggregate is $7.1 11 million over the 20 years. 12
And I did hear 13 you say in your testimony that the SRC did 14 approve this, correct? 15
Okay. On of your testimony, third paragraph, you 19 say, the project is expected to create 20 approximately 206 construction jobs. What kind of impediments would get in the way to achieving that goal? Because you use the word expected.
Well, it's difficult sometimes when techniques in construction 65 Whole - 3/30/04 - Bill 040157 change. So that may be 200 jobs; it may be 120 jobs. This is the estimate that we use, based upon the cost of the improvements that we're being advised are going to occur in the Fifth District.
And then you say retain and create 950. If you could please break that down for us.
How many would be created specifically for this project, and how many would be retained? Unless I missed that in the testimony.
Well, within the TIF District there's 800 jobs being retained and 150 being created.
ACE is retaining 200 other jobs that are not at risk that will be in another location.
Okay. ACE 66 Whole - 3/30/04 - Bill 040157 plans on putting 800 people in this building, as you just stated, correct?
Currently, 1,000 employees in its headquarters; is that accurate?
Okay. And on , okay, you said it would be 950 employees. That looks like a net loss of 50. Would that be the accurate assumption?
No. Because 200 other employees currently in the City of Philadelphia will be retained in the City of Philadelphia. So there will be 1150 in total in the City of Philadelphia.
Okay. With these types of packagings, do you ask for guarantees or source protections to ensure that those 800 remain in Philadelphia?
We negotiated a clawback 67 Whole - 3/30/04 - Bill 040157 with ACE where they must retain at least 920 jobs here in the City of Philadelphia.
Is that a first? Is that unprecedented? Is that a practice? What is it?
Okay. Thank you for your testimony. Thank you, Madam President.
You're welcome. The Chair recognizes Councilman Kelly.
Mr. Fina, in your testimony you mention that the building is 50 percent occupied. Could you tell me who is occupying the building now at 436 Walnut?
There is one large tenant 68 Whole - 3/30/04 - Bill 040157 and one small tenant. The one large tenant is One Beacon; the small tenant is Exliebers (phonetic).
Are they going to remain in Philadelphia; do you know? Where are they going to be relocated?
Their lease continues through 2008. And ACE is committed to not -- not to force them out.
Okay. In other words, in 2008 their lease would expire, and they would have to be relocated; is that true?
Okay. Could you tell me: What type of reduction are you talking about with the TIFs with those clawbacks?
What we would do is divide the 920 by the number that they 69 Whole - 3/30/04 - Bill 040157 actually have, and then multiply that by the incremental tax. That would become a percentage. And then multiply that percentage by the incremental tax that they were to receive the following year. And they will have that deducted from their -- from that amount of incremental taxes.
I see. In other words, if it falls drastically below the 920, then it would be substantial.
Yeah. Well, let's say if it went down to 460, just as -- because I could do the math easy. That's 50 percent. So they would get 50 percent of the incremental tax the next year. But if they didn't move the jobs back up, then they would get -- that would continue. So that's a drastic example that we do not expect to happen.
Okay. Well, just following up on Councilman Clarke, he evidently has mentioned that there's going to be a lot of activity, I guess, with the TIFs and the KOIZs in the upcoming months 70 Whole - 3/30/04 - Bill 040157 or years. And I'm sure that you're going to have to have some kind of a plan implemented to do something with the relocation of all these people from all the other buildings that are going to be moving into these newer buildings.
Thank you. The Chair recognizes Councilman O'Neill.
Thank you, Madam President. Mr. Fina, you mentioned the $1.6 million economic stimulus money?
And is it out of current fiscal year's budget or is it out of the upcoming '05 fiscal budget?
How many public dollars, excluding incremental taxes, are involved, City dollars, are involved in this transaction? I'm not talking about credits against taxes that we might not have gotten, same as the incremental taxes, but obviously the $1.5 million is direct City money.
Okay. So the $1.5 million grant is the out of pocket, 72 Whole - 3/30/04 - Bill 040157 sort of, if you will.
Okay. I just want to thank PIDC and Commerce, and actually, the applicant. This is about the best information I've gotten on a TIF. And that was done on a short, fast track. But... And the Chamber. I think people really put their heads together on this. If this is what we're going to see in the future, I think we have a good chance of succeeding.
Thank you, Councilman. I appreciate that. And on behalf of all of us, I thank you.
Thank you, Madam President. Mr. Fina, isn't there some post 9/11 73 Whole - 3/30/04 - Bill 040157 insurance underwriting issue, either corporate policy or overall insurance issue, that at the same time the lease is expiring, the inability or the difficulty in housing more than 1,000 people in what's called a Trophy building, which would be Liberty, wasn't that part of what, kind of -- part of the catalyst, in addition to the lease expiring? It may be an ACE corporate policy alone or it may be an overall insurance industry issue.
That's a question that we're going to verify with ACE, how they want us to respond to that, Councilman.
I think it's a fair question. But I just want to check to make certain I'm not speaking against company policy.
In general terms, it would seem that after 9/11 housing 1,000 or more employees in a large building must be difficult to insure, just 74 Whole - 3/30/04 - Bill 040157 in general terms.
New Jersey, principally; Bucks County. I don't believe Delaware, but they did look at --
Delaware is kind of a general contender for everything, isn't it?
But... So it's Jersey, Bucks County, potentially Delaware. Can you talk about any type of incentives that you were aware of that were waived out there? Because I heard some big numbers coming out of Jersey.
Oh, I'm sorry. I misstated. It's $22 million cash and $10 million of additional incentives.
And how does that, in your business, in your industry rank as an incentive? Was that a major one, a minor one, medium sized one?
That's a very significant incentive. We're not able to match that incentive with ACE. We are fortunate we convinced them to stay with the incentives that we proposed.
What's the condition of the building at 436 Walnut right now? What would you... Is it -- What would you term it, in terms of office class?
I don't believe so, Councilman. And actually, two buildings, one 12 stories and another 6 stories, fused 76 Whole - 3/30/04 - Bill 040157 together years ago. 9 and 12.
There's been some extensive discussion about TIFs and strategy and issues relative to the number of TIFs we've done and what their effect has been. I want to ask you from the opposite side. Do you have an estimate on what number of jobs we would have lost had we not used TIF?
I know we're about five -- you estimate about 5,000 created. I'm talking about, what would we have lost had we not had TIF as a weapon?
The TIFs that have closed have created all net new jobs. They're hotels, the other... Quite a few hotels. But in the Kverner project. I mean, they were all net new jobs, so we have not done retained jobs until now with the TIFs.
Do you have -- From your experience, I think you've been involved probably with every TIF since '96. 77 Whole - 3/30/04 - Bill 040157
Had you in your own calculations determined what potential loss there would have been had TIF not been a tool to use in retention?
I mean, if you don't know now, I'd be interested in having you do some calculation, just to give us an idea of perspective.
I would be interested in knowing in the future what you would have estimated the overall loss would have been had TIF not been here.
Madam President, point of information. Madam President. Madam President. 78 Whole - 3/30/04 - Bill 040157
Just for clarity of the record, I believe Mr. Fina just testified that TIF has not been used for retention before; is that correct?
Thank you. COUNCILMAN DiCICCO: Have TIFs resulted in retention, even though it wasn't anticipated?
With one exception, all the projects are new. There was -- And the job creation was new, Councilman, such as Kverner. Those jobs did not exist. The PSFS Hotel did not exist. So, all new jobs. But in the PNC Bank Center, the first TIF we did, there's retention there. But...
So we will -- we will do that calculation and get that to the President. 79 Whole - 3/30/04 - Bill 040157
And additionally, if you could kind of extrapolate what that loss of those unretained potential jobs would have been, relative to the City's economy, loss of tax dollars.
Okay. There's an economic formula that you could use a multiplier effect and do indirect jobs for every job created. Normally it's called a RIMS formula.
You know, I voted on every TIF I think we've done since '96. And this one seems to me to be really a no-brainer in the scheme of TIFs. And again, we always look retrospectively at TIFs, to see whether or not it had the effect that we've desired. Sometimes perhaps not; sometimes minimally. But I think this one to me seems to be a relatively easy one to vote for because of the historic nature of this company in the City, and because of the job retention and the additional creation. It 80 Whole - 3/30/04 - Bill 040157 seems to me to be one of the better ones. So, thank you for your testimony.
Thank you. The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam President. Good morning, Mr. Fina, Mr. Rhoads. On the subject of job retention, as it relates to this particular TIF, we understand that we will be keeping those 800 jobs, actually 1,000 jobs possibly because the other 200 that will not be located at this particular site may have left as well. That's a possibility, I'm sure. But when we talk about TIFs, just thinking of a few that, when we've done some for hotels, as an example, they may not necessarily be described as retaining jobs. But there are ancillary or retaining 81 Whole - 3/30/04 - Bill 040157 jobs in the restaurant industry, as an example. But for some of the hotels and the fact that we're able to accommodate larger conventions, there is a spinoff that does retain jobs, maybe not specific to that TIF building or that project, but other jobs are being retained Citywide. And that's, I guess, hard to calculate, although we can guesstimate on the jobs that are retained.
There are economic models that you can use to do that, Councilman. And... You know, we don't do that because we'd rather do real nose counts of people. COUNCILMAN DiCICCO: And I understand that. But in a broader sense there is job retention --
Oh, absolutely. COUNCILMAN DiCICCO: -- somewhat related to every TIF that we've done --
Absolutely. COUNCILMAN DiCICCO: -- or will do. In some shape or form.
There's not only job 82 Whole - 3/30/04 - Bill 040157 retention; there's also job creation. COUNCILMAN DiCICCO: Job creation as well.
Yes. COUNCILMAN DiCICCO: All right. I just have two other questions. Of the 150 new jobs that we're anticipating, what is the average salary of those jobs? Does anyone know? Approximate?
About 79,000, Councilman, annually. COUNCILMAN DiCICCO: 79,000 annually per job. Anyone do the calculations on... I could probably do that real quick. It's about, what? $3.2 million a year in Wage Tax, just rounding it off?
Yes. COUNCILMAN DiCICCO: So we pick up an extra $3.2 million on Wage Taxes just on those 150,000 jobs. And where I'm going is, I'm certainly not going against what Councilman Goode was talking about earlier, but the $98,000 job creation is considerably offset 83 Whole - 3/30/04 - Bill 040157 by what we collect in the Wage Taxes.
Yes. I would agree with you, Councilman. COUNCILMAN DiCICCO: Okay. Thank you. I have no further questions, Madam President, Madam Chair.
I have some question, Mr. Fina, but I also -- if there are questions for this group, I'll wait because I want to call Mr. Roundtree.
Councilwoman, I've asked that question of ACE. And they're still in 84 Whole - 3/30/04 - Bill 040157 the very preliminary engineering of the building, so they haven't made a determination of what source they're going to use.
So they haven't -- They have -- And it already has a fueling system, so they'll have to look at that to see what's the most economical basis for them to rework that system, replace that system, buy an alternative system. And that has not been determined yet.
Well, given the fact that PGW is just about bankrupt, it would be very helpful if we could encourage these companies that we grant TIFs to use gas as a source of energy. COUNCILMAN DiCICCO: If you can guarantee they won't shut the gas works down. 85 Whole - 3/30/04 - Bill 040157
Well, the representatives at ACE are sitting in the audience. We ask you to give serious consideration to the use of gas. It is clean, it is economical, and will help the City. But with all respects to PECO, but they don't provide anything.
Councilwoman, we asked the question already in lieu of our hearing in about an hour. And we were advised that they're using both, the plans are to use both.
Well, I mean, they use electric for the lights. I mean, that doesn't cut you out. That's a given. I was talking about heating. I did say energy. I was talking about heating. Okay.
Councilman DiCicco, what are you saying? COUNCILMAN DiCICCO: They may have an incentive to negotiate a deal with PECO.
Then I'll come 86 Whole - 3/30/04 - Bill 040157 with my other question. I have questions of Mr. ...
Thank you. I won't comment. I thought of something but I better leave that alone. Donna, you have a question.
We had follow-ups for these witnesses, Councilwoman Miller, and Councilman Rizzo, I know. Are there other questions for these witnesses? Councilwoman Miller?
My questions are pretty much around employment related issues, so I know that that's part of what Councilwoman Tasco wants to ask. But I don't know whether you have this information, Mr. Fina. Maybe someone from ACE INA can provide some information to us. 87 Whole - 3/30/04 - Bill 040157 Of the 800 current employees or 1,000 current employees, or the 800 that's going to remain here, how many are Philadelphia residents? What types of jobs are they? And I'll wait for those two. I have a couple more. And what is the diversity of the current work staff -- work force?
There are 300 Philadelphia residents in their current force work. 48 percent of their current work force is female, percent of their 17 current work force is minority. 40 percent 18 female; 20 percent minority. 19
It's my 20 understanding that this is a national headquarters. So you have directors, in terms of titles of positions... What types of positions currently exist at INA?
They have a number of positions, from clerical to executive. And 88 Whole - 3/30/04 - Bill 040157 the average salary is quite good. It's 79,000 some dollars annually.
Well, if you have any clerical positions that are available for $79,000 a year, I have some people we can refer for that.
What level of minorities are a part of the senior level staffing, and minorities including -- that also means women.