Page: 1 FINANCE COMMITTEE PUBLIC HEARING, 6/2/2016
1 HOUSE FINANCE COMMITTEE
2
3
4 HEARING ON HOUSE BILL 1871
5 UNIFORMITY CLAUSE
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8 Proceedings taken at the Pennsylvania
9 Convention Center, Room 108 AB, 1101 Arch Street,
10 Philadelphia, Pennsylvania, on Thursday, June 2, 2016,
11 commencing at approximately 10:16 a.m., before Barbara
12 McKeon Quinn, a Registered Merit Reporter and Notary
13 Public, pursuant to notice.
14
15
16 BEFORE:
17 BERNARD T. O'NEILL, MAJORITY CHAIR
18 JAKE WHEATLEY, JR., MINORITY CHAIR
19 CHAIRMAN JOHN J. TAYLOR
20 REPRESENTATIVE JOHN A. LAWRENCE
21 REPRESENTATIVE DUANE MILNE
22 REPRESENTATIVE LESLIE ACOSTA
23 REPRESENTATIVE DONNA BULLOCK
24 REPRESENTATIVE MARY JO DALEY
25 Page: 2 FINANCE COMMITTEE PUBLIC HEARING, 6/2/2016
1 APPEARANCES: (Continued)
2 REPRESENTATIVE JASON DAWKINS
3 REPRESENTATIVE MADELEINE DEAN
4 REPRESENTATIVE MARIA P. DONATUCCI
5 REPRESENTATIVE MICHAEL J. DRISCOLL
6 REPRESENTATIVE JORDAN A. HARRIS
7 REPRESENTATIVE WILLIAM F. KELLER
8 REPRESENTATIVE STEPHEN KINSEY
9 SENATOR JOHN P. SABATINA, JR.
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12 ALSO PRESENT:
13 Mark H. Foreman, Minority Executive Director
14 Jeremy Kiehl, Research Analyst Christine R.
15 Seitz, Research Analyst
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25 Page: 3 FINANCE COMMITTEE PUBLIC HEARING, 6/2/2016
1 INDEX OF SPEAKERS PAGE
2 BY MR. JERRY SWEENEY 11
3 BY MR. PAUL LEVY 16
4 BY MR. JOSEPH ZURITSKY 25 M 5 BY S. VARSOVIA FERNANDEZ 28
6 BY MS. TARA CHUPKA 31
7 BY PRESIDENT DARRELL CLARKE 62
8 BY MR. GABE MORGAN 94
9 BY MR. PATRICK EIDING 113
10 BY MR. DAVID THORNBURGH 117
11 BY MR. DAVID McFARLAND 123
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25 Page: 4 FINANCE COMMITTEE PUBLIC HEARING, 6/2/2016
1 CHAIRMAN O'NEILL: I'd like to call the
2 meeting to order in Philadelphia.
3 Good morning. I'm Representative Bernie
4 O'Neill, Majority Chairman of the Committee.
5 And I would ask that everybody, if you
6 have some sort of electronic device, a cell phone or
7 whatever, to please silence them to make sure they do not
8 go off.
9 And if you are testifying or asking a
10 question, just please speak loudly and clearly because
11 it's being recorded by the court reporter.
12 Before we begin, I'm going to ask just the
13 members of the committee and staff to identify themselves
14 and introduce themselves.
15 I'll start with my executive director here
16 on the right.
17 CHAIRMAN TAYLOR: Chairman John Taylor,
18 Executor Director for the finance committee.
19 REPRESENTATIVE LAWRENCE: John Lawrence.
20 I serve the 13th District, Chester and Lancaster
21 Counties.
22 REPRESENTATIVE DEAN: Good morning. I'm
23 Madeleine Dean from Montgomery County.
24 CHAIRMAN WHEATLEY: Good morning. I'm
25 Chairman Jake Wheatley from Allegheny County, City of Page: 5 FINANCE COMMITTEE PUBLIC HEARING, 6/2/2016
1 Pittsburgh.
2 REPRESENTATIVE DALEY: Good morning.
3 I'm Mary Jo Daley. I represent first string suburbs
4 right close to Philadelphia so I'm very interested in
5 this topic.
6 REPRESENTATIVE KINSEY: Good morning.
7 State Representative Stephen Kinsey. I represent the
8 Northwest section of Philadelphia.
9 CHAIRMAN O'NEILL: Thank you.
10 We've also invited to the hearing all
11 members of interest from the Philadelphia delegation in
12 the House and Senate. So those that are here, if you
13 would like to introduce yourselves.
14 REPRESENTATIVE BULLOCK: Good morning.
15 Representative Donna Bullock, 195th District.
16 REPRESENTATIVE DAWKINS: Good morning.
17 Representative Jason Dawkins from the 179th District.
18 REPRESENTATIVE KELLER: Bill Keller, 184th
19 District, South Philadelphia.
20 SENATOR SABATINA: John Sabatina, 5th
21 Senatorial District, Northeast Philadelphia, and
22 Bridesburg and Port Richmond.
23 CHAIRMAN O'NEILL: Thank you very much.
24 Before we begin, I just want to reach out
25 and say thank you to some people that helped put this Page: 6 FINANCE COMMITTEE PUBLIC HEARING, 6/2/2016
1 together and host the committee. That's, of course,
2 Chairman Taylor to my right, Mr. Paul Levy, Mr. Jerry
3 Sweeney, Ms. Lois Hagarty -- and I hope I get this
4 right -- Mr. Ed Mansouri. Did I say it right?
5 Anyway, they helped put the hearing
6 together and hosted us, so I really wanted to thank them
7 for that.
8 We're here today to have a hearing and
9 discussion on House Bill 1871.
10 Before I begin, Chairman Wheatley, do you
11 have any comments you would like to say?
12 CHAIRMAN WHEATLEY: No.
13 CHAIRMAN O'NEILL: Okay. Well, then what
14 I would like to do is just turn it over to Chairman
15 Taylor. House Bill 1871 is introduced and Chairman
16 Taylor is the prime sponsor.
17 So I'll turn it over to the Chairman.
18 Thank you.
19 CHAIRMAN TAYLOR: Thank you, Chairman.
20 First of all, good morning, everyone.
21 Thank you so much for being here.
22 While this is not a new concept for any of
23 us in the audience or here in Philadelphia, this
24 particular topic has been studied for some time, although
25 it is a new bill and it was introduced not that long ago Page: 7 FINANCE COMMITTEE PUBLIC HEARING, 6/2/2016
1 when we finally had sort of a consensus of what it would
2 look like.
3 And in that time period certainly we want
4 to thank Chairman O'Neill for moving this in a quick
5 fashion that he has. The hearing is usually the first
6 step in getting a bill moving, particularly a bill like
7 this that's simple on its face, but has some complicated
8 and very important ramifications.
9 I'd like to thank the members for taking
10 the time to be here, because we think this is an
11 important bill. We think it's going to be a
12 substantively beneficial bill to the area, but it's not
13 without controversy.
14 So the members that have come here today
15 and, Chairman Wheatley, thank you for coming from
16 Pittsburgh, and to all the members to be here today.
17 It's critical that our members look at this legislation
18 and consider it and keep an open mind.
19 And I say that because I mean what we're
20 trying to deal with in the overall scheme of this bill
21 is -- is a problem with job growth in the City of
22 Philadelphia.
23 All indicators about the progress of this
24 city and the liveability of this city and why people want
25 to be here are all positive in Philly. Page: 8 FINANCE COMMITTEE PUBLIC HEARING, 6/2/2016
1 What has not been positive is a steady job
2 growth, and as a result, we're probably losing jobs and
3 businesses to other states and to other cities.
4 And what this bill, House Bill 1871, does
5 is basically shift the burden of taxes in a way that's
6 beneficial to job growth.
7 And in the course of shifting that burden,
8 we're also not affecting the revenues of the City of
9 Philadelphia, which I think is critical. Because in any
10 other format, in any other way we do it, we risk revenues
11 to the city or we can change business taxes and other
12 taxes in a way that would have the opposite effect and
13 drive people from the city.
14 So this bill merely changes the way that
15 we like to tax businesses in the City of Philadelphia,
16 shifting to a higher property tax in favor of a lower
17 business tax and a lower wage tax.
18 But to do that, we have to change the
19 Pennsylvania Constitution because we have a Uniformity
20 Clause in the constitution that requires that businesses
21 and residents be taxed at the same rate.
22 This changes that. But I think there's
23 been no disputing the important findings of tax
24 commissions throughout the last decade or so about the
25 slow job growth and that the factors that everyone points Page: 9 FINANCE COMMITTEE PUBLIC HEARING, 6/2/2016
1 to about why businesses aren't relocating here and why
2 young professionals aren't coming at the rate that they
3 should is because of the wage tax and the business taxes
4 that we now levy.
5 At the same time, we have an important
6 obligation to the residents of Philadelphia for the
7 revenues that we do have and the School District of
8 Philadelphia. We want to maintain them and keep them
9 balanced and we think that this does that.
10 And, Mr. Chairman, the panel that you've
11 assembled are folks that have studied this long, long
12 before we, as members, paid attention to this. I am the
13 sponsor of the bill, but certainly not the architect of
14 the concept, and all the other members of the City of
15 Philadelphia, all the legislative delegation, have really
16 been engaged in this and I want to thank all of them and
17 particularly Chairman Keller for his help in this.
18 But the folks that will be here to talk
19 with us will give us a good sense of why we need this and
20 what this bill will mean to the City of Philadelphia.
21 CHAIRMAN O'NEILL: Okay. Thank you very
22 much.
23 I just want to point out, I believe that
24 we're joined by Representative Jordan Harris from the
25 City of Philadelphia -- Page: 10 FINANCE COMMITTEE PUBLIC HEARING, 6/2/2016
1 REPRESENTATIVE HARRIS: Yes.
2 CHAIRMAN O'NEILL: -- so he's here with
3 us. Thank you for joining us.
4 We have actually two panels and two other
5 testifiers that are scheduled. I've been informed that
6 Mayor Kenney will not be joining us now to testify and
7 we're still waiting to hear from the Honorable Darrell
8 Clarke, who's the president of City Council, whether he
9 will be here or not.
10 So I'd like to bring up the first panel of
11 the business community and that's Mr. Levy, Mr. Sweeney,
12 Mr. Zuritsky -- did I pronounce it properly?
13 MR. ZURITSKY: Zuritsky.
14 CHAIRMAN O'NEILL: Zuritsky. Thank you.
15 -- Ms. Fernandez and Ms. Chupka. Did I
16 say it right?
17 MS. CHUPKA: Chupka.
18 CHAIRMAN O'NEILL: Chupka. Okay. Fine.
19 CHAIRMAN TAYLOR: I would like to point
20 out before our testifiers begin that there are some very
21 important typos in the original language before we get
22 started in voting on this that we need to get amended.
23 A very few small words that are very, very
24 important in terms of the meaning of this bill. So I'm
25 sure Paul will address that. Page: 11 FINANCE COMMITTEE PUBLIC HEARING, 6/2/2016
1 CHAIRMAN O'NEILL: You may begin in any
2 order that you wish or desire. It's up to you guys.
3 MR. SWEENEY: Good morning, Mr. Chairman,
4 and committee members and other interested parties.
5 Thank you for allowing me to testify. And welcome to
6 Philadelphia.
7 My name is Jerry Sweeney. I'm president
8 and chief executive officer of Brandywine Realty Trust.
9 Brandywine is a publicly held real estate company with
10 over $2 billion invested in Philadelphia and over $3
11 billion invested in the Commonwealth.
12 Brandywine is the largest owner of
13 commercial property in Philadelphia, owning over 50
14 percent of the trophy class office buildings in
15 Philadelphia central business district.
16 Like many you'll hear from today, we are
17 members of a historically unique collection of
18 organizations known as the Philadelphia Growth Coalition,
19 a group of labor, business and civic organizations
20 organized around one key unifying goal, and that is, to
21 add jobs to Philadelphia and to the Commonwealth of
22 Pennsylvania.
23 In the last four decades Philadelphia has
24 lost 28 percent of its jobs. Philadelphia has still not
25 regained 1990 job levels and still lags peer cities in Page: 12 FINANCE COMMITTEE PUBLIC HEARING, 6/2/2016
1 annual growth rates.
2 The implications of this staggering
3 decline are stark. Our unemployment rate continually
4 exceeds the national average, Philadelphia has one of the
5 highest poverty rates among major U.S. cities and one of
6 the worst rates for deep poverty in the country.
7 Our declining job base also means that 40
8 percent of city residents commute outside the city to
9 find work, a rate more than twice the reverse commute of
10 New York City.
11 There is no question that our tax
12 structure is a gating issue for companies looking to
13 locate to Philadelphia. Philadelphia has a wage tax that
14 is four times the regional average and the highest wage
15 tax of the top 50 largest U.S. cities.
16 Businesses are immediately deterred by the
17 20 to 30 percent BIRT tax premium to do business in the
18 city.
19 Now, in one respect our Growth coalition
20 plan is not unique. It frankly simply builds on two
21 prior tax commissions that concluded that the best way to
22 add jobs is to shift the burden from wage and business
23 taxes to broad-based taxes on real estate.
24 On the other hand, our plan is
25 exceptionally unique and tremendously encouraging. For Page: 13 FINANCE COMMITTEE PUBLIC HEARING, 6/2/2016
1 the first time, commercial property owners and businesses
2 are saying they are prepared to pay more in taxes to make
3 Philadelphia more competitive and grow jobs.
4 We are prepared to invest in the city's
5 future because we believe in where Philadelphia can go,
6 where we can be in 20 years. Our plan is fully
7 self-financed, it is structured on a pay-as-you-go
8 approach, that it cannot open any gap in the city's
9 budget, and we're all prepared to invest to pay more in
10 real estate taxes so long as that investment is used to
11 make Philadelphia more competitive.
12 That's why the linkage of higher business
13 property taxes being used to reduce wage and business
14 taxes is so important. Our plan is projected to over ten
15 years reduce the wage tax by 25 percent and cut the net
16 income component of the BIRT by 50 percent.
17 The proposed modification will enable but
18 not require Philadelphia to enact legislation to assess
19 real estate taxes on business properties at a rate up to
20 15 percent higher than the rate on non-business
21 properties.
22 The proposed amendment does not specify
23 the tax rates to be charged by the city. It only
24 specifies that the city chooses to raise business
25 property taxes. That rate can be no more than 15 percent Page: 14 FINANCE COMMITTEE PUBLIC