the freshman 15a

8/14/2019 The Freshman 15A

1/35

1

TheF

reshman

15:

15Way

stoSaveO

ver$60MillionAnnu

ally

CouncilmanBillG

reen

CouncilmanCurtisJo

nes,

Jr.

Counc

ilwomanM

ariaD.

Quiones-S

nchez


2/35

2

Summary

$100,0

00

6.BanSwag&Custo

mPrinting

$100,0

00

4.ImplementTravelFreeze

$25,000

5.UpdateMailPolicies

$250,0

00

3.UtilitySavings

$2.7

2millio

n

2.IncreaseCarSharing

$2million

13.

CellularPhoneAntennas

$2-3million

12.

SwitchtoVoIP

$8-18millio

n

11.

PaperlessGovernment

$10million

10.

TechnologyReorganization

$9.4million

9.StrategicUseofOvertime

$2.5million

8.BurglarAlarmServiceFee

$10million

7.RecoupOutstandingBail

$2million

1.ElectronicFundsT

ransfer

$5-10millio

n

15.

CloseTaxLoopholes

$2.7

8millio

n

14.

HireAdditionalA

uditStaff

AnnualSavings/Revenue

Item

TotalAnnual

Savings/Additional

Revenue

:

$57to$73m

illion


3/35

3

TheFreshm

an15

TheFreshmenCoun

cilmembersproposethat

beforecuttingservicesorfreezing

plannedtax

reductions,theCity

shouldcutw

astefulspending

andinstitutecommo

nsensecost-savingmeasur

es.

Thefollowingpropo

salscouldbe

actedupon

relative

lyquickly,ei

therbyexecu

tiveorderor

legislativeaction.


4/35

4

B

ackgrou

nd

Sources:TheMayorsOper

atingBudgetinBriefforFiscalYear20

08,p.

6;TheMayorsOperatingBudge

tSummaryforFiscalYear2009,p.7.

IncreasesinFunding

ObligationsbyCategory,

FY08toFY09

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

$1,100

Fire

Police

Prisons

OtherCriminalJustice(e.g.,

ClerkofQuarterSessions,

D.A.,FirstJudicialDistrict,

HumanServices

PublicHealth/Behavioral

Health

Parks&Recreation

Streets

Sanitation

CitySEPTAsubsidy

InternalSupportAgencies

(e.g.,Finance,MOIS,Labor

Relations,Law,Personnel,

FleetPurchase/Maintenance

EmployeeBenefits

SinkingFund

Rentals&Leases

Telecommunications/Utilities

AllOther

Category/Department

Obligation(millions)

0%

2%

4%

6%

8%

10%

12%

14%

Percentchange,FY8toFY09

FY08

FY09

%C

hange


5/35

5

B

ackgrou

nd

Sources:CityofPhiladelphiaFive-YearFinancialPlan(asapprovedbyPICAonJune17,20

08),pp.

21-31;PICAStaffReportonthe

CityofPhiladelph

iasFive-YearFinancialPlanforFiscalYear2009FiscalYear2013,pp.

19-22;CityofPhiladelphiaRevenue

DepartmentRese

archRevenueReport#20080930.prelim

,p.

1;PICAMonthlyCityofPhiladelphiaTaxRevenueUpdateThroughSeptember

2008.

Pr

ojectedvs.ActualGrow

thforSelectedLocalTaxRevenueSources

-30.0

0%

-25.0

0%

-20.0

0%

-15.0

0%

-10.0

0%

-5.0

0%

0.0

0%

5.0

0%

10.0

0%

15.0

0%

20.0

0%

25.0

0%

30.0

0%

35.0

0%

40.0

0%

Wagetax

Realtytransfer

tax

Salestax

Realestatetax

Parkingtax

Revenuesource

Revenuegrowth

FY09revenue

growthprojectedin

FiveYearPla

n

FY09revenue

growthtodate

(Q1FY08vs.

Q1FY09)


6/35

6

B

ackgrou

nd

WageandSalesTaxesP

rojectionsvs.

Collectio

ns,

September2008

-7.00%

-6.00%

-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

Wagetax

Salestax

Revenuesource

Revenuegrowth

FY09revenuegrowth

projectedinFiveYear

Plan

Revenuechange,Sept.'07

vs.Sept.'08

Sources:PICAStaffReportontheCityofPhiladelphiasFive-YearFinancialPlanforFiscalYear200

9FiscalYear2013,p.1

9;CityofPhiladelphia

RevenueDepartmentResearchRevenueReport#20080930.prelim,p.1;PICAMonthlyCityofPhiladelphiaTaxRevenueUpdateThrough

September

2008.


7/35

7

B

ackgrou

nd

*Five-YearPlanBPTrevenuegrowthprojections:0.8%inF

Y09,

1.3%inFY10,

1.5%inFY11,0.

3%inFY12,and1.0%inFY13.

**AlternativeBPTrevenuegrowthprojections:-7.9

%inFY

09(theamountbywhichBPTrevenuefellbelowprojectionsforFY08),-2.0%in

FY10,0.0

%inFY11,0.

5%inFY12,and1%inFY13.

Sources:CityofPhiladelphiaFive-YearFinancialPlan(asapprovedbyPICAonJune17,

2008),p.2

5;CityofPhiladelphiaRevenueDep

artment

ResearchRevenueReport

#20080930.prelim,p.

1;PICAMonthlyCityofPhiladelphiaTaxRevenueUp

dateThroughSeptember2008.

BPTRevenueUnderVariousGrowthP

rojections

$(600,0

00,00

0)

$(400,0

00,00

0)

$(200,0

00,00

0)

$-

$200,0

00,00

0

$400,0

00,00

0

$600,0

00,00

0

FY09

FY10

FY11

FY12

FY13

FiscalY

ear

BPTrevenuecollected

-10

-8-6-4-20246810

%changeinBPTrevenue

BPTrevenuetotalsunderFiveY

earPlangrowth

projections

BPTrevenuetotalsunderalternativegrowth

projections

CumulativedifferenceinBPTrevenues,FiveYear

Planvs.alternativerevenuegrow

thprojections

FiveYearPlanBPTrevenuegro

wthprojections*

AlternativeBPTrevenuegrowth

projections**


8/35

8

1.ElectronicFundsTrans

fer

Eachyear,theCommonwealthofPenn

sylvaniasendsthe

CityofPhiladelphiamo

rethan$250m

illioninthefor

mof

paperch

ecks,delivered

viaU.S.mail.

Thefundsrangefromgrantsforfirean

drescueoperationsto

Fairmou

ntParkproject

sandDHSreim

bursements.

Asaresultofthistransmittalmethod,anestimated$1

million

dollarsislostannuallyduetoun-cashed,

lost,

and

unclaimedchecks.Furt

her,

becauseittakesuptoamonth

fortheC

itytocashchecksfromtheCommonwealth,

the

Citylosesupto$1milliondollarsayearininterestth

at

wouldh

aveaccruedifthechecksweredeposited

immedia

telyafterdisbursement.


9/35

9


fer

TheCommonwealthsDepa

rtmentofTreasuryhasaprogramcalled

Investthatfacilitatestheelectronicmovemen

toffundstomunicipal

governme

nt.

Insteadof

mailingchecks,th

eCommonwealth

couldplacefunds

forthe

Cityinto

aninterest-bearing

Investaccount.W

hentheCityisreadyto

receivethefunds,itwouldm

erelytransferthemfromtheInvestaccount

intoitsba

nkaccount.

Investaccountsarefreetose

tupandthereare

nofeesformaintaining

them.

MovingtoanInvestaccountalsowouldelimin

atethepossibility

of

checksbeinglostinthemail.

Mostimportantly,useofan

Investaccountwo

uldensurethatthe

City

wouldear

ninterestonthese

fundscontinually

untilthemoneyis

spent.


10/35

10


fer

Anexampleoflostr

evenuefrom

potentialaccrued

interest:

On7/

16/07,theCommonwealthissuedth

eCity$16.4millio

nin

checksforthePoliceDepartment.

Twenty-three(23)daysp

assedbetweenwhenthecheckswere

issued

andw

hentheyweredep

ositedbytheCity.

Atthattime,theinterestrateonanInvestaccountwas5.17%

.

HadthosechecksbeeninanInvestaccountduringthethree-week

period

,theCitycouldhavegenerated$54,171ininterestenoughto

payapoliceofficerssala

ry.

EstimatedSavings:$

2millionannually

EstimatedCoststoA

chieveSavin

gs:$0


11/35

11

2.IncreaseCar

Sharing

In2003,theCityelim

inated330veh

iclesfromitsfleet,

approximatelyhalfof

whichwerepassengervehicles,

through

theintroduct

ionofautomatedvehicle-sha

ring

program

(AVSP)with

PhillyCarShare.

Thefive-year

costsav

ingswere$9m

illion.*

IftheC

ityeliminated

anadditional500carsfromits

nearly6

,000vehiclefleetusingcarsharing,thesavings

wouldb

e$2.7

2millio

nannually.

*CasestudyinG

overnmentFinanceReview,De

cember2006.


12/35

12

3.Red

uceUtilityBills

Becauseplayingfieldshaveh

ighelectricitydem

andvs.usageratio

s,the

Cityischargedhighutilityr

atestolightthem.

Thelightsonplayingfieldsareoccasionallyleftonduringdaylight

hours,wh

entheyarenotne

eded,resultinginu

nnecessaryutility

costs.

Toaddres

sthisproblem,the

Cityshouldinstalldaylight-sensing,

automatic

lightcontrolsonplayingfieldlights.

UseofthesedevicesshouldbeexpandedtoCit

yofficebuildings,

as

appropria

te,andCityemplo

yeesshouldbeinc

entivizedtoreduceenergy

consumpt

ionatwork.

Estimated

savings:$250,000

annually


13/35

13

4.ImplementTravelFree

ze

Philade

lphiashouldfollowGover

norRendells

exampl

eandbanall

non-essential,out-of-town

travelb

yCityemplo

yees.

Givenairfareandho

telcosts,itcancostover$

1,000

tosend

asingleemployeeonasev

eral-daytrip.

Estimatedsavings:$100,0

00annu

ally


14/35

14


ItiscommonpracticeforCitydepartmentstousetheU.S.

PostalServicetosend

interofficem

ail.

Theenvelop

epicturedabovewassentfromanofficeinCityHalltoCouncilman

Green,whoseofficeisalsoinCityHall.


15/35

15


Proposedc

hanges:

Allletters

,reports,andotherpublicationssent

byoneCitydepartment

toanothershouldbesentviaemail.

Theresho

uldbeanimmedia

tebanonsending

mailbytheU.S.Postal

Servicebe

tweenCityHall,t

heMunicipalServicesBuilding,and1

515

ArchStreet.

TheManagingDirectorsOfficeshouldorganizeaninterofficeCitymail

serviceusingcurrentemploy

eestodeliverdocu

mentsthat,

forlegal

reasons,m

ustbesentinhard-copyform.

Tothegreatestextentpossib

le,theCityshould

sendmailusingtheU.S.

PostalSer

vicesreducedbulk

mailrate.

Potentialsavings:

If50,0

00piecesofmailsentatthefull$.42rate

wereeitheremailedor

sentusing

thebulkrate,the

savingswouldbea

tleast$25,0

00per

year.


16/35

16

6

.BanSwag&CustomPrinting

Swag:Taxpayersshouldnotpayfor

Citydepartmentstoprinttheirnames

onpens,pencils,andnotepads,o

ron

tchotchkes(likethestar-shaped

winduptoy

pictured)thathaveno

practicaluse.

Sometimesswagismore

substan

tialthanpensand

pencils


17/35

17

6

.BanSwag&CustomPrinting

CustomP

rinting:Itiscomm

onforCitydepartmentstohavetheirnames

printedon

folders,irregularsizedenvelopes,reportcoverpages,etc.,an

unnecessaryexpensenotnecessarytoforwardDepartmentalmissions.

Potentialsavings:$100,0

00peryear


18/35

18

7.Recou

pOutstandingBail

Accord

ingtotheDistrictAttorne

y,theCityis

owed$

1billioninb

ailforfeituresasaresultof

defendantsfailingto

appearatreq

uiredcourt

hearing

s.

Understatelaw,thesefundsarep

ayabletothe

City.

IftheC

itysuccessfullypursues1%

ofthesefun

ds

peryea

r,itwouldnet$10millionannuallyor

$50

million

overthenex

tfiveyears.


19/35

19

7.Recou

pOutstandingBail

Investingrecoupedbail

moneyincrimeprevention

activities,suchasTown

WatchandSeed&Weed,cou

ld

furthersavemoneyfortheCity.

Themoneycouldbeusedtoplacemorepeopleunderhouse

arrest,th

erebysavingth

eCityevenmo

remoney.

While

housinganinmateinprisoncoststh

eCity$75/day,ho

use

arrest

costsonly$18/mo

nth.

Usingawirelesssystemforhou

se

arrest,ratherthanthecu

rrentGPSsystem,wouldreducethe

costto

only$

2/month.

Many

peopleeligiblefor

housearrestareunabletobeplacedinit

becausetheycannotaffo

rdtohaveaphone

lineinstalledinth

eir

home,whichisrequired

forhousearrest.

Recou

pedbailmoneyco

uldbeearmarkedtopaytoinstallph

one

liness

omorepeoplecan

beplacedunderhousearrest.*

*TheFreshmenCouncilmembersthankDeputyM

ayorEverettGillisonforthissuggestion.


20/35

20

8

.BurglarAlarm

ServiceFee

In2007,

Philadelphiaha

d105,856registeredburglaralarm

usersand91,9

18alarmactivations.Of

thoseactivation

s,

98%werefalsealarms.

ThePhiladelphiaPolice

Departmentestimatesthatits

officersspendover52,6

90hoursperyearrespondingtofalse

alarms.

InFY07,theCityrana

$987,6

41deficitrelatedtoburglar

alarms:

itspent$4,1

36,310responding

toalarmactivations,

butcollectedonly$3,14

8,669inalarmuserregistration

sfees

andfines.


21/35

21

8

.BurglarAlarm

ServiceFee

Theregistrationfeesandfinesforburglaralarmshavenotb

een

changedsince1992.

Theannualregistratio

nfeeisonly$35

and

thefineforsettingoffafa

lsealarmwhichdoesnotkickin

until

thefourthfalsealarmis

only$25.

A1994studydeterminedthatitcoststheC

ity$29.89torespond

toeachb

urglaralarmactivation,aninflation-adjustedcosto

fover

$43pera

larm.

TheCity

shouldmakerea

sonableadjustmentstotheregistr

ation

feeandfine,increasingthemto$50and$75,respectively,andalso

reduceth

enumberoffre

efalsealarmsfromthreetoone.

Estimatedadditionalrevenue:$2.5millio

nannually


22/35

22

9.Strateg

icUseo

fOvertime

TheCity

isprojectedtospend$187.9milliono

novertimepayin

FY09.

Approxim

ately10-13%ofC

itypayrollcostsar

eforovertime.

Inoth

ermunicipalities,only5%ofpayroll

costsareforovert

ime,

while

intheprivatesector,only1%ofpayrollcostsareforovertime.

Touseo

vertimemores

trategically,the

Cityshould:

Analy

zedaysoftheweekandmonthshavingthehighestuse

of

overtimeandadjuststaff

ingaccordingly.

Examinetherelationshipbetweenabsentee

ismandovertimeuse.

Inform

employeesabouttheactualreturnonovertimehours.

List

overtimeseparatelyfrom

regularpayonpa

ystubssopayeescansee

thattheextrapayisrelativelysmallafterdeductionsfortaxes,

health

care,e

tc.

Determinewhenuseofovertimeactuallyisacost-saverforth

eCity.

Amodest

5%reductionino

vertimeexpenditureswouldsave$9.4

millionannually.

Bringingovertimedownto

thenationalmunicipalaveragewouldsaveover

$90millionannually.


23/35

23

1

0.Techn

ologyReorganization

Currently,

everyCitydepartmenthasitsownbudgetforInformation

Technology(IT).Asaresult,d

epartmentsarenegotiatingdifferentcontracts

withthesa

mehardwareandsoftwarevendorsforid

enticalproductsand

services.

TheCityc

ouldrealizesignificantsavingsiftheDivisionofTechnology(DOT)

negotiated

additionalmasterlicensesonbehalfofallCitydepartments.

Toachieve

thesesavings,

DOT

needstoperformas

trategicsourcingau

ditof

theCitysexistingITinfrastruc

turetoidentifyduplicationandoverlapt

hatcan

beconsolid

ated.

DOTwouldthenrenegotiatem

anycontractsintosinglemasterones.

AllfutureITprocurementsho

uldbecentralizedandmanagedbyDOT

,

allowingth

eCitytosaveasmu

chaspossiblefromb

uyingsoftwareandhardware

inlargequantities.

Tofurther

minimizeduplicatio

nandoverlap,abud

getclassshouldbec

reated

forIT.


24/35

24

1

0.Techn

ologyReorganization

OncetheC

itymovestocentralizedITprocurement,DOTshouldtransition

fromtraditionaldesktopcomputerstothinclientd

evices.

Costsavingsofthinclientdevices:

LowerITadministrationcosts.

Lowerh

ardwarecosts.

Lessene

rgyconsumption.

OncetheC

ityhasbeenstrategicallysourcedandbeguntomovetothinclient

devices,itcanbegintoswitcho

vertofloatinglicen

sesforsoftware.

CurrentlytheCitybuysalicensef

oraprogramlikeMicrosoftWordforeverysingleCity-owned

computer.

Because

thereisneveranoccasionwhereeveryMicrosoftWo

rdlicenseisbeingused,th

isisa

wastefulpractice.

AfloatinglicensewouldenabletheCitytopurchaseonlythe

maximumnumberlicensesthat

wouldb

eusedatanygiventime.

CentralizedITProcurementan

dStrategicSourcing

couldresultinamin

imumof

$10millionofsavingsannually

.


25/35

25

11.

PaperlessGo

vernment

Philadelphiacansavem

illionsofdollarsinadministrative

coststhroughagreater

emphasisontechnologyanda

concurr

entreductioninpaperconsum

ption.

Enhanceduseoftechnologycouldeventuallysave

Philadelphia$138to$264millionannuallybyreducing

paperconsumptionand

streamliningw

ork-flowproce

ssesto

increase

theproductivityandefficiencyofgovernment.

Inaddit

iontosavingm

oney,technologicalefficiencywill

transfor

memployeesw

hopushpapers

andprocessforms

intooneswhointeract

withcitizens,w

orkingtoserve

their

needs.T

echnologywillenableCityworkerstobeinn

ovative

anduse

theirtalentsto

findcreativesolutionstoproblems.


26/35

26

11.

PaperlessGo

vernment

Automatedprocessesca

nbeusedtoapproveroutine

applicationsforpermits

andself-service

informationkiosks

similartobankATMsc

anshrinkcusto

merlines,there

by

speeding

theprocessing

ofrequests.

Useofelectronicforms

thatstoreinfor

mationwill

dramaticallyreducethe

needforrepeatedlyenteringid

entical

data.Electronicformswillalsoeliminatethenumberof

Cityemployeesdevoted

toperforming

dataentry,thereby

allowing

theCitytorea

ssigntheseemp

loyeestotaskswhere

theydirectlyinteractwithcitizens.


27/35

27

11.

PaperlessGo

vernment

Providin

gCityemployeeswhoworkinthefieldwith

hand-

heldPDAs,ratherthan

paperforms,to

collectdatacan

increase

theirproductivitybyupto30%.

Notonlyca

nthe

informationbeentered

faster,

itcanbe

instantlytransm

itted,

electronically,

backtothehomeoffice,

eliminatingthe

need

foranotherpersontoty

peitin.

Theefficiencysavings

couldbe

usedtoputmo

repeopleinthefield,suchasL

&I

inspecto

rsandpoliceofficers.

Thefort

hcoming311sy

stemcanimpro

vetheaccountability

ofCityagenciesandallowcitizensand

managerstomonitor

theprog

ressofservicer

equests.

Itwill

alsoallowtheC

ityto

haveadata-centricmanagementapproa

chtocity

governm

entsomethin

gcanonlybem

anagedifitis

measured.


28/35

28

11.

PaperlessGo

vernment

*Source:SolidWaste

ManagementCoordinatingBo

ard,

OfficePaperReductionD

emonstrationProject,availableat:

http://www.swmcb.org/files/OfficePaperReport.pd

f.

Actionitemsthatcanbeimplement

edimmediate

ly:

a.Eliminatingpaper:$7-16millioninannualsavings

Allco

mputersconnectedt

oprinterscapableof

double-sidedprintin

gshould

beset

todosoautomatical

ly,achangethattakeslessthan30second

s.

Double-sidedprintingcouldreducepaperuseb

ynearly50%.

Every

dollarspentonpaperresultsinapproxim

ately$13-31insecondary

costs(e.g.,paperstoragean

dtransportation,pr

intingmachinery,in

k,

postag

e,labor).*

Ifdou

ble-sidedprintinganddistributingreportsasPDFsviaemailsavedthe

Citya

mere$500,0

00indirectpapercosts,thesecondarysavingswouldbe

$6.5to$15.5millionannually.


29/35

29

11.

PaperlessGo

vernment

b.

Electron

icProcurementInitiatives:$100,0

00inannu

al

savings

TheProcurementDepartmentmailsapproximately5

,000bidannouncementsperyear

tovend

ors.

Emailingbidannouncementsorpostingthemonthewebwouldsave

$2,5

00-5,0

00annually.

Charterchangeallowingforelectronicsubmission/re

viewofcompetitive,sealedbids,

resultin

ginnumerousefficiencygains.

Electro

nicsubmissionofdepartmentalreportsonven

dorperformance,yield

ing

efficien

cygainsandeasierand

betterreviewofpastperformancedatawhen

consideringnewbids.

c.PaperlessPaychecks:over$500,0

00in

annualsavings

Theprimarycostsofpaperchecksanddepositstatem

entsstemfrompaper,printing,

postage

,labor,andtransaction

fees.

Forexample,the

transactionfeeforapapercheck

is$1.10

,comparedtoonly$0.35fordirectdeposit.

Approximately80%ofcombinedCityemployeesand

pensionersreceivetheir

paychecksandpensionsviadirectdeposit,while20%

receivepaperchecks.

IfallCityemployeesenrolled

indirectdepositandreceivedtheirdepositstatements

electronically,t

heCitycouldsave$500,0

00peryear.


30/35

30

12.

SwitchtoV

oIPNow

TheCity

hasapproximately33,0

00phone

linesandpays$7

per

monthperline,resultinginanannualcost

of$2,7

72,0

00.

ConvertingtoVoIPwith

IPPBX(orIPCentrex)capability

wouldlik

elyreducetheC

itysperlinecostto$4permonth

,

therebysavingapproxima

tely$1millionp

eryear.

Toaccom

plishthis,theC

itywouldhavetomigrateallCity

officeson

toacommonEt

hernetNetwork,whichwouldsave

another$500,0

00peryea

r(asaresultofavoidingthecosto

f

multiple

T-1linesandadd

edCentrexando

therservicestoremote

locations

theT-1srequire).

VoIPtechnologycouldalsoenabletheCitytoeliminatecurrent

chargesforserviceslikeco

nferencecalling,voicemail,auto

attendant,etc.,therebysavinganadditiona

l$1millionper

year.

Source:Analysisprovidedbytechnologyconsultants.

Contactinformationon

file.


31/35

31

12.

SwitchtoV

oIPNow

EstimatedAnnualSavings:$2to$3million

EstimatedCoststoA

chieveSavin

gs:$0*

Theses

avingsestima

tesdonotincludethe

efficien

cygainsandreducedsupportcoststhat

wouldresultfromm

ovingtoaco

mmonnetwo

rk,

whichcouldyieldtensofmillion

ofdollarsin

savings

everyyearfo

rbothcurren

tusesand

plannedprojects.

*Aservicecomp

anywouldbuildtheVoIPsyst

emfortheCityagainstacontr

acttoprovidetheservice,enab

ling

theCitytorealizeallofthepotentialsavings.


32/35

32

13.

LeaseCityRo

oftopsan

d

LandforCellularPhone

Antenna

s*

City-ow

nedpropertiesandlandareamongsom

eof

themostdesiredlocationsforcell

ularphone

antennas.

Curren

tmarketleaserevenuesforantennasitespay

$1,8

00to$5,0

00per

month/persite/percarrier.

Estimatedadditionalrevenue:$2millionannu

ally**

*TheFreshmenCo

uncilmembersthankCouncilm

anGoodeforthissuggestion.

**Source:Savings

estimatefromAxisPartners,L

LC.


33/35

33

14.

HireAdditio

nalAud

it

Staff

Itwouldcosts$379,611tohirefiv

eadditional

Revenu

eExaminers

andoneadditionalRevenu

e

Examin

erSupervisorintheRevenueDepartment.

ForFY09,thesen

ew

position

swouldgenerate

approximately$3,16

8,714inadditionaltaxrevenue.

Estimated

addition

al

revenue

:

$2,78

9,1

03

annually


34/35

34

15.

Clo

seTaxL

oophole

s

Limitallowab

leRealEstateInvestmentTrustdeductions

RealEstate

InvestmentTrusts(REITs),

likeothertrustsandinvestmentfunds,

areallowed

todeductprofitspa

idoutasdividendstotheirshareholders,

effectively

exemptingREITsfromtheCitysnetinc

ometax.

In1999,th

eREITdeductionwasexpandedtoincludeanybusinessthatpartners

withaREI

Tonarealestateproject,nomatterhow

smalltheREITsshareinthe

project.It

isestimatedthatthisexpandeddeduction

costtheCity$10m

illionin

taxrevenueforFY07alone.

In2005,th

eLawDepartmentd

eterminedthatthise

xpansionoftheREIT

deductionwasimproper.

TheCityshouldremovetheREITdeductionfromentitiesthatonlyhav

eREIT

shareholdersandarenottruein

vestmentfunds/trus

ts.

Estimatedadditionalrevenue:$5-10millionannua

lly


35/35

35

15.

Clo

seTaxL

oophole

s

Collecttaxesonthefor-profitbu

sinessactivitiesofn

ot-for-profitentitie

s

Manylargenon-profitsownandmanagerealestateorconductotherbusinessacti

vitynot

specificallyrelatedtoitsnon-profit

mission.

Revenuesfromtheseactivitiesares

ubjecttotaxation.

Currently,taxesarenotco

llectedon

thetaxablebusinessactivitiesofvar

iousnon-profitorganiz

ations.

TheCityshouldpursueallrevenue

owedfortaxableactivities,includingthebusiness

activitiesofnon-profits.

Tightenregulationsregardingpa

ymentsbetweenrelatedcompanies

Whenabusinessmakesapaymenttoawholly-ownedsubsidiaryorapartnercom

pany,the

paymentsar

etaxdeductible,justlikeanyotherbusinessexpense.

Ifthissamebusiness

receivesapa

ymentfromitssubsidiaryorpartnercompany

,thosefundsalsoaren

ot

taxable.

Asaresult,whenfundsarecirculatedbetweentworelated

companies,bothbased

in

Philadelphia

,themoneyisnottaxe

dbytheCity.

Thelawwasintendedtopreventdouble-taxation,anappropriategoal,butthecurrent

regulationseffectivelyremovefrom

thetaxrollsmillionso

fdollarsayearthatshouldbe

subjecttota

xation.

TheRevenu

eDepartmentshouldclarifyitsregulationson

thispointandcollecta

lltaxes

owed.

the freshman 15a

Documents