Archive: February, 2009
Catherine LuceyHere are the details from the Mayor's press office:
FOR IMMEDIATE RELEASE
MAYOR NUTTER AND CONTROLLER BUTKOVITZ ANNOUNCE PLAN TO REDUCE CITY’S PENSION OBLIGATIONS
$172 million in savings will be realized over five years
Philadelphia – Today, Mayor Michael Nutter, City Controller Alan Butkovitz and the Pension Board announced a plan to reduce the City’s pension obligations while saving the city $170 million over the next five years.
The pension plan proposal includes: lowering the assumed return on the pension investments from 8.75% to 8.25%; increasing the period over which the unfunded liability is paid off from 20-40 years; and spreading out the fund’s earnings and losses from five to 10 years. The total savings from these actions would amount to more than $170 million to the City’s general fund through FY14.
The pension proposal would decrease the financial burden on the City and increase its ability to fund existing liabilities in the long-term. Two components of the plan will require legislative action from the Pennsylvania Legislature.
“At a time when the City is facing unprecedented financial challenges, it is critical that we examine every possible option that might help us weather this storm,” commented Mayor Nutter. “If we are able to work with our partners in Harrisburg to pass the necessary legislation, the positive financial impact on our five-year plan would be significant.”
City Controller Alan Butkovitz added, “I presented this idea to the Mayor in an effort to help bridge the $1 billion budget gap confronting the City. The Mayor is to be commended for his courage in confronting this problem now and working with us to move quickly and put this plan on the fast track. This pension plan will not only save the city $170 million over the next five years, it will also avoid a looming pension fund crisis that was likely to occur in three years time if action was not taken today.”
Lower the earning assumption
Lowering the earnings assumption from 8.75% to 8.25% is fiscally responsible, making the assumed return more reasonable and aligning the assumptions with other jurisdictions. The Pennsylvania Intergovernmental Cooperation Authority (PICA) has recommended that the Pension Board take this action. Lowering the earnings assumption will mean that the proportion of the fund that is currently funded will go down from about 55% to about 52.5%. Without the following two steps, lowering the earnings assumption would force the City to increase its annual contribution to the pension fund. The Pension Board has voted to change the earnings assumption contingent on state legislation to increase the amortization and smoothing periods.
Increase the amortization period
Increasing the amortization period will increase the length of time that the City has to pay off its pension costs. This is equivalent to stretching out the mortgage payments on your house. The dramatic losses in the fund caused by this year’s economic crisis can now be spread out over an additional 20 years, therefore saving the City money in the short term. The impact of this change will be to decrease the annual contribution to the pension fund. State legislation is required to modify the amortization period.
Increase the period over which the pension fund’s losses/earnings are spread
Spreading out the pension fund’s losses/earnings over a longer period of time, from five to ten years, allows the City to save money because it evens out the dramatic fluctuations from year to year. This year’s extraordinary losses caused enormous increases in costs for the City. By spreading out these costs, the annual contribution to the pension fund will be reduced. State legislation is required to modify the smoothing period.
The net impact of all three steps of the pension fund proposal will be to lower the amount the City is required to contribute to the pension fund over the next five fiscal years.
The estimated savings of the pension proposal total $170 million to the City’s general fund. The total amount of estimated savings is based on the fund’s 20% loss year-to-date this fiscal year.
Current Proposed Effect on Pension Fund Necessary Action
Lower Earnings Assumption 8.75% 8.25% Increases annual contribution Vote by the pension board
Increase Amortization Period Average of 20 years 40 years Decreases annual contribution State legislation
Increase Smoothing Period 5 years 10 years Decreases annual contribution State legislation
Chris BrennanOK, let's try this again. Closing arguments in the City Hall corruption case of Chris Wright, City Councilman Jack Kelly's former chief of staff, and three political allies, were supposed to be completed yesterday. But defense attorneys and the U.S. Attorney's Office spent the day instead negotiating about the instructions the judge will give to the jury when it gets the case for deliberation. We're all back in court. Closing arguments, we're told, are about to start.
Attorney Andy Teitelman and his clients, Hardeep and Ravinder Chawla are accused of bribing Wright with $1,000, a rent-free apartment and free legal services for several personal problems in return for help on real estate and tax matters with city officials and agencies.
The four defendants seem in high spirits this morning, joking around with their attorneys while we wait for judge and jury.
Check back here during the day for updates on the closing arguments.
UPDATE, 9:15am: We just lost another juror. U.S. District Justice Eduardo Robreno just announced that one of the jurors had a "physical incident" at home last night and is unable to serve until the end of the trial. A juror was dismissed this week after defense attorneys complained about "inappropriate conduct." An alternate juror was dismissed last week after serving became an economic hardship. We started with three alternate jurors. Now we have none.
UPDATE, 9:45 am: Assistant U.S. Attorney Michael Bresnick just told the jury that Teitelman and the Chawla brothers helped Wright with the things he needed most -- money, a place to live and free legal advice. In return, they sent him orders by e-mail when they needed help on real estate deals, tax bills and other city matters. "You name it, they went to Wright," Bresnick said. "They owned Chris Wright and they knew it."
UPDATE, 10 am: Bresnick is working to use Wright's stammering testimony against him, noting that he had been "choking" on the question of why he took a $1,000 check from Hardeep Chawla but would have declined cash. Wright was unable to say why. “The real answer wouldn’t have helped him,” Bresnick said. “By giving that money as a check, it was simply a way to dress it up, to make it look less like a bribe.”
UPDATE, 10:10 am: Lisa Mathewson, Chris Wright's attorney, just told the jury there is little debate about what happened between her client and Teitelman and the Chawla brothers. The question, she stressed, is whether there was an intent to break the law when Wright helped his friends with constituent services and they helped him with money and other support. “In a case like this, ignorance of the law is an excuse,” Mathewson said. “What’s going on in their heads is the most important question you will decide."
UPDATE, 10:25 am: On the $1,000 check, Mathewson said Wright took it as a Christmas gift, knowing that Hardeep Chawla understood that he was going through a difficult period in his life and had financial problems. “He’s not an unscrupulous guy, ladies and gentlemen, who will just take anything anyone hands him," she said.
UPDATE, 12 pm: Bill Winning, Hardeep Chawla's attorney, is telling the jury that his client had very little to do with the many dealings between his brother, Wright and Teitelman. Hardeep Chawla's largest tie to the bribery case is the $1,000 check. “The $1,000 check here was not a bribe," Winning said. "It was a gift. It had no strings attached to it.”
Hardeep Chawla, a major campaign contributor with his brother for Kelly, pleaded guilty in 2006 to defrauding the U.S. Government on leases for two buildings. Kelly signed a letter of reference to the judge in that case after Wright and Teitelman e-mailed it back and forth for editing. The prosecution says the check was a bribe in advance of that letter.
Winning pointed out that Wright listed the $1,000 as a gift on a state financial disclosure form. “Bribes are paid in brown paper bags in the middle of the night," Winning said. "They’re secret and undisclosed. You don’t tell anyone. That’s not what happened here.”
UPDATE, 12:15 pm: Bill DeStefano, Teitelman's attorney, has raised a point we've heard often in this case -- there's very little disagreement between the prosecution and the defense about the things that happened. The disagreement is focused on why things happened, why Wright got a rent-free apartment and money and legal work and why he helped the Chawlas and Teitelman with constituent services.
“What you’ve heard, at least so far, are some competing versions of the truth," said DeStefano, adding that constituent services were a large part of Wright's job. "Philadelphia City Council is a constituent service machine."
UPDATE, 1:10 pm: Prosecutors have mentioned more than once that Ravinder Chawla is paying the legal fees for Teitelman, who serves as general counsel for many of the Chawla family businesses. Chawla, at the lunch break, made an interesting point -- So are you. Chawla noted that he can and will write off legal fees as a corporate expense. So the burden for those legal fees falls on everyone who pays taxes.
UPDATE, 1:35 pm: Tom Bergstrom, Ravinder Chawla's attorney, is focusing on another key factor in the joint defense of the four men on trial. They all had dealings with each other but didn't know all the details of each man's interaction with the others. Bergstrom says Ravinder Chawla didn't know about the $1,000 his brother gave Wright or the free legal services provided by Teitelman.
And Bergstrom pointed out that the Chawlas were major donors to Kelly's campaigns. “The reality is, as nice a fellow as he is, the Chawlas didn’t need Chris Wright," Bergstrom said. “If they really wanted to talk to Councilman Kelly all they needed to do was pick up a phone.”
UPDATE, 2:10 pm: The closing arguments are over and the judge has started giving the jury a lengthy set of instructions on how to deliberate on the case. Robreno said he will end court today at 3:15 p.m. to help at least one of the jurors leave for weekend plans. He doesn't expect to complete the jury instructions today. Since Monday is a federal holiday -- President's Day -- the jury will get the rest of its instructions on Tuesday and then start deliberating.
We've been reviewing the scenarios prepared by city departments to show the impact of 10, 20 or 30 percent budget cuts on their operations. As we've reported before, these scenarios -- prepared to show the city's options for closing a $1 billion budget hole over five years -- show devastating reductions for departments like police, streets and libraries.
The mayor's office, which had a budget of $6.6 million after the fall budget cuts, also prepared scenarios. They did a 10 percent and a 20 percent report, both of which include staff reductions and reorganization of units. But when it comes to 30 percent, they didn't do a scenario. The document just says "would require complete reorganization of Mayor's Office."
We asked Mayor Nutter why his own office didn't do all the scenarios.
This just dropped in our inbox. As you may know, the city pension fund is one of the biggest drags on Philly's budget. (Look at today's DN editorial). So we're not sure what this is about, but it should be interesting:
M E D I A A D V I S O R Y
For Immediate Release: February 12, 2009
The federal corruption trial for Chris Wright, City Councilman Jack Kelly's former chief of staff, and three of his political allies should get back under way within the hour. The defense rested yesterday afternoon. Prosecutors are expected to begin their closing arguments at 11 a.m., followed by defense attorneys for Wright, attorney Andy Teitelman and his two clients, developers Hardeep and Ravinder Chawla.
Teitelman and the Chawla brothers are accused of bribing Wright with $1,000, a rent-free apartment and free legal services for several personal problems in return for help on real estate and tax matters with city officials and agencies.
Check back here during the day for updates on the closing arguments. U.S. District Justice Eduardo Robreno told the jury yesterday that they may begin deliberating this afternoon.
Former state Sen. Vince Fumo said in court that he was "probably wrong" to let a Senate staffer do campaign work at her Senate desk.
Congressional leaders announce stimulus deal. What does it mean locally?
City Council holds a hearing to ponder expanding the Philadelphia Community Court.
If the stimulus package becomes a reality, Philadelphia seems poised to get a cut of the funding for key priorities like schools, transit and housing. But Mayor Nutter stressed tonight that stimulus money will not help him close the $1 billion shortfall in his five year plan.
“These dollars are not to fill budget holes. Everyone has made that very clear,” Nutter said tonight. “The theory here is when more people are working, they’re paying taxes. Then tax revenues will flow and those dollars will come back to Philadelphia.”
Nutter, who spent the day in Washington DC today to meet with lawmakers about the stimulus package, said he was optimistic about Philadelphia’s fate under the stimulus deal, but didn’t yet know exactly what programs will get funding – or by how much.
Congress has announced that they have reached a deal on the economic stimulus package -- a $789 billion agreement. For the details so far, click here.
We're still trying to figure out what this all means for Philly. We'll keep you posted.