COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES APPROPRIATIONS COMMITTEE BUDGET HEARING DEPARTMENT OF GENERAL SERVICES STATE CAPITOL HARRISBURG, PENNSYLVANIA ROOM 140, MAJORITY CAUCUS ROOM WEDNESDAY, MARCH 1, 2017 3:00 P.M. BEFORE: HONORABLE STANLEY SAYLOR, MAJORITY CHAIRMAN HONORABLE JOSEPH MARKOSEK, MINORITY CHAIRMAN HONORABLE KAREN BOBACK HONORABLE JIM CHRISTIANA HONORABLE SHERYL DELOZIER HONORABLE GEORGE DUNBAR HONORABLE GARTH EVERETT HONORABLE KEITH GREINER HONORABLE SETH GROVE HONORABLE MARCIA HAHN HONORABLE SUE HELM HONORABLE WARREN KAMPF HONORABLE FRED KELLER HONORABLE JERRY KNOWLES HONORABLE NICK MICCARELLI HONORABLE DUANE MILNE HONORABLE JASON ORTITAY HONORABLE MIKE PEIFER HONORABLE JEFF PYLE HONORABLE BRAD ROAE HONORABLE JAMIE SANTORA HONORABLE CURT SONNEY HONORABLE KEVIN BOYLE HONORABLE TIM BRIGGS HONORABLE DONNA BULLOCK HONORABLE MARY JO DALEY HONORABLE MADELEINE DEAN HONORABLE MARIA DONATUCCI HONORABLE MARTY FLYNN
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COMMONWEALTH OF PENNSYLVANIAHOUSE OF REPRESENTATIVES
APPROPRIATIONS COMMITTEEBUDGET HEARING
DEPARTMENT OF GENERAL SERVICES
STATE CAPITOLHARRISBURG, PENNSYLVANIA
ROOM 140, MAJORITY CAUCUS ROOM
WEDNESDAY, MARCH 1, 20173:00 P.M.
BEFORE:HONORABLE STANLEY SAYLOR, MAJORITY CHAIRMANHONORABLE JOSEPH MARKOSEK, MINORITY CHAIRMANHONORABLE KAREN BOBACKHONORABLE JIM CHRISTIANAHONORABLE SHERYL DELOZIERHONORABLE GEORGE DUNBARHONORABLE GARTH EVERETTHONORABLE KEITH GREINERHONORABLE SETH GROVEHONORABLE MARCIA HAHNHONORABLE SUE HELMHONORABLE WARREN KAMPFHONORABLE FRED KELLERHONORABLE JERRY KNOWLESHONORABLE NICK MICCARELLIHONORABLE DUANE MILNEHONORABLE JASON ORTITAYHONORABLE MIKE PEIFERHONORABLE JEFF PYLEHONORABLE BRAD ROAEHONORABLE JAMIE SANTORAHONORABLE CURT SONNEYHONORABLE KEVIN BOYLEHONORABLE TIM BRIGGSHONORABLE DONNA BULLOCKHONORABLE MARY JO DALEYHONORABLE MADELEINE DEANHONORABLE MARIA DONATUCCIHONORABLE MARTY FLYNN
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BEFORE (continued):
HONORABLE EDWARD GAINEYHONORABLE PATTY KIMHONORABLE STEPHEN KINSEYHONORABLE LEANNE KRUEGER-BRANEKYHONORABLE MIKE O'BRIENHONORABLE PETER SCHWEYER
NON-COMMITTEE MEMBERS:HONORABLE DAVE MILLARDHONORABLE DAVE ZIMMERMANHONORABLE MARK KELLERHONORABLE DAN MOULHONORABLE WILL TALLMANHONORABLE RUSS DIAMONDHONORABLE MARTY CAUSERHONORABLE KRISTIN PHILLIPS-HILLHONORABLE ERIC ROEHONORABLE BOB GODSHALLHONORABLE CRIS DUSHHONORABLE DARYL METCALFEHONORABLE EDDIE DAY PASHINSKIHONORABLE MARK LONGIETTIHONORABLE PAUL COSTAHONORABLE THOMAS CALTAGIRONEHONORABLE MORGAN CEPHAS
COMMITTEE STAFF PRESENT:DAVID DONLEY
MAJORITY EXECUTIVE DIRECTORRITCHIE LaFAVER
MAJORITY DEPUTY EXECUTIVE DIRECTOR
MIRIAM FOXDEMOCRATIC EXECUTIVE DIRECTOR
TARA TREESDEMOCRATIC CHIEF COUNSEL
T i f f a n y L . Ma s t • Ma s t Re p o r t i n gma s t r e p o r t i n g @g ma i l . c o m
( 7 1 7 ) 3 4 8 - 1 2 7 5
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I N D E X
TESTIFIERS
* * *
NAME PAGE
CURT TOPPERSECRETARY,DEPARTMENT OF GENERAL SERVICES..............4
BEVERLY A. HUDSONDEPUTY SECRETARY FOR ADMINISTRATION,DEPARTMENT OF GENERAL SERVICES.............55
SUBMITTED WRITTEN TESTIMONY
* * *
(See submitted written testimony and handouts online.)
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P R O C E E D I N G S
* * *
MAJORITY CHAIRMAN SAYLOR: Mr.
Secretary, would you and Bev rise to be sworn
in?
(All testifiers were duly sworn by
Majority Chairman Saylor.)
MAJORITY CHAIRMAN SAYLOR: Thank you.
You may start with any opening comments
that you may have, Mr. Secretary.
SECRETARY TOPPER: Thank you, Mr.
Chairman.
I have submitted testimony for the
record, and I think that will suffice today.
I'll be happy to move to questions.
MAJORITY CHAIRMAN SAYLOR: Very good.
We'll start with Representative Santora.
REPRESENTATIVE SANTORA: Thank you,
Mr. Chairman. Thank you, Mr. Secretary.
SECRETARY TOPPER: Thanks.
REPRESENTATIVE SANTORA: Welcome. I
want to focus on real estate. Let's start with
the five prison closures.
When the Governor recently announced the
closing of Pittsburgh, some issues have come to
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light. One of them was, for the final
disposition of Greensburg, it involved a $7
million buyout required in connection with the
sale of the property.
Are we going to face that same type of
thing here with the Pittsburgh closure and sale?
SECRETARY TOPPER: No, Representative.
I don't believe there are any outstanding
liabilities of that sort.
REPRESENTATIVE SANTORA: Excellent. So
were you involved in the recommendations on how
to dispose -- are you involved in the
recommendations on how to dispose of these
properties?
SECRETARY TOPPER: The Department of
General Services provided some information to
the Department of Corrections having to do with
outstanding capital debt, so pre-existing
capital projects that had been performed at the
property. And we also, I believe -- hang on.
That's right. And we provided a survey
of utility costs associated with all of the
properties that were under consideration by the
Department, but that was the extent of our
involvement prior to the decision.
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REPRESENTATIVE SANTORA: Now, once the
decision is made, are you going to handle the
disposition?
SECRETARY TOPPER: We will. That's the
role that DGS has under current statute. We did
take a relatively extraordinary step, though,
this year in an effort to try to accelerate the
sale and try to accelerate the disposition.
So where, typically, the Department
would wait until the property had been vacated
and would wait until the property was formally
declared surplus, this year, as soon as the
announcement was made, we got together with the
Department of Community and Economic Development
and with the Department of Corrections, and
we've already begun the pre-sale survey work
that has to be done, the appraisal. And you
know, we intend to do everything we can to get
it -- to get the property off the books as
quickly as possible.
REPRESENTATIVE SANTORA: That's where I
want to go. That's one of the things that
concerns me, get the property off the books as
soon as possible. And I understand that, from
DGS, it would be $3 million a year to mothball
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it and keep it during that process.
Has there been any thought given to
being a real estate seller in the sense of
bringing developers to the table, let them come
to you with what the value is post-development
and maximize the revenue coming in to the
Commonwealth on a per unit basis or what the
overall property is worth?
I believe we have waterfront property
there in Pittsburgh. For example -- I'm told
it's 24 acres -- I just did some quick math on
10 acres with the DGS, 500 units at $100,000 a
door, I've got $60 million or so.
It's just, there is some great potential
to sell it as an apartment complex, as
residential condos, whatever it is. I'm told it
is in a very good area. And you know, I said it
yesterday, except for that there's a prison
there. That problem is being solved. There's
very low demo costs with the amount of steel in
that property.
So are we looking at those opportunities
to maximize revenue for the Commonwealth?
SECRETARY TOPPER: Yes, Representative,
we do intend to look at those opportunities.
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Current statute is really quite
prescriptive, though, in terms of what we're
allowed to do when it comes to disposition of
real property. It's likely that the best path
to get to a scenario like the one you've
described would be to work through local
redevelopment authority and use the authority to
engage local developers, members of the
community, in order to do some planning.
It may be that the entire facility
doesn't have to be razed in order to turn the
property into something that's productive and
valuable. I think that study has to be done.
REPRESENTATIVE SANTORA: Okay. But you
say there's legislative work that would need to
be done for you to do a direct sale?
SECRETARY TOPPER: Well, any time we
make a direct sale, the statute is really pretty
prescriptive, we're required to get an appraisal
of the property, and we're required to sell it
to the highest bidder --
REPRESENTATIVE SANTORA: Okay.
SECRETARY TOPPER: -- without really
taking into consideration what the highest and
best use for the property might be. We would
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certainly love to have greater flexibility to be
able to approach the marketplace in a more
commercial fashion.
REPRESENTATIVE SANTORA: I know I'm out
of time. There's much more I'd like to talk
about. If there's a second round, I'd like to
get on that list.
Thank you.
MAJORITY CHAIRMAN SAYLOR: Very good.
Representative Briggs.
REPRESENTATIVE BRIGGS: Thank you,
Chairman.
Thank you, Secretary, for your time this
afternoon.
As you know, your Department and
yourself were very helpful on a couple of
instances in my Legislative District when
Representative Kampf and I joined together to do
a land conveyance for our township, for Upper
Merion Township in Valley Forge Park, and the
other was trying to assist, and it ended up
working, with a State store opening in our area.
And both times, there were a lot of
challenges and delays in terms of the processes
that you had to go through, not because of you,
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just because of the processes set forth. Last
year at this hearing, you discussed a little bit
of some modernization efforts that you were
thinking of bringing forward.
Could you update us on some ideas that
you may have to streamline the process a little
bit?
SECRETARY TOPPER: Sure, Representative.
Thank you for the question.
I think with respect to real estate
modernization, it really falls into two
categories, things that we'd like to do. First,
with respect to sales, basically, when property
becomes surplus, the key thing is to minimize
the amount of time that the property remains on
the books.
It turns out that for the portfolio
property that we carry that sits vacant, it will
no doubt cost us more to maintain it while we're
prepping it for sale and putting it on the
market and getting it sold than the property
will ultimately return once it is sold.
That's because we still have to secure
it. We still have to do the landscaping, pay
for all of the utilities, et cetera. So the
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cycle time really matters for the sale of
surplus property. We'd love, along the lines of
what I just referenced, we'd love to have more
flexibility to be able to move those properties
faster when they're declared surplus.
On the leasing side of the real estate
business, there are a number of things that I
think we can do and could work on together. The
process that we follow for real estate, for
commercial leasing in the Commonwealth, is
largely laid out in statute that was created in
the 1930s.
The real estate market has, you know,
has evolved. And our ability to use sort of a
modern approach or modern tools to engage with
the market would be much appreciated.
We plan, actually in March, to hold
what's called a kaizen event or a lien
management event involving the Treasurer's
Office, the Office of the Budget, and our own
folks, in an effort to really look at, end to
end, the entire process from start to finish,
from when an agency decides that they need new
space to when we are ultimately able to move the
agency into that new space.
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And we hope that, by virtue of going
through that process and that analysis, that
we'll be able to pull, you know, hopefully, more
than a month out of the current process. It
just takes time to decide where the agency is
going to locate, whether or not we can have the
agency co-locate with other agencies in the same
municipality, find a downtown location, do a
public bid, and then finally, get a lease
executed and through the entire signature
process, which involves the Board of
Commissioners for Public Grounds and Buildings,
the Treasurer and the Comptroller's offices.
I think there's a lot of opportunity
there for us to be able to move much more
quickly.
REPRESENTATIVE BRIGGS: Thank you for
that answer.
Thank you, Chairman. That's all I have.
MAJORITY CHAIRMAN SAYLOR:
Representative Dunbar.
REPRESENTATIVE DUNBAR: Thank you,
Mr. Chairman. Welcome, Secretary.
In your '16-'17 budget, GGO line item
for DGS was decreased. You had mentioned in
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your own information here today -- you had
stated that last year's budget decision to
capitalize our Public Works Program was a key
component of our success. That decision
provided nearly $14 million of relief for the
General Fund, but more importantly, it enabled
DGS Public Works to adopt a more flexible and
scalable model.
Excuse me for my confusion, but I hear
the words capitalize our public works, and I
understand that this, essentially, was a bond
issuance?
SECRETARY TOPPER: Well, technically, it
wasn't a bond issuance by itself. What the
change last year enabled was, it enabled us to
pay for the administration of the billion dollar
portfolio of capital projects out of bond
proceeds.
REPRESENTATIVE DUNBAR: Out of bond
proceeds?
SECRETARY TOPPER: Yes.
REPRESENTATIVE DUNBAR: So it wasn't --
and I'm thinking out loud here, but if you have,
let's say, you're refinancing a bond package,
then there are essentially proceeds that can be
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utilized as profits to help reduce your other
items.
But this, essentially, you did use bond
proceeds to pay employees, then?
SECRETARY TOPPER: We did, beginning
with the current fiscal year.
REPRESENTATIVE DUNBAR: Okay. And I
have concerns there. Tax exempt status, our
bond borrowings are tax exempt. I believe there
are some limits of how much of bond proceeds you
can use and still maintain your tax exempt
status. If you can please just check on that
for me and get back.
SECRETARY TOPPER: I'd be happy to. I
can share with you, though, that it was pretty
thoroughly vetted by the Office of General
Counsel and by the Office of Budget Counsel.
REPRESENTATIVE DUNBAR: I'm sure it was,
but I'd love to see it in writing.
SECRETARY TOPPER: Sure.
REPRESENTATIVE DUNBAR: Also, in this
year's budget information, I see that in the
Governor's budget document, it says that six
positions are being transferred from the Office
of Budget to DGS.
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How -- first off, what is that about?
And how are we paying for that?
SECRETARY TOPPER: Sure. Those are
General Fund-funded positions; they're not
within the Public Works deputation. Those
positions are moving over to join our facilities
management deputation in real estate and in
maintenance.
It's really just the result of our
ongoing effort to consolidate like operations
from across agencies within the enterprise.
REPRESENTATIVE DUNBAR: So they will not
be paid out of the same pot of money that the
bond proceeds went into; is that correct?
SECRETARY TOPPER: That's correct.
REPRESENTATIVE DUNBAR: Okay.
SECRETARY TOPPER: It is only -- bond
proceeds are only going to fund the staff that
are working directly on capital projects that
are also funded by those bond proceeds.
REPRESENTATIVE DUNBAR: I understand.
And I mean, I do have concerns, though, of going
down that road of how it affects our bond
ratings, as well as even in your testimony, you
said, indeed, it is possible to run the business
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of a government like a business.
I would assert that this is not running
like a business would run; it's something a
business would not do.
SECRETARY TOPPER: Forgive me, I can't
call to mind the exact statistics from last year
when we did the study, but we would be among, I
believe, 15 or 16 other states that currently do
approach their funding for their capital
portfolio this way, as well as many major
universities like the one that I left in order
to take this position a couple of years ago at
Georgetown.
It is a relatively common practice, at
least among those kinds of organizations. And
in our instance, it really did create the
opportunity for us to scale, to be flexible, and
to begin to address what had become really an
unacceptable backlog of capital projects.
REPRESENTATIVE DUNBAR: I appreciate
that, and I'm not denying that the use may have
been beneficial, but my preference would not be
to use bond proceeds to do it. I'd rather use
regular funding, other funding streams, to do it
as opposed to bond issuances.
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SECRETARY TOPPER: Understood.
REPRESENTATIVE DUNBAR: Thank you,
Mr. Chairman.
MAJORITY CHAIRMAN SAYLOR:
Representative Krueger-Braneky.
REPRESENTATIVE KRUEGER-BRANEKY: Thank
you, Mr. Chairman.
Thank you, Secretary; this side.
SECRETARY TOPPER: Thank you.
REPRESENTATIVE KRUEGER-BRANEKY: How are
you?
SECRETARY TOPPER: I'll get it right
sooner or later.
REPRESENTATIVE KRUEGER-BRANEKY: It's
going to be like a volleyball match the whole
time.
So I've got a question about
procurement. I fundamentally believe that we
can maximize the power of our State dollars when
we're doing business with Pennsylvania-based
companies.
Research shows that when you spend your
money at a locally owned company as opposed to
an out-of-state corporation, about three times
as much of that money circulates in the local
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economy.
So can you tell me first -- I know that
there was an executive order from Governor Wolf
directing his agencies to ensure diversity and
inclusion in state contracting. I'm curious to
hear how that's going and if you could give me
some numbers if you've got them or follow up
with them, particularly regarding minority-owned
businesses, women-owned businesses,
disadvantaged-owned businesses, and
veteran-owned businesses.
How are we doing with contracting with
them?
SECRETARY TOPPER: Sure, I'll be happy
to.
You've got the numbers, right? Okay.
Wow, you really do have the numbers; I have
charts.
REPRESENTATIVE KRUEGER-BRANEKY:
Wonderful.
SECRETARY TOPPER: Thanks,
Representative.
I can share with you that two years ago,
when we came into office, the percentage of the
Commonwealth's business, as a matter of the
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total percentage of total payments that the
Commonwealth was making to vendors who are
either self-certified small businesses or
minority-owned or women-owned or what we call
diverse small businesses, that percentage had
been in decline for going on five years. It had
fallen from just under 10 percent for diverse
businesses -- I'm sorry; for small businesses
overall -- to just under eight percent when we
arrived.
I'm pleased to be able to say that based
on the latest data, we've at least interrupted
the decline. And I have a lot of confidence
that we're going to be headed back in the right
direction.
You know, as a convenient benchmark, if
we look at neighboring states like Maryland and
New York State, they routinely see small
business participation north of 20 percent. And
I see no reason why we couldn't also be doing
more, doing that level of small business
contracting here in Pennsylvania.
Here's what we've done in the last
couple of years here, particularly in the last
year, to help make that happen. The first thing
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we did was we established an empirically valid
metric for how we measure it.
This is a metric that had been
generating a lot of confusion over the years as
successive administrations had defined it in
different ways. We've tried to clear that up.
We've included LGBT businesses and
businesses owned by folks with handicaps. We've
included small businesses for the first time in
our RFP process.
REPRESENTATIVE KRUEGER-BRANEKY: Can you
tell us how you are defining small business,
because that's a term that folks define very
differently?
SECRETARY TOPPER: Got you. So it's a
term that's partially defined in statute and
partially defined by policy. So the statutory
part would be businesses must have fewer than
100 employees.
REPRESENTATIVE KRUEGER-BRANEKY: Okay.
SECRETARY TOPPER: And the policy part
pertains to different revenue limits that are
established. So for the most part, it's
businesses with less than 20 -- right, it's
businesses with less than $20 million a year in
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revenue.
REPRESENTATIVE KRUEGER-BRANEKY: Okay.
SECRETARY TOPPER: For IT businesses,
the limit is a little higher, it's $25 million.
We've incorporated new provisions into our
contracts, requiring subcontracts with firms
that make commitments to small businesses so
that those commitments are actionable in the
event that they're not followed through on.
We've adjusted the scoring process so that we
could make it more likely that businesses that
commit to doing business with small businesses
in Pennsylvania are going to win our contracts.
REPRESENTATIVE KRUEGER-BRANEKY: Okay.
SECRETARY TOPPER: And as I said, I'm
comfortable that we're going to -- that we're
making a dent here and the rate is going to
start climbing back up.
REPRESENTATIVE KRUEGER-BRANEKY: And
do you have any stats particularly on
contracting with minority-owned businesses,
women-owned businesses, and veteran-owned
businesses?
SECRETARY TOPPER: Sure. I don't know
if we can break it out here.
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REPRESENTATIVE KRUEGER-BRANEKY: If it's
something that you can submit, folks are --
SECRETARY TOPPER: I got it.
REPRESENTATIVE KRUEGER-BRANEKY: --
welcome to submit data afterwards; I know that I
saw the light change.
SECRETARY TOPPER: Okay.
REPRESENTATIVE KRUEGER-BRANEKY: But
thank you for your work on this effort. I hope
that we can look to best practices from other
states, as well, to make sure that we're doing
business with Pennsylvania-based businesses
whenever possible.
MAJORITY CHAIRMAN SAYLOR: Secretary,
you can send that, but you're welcome to finish
answering her question.
SECRETARY TOPPER: Thank you, Mr.
Chairman.
I'll be happy to provide a report in
full. In fact, next week we issue our annual
report, which will have all of these statistics.
I would respond, though, just briefly to the
request that we do more business with
Pennsylvania small businesses.
And I would just say that I, and that we
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as an Administration, would like nothing more
than to do more business with Pennsylvania small
businesses, and that's certainly our intent.
There are challenges with attempts to
approach that statutorily and to limit the
Commonwealth's ability to do business with firms
that are located or headquartered outside of
Pennsylvania. To the extent that we start
erecting those kinds of preferences, formal
preferences, they do kick off certain
reciprocity arrangements that potentially make
our own businesses less competitive elsewhere.
So I think we need to approach that with
some care. Thanks.
MAJORITY CHAIRMAN SAYLOR: Okay. If you
would see that Chairman Markosek and I have
that, I would appreciate it.
SECRETARY TOPPER: Thanks.
MAJORITY CHAIRMAN SAYLOR: I also wanted
to recognize that we've been joined by
Representative O'Brien, Representative Wheeland,
and Representative Phillips-Hill.
Our next questioner is Representative
Keller on that side of the room.
REPRESENTATIVE F. KELLER: Thank you,
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Mr. Chairman, and thank you, Mr. Secretary.
I want to get back to where
Representative Dunbar was on the $14 million.
And it's in your testimony, on page 2, that last
year we saved $14 million in relief for the
General Fund.
Is that the salary and benefits of the
people that manage these capital projects?
SECRETARY TOPPER: It is. It would be
the salary, the benefits, and the operating
dollars associated with it, yes.
REPRESENTATIVE F. KELLER: Okay. So the
personnel costs?
SECRETARY TOPPER: Yes.
REPRESENTATIVE F. KELLER: If they
weren't managing those projects, would we still
have need for those employees?
SECRETARY TOPPER: No, I don't believe
so.
REPRESENTATIVE F. KELLER: We would not
have need for those employees. So they're
strictly -- but they are Commonwealth employees?
SECRETARY TOPPER: They are.
REPRESENTATIVE F. KELLER: So prior to
last year, we paid their salary, I'll say on
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a -- we didn't capitalize it; it was expensed on
a -- every month, it was part of our budget?
SECRETARY TOPPER: That's correct. They
were General Fund expenses.
REPRESENTATIVE F. KELLER: Okay. So
since we borrowed money to pay salary and
benefits, that now becomes debt service this
year, correct?
SECRETARY TOPPER: It does.
REPRESENTATIVE F. KELLER: Which leads
me back to my next thing. Because once you
start to do this, you start to spiral and it
creates other problems.
Because now I understand that this year
there's a proposal to borrow money against the
Farm Show Building to pay debt service; is this
correct?
Is that what the proceeds from that are
being used for?
SECRETARY TOPPER: I believe that's
correct.
REPRESENTATIVE F. KELLER: Okay. So we
increase our debt service by borrowing money to
pay payroll expenses. And then this year, we
borrow money to service the debt that we
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borrowed to make payroll expenses last year.
Chairman Markosek wanted me to tell a
joke; I don't know if I can come up with one
better than that, quite frankly.
Thank you for laughing, Mr. Chairman.
MINORITY CHAIRMAN MARKOSEK: I promised
the gentleman that I would laugh if he at least
tried to tell a joke --
REPRESENTATIVE F. KELLER: Well, it
would be --
MINORITY CHAIRMAN MARKOSEK: -- even if
it wasn't funny.
REPRESENTATIVE F. KELLER: Hey,
Chairman, you're taking up my five minutes,
please.
So I guess what I --
MINORITY CHAIRMAN MARKOSEK: Time is up.
REPRESENTATIVE F. KELLER: Well, you
know, it probably -- you know, people at home
aren't laughing. Okay. It's not a joke because
we are making decisions that are lumping debt on
future generations. These are projects that
have been managed last year.
How long are we financing these bonds
for?
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SECRETARY TOPPER: Most of these capital
projects, I believe, are financed with 30-year
debt.
REPRESENTATIVE F. KELLER: So my
granddaughter who is six, when she goes to work,
will be paying off work that was done last year?
SECRETARY TOPPER: I believe that's how
it works.
REPRESENTATIVE F. KELLER: The labor
that -- goodness gracious. You know, I could
keep going. I do have one question.
SECRETARY TOPPER: Sure.
REPRESENTATIVE F. KELLER: The Farm Show
Building, is that in a flood plain?
The reason I ask is because if we borrow
money against it, I'm just wondering if we're
going to have to take out flood insurance.
SECRETARY TOPPER: I believe that within
the context of the lease-leaseback provision
that's included in the budget, I believe the
Commonwealth would retain the insurance
responsibility for the facility and would
continue to insure it as part of our own
self-insurance program, which is managed by my
Department.
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REPRESENTATIVE F. KELLER: Right, but
you know, like when I have a mortgage on my
house, if it's in the flood plain, I'm required
to have flood insurance.
SECRETARY TOPPER: It's -- the
property --
REPRESENTATIVE F. KELLER: It is in the
flood plain. I do know the answer to that.
Sorry for answering a question I know, but it is
because I have the map.
SECRETARY TOPPER: The property is
insured.
REPRESENTATIVE F. KELLER: Again, I
could go on and on, but I just -- I hope that
the Governor is watching and realizes how much
of a hole we're digging for our future
generations by borrowing for payroll and then
mortgaging our assets to pay that payroll.
Thank you, Mr. Chairman.
MAJORITY CHAIRMAN SAYLOR:
Representative Daley.
REPRESENTATIVE DALEY: Thanks, Mr.
Chairman.
Secretary Topper, it's good to see you.
I just wanted to ask you a few questions about
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some of what you're doing related to energy
savings. The budget materials indicate that
you've been aggressively pursuing energy savings
across the Commonwealth.
Could you just expand on that work with
the State agencies, because my understanding is
it has something to do with determining demand?
SECRETARY TOPPER: Sure, I'd be happy
to.
Really, what the program amounts to is
making a serious effort to aggregate and
leverage the demand for electricity and natural
gas across the vast enterprise that is the
Commonwealth. So rather than have the agencies
go to market on their own and then also rather
than take each individual facility's
requirements to the market on their own, and
rather than just pay the standard rate without
making an effort to aggregate and set pricing
competitively, we have been working for a number
of years now with the Penn State facility's
Engineering Institute to be a lot more strategic
about how we take our electricity demand in
particular to market.
And these have been very good times to
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be doing that because of the characteristics of
the market. We are in what's called -- what
they call a backwardation scenario, where the
cost of electricity on a long-term contract, it
actually gets lower as you go further out. So
we have been leveraging that pretty aggressively
here over the course of the last year.
Over the last two years, we've
identified and contracted for electricity,
basically generating more than $4 million in
annualized cost savings and bringing our total
cost per kilowatt hour down to, I think, 5.4
cents, which is quite a competitive rate. And
the beauty of it is that most of that demand is
now locked in, in some cases, for as long as
four years.
So we have stable, low utility costs,
you know, for at least the next three to four
years. And that's really all as a result of
some creative strategy and a great effort on the
part of our Department here.
REPRESENTATIVE DALEY: That's great. So
I understand you're also using renewable
energies for a portion, I think a good portion,
of the demand.
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SECRETARY TOPPER: That's correct,
Representative. We did -- we took a small
portion of the savings and allocated that
savings to restoring the Commonwealth's purchase
of green energy. So 30 percent of the
Commonwealth's electricity demand is now coming
from renewable sources.
REPRESENTATIVE DALEY: That's great.
That's great.
I'm also just interested -- you've hired
a Director of Business Transformation to
spearhead a lien management operation. I think
you referred to it briefly in one of your
previous answers.
SECRETARY TOPPER: Yes.
REPRESENTATIVE DALEY: Did you have
anything you wanted to add since I have a little
bit of time left on the clock?
SECRETARY TOPPER: Sure. It's just --
it's an initiative that I'm probably -- probably
the one I'm most excited about this year.
We are joined up with the Office of
Administration and their GO-TIME office and have
become a lead agency here for the Commonwealth
to roll out these, you know, a new approach to
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the way we manage our Department. We are
adopting basically the same management
principles that were developed by Toyota in
order to rethink the way that we work.
Basically, it entails the provision of a
bunch of training, training to our staff,
training to our management, to get them to begin
to see our business processes in a new way, to
get them to organize in a new way, and to get
them to pursue standardization in a new way.
And the net of it is that you can eliminate huge
amounts of waste, you know, by simply focusing
on what your customer wants and needs and
eliminating the effort that's going into
everything else.
REPRESENTATIVE DALEY: So is that just
in DGS, or does that extend through the
Administration?
SECRETARY TOPPER: It's been rolled out
Administration-wide. DGS is one of the early
adopters, and I'm excited about where we'll be
able to take it because I think it's the key to
us being able to operate in a much more
efficient way.
REPRESENTATIVE DALEY: Well, it's nice
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because I think a lot of businesses have been
using lien management. So they can then see
that the State is doing it, and that's a good
thing.
Thank you.
MAJORITY CHAIRMAN SAYLOR:
Representative Delozier.
REPRESENTATIVE DELOZIER: Thank you,
Mr. Chairman.
Secretary, I'm over here; far side. We
keep making you turn, both sides.
SECRETARY TOPPER: That's okay.
REPRESENTATIVE DELOZIER: I have a
couple of questions, so I'm going to try and hit
a bunch of them pretty quick. The COSTARS
Program that you have in the Department, I
appreciate the mailing that we got with a lot of
the project rejects.
Quickly, the question, requirements for
bidding for the COSTARS Program, if I read the
language correctly, everything over $25,000, or
if the municipality has a lower setting, is
competitively bid; is that correct?
SECRETARY TOPPER: The contracts
themselves are all competitively bid, the State
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contracts that the Department puts in place.
REPRESENTATIVE DELOZIER: But these are
for municipalities to use the COSTAR Program,
but they are required to competitively bid
contracts?
SECRETARY TOPPER: The requirements that
the local municipalities are under, I believe,
are determined by their local regulations and by
working with their local solicitor.
REPRESENTATIVE DELOZIER: Correct, but
if you read the COSTARS Initiative that you had
mailed to us, it said that it's an either/or
situation, where it's either the stipulation as
to what they have in place, as you mentioned, so
if their threshold is $15,000 or $25,000,
whichever is less.
SECRETARY TOPPER: Yes, that's correct.
Certainly, we would recommend that they compete
as much as they can. These contracts are all
multiple award contracts. They operate a lot
like a GSA schedule, and there is often a lot of
benefit to the municipality to taking the extra
step --
REPRESENTATIVE DELOZIER: Sure.
Absolutely. I guess the complaint that I have
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received on a couple different bases is that
they're not being competitively bid and they're
sole sourcing, and that is not a good savings.
I know you listed here the savings for
our municipalities; I wholeheartedly support,
obviously, the fact that we can have that for
the local taxpayers, but the issue comes back to
the fact that they're not being competitively
bid. And so, therefore, we're missing out on
that competitive edge and that ability to bid
down the price.
So the price is being offered at one
price only, and that is what's being accepted.
So we have a conversation, I guess, that we need
to have about the fact of the need to -- who
oversees the fact that they're competitively
bid, is it the State --
SECRETARY TOPPER: I do not believe --
REPRESENTATIVE DELOZIER: -- to enforce
it?
SECRETARY TOPPER: I do not believe that
the Department of General Services has an
enforcement responsibility vis-a-vis all of the
municipalities and their use of the contracts.
REPRESENTATIVE DELOZIER: So it's an
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honesty system?
SECRETARY TOPPER: I don't know the
answer --
REPRESENTATIVE DELOZIER: Okay. Could
we just find --
SECRETARY TOPPER: But I'm happy to
investigate it.
REPRESENTATIVE DELOZIER: -- out who has
that enforcement --
SECRETARY TOPPER: Yeah.
REPRESENTATIVE DELOZIER: -- just to
find out what -- to switch issues real quick, a
few weeks ago, we had a little break-in here in
the Capitol Police.
What have we done to increase that issue
of security?
SECRETARY TOPPER: Sure. So --
REPRESENTATIVE DELOZIER: And I might
speed you up because I have a bunch of other
questions to follow that up.
SECRETARY TOPPER: Well, you know, do
you want a complete answer?
REPRESENTATIVE DELOZIER: Well, I just
-- if not, we can have it submitted afterwards
if it is -- I only have five minutes; that's
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all. I'm just trying to --
SECRETARY TOPPER: Okay. So immediately
following the break-in, we did ask Capitol
Police to come up with some additional ideas
around what we could do for enhanced security,
things like window sensors, you know. We're
currently evaluating those options.
To be honest, though, the best thing we
could do would be to make sure that the windows
get locked at night. That's by far the --
REPRESENTATIVE DELOZIER: Or we don't
have drunk people wandering around the campus, I
guess, is another issue.
SECRETARY TOPPER: Well, there's that,
but you know, the security in the Capitol is
actually quite good. It's important, I think,
to just be aware of the facts here.
That individual was apprehended within
about 14 minutes, which is not -- you know,
certainly, I'd love for it to have been shorter,
but at 2:00 in the morning, you know, in a
facility like this, this is the sort of thing
that we don't really anticipate.
We had the guy nabbed within 14 minutes,
and we have him on video, basically from
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virtually the moment he left the
Representative's office, all the way through the
Capitol into the Senate. We can make his
identity, you know, quite easily.
REPRESENTATIVE DELOZIER: And I know you
have him and everything else. And I'm not --
I'm just trying to understand, you know, what
changes we're going to make because of it. We
need to learn from each situation.
But quickly, moving on from that with
the Capitol Police and everything, what is the
relationship with the Capitol Police and backup
and service to HPD?
SECRETARY TOPPER: Capitol Police is
available to HPD to be called in as backup.
REPRESENTATIVE DELOZIER: Do they do
shifts with the Bureau?
SECRETARY TOPPER: They do not.
REPRESENTATIVE DELOZIER: So Capitol
Police does not do shifts with the Bureau?
SECRETARY TOPPER: No.
REPRESENTATIVE DELOZIER: My
understanding was that Capitol police officers
do work with HPD, so my questions after that
were going to be, do they do that on voluntary
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time; how do we get reimbursed, those types of
things?
SECRETARY TOPPER: Representative, my
understanding is that we're not formally
performing shifts with HPD. So I'm not sure
where that -- I'm not sure where you're getting
your information.
REPRESENTATIVE DELOZIER: Okay. I have
a police bureau, you know, job assignment, and
it does say that Capitol Police are supplying
two uniformed officers to assist with the
detail. So I'm just trying to -- my thing goes
to who's paying them, and are we getting
reimbursed for those officers?
SECRETARY TOPPER: So that must be a
specific security detail. I'd like to -- for
certain events, and I don't know which ones, but
say big political rallies, things of that
nature, you know, Capitol Police will
participate along with HPD and State Police in
order to provide adequate security for those --
REPRESENTATIVE DELOZIER: And is that on
their duty shift, or is that like on their own
volunteer time and they get paid by Harrisburg,
or they get paid by --
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SECRETARY TOPPER: No, typically, they
would be on duty.
REPRESENTATIVE DELOZIER: So they'd be
on duty for the Capitol?
SECRETARY TOPPER: That's correct.
MAJORITY CHAIRMAN SAYLOR:
Representative, your time is up.
REPRESENTATIVE DELOZIER: Sorry, I
wasn't looking. I was trying to avoid the red
light.
But if you could, I'd just be curious to
get some more answers on how that is, and just
in the payment of who's paying who.
Thank you.
SECRETARY TOPPER: Sure.
MAJORITY CHAIRMAN SAYLOR:
Representative Bullock.
REPRESENTATIVE BULLOCK: Thank you,
Mr. Chairman. How are you doing today? I'm
right in front of you; right on top. Hi.
So first, I want to thank you for your
answers to my colleague, Representative Leanne
Krueger-Braneky, in regards to inclusion of
small businesses, minority and women businesses;
and I look forward to seeing the report, as
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well, next week.
I wanted to dig in a little deeper to
your RFP process. I understand you've made some
recent changes to streamline that process to
reduce the timing for the review of those
proposals.
Can you talk a little bit more about the
changes you made and how you anticipate that
improving the process?
SECRETARY TOPPER: Sure. So finding a
way to streamline the RFP process is really a
critical part of our overall strategy, both to
bring down costs and to enhance opportunities
for small businesses and small diverse
businesses.
The reason for that is because,
generally speaking, the default manner that the
Commonwealth uses for procurement, which is a
traditional sealed bid, seldom gets us the
lowest possible cost overall, once you take into
account everything that is involved.
If it were a great way to buy things,
then that is what the commercial world would do,
but they don't. The commercial world does
virtually everything on a best value basis,
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which is why we've been keen to do more of it.
Today, only about 30 percent, less than
30 percent of the Commonwealth's dollars, are
spent on a best value basis, and that mean that
the rest is done via sealed bid. So we need --
we really do feel like we need to change that
percentage.
It's also true that the only instance
where we can consider the characteristics of the
business that's bidding, such as whether or not
they're here in Pennsylvania, whether or not
they're a small business, whether or not they've
subcontracted with a small business, all of
those considerations only come into play when
we're using an RFP here in Pennsylvania. And so
it's important for us to use an RFP if we want
to try to drive those numbers up.
The old process was a real hurdle there
because it was taking nine to 12 months for an
agency to conduct a best value procurement using
an RFP. So we started applying lien principles
and taking out unnecessary steps, really
stripping it down and looking at, okay, well,
what's minimally required by the Procurement
Code and then building back in a process that is
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just a whole lot more efficient; it doesn't
waste time and energy.
That new process is going to get rolled
out this spring. We've piloted it a couple of
times, and we have reason to believe that it's
going to pull probably half of the cycle time
out, enabling the agencies to do more on a best
value basis so we can do more business with
small and minority-owned businesses and also so
that we can negotiate better costs going
forward. So it's a lynchpin to a number of
things.
REPRESENTATIVE BULLOCK: I look forward
to seeing that as you roll it out.
A quick question in regards to the
report that you shared with Representative
Krueger-Braneky that would be coming out. Does
it also include, in addition to the percentages
of the minority and women-owned businesses, the
small business, the actual dollar amount of
those contracts?
SECRETARY TOPPER: It does
REPRESENTATIVE BULLOCK: Okay. I'll
look for it. I just wanted to make sure that
that number was in there.
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And my last question is a question that
I share with each agency, and it's in regards to
your own hiring within your Department. If you
can share with me your own diversity numbers in
regards to both your staff and management.
SECRETARY TOPPER: Sure. Thanks,
Representative. We'll be happy to submit this
in writing, as well, but out of 874 total DGS
employees, minority females account for 9
percent or 77; minority males are 113 or 13
percent; white females are 169 or 19 percent.
In our executive staff, 39 percent of our
executive staff are women and minorities. That
would be Bureau Director and above.
That number actually does not include
the recent appointment of our new Deputy
Secretary for Diversity, Inclusion & Small
Business Opportunities, Kerry Kirkland. So that
percent will go up a little bit.
REPRESENTATIVE BULLOCK: Great. If you
could just send that in writing, I'd appreciate
it. I missed a few of those numbers.
Thank you.
SECRETARY TOPPER: Yeah, no problem.
Thank you.
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MAJORITY CHAIRMAN SAYLOR:
Representative Knowles.
REPRESENTATIVE KNOWLES: Thank you,
Mr. Chairman. Thank you, Mr. Secretary, for
being here.
I want to continue along the lines of
the public safety. There's a line item in the
general service budget for $5 million for
Capitol fire protection.
I wonder if you could talk briefly,
because I do have another question, about the
process in which the city received that money,
and when is it paid each year?
How is it paid, and when is it paid?
SECRETARY TOPPER: Sure. So the payment
is basically a payment in lieu of taxes in
return for fire and safety protection here for
the Capitol Complex. And I don't know the exact
timing.
REPRESENTATIVE KNOWLES: Is it paid in
installments, or is it paid --
SECRETARY TOPPER: It's paid in a lump
sum on an annual basis.
REPRESENTATIVE KNOWLES: Okay. And a
follow-up.
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Is there any stipulation, or are there
any stipulations within the agreement that
require the city to spend that money on fire
equipment for firefighting purposes?
Is there anything that requires them to
do that?
SECRETARY TOPPER: I don't believe so,
Representative.
REPRESENTATIVE KNOWLES: I would just
suggest that that may be something you want to
consider, because I mean, with all due respect,
I think there's a fine firefighting organization
within the city, but I've seen some of that
equipment. Some of those engines, some of those
trucks look like they're going to need to be
towed to a fire.
I would just suggest that you consider
that in negotiating with the city. The other
thing, in terms of -- and Representative
Santora, I thought, brought up a good point in
terms of disposition of State property.
You know, is it a requirement that when
we are disposing of State property that, number
one, it has to be offered to a government
entity, any government entity, and they would be
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first to get it?
And secondly, if that's not the case,
then a development authority?
Is there anything to that?
Can you fill me in on that?
SECRETARY TOPPER: Sure. The process,
as it currently stands, is that when an agency
declares a property surplus, DGS first will
offer it, you know, make sure that the other
agencies are aware of it.
We usually have a pretty good handle on
what the other agencies' incremental spaces are.
So we can suggest to an agency that it move into
an agency that's about to become vacant.
But if there are no needs from other
State agencies identified, then we turn to
whether the property, you know, how the property
can most efficiently get sold. We do have the
authority to convey a property to a local RDA
without a statute being passed, and we do
exercise that authority on occasion.
However, for major properties, our
practice has been to work with the General
Assembly as if the General Assembly -- as if an
Act was required.
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REPRESENTATIVE KNOWLES: Is that
process, or is that law?
SECRETARY TOPPER: Well, I believe the
authority is statutory; the rest is process.
REPRESENTATIVE KNOWLES: Okay, just a
comment. And I really think that we need to
take a close look at how we dispose of State
property.
I mean, I'm looking in this book, and it
says that in 2016, 12 properties were sold for
$332,000. That's $27,600 on an average
property.
I do believe -- I get it that we don't
want to, you know, we don't want to mothball
them. I get that, but I think that
Representative Santora brought up an excellent
point. I think that we -- I had my real estate
license until most recently.
I think we really need to look at that
in terms of generating revenue that we could be
generating by putting more effort into that
process.
SECRETARY TOPPER: Representative, we'd
like nothing better than to work with you to
come up with a better process. And I know that
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we've been working pretty hard to pull together
some ideas for statutory changes. And you know,
we'll continue to work here with the Governor's
Office and with you and we'd love to see
something get introduced this session.
REPRESENTATIVE KNOWLES: Thank you very
much, Mr. Secretary.
Thank you, Mr. Chairman.
MAJORITY CHAIRMAN SAYLOR: Representative
Kim.
REPRESENTATIVE KIM: Thank you,
Mr. Chairman.
I see that my good friend, Representative
Knowles, is throwing shade at some of my city fire
trucks. I'm happy to pass a plate around and collect