Clarke’s lingering concerns about Rebuild structure: ‘privatization’ and Council oversight

Rebuild has officially reached that awkward stage when it’s more than just an idea but several steps away from implementation. It’s at the point when politicians haggle over details in public while they smooth out the bumps in private, until everyone is begrudgingly halfway-satisfied. Basically, Rebuild is having legislative growing pains, or the policy equivalent of being a teenager. And we all know what comes along in the life of a teenager: angst.

On Tuesday morning, Council President Darrell Clarke appeared [audio] on Philadelphia’s only black-owned talk radio station, WURD, to speak about the ongoing negotiations surrounding Rebuild, Mayor Kenney’s $500-million plan to remake the city’s parks, rec centers, and libraries. In December, Clarke wrote a lengthy list of grievances about the administration’s proposed structure of Rebuild, including his trepidation that Rebuild could effectively privatize the city’s parks, recreation centers, and libraries. On air this week, he said the debate wasn’t adversarial but he once again questioned the core structure behind the administration’s proposal for Rebuild — that the city would lease facilities it intends to upgrade to the Philadelphia Authority for Industrial Development (PAID), then sublease them to nonprofits that will oversee those renovations. Clarke argues this lease structure, which also would enable the overseeing nonprofit to sublease or even sell city property, is tantamount to “some level of privatization of our parks and rec centers.” Clarke added, speaking to WURD host Solomon Jones, “that’s some scary stuff.”

Callers on WURD have recently echoed Clarke’s concerns, not without good reason. In recent history, Philadelphia has placed control of public assets in the hands of private managers, with varying degrees of success. There are the shining outcomes of certain public-private partnerships for public space improvements, like the Schuylkill Banks and Dilworth Park, but not all of these decisions are remembered fondly, such as Edison schools. Even the prospect of temporarily using parkland for a private purposes — such as the Chinese Lantern Festival in Franklin Square — can seem like a threatening gesture for a lot of people. At a press briefing last month, Rebuild executive director Nicole Westerman said that the project is “absolutely not” a form of privatization. The Rebuild team also contends that safeguards exist within the Rebuild legislation to prevent changes of ownership of public facilities. Still, the word “privatization” has been bandied about like a bludgeon by Clarke.

What bothers Clarke is part of the proposed lease and sublease structure described in Rebuild legislation, which states that “project users” — the nonprofits that would oversee the improvements on parks and rec sites and award the contracts to work on them — will have an optional purchase clause in their lease agreements:

The City requires, and PAID shall include in the Sublease, an option for the Subtenant [project user] to purchase the Renovations. The Sublease shall require the Subtenant to meet the following terms and conditions in order to purchase the Renovations. The Sublease will state that option may be exercised only upon Subtenant’s timely delivery of notice to PAID and the City and upon satisfaction of all the following conditions…

Despite the word “purchase”, the administration argues that there’s virtually no way, within the proposed structure of Rebuild, for public facilities to permanently end up in private hands. The position from the administration is that this clause exists solely in order to satisfy the Pennsylvania Economic Development Financing Law, which governs PAID. In order for PAID to sublease the facilities to nonprofits that are selectively chosen, rather than awarding contracts to the lowest-bidder, the nonprofits must have the option to acquire legal title to the improvements (per Section 12 of the law). The administration says that choosing to work through PAID (as opposed to the city’s capital programs) provides the city with greater flexibility to meet Rebuild’s diversity and inclusion goals, by allowing the city to pick project users that present a detailed plan to include minority- and women-owned businesses in the renovations.    Without choosing this route, Rebuild projects would likely have to work within the less flexible rules of the 1951 City Charter (unless other pending reforms are enacted in the meantime) that have enabled construction sites to be dominated by larger, mostly white and male contractors. Clarke has argued that there’s not necessarily a correlation between the lack of diversity on construction sites and the low-bid requirement, and that the city can improve the former without sacrificing the latter.

The Rebuild team has described the option to purchase provision as a paper tiger that is not expected to be invoked much, if at all, because it is so narrow in scope. According to the administration, the clause does not allow for the “subtenants” to buy the entire facility (say, a rec center) or the land underneath it, rather, only whatever alterations they make (say, a new roof or playground). “The option to purchase is for the improvements,” says David Gould, Deputy Director of Community Engagement and Communications for Rebuild. “The City will maintain ownership of the land and the ability to lease the land as it sees fit. It’s unlikely that a project user would want to or be able to finance the acquisition of the improvements without having assurances that the land would be available.” Even in a hypothetical situation in which a project user tore down an entire rec center and built an entirely new one, the land underneath it would never be for sale, Gould says, truncating whatever value there might be in the option to purchase.

So, is this route to Rebuild worth the trouble given the widespread confusion over the option to purchase clause? Simply put, the law has been utilized effectively by the city in the past. The oft-cited example is a current agreement between the city, PAID, and Delta Air Lines in which the private company has overseen the public-dollars development work on the airport terminals that it uses. According to PIDC president John Grady, the structure used at the airport has allowed for a more efficient and prompt “alternate public procurement process” that makes it easier to meet diversity and inclusion goals, while having the opportunity to raise private investment by working through PAID, a governmental authority overseen by PIDC.

“The economic development financing law enables the City to leverage the capacity of supportive nonprofit partners who have the ability to deliver projects efficiently and effectively, meet diversity and inclusion goals, engage with residents, and fundraise to bring more resources to Rebuild projects,” says Gould.

To date, that explanation hasn’t satisfied Clarke. Previously, he has questioned why city offices, in lieu of nonprofits, weren’t better equipped to deliver Rebuild. On WURD this week, he introduced the idea of for-profit minority-owned construction companies being in play as project users, along with nonprofits. And while the reliance on nonprofits remains a point of disagreement about Rebuild, Clarke has other ideas about altering the way Rebuild is proposed to work.

PlanPhilly obtained a document in which Clarke’s senior legislative council offers a proposed list of amendments to the Rebuild legislation, offering a sense of the scope of changes Clarke might pursue. Among the potential amendments outlined in the document is a new requirement that every lease and sublease of Rebuild facilities must be approved by an ordinance passed by Council (rather than a blanket pre-authorization of all the facility leases being ceded to PAID, as the legislation currently reads). Another calls for a “Project Review Team” — comprised of one member appointed by the Mayor and one member appointed by the Council president — to review any contracts awarded through Rebuild. There are also new provisions that would create more sweeping councilmanic oversight over the fiscal aspects of Rebuild, such as an amendment requiring the Kenney administration to submit an annual budget outlining anticipated expenditures and sites. Lastly, it includes proposed amendments to the Memorandum of Understanding in the works with the building trades, aimed at enhancing racial and gender workforce diversity on Rebuild projects. The memo calls for more guarantees from the city’s labor unions in order to create a more racially and gender diverse pipeline of candidates for union membership. Taken together, they represent strong pushback against the current legislation, although the administration has separately announced its intent to put in place community and financial oversights in Rebuild — those details simply haven’t been codified in the bill. “There’s a lot of conversation and a lot of presentation, but at the end of the day, it’s not actually in the document,” Clarke said on WURD earlier this week. “If it’s not in the bill, it doesn’t matter.”

While Clarke’s office confirmed the authenticity of the memo, dated March 21, communications director Jane Roh cautioned that it doesn’t necessarily reflect the most up-to-date positions of the Council President, although she wouldn’t discuss publicly how his views might have changed. Still, it’s a window into the thinking of the most powerful member of Council, who seems intent on getting more oversight and control for City Council at every stage of Rebuild projects before greenlighting the financial vehicle that will pave the way for Rebuild. As for how far apart the two sides remain, Roh struck a conciliatory tone. “Council President Clarke continues to work with his colleagues toward a legislative package that will ensure Rebuild is a truly inclusive, efficient, transformational, and public public works program,” she wrote in a statement. “Philadelphians from all neighborhoods and of all opinions on the soda tax expect and deserve no less.”

For other Council members, the Rebuild legislation is far from satisfying in its current form, but their hopes don’t appear to be of the same magnitude as Clarke’s. Councilwoman Maria Quiñones-Sánchez, when reached by PlanPhilly, seemed focused on codifying into the legislation more guarantees related to Rebuild’s goals of using project work to create economic opportunity in oft-overlooked neighborhoods and boosting the diversity of labor unions and building contractors. “As Rebuild rolls out as a transformative initiative to enhance public amenities in all neighborhoods, public-private partnerships will create an opportunity for a more robust inclusionary process,” Quinones-Sanchez said. “My priority is eliminating the barriers that stand between communities of color and the family-sustaining jobs in the building trades. We need a clear pathway for qualified individuals to gain access to the opportunities of worksites funded with taxpayer dollars.”

Councilwoman Bass concurred, citing the need to legislate more specifically how Rebuild will facilitate more diverse candidates in the labor unions’ pre-apprenticeship programs — and linking those candidates to Rebuild sites. She also cited the need to ensure that Community Development Corporations (CDCs) will be eligible to be “project users” (the nonprofits overseeing project work) in Rebuild.

At face value, it doesn’t seem like the administration and Council are very far apart on all of these items. The “privatization” element of the bill is an exception. For the administration, including such a provision is a prerequisite to accomplishing the myriad goals of Rebuild. For Clarke, it’s a dubious bet on the nonprofit sector. It’s unclear what could ultimately pacify Clarke while keeping this option to purchase in the bill, though based on his comments, granting more influence to Council throughout Rebuild would be a start. For now the mayor’s plan has indeed “degenerated into a political feast,” as columnist and former chief of staff to City Council Jay McCalla predicted it would.

Asked whether the amendments in the March 21 memo by Clarke’s counsel would impact the ability to meet the administration’s goals for Rebuild if enacted, David Gould chose a similar tact to Clarke, essentially saying let’s wait until it’s in writing. “We want to respect the legislative process and will wait to respond until there are formal proposed amendments from Council,” says Gould. 

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