MR. GILDER: Thank you, everyone. You know, the Manhattan Institute is involved in ideas and in prosecuting these ideas. We haven't quite learned how to have a dinner on time, but we are not restaurateurs, and we appreciate your indulgence, but it does mean that we are going to have to start while you are in mid flight with dinner and we apologize.
I am Dick Gilder, Chairman of the Manhattan Institute, and on behalf of my fellow trustees, our staff and our fellows of the Manhattan Institute, and our terrific President, Bill Hammett, welcome. And Bill, where are you, I want you to get a special nod. Bill, please stand up. He knew I was going to do this. We have a problem of having a very shy president. Obviously, he is not an elected official. In any event, when Bill comes back, I will rerecognize him and I know you will all indulge me.
In about fifteen or seventeen seconds Nat Glazer will introduce Ed Rendell, our Wriston Lecturer for this evening. And for these next minutes, we have some Manhattan Institute matters that I hope you will enjoy listening to and that this is backing up so that we can get a running start for Mayor Rendell.
The main reason we give these lectures is to thank you. Many of you have donated cash to our support and, of course, without that we couldn't get to first base. But many of you of that group and many others are here coming to our seminars, coming to our forums and our discussion groups, reading our City Journal and our other publications and getting involved in the real meat and potatoes of what we are trying to do.
We are, after all, a policy institute. We are trying to effect and change public policy through public opinion. And so your involvement in any part of the transmission of our ideas is absolutely vital. and we are most grateful for your interest in coming to our meetings, meeting our stuff and participating, giving us hell when you think you should and often we need that, just as anyone who is serious about his or her undertakings does. So thank you and well done.
In thinking about this last year of activities of the Manhattan Institute, we have continued our excellent work in introducing new Americans to quick Americanization, the work in judicial reform continues apace with Wally Olsen and Peter Huber, Linda Chavez helping in the New American effort in Washington.
But tonight I want to focus particularly on two of our activities, the City Journal and the Center for Educational Innovation. In the City Journal we are thinkers. In the Center for Educational Innovation we are doers. And both of those might be the theme for this evening.
As far as the City Journal is concerned, you have read issue after issue full of facts and ideas on New York City budget matters, New York State budget matters, comparing our City and State to other cities and other states, quite unfavorably, as far as we are concerned, working on issues of governance, working on judicial ideas, on streamlining government and on the quality of life. And these issues are building up such momentum that it is definitely having an effect. I mean, I think we all sense that. we sense this desire for more information. We believe in our city and our state, in spite of the untoward direction both have taken in recent years, and it is so great to have these facts at our disposal, so that we can begin to build for the future using them.
And we are not alone, Mr. Marlin and Mr. Guilliani both spent much time with our fellows going over these ideas and these issues. And in Mayor Elect Guilliani's thinking, you could see the influence on many of our ideas, particularly in the quality of life issues and the homeless questions and in streamlining and downsizing government. And this was such a close election that we really feel on the margin we made a big difference here.
In the Institute for Educational Innovation, it was a tremendous year for us. First Sy Fliegel's book came out, Miracle in East Harlem. You are going to meet Sy in a little while, so I will not ask him to stand quite yet.
You remember a couple of years ago our main focus was on District 4, but last year we began to move the idea of school choice to District 3. District 3 is a very crucial district, because District 4 is all quite unified. It is East Harlem, it is Hispanic pretty much 100%. Whereas, District 3 starts at 59th Street on the westside, goes all the way up to Columbia, so it embraces rich and poor districts, black and white districts and it is, from a point of view of trying to make a point, much more interesting in that sense. And we have reports already within one year, thanks to John
Ellwell and Anton Klein, the leaders of that district, and, of course, our wonderful fellows, that great things are happening already. Test scores are on their way up, attendance is on its way up, dropouts are on their way down and we are very pleased with what's happened. And you will hear in a little while how we plan to build on this success in now these two districts and a number of other districts in the city.
We are particularly happy that we have a new Chancellor in Ray Cortines, and we hope the new Chancellor will be able to stop in later tonight, he has another commitment, but we are hoping he will be here. We are very pleased with his appointment because here for the first time in many years we have a school chancellor who is particularly interested in children and in classrooms. And once you have school leadership who are interested in the kids, lots of good things are going to happen. And the Chancellor is open to our ideas and to other people's ideas as well. He has announced more than once that he would like our help and the help of other groups who are interested in growth, in choice, in charter schools, anything to move this improvement forward in our invaluable New York City school system. So, we are thrilled about that.
Now, our fellows of the CEI were active, as always, in districts beyond New York City. They have been active in Philadelphia, in Baltimore, even in Buffalo and an important progress was made in a town called East Orange, New Jersey. East Orange is an inner city enclave, near the oranges, where the entire school district has gone to choice, under the terrific leadership of John Howard.
Now, our lecture series, The Wriston Lectures, were named for Walt, who is a key trustee and very hard working, never misses a meeting and contributes tremendously to our work. And we thought to honor him with this Wriston Lecture series six years ago. The General Electric Company also felt pretty strongly about Walt. He has been a director of their's for many years. So, some time ago they bestowed upon us a six figure grant in Walt's honor. And so we have decided to take the income from that grant and evolve a new award for education in school administration. It is going to be GE Wriston Award for School Innovation. And we have our first honorary tonight and Sy Fliegel is going to present the award. Sy Fliegel, of course, our key member of the CEI of the Manhattan Institute. So, Sy, could you come up and do some honors. And I will come back to you after Sy.
MR. FLIEGEL: This morning Cole and I were up in the South Bronx in District 10 and a principal whizzed by and hollered out, "Tell Gilder it is 90.11 And he waved and smiled. And what he was talking about and the reason I mention this is for those of you who feel, how do we change the system without really knowing about education? I can tell you Dick Gilder knows very little about education, yet he is changing the system.
I took him up to visit a school in the South Bronx. It was an outstanding school with three schools of choice, and we went through the school and everyone was happy and then they met with myself and Dick and he said, "You have done an outstanding job." And they thought that was it. And he said, "Your stock is at 50, what are you going to do to get it to 100?" And, today the gentleman's message is that it is at 90. So, I thank you.
John Howard is the recipient of the first General Electric/Walter Wriston Fellowship. Now, John Howard became the Superintendent of East Orange, a school district of over 15,000 youngsters, in 1992, in September. I think it was on September 5. On September 7, we got a call from a gentleman called John Howard and he said, "I am interested in changing the East Orange School System and I would like your help."
And it was our belief, and I said this to him rather immodestly when we first met, "Anyone who is smart enough to call us after being on the job for two days has to be an exceptional superintendent." And he is just that.
What is most impressive about the Wriston General Electric Award is that we are giving an award to an innovator at the beginning of the innovation. It is very easy to give awards to folks when they have done something exceptionally fine and there is no danger. But it as the beginning that you need support. And the award we are giving tonight is more than just this very nice piece of paper, $10,000 go with it and our best wishes for John Howard to use it any way he likes to use it.
And let me just tell you a little bit about him. He was a star basketball player in Cincinnati. He toured with the Harlem Globetrotters. He then went on to become an educator. He spent twentyfive years in this education business of ours, receiving his doctorate. He has been a teacher, he has been a high school principal, he has been a curriculum developer and a researcher. And I was speaking to the President of his School Board, who is here with him today. And the President of the Board, since I told him I was going to say, isn't it terrific to give someone support at the beginning, he said, "I want you to know in one year in East Orange for the first time in nine years the entire 9th grade has passed the State Competency Test," and he gave full credit to John Howard for that. So, it is with great pleasure that I call John Howard to the rostrum to receive this award.
MR. HOWARD: Any time you give a podium and a microphone to a superintendent, you can expect a very elongated presentation. But this evening I am going to try to make it as brief as I can.
I want to thank Mr. Jimmy Small, President of the East Orange School District, my friend Sandra Fryerson, who is with me this evening. I want to thank Peter Flanigan, Chairperson of CEI; Richard Gilder, Chairperson of the Manhattan Institute; William Hammett, President of the Manhattan Institute; and the senior fellows that for the past year and a half have worked very closely with me in the East Orange School District, Dr. Fliegel, Dr. Medina, Reggie Landow and Coleman Ginn.
I also want to say and extend my appreciation to Ray Domenico, Executive Director. I have not met Mr. Walter Wriston but if he is here, God bless you.
This is my twentysixth year in the business. I wrote my first book in 1974, called, The Adoption of Systems Innovations in Educational Organizations A Case Study of Operation Guidance at the Ohio State University, the National Center for Research in Vocational & Technical Education.
I always thought I was an innovator and an educator who looked beyond the traditional, looked beyond what was in front of me and I tried to make a lot of change.
This award that I humbly accept this evening, I wish both of my parents were living to witness this very important occasion for me, but they are not, but I want to say God bless them for giving me the courage, giving me the energy and the intellect and all the things that go along with trying to succeed in this country.
My fondest memories that I shared at the University Lab School at the Ohio State 'University Campus when I was a high school student; not knowing too that it was a school of choice, as far back as the early 6011s. And now I find myself trying to implement and will implement eighteen schools of choice from preschool to fourteen in the East Orange School District beginning next year.
I believe that the vision that the Manhattan Institute and the Center for Educational Innovation has regarding schools of choice is a very important one for all of us in this country. I stand by you to provide my support and my leadership any time that I can help you accomplish your mission.
And, again, I want to thank all of you who made this possible for me this evening. God bless you.
MR. FLANIGN: Congratulations, John. it is wonderful for us who have been working for choice to have you carrying it out in East Orange.
My name is Peter Flanigan. I am the Chairman of the Advisory Board of the Manhattan Institute's Center for Educational Innovation. And as Dick said, education is an important part of this evening, and an important part of our guest list here are three people who have served the cause of education in, this city extraordinarily well and I would like to introduce them. Carol Gresser, the President of the New York Board of Education, would she stand, please. Nympha Saga, Nympha, would you stand, please. A member of the Board of Education. And Irene Impellizeri, a member. God bless the three of you and what you have done f or the kids of this City.
Now I have a very special and exciting announcement to make. Those of you who have heard Sy Fliegel, not only tonight, but earlier, and those of you who haven't, who will read about Sy Fliegel and the Miracle of East Harlem, knows what he and Cole Genn and their associates did in District 4 in East Harlem.
Where they took the District that was the worst by ever' y measure academically in this City and by first creating special schools, schools that had something different to offer to their students, and then allowing the parents and students that wonderful creative energy that comes from exercising their freedom of choice, to make that school the 15th out 32 schools in New York City. And that is what public choice has advocated, has designed, has implemented, as Gilder said, by the Center for Educational Innovation, intends to do.
But as you heard Dick say, we have only done it with a few schools, one other district, District 3, and we have wondered, as you must have wondered, if this idea is so clearly the way to go to improve the school system, why haven't the other thirtyone districts done it?
Why they haven't done it? I don't know. Perhaps they just don't have the energy, they don't have the imagination. But tonight I am announcing an extraordinary gift by an extraordinary man, that will bring choice to at least five other districts in this city, and that is a million dollar gift by that unbelievably generous Chairman of the Manhattan Institute, Dick Gilder. And with that money the Center for Educational Innovation is going to help create seventyfive new alternative schools in five school districts. Just imagine that.
And then the parents and the students of those districts are going to be able to do what the parents and the students in District 4 do, choose the school that their children can go to and if one of the other schools isn't chosen, they will do what they did in District 4, they will close it down and the next year it will open and people will choose it. That's what choice is about and that's what Dick Gilder is providing in this city. Dick?
MR. GILDER: It is a little selfserving. Those of you who are interested in investing in not for profit activities, and I suspect most of you in this room are, realize that providing the money is the easy part. The hard part is done by the people on the receiving end, and if you are lucky to have absolutely superb folks, who are going to manage your investment for you, then you really have a chance of doing something.
You have been hearing about these fellows, you have met Sy. I would like to introduce you now to the other fellows of the CEI. These guys started as teachers and worked their way up as principals and assistant superintendents, superintendents. When they go into a school or to a school district, I mean, everybody knows these fellows, know exactly what they are doing and they are very tough. Cole Genn wore a wire in order to turn in some misgrants in his district to the FBI. I mean, you are not talking about light-weight guys here. So, I would like them to stand. Carlos Medina, where are you, Carlos. Cole Genn.
Reggie Landow. Reggie is not here tonight, I'm sorry. Another tough umbrae. And Ray Dominico who orchestrates and runs the show. Ray. Thanks a lot.
You folks heard about East Orange. There is another town in New Jersey, Jersey City, which isn't in a heck of a lot better shape or it wasn't until Mayor Bret Shendler came along. We just wanted to let him get up and wave to you. He is the Mayor of Jersey City.
And another guy who the Manhattan Institute is keen on and I think he likes our staff too.
The Wriston Lecture Series started six years ago. And talking about investments, we have to kind of see how well it, too, has done, and whether the ideas that were propounded by the various lecturers have survived the test of time.
And again, thinking of this contradistinction between thought and action, that also holds it way in considering the Wriston lecturers. We have had, I would say, four thinkers and two doers, and tonight a third doer.
Our first thinker is Carver Mead, who inaugurated this series, an engineer from Cal Tech, whom George Gilder called the father of the microprocessor. He told us back then, something we all knew, that the speed of these semiconductors is moving up expediently, but he also told us that the smaller the material got, the faster it got, and the faster it got, the more accurate it got. And in that sense presaged this whole revolution that we are in the midst of. And that really adumbrates into other lecturers that I may remember to remember and quote you later on in this little peregrination through history.
our second lecturer was Tom Wolfe, you remember Barn Fires of the Vanities. And Tom Wolfe in that lecture predicted, which was five years ago, that New York City would have a black mayor, which indeed and obviously happened a year later. There was no prediction, whether that black mayor, however, would be reelected. We just say that for what it is worth.
Our third thinker in this thinker doer series was V. S. Naipaul, who was comparing the thinking of Islam and the Moslem world in comparing it to that of the Western World. And he pointed out that the Western world with its emphasis on individual responsibility, and on individual opportunity, governed by the golden rule, would always outstrip the Moslem thinking, which basically held that all the good poems had been written and it is backward looking and recidivist. Andso that also forecasted what is becoming now a fairly clear trend in those two societal developments.
Milton Friedman was our fourth thinker. And you remember Milton's talk two years ago in which he reminded us all of Adam Smith's law, always a fond thought to any of us growth conservatives, and free market conservatives. Adam Smith's law was that if every man tried to improve his condition that that evoked an invisible hand of society which basically causes society to go in the healthy and right direction.
And then Milton Friedman added the Friedman corollary, which was, that as government gets involved in trying to decide what is best for individuals, the invisible hand moves everything in the wrong direction. And that, therefore, the only way to confront that tendency is to shrink and reduce the size of government.
On the action side, Rupert Murdoch was our first man of action. He gave the third Wriston lecture and gave us a blow by blow account of the Battle of Whopping, where he, and with Mrs. Thatcher's encouragement and abetting, aided and abetted as they say, by Mrs. Thatcher defeated the unions and provided, therefore, the technology and the cost reduction to move forward. You must have technology if you are disseminating news, because you remember the faster things go, the more accurate they are, and you must be able to transmit quickly. So, that point was reverberated two years later in Murdoch's talk. And thinking back on the events at the New York Post this year, it was no great surprise that, once again, Mr. Murdoch outfacedthe remnants of the trade union here in the newspaper battle there.
Last year we had Johnny Ray Youngblood, another doer, who gave a terrific talk and made the point that, you remember, he is in East New York where his group of 2,000, several thousand people have built 2,000 housing units in this minority areain this almost bankrupt in terms of improvements and quality of life, and yet they have rebuilt this single handedly with not much help from the government. And his view is you should never help someone who can help himself.
once again this theme of self reliance and individuality and individual responsibility echoes and reechoes throughout these lectures.
By the way, this school term two new high schools opened up in this impoverished district. And the high schools that they have had, the only place Johnny Ray Youngblood's kids could attend high school was Jefferson or Bushwick, the two worst high schools in the City. And thanks to Cole Genn and the Manhattan Institute, CEI, there are two brand new schools there, and we are very thrilled about it. And, of course, all of Johnny Ray's people are there in those schools.
So, now we have the consummate and ultimate doer and elected official, Mayor Ed Rendell from Philadelphia, who took over a City near bankruptcy. This is the fifth biggest city in the United States, of high stakes, and since then has been working to privatize, to confront unions and to move everything in the right direction.
Philadelphia is very much like New York, it is a port city. It is there on the Delaware River, with an even older history than ourselves, and we have much to learn from our brother city in Philadelphia.
To introduce Mayor Rendell is Nat Glazer. Nat is a Professor of Education and Sociology at Harvard Emeritus. He is also CoEditor of The Public Interest and has been for many years. He is a distinguished Scholar. He has written twenty books. And certainly not least a Trustee of the Manhattan Institute and a valued one at that. May I present Nat Glazer.
MR. GLAZER: Thank you, Richard. I am glad to see so many New Yorkers here today to hear the Mayor of Philadelphia. Philadelphia and New York City is known mainly for a famous joke, which I have decided not to repeat. On the other hand, you can approach me later.
But it is now known as an example of another City with problems, of how another City with problems, a City very much like New York, even if it is only onefifth the size, how it can with vigorous, courageous and intelligent leadership begin to address its problems effectively.
Edward G. Rendell, the 121st Mayor of Philadelphia, was elected November, 1991. He immediately faced terrible problems, so severe that even the New York Times took notice of it. It doesn't often take notice of things like this.
Basically the City faced bankruptcy. Mayor Rendell proposed the measures, they were complex measures, that were necessary to stave off bankruptcy.
A year ago, some of us may recall, we read an editorial in the Wall Street Journal titled, Progress in Real Courage. You know what real courage means, dealing with the municipal unions.
Well, the Wall Street Journal said, "Mayor Rendell invited a disaster. The work force, the average employee costs the City more than $50,000 a year in salary and benefits and is covered by absurd work rules. One rule which is no joke," and I am still quoting the Wall Street Journal, and of course, we always have to check it out, but nevertheless, they were right, said that, "Three city workers are needed to change a light bulb at the City airport." That would remind many of us of another joke, which I will not mention.
"After months of fruitless talks, Mr. Rendell gave the unions a deadline of 5 P.M. yesterday to agree to his final offer, changes in work rules, so that City managers could do their job, a cut in paid sick leave from twenty days to twelve and a two year wage freeze. The unions say they will strike and are taking out full page ads of piled up garbage." We remember that in New York too.
"Years ago ...” the Wall Street Journal continues, “ ... New York City's political establishment caved into the municipal unions and the City has never really recovered. Mayor Rendell is holding firm so far."
Well, we all held our breath, those of us who read the editorial and wondering what happens next. The day came soon, some unions did strike. But the educational work of Mayor Rendell, and it has to be educational work, paid off. He would go before groups, groups of ordinary employees of private business and ask, "Does anyone here have twenty days of paid sick leave?" The strike collapsed and Mayor Rendell managed to get contracts that saved off bankruptcy.
The encomia soon followed. Here is a headline from the U.S. News & World Report, "A Democratic's Tough Love Lessons". Mayor Rendell is a Democrat. That was in U.S. News & World Report. The Economist titled its story, "Back from the Brink".
But, of course, that's only the beginning. The problems of our old cities are serious and terribly difficult and not to be saddled by one victory or one act of intelligence, bravery and fortitude.
I have been looking at the Philadelphia Enquirer, I must say, for the last few weeks in preparation for Mayor Rendell's visit and it is no surprise that you will find that there is nothing different in Philadelphia from any of our old big cities. There are these meaningless murders going on all the time, people being killed pointlessly because they looked at someone the wrong way. There is problem ridden housing projects. There's concerns about police misbehavior.. There is a fight over a Civilian Review Board. There are Federal judges who have imposed caps on the number of prisoners you can have in the city jails and which, therefore, require the city to release people who think they should not be released. There are conflicts over set asides in City contracts for minority owned firms and there is overall, as in all our old cities like New York, a loss in the number of jobs in private employment, a declining tax base and a city government that may still be too expensive for the city. There is good news too, and this is a result of my reading the Philadelphia Enquirer. As you know, the Phillys won the National League Pennant, and they did not win the World Seriesbut after that terrible loss and disappointment, it turns out that Philadelphia has been rated number 3 in some national listing, liveable places, as the most liveable place in North America, beating out Toronto, its historic enemy, by one place. How much that will help Philadelphia, I don't know.
At any rate the problems all sound familiar. We have been reading about mayors with real courage. The Mayor of Indianapolis, the Mayor of Jersey City, who is here tonight and elsewhere who are tackling these problems, that have to be tackled. We now have a new mayor in New York who we hope will learn from these new mayors and attack ours with the same energy.
We have reached out to Philadelphia to hear from one of the new mayors who is showing the way how, Mayor Ed Rendell of Philadelphia.
THE HONORABLE EDWARD RENDELL: Good evening, everyone. I am pleased to be here. I grew up in New York. My mom still lives here. I got a chance to see her this afternoon. And it is a pleasure coming to New York, because I never feel quite so bad after I come to New York.
And, secondly, every once and a while I wonder what would it have been like if I had come back from law school and set up shop in New York and whenever I think about that, all it takes is the cab ride from Penn Station to my mom's house, and about halfway through that cab ride I am thoroughly convinced I made the right decision. And today the cab driver took me up Eighth Avenue and even for a native New Yorker it was stunning. I said to myself, if Moses came to life again and wound up on Eighth Avenue, he would have thought, gee, my speech about Sodom & Gamorer didn't work. Particularly if he learned that more Jews live in New York City than anywhere else on the globe.
But all kidding aside, I am a native New Yorker, I have great memories about my childhood, and there is no question that New York was and still possesses the potential to be the best and the most exciting city on the planet, and all of us. All of us, no question. And all of us who believe in the strength, and vitality and vibrancy and dynamism of cities, who believe that if the cities are run right they can be the very best places to live and to work and to play, all of us around the country are rooting for New York to come back. So, I am pleased to be here.
Let me give you a little bit of a road map about what I am going to do, and when I talked to Bill he gave me some time parameters and I assumed I would be starting around 7:30, giving those time parameters. I don't know what to do. I am really at a loss to make a snap decision, but we will do the best we can here.
What I had planned to do is give you a little bit of a run down of where we were the day that I took office, because I think it is instructive in what we did and how we f ought out of what was our most immediate problem and then, as importantly, tell you what I believe is the fate of American cities, even if American cities are run right, and what American cities need to be saved. And those are, in a way, two very distinct and separate things, but in a way they are interrelated.
I took office on January 6, 1992, in the City of Philadelphia. I was the 121st Mayor of a city that is a little over 300 years old. It doesn't make a lot of sense when you divide 121 into 300. And I didn't understand until I went to a marking ceremony for the oldest synagogue in Pennsylvania, Mecca Israel, and they happened to have the original Board of the Synagogue Minutes. And they read that a man who was a great friend of the Synagogue, not a Jew, but a great friend of the synagogue had been offered the job of mayor by the town fathers. And he had turned it down. And apparently, the system in early Philadelphia was that if the town fathers selected you to be mayor, you either took the job or paid a twenty pound fine. And this fellow went ahead and paid a twenty pound fine. And I thought to myself, if this was last year, how strange, this fellow paid twenty pounds not to be mayor and I just spent $5 million becoming mayor. It didn't seem to make a whole lot of sense to me.
I was sworn in and as I went down to the Academy of Music to take my oath of office, someone handed me a copy of USA Today which on the front page, in that column on the left, had a little box saying, "Edward G. Rendell, former District Attorney of the City of Philadelphia gets sworn in today as Philadelphia's 121st Mayor and he faces the most horrifying municipal fiscal situation in the country." And I almost told them to turn the car around and take me back home.
I took the oath of office and Philadelphia was running at a $230 million deficit on a $2.3 billion a year operating budget.
In my fourth day as mayor we were f aced with missing a payroll. It was only the last second intervention of a judge that allowed us to stretch out our payments that were due to the Employee Pension Fund that kept us from missing a payroll. We had a bond rating that was below any investment credit rating, was in the lower part of the junk bond, rating status. We had gone into the credit market in November of 1991, a couple of months before I was sworn in, to try to borrow money on a short term note, what they call a trans and no one on Wall Street would buy a nickel's worth of our paper.
The Philadelphia banks got together and in the great spirit of altruism that affects banks, I guess, all over, they did loan the City money for this six month period but charged them 21% in interest and fees.
To give you just one, to fast forward a little bit, we did the same trans borrowing for the same amount of money, for the same period of time, in November of last year, having been in office for less than a year and we were able to borrow money on the street and the interest and fees were about 4.6%. And that was in less than a year.
Well, let me get back to where we were. We were a city that with that cumulative budget deficit, if nothing changed my four years as mayor, that budget deficit would grow and that means with a wage freeze, that budget deficit would have grown to $1.4 billion or roughly 58% of our operating budget. Obviously, we needed to take action.
The first course of action that under normal circumstances you would look at is raising revenue, raising taxes. We simply didn't have that luxury. In the eleven years prior to my becoming mayor in the City of Philadelphia, we had virtually taxed ourselves out of existence. We had raised taxes nineteen times in eleven years. And those weren't minor fees or minuscule taxes. Those nineteen came from business tax, wage tax, property tax and sales tax.
In that nineteen years we had caused 16% of our tax base to leave. According to a study in the Wharton School, our wage tax alone in those eleven years had cost us the loss of 150,000 jobs.
So, clearly, raising taxes was not an option. It was not a viable option. Not just for political reasons, because I had the rare luxury, I was an American politician who could have taken office, spent about eight weeks on the job and gone on TV and said, "Folks, I know during the campaign I said that I would try not to raise taxes, I never said during the campaign that I wouldn't." Because I was very honest, I said, "Look, we are going to try, we are going to do everything we could to avoid raising taxes, we are cut every nickel of waste out of the government, but I can't tell you here and now that we can promise you not to raise taxes."
And I could have gone on the, air and said, "Folks, I have been mayor for eight weeks, I have had the books and that last administration, that last council, they were so bad, that having the books for eight weeks, we have no choice but to raise taxes, we are going to do it once, that's the end of it, we will get it over with now. And I could have sold it without the slightest bit of problems. That is how badly people thought of the predecessor council and the predecessor administration.
So, we didn't do that not to incur any political favor, we didn't do it because it would have been the last straw to break the City's back. We would have been literally shoveling sand on our own coffin. And I was determined and resolute not to do it.
So, what was our option? Well, option number one was massive across the board layoffs in every department. We rejected that as well, because there were two things that were driving homeowners, taxpayers and businesses out of the city. One was our incredible tax burden, which is the third highest, was at that time the third highest in the United States, behind only Portland and Milwaukee, but two was the level of our services. Our services stunk.
I have been mayor for twentyone months and our services have gone from terrible to somewhere between poor and fair. But that is substantial progress considering the financial environment that we worked in. But our services stunk, and to do across the board layoffs would have deteriorated services to the point that it would have had the same result, it would have continued the flight of taxpayers, homeowners and businesses from the city.
So, we were left with only one real option, and that was cut the cost of the 'operation of our government. Cut the cost. And the good news is, and this is real good news, that in 18 months, at the end of the fiscal year on June 30 of this year we had eradicated what would have been on that day, if we had done nothing, even with a wage freeze, we had eradicated a $450 million deficit, and we did it without raising one tax one penny. And to be honest, it was relatively easy.
I mean, I would like to stand up here and tell you that I am this courageous genius, but it was relatively easy, because there was so much material to work with.
We inherited a situation where, as Dr. Glazer said, our average city employee cost us over $50,000. To put it in terms that those of you who are business people would understand, we paid 55 cents in benefits for every dollar of wages. Now, I wouldn't hazard a guess at what the average company in New York pays, probably somewhere in the mid to high 201s.
Other governmental, or quasigovernmental bodies like the school districts in the city of Philadelphia were in the low 401s. We now are in the high 301s, because we took that benefit package and took it head on and reduced it significantly, by over $400 million. The contract we signed with our non uniform municipal unions and the arbitration awards that we won in dealing with our police and fire arbitrations, they were essentially identical to what we had negotiated with our non uniform work force, produced almost $400 million in concessions over a four year period.
And to be honest, we probably didn't do all that we should have. We saved over $300 million in the four-year period in health care costs alone. The average, this is a stunning statistic, when I first heard it, I didn't believe it, we were paying on an average, if you blend our four big unions together, we were paying about $500 per month per employee for health care. $500 ($6,000 a year) per employee per month. We now pay about $360 per employee per month. And we still have a great health care plan. We still have free, no copay, the best HMO managed care coverage that any citizen in the City of Philadelphia can obtain.
We still have point of service virtually for free. And we have Blue Cross, Prudential for a small stipend for a single person and a modestly small stipend for a married person with a family. We have prescriptions virtually free, $1, $2 copay. We have a dental and optical plan. Again no copay.
We have the top of the line and we have nonetheless reduced all of that.
Our workers had a total of fortyseven days off if they took them a year when I became mayor. And that is a worker who only has two weeks paid vacation. Two weeks paid vacation is ten. Twenty sick days was thirty. Fourteen paid holidays, including some you have probably never heard of, like we were the only place on earth to get both President's Day and Lincoln's Birthday. We got Election Day. We got Flag Day. I mean, we got them all. Good Friday. I mean, we got them all. And then because we got Good Friday, we have three administrative leave days that any employee can take at will so that Jewish employees could have the three major Jewish holidays off. So that is 47. And we haven't even begun to talk about our funeral leave policy. You are allowed 'three days off for the death of one of the five major relatives in your family. So, if you had a terrible year, you could get 62 paid days off in the City of Philadelphia.
Well, we went after all of that. We reduced the paid holidays from fourteen to ten. Last Tuesday was the first Election Day that hasn't been a paid holiday in over a half century in the City of Philadelphia. Tomorrow we will be celebrating our last paid Veteran's Day holiday. And Flag Day and President's Day went last year.
And those aren't just productivity issues, because think about a City work force. A city work force, most of it, about 40% of it works on holidays. Police have to work, fire have to work, prison guards have to work, water people have to work. So many of our people have to work on holidays, that when you designate something as a holiday, like Flag Day, everybody gets overtime. We saved about $2.7 million on each holiday we eliminated in overtime. Stunning, absolutely stunning results. But it is true.
And I assumed, everyone said what a mean and rotten guy T was during these negotiations, and I said that I thought that our city work force could overcome the emotional stress of being away from their families on Flag Day. And we had no reported nervous breakdown since Flag Day is no longer a holiday. On the other hand, I am very careful to never miss our noon time Flag Day celebrations.
We went after our disability system that was out of control. Our workers could get a partial pension and workmen's compensation at the same time. Our disability system paid them more money for not working than it did for working. We had frequent cases of double dipping. We had some famous cases that the Enquirer broke where a man claimed that he was injured at work because he slipped on some catsup at a seafood restaurant at lunch and the reason he claimed that this was work related because he said he was out with two other employees of his department and they were discussing business matters. He wound up getting an award from the Pension Board of well over $1 million.
It was a city that in terms of the benefit package was totally out of control. So, we negotiated a 30 month wage freeze and we got all of these concessions.
How did we do it? I know we are here looking for lessons, and obviously a lot of you have asked me about what in our experience relates to New York. How did we do it? We did it for two reasons. One, because people were innately fed up, and two, as Dr. Glazer said, we communicated effectively. And I started during the campaign and I never stopped, from the day that I took office. We communicated two very, very sound and correct facts: One, that we were out of money, no joke, we were out of money. Two, that the benefit package, compared to what the average Philadelphian got, was out of control.
Those things worked enormously well. The public was convinced without any doubt, every citizen from every segment of our public, that we were out of money. And I never hesitated to make that point.
I often said to people, "Look, I wish we had money, I wish that we could do something for our work force, just like I wish that we didn't have to cut the budget and reduce some of the services that are on the periphery for you the people of the city. But we don't have any money, we can't print it. You know, I would love to wake up tomorrow morning and have enough money to do all these things.” And I would tell them, "I would also love to wake up tomorrow morning and look in the mirror and say, "Gee, I am going to comb my hair in a pompadour today." I said, "That is not likely to happen, and neither is it that we are going to find any money." And people understood. And the benefit package, they absolutely understood.
It was interesting, during the negotiations we were visited by virtually every leader of every national union in the United States of America, and they weren't friendly visits. Now, they were visits that carried with them no explicit threats but, gee, you are a terrific guy and you are a democrat and we would like to see you make something of yourself in this world, and you don't want to run aground on this issue and you don't want to have happen here what happened in Pittsburgh, which had a horrible newspaper strike. I don't know if you remember the newspaper strike in Pittsburgh, but it was interesting. I mean, that never affected me a bit. Again, not because I am equipped with an extraordinary amount of courage, but because for every national union leader that came and put pressure on me, their local unions never said boo. And the reason they never said, boo, is their workers understood, their workers knew that the benefits the city workers were getting far outstripped their’s. Their workers knew that if we didn't do something, that they were going to have to pay the tab. They were going to have to pay the tab.
So, we didn't get any problem from any union in the City of Philadelphia other than the municipal unions themselves. Even though all these big names came across from the country to influence us. Even though at the Democrat Convention in July here in New York there was a demonstration outside the hotel against me. Even though in my own delegation they were carrying signs because the Democrat delegation, you are bound to get a few labor leaders in it, as they should be in our delegation and I had to sit there while people were carrying signs, "The Three Worst Enemies of Labor". I remember Frank Lorenzo, I don't remember number two, and I was number three.
I was visited by union members from other delegations. They came and sought me out to berate me, to absolutely berate me. But it was a water off a duck's back, because I knew at home the working people had had it, and because we made our case to the people of Philadelphia.
The unions tried virtually everything they could; television ads against privatization with people being put out of work and the father coming home and saying he wouldn't be able to feed his family anymore; appeals, unabashed appeals to race, saying that, Mayor Rendell and his advisors are a bunch of white guys in suits and they want to take away benefits and take away jobs from poor hard working black workers.
They tried to make the privatization issue one where the only thing we were going to privatize was blue collar jobs. In fact, we have privatized as many white collar services as we have blue collar services in the twentyone months that I have been mayor.
But all that fell on deaf ears. You know why? Because black citizens of Philadelphia were fed up. They were fed up with paying more taxes and seeing union workers get benefits that they could barely dream of.
So, it really didn't take much courage. And they went on strike and in sixteen hours the strike folded and they signed what is the most concessionaire contract in the history of the City of Philadelphia, not the most concessionaire contract in the United States.
As I pointed out during all of this, in California the state teachers took a 7% pay decrease. Gosh, even in New York one year a number of your union members took 17 unpaid furlough days, which is in essence a one shot across the board salary decrease. So, we didn't ask any salary cuts and we negotiated a contract zero, zero, two, three, and the two and three came in in the last quarter of the third year and the last quarter of the fourth year. And we wound up with a very good contract that was step one with getting the job done.
But all along I made the point, from the first day that I went on television and outlined how we were going to get healthy and get back on track, I made the point that we weren't going to balance this budget solely on the backs of our work force. That everybody was going to have to bear part of the burden, everyone; citizens, workers, managers, myself and everyone that I appointed to any sort of management position took a 5% pay cut in these twentyone months and we have a balanced budget and I still have not restored that pay cut. I think I will at the end of the calendar year, but I am not certain of that, but we have not restored it.
And our vendors, because as I went about looking at the other side of the coin, where we were going to save the other 55, 56, 57% of the money needed, we put them under the broad umbrella of management and productivity. And we created an office of management and productivity for the first time in the City of Philadelphia. And better still, we created the Mayor's Private Sector Task Force on Management & Productivity. And in my first year in office we had 300 executives loaned to us, either working full time or part time for the government, either working full time in the departments themselves, providing support and looking around and seeing if they could come up with ideas, or part time organized in groups that came up with ideas both by department and department or ideas that cross cut, like setting up a fleet management system with one fleet management office as opposed all of the different departments run their own fleets and repair their own vehicles, etc.
And I cannot overestimate the value of the Management & Productivity Task Force. It was remarkably good. And we went about it and saved a ton of money by doing this. And we saved it in a number of ways.
Privatization, yes. But privatization is more than just a money saver. Privatization is also a service delivery improvement. In most cases we have in every facet that we privatized, we deliver a better product. Not only do we save money.
We privatized in the first year fifteen different functions, we have fifteen on the drawing board now. With those thirty we will save about $33$34 million a year. And in almost every case we are delivering a better product to the citizens of Philadelphia.
And privatization has not proven nearly as hard to do as everyone expected for a whole number of reasons, which if you are interested, I will be happy to outline for you in the question and answer period.
Secondly, we took a look at our vendors. And I said during the campaign and I said when I announced our five year recovery plan, that our vendors would have to participate in taking a hit. And I announced that we would seek at least a 5% reduction in the cost of doing business with all of our vendors that we could that were in a no bid system. And we did it.
Law firms who do business for the City of Philadelphia must cap their fees in advance. Some of the firms decided they did not want to cap their fees. We moved on to other firms.
Investment bankers, we pay no one for just being part of the issue. They get paid when they go out and sell. And they get paid for performance. They get paid if they do an excellent job in selling, they will get more work the next time. And as a result we have in every issue; I mean, we went into the bond market in June, we wanted to take advantage of the interest rates and refinance, and even though we have improved our rating, we are still one level below investment grade in our rating, and yet on that day, on one specific day, we sold $15 million in bonds and we sold it at about 6.38% interest.
The City of New York, which has a fairly stable investment rate, credit rating, went in and sold $15 million of bonds that day and they sold it for 6.27% interest.
So, we have done very, very well, because we have put heat on the people who do business for us. And it is interesting, vendors of a major city have a tendency, either intentionally or unintentionally, to look upon the City as a fatted calf, an absolute fatted calf. One, because most of the bureaucrats who deal with the contracts don't care. They take the OPM approach'. It is other people's money. It doesn't matter to us. It plain and simply doesn't matter to us.
Two, often the relationship between vendor and government is a relationship between contributor and candidate, and they believe that the candidate will not in any way, shape or form do anything detrimental to their interests.
And, three, because government has never applied sufficient personnel to do oversight of their contracts. Well, we went in and we examined every single contract we had. And we saved millions of dollars.
My second month in office, the Office of Management and Productivity caught something that was unbelievable. We had a year to year lease in a Grade C building, which our Department of Public Welfare, DHS, was headquartered in. And the lease had an escalator every year of 9%. We were paying at that time, and we were about to be renewed again, we were paying $32 a square foot. Now, that may not sound so much in New York, but you can get space in One Liberty, the highest building, the newest building, the most dramatic architectural building in the City of Philadelphia for no more than about $27 a square foot, and we were paying $32 a square foot.
We went to the landlord and said, we are out of here unless you renegotiate our lease and renegotiate it for a term of one year, a short term of years. And we renegotiated that lease for $8 a square foot. $8 a square foot.
Better still, we renegotiated every single lease that we had and renegotiated them downward, except one. Every single lease that we had.
Better still, we looked at things like outside insurance for city businesses. We have something called the Philadelphia Parking Authority that, don't ask me why, but operates garages, parking lots and the like and requires a lot of property and casualty insurance and workmen's comp. And the way it had been done in the past was whoever the favored broker, local broker of the mayor was, that broker got the contract, went out and got a national company to write the insurance and whatever the rate was, the city paid.
Well, we decided we were going to do a little competition, and we took the three favorite brokers of the mayor and we asked them to compete and go out and find us a company that would quote us a good price. Well, number one, the good news is, in this competition the low bidder came in a million dollars under the previous year's quote for the insurance and that bidder won the contract, and then turned around and handled our claims work so effectively they saved us another million dollars in the claims area.
But the most amazing part of that entire exercise was that the incumbent, who had the good sense to also contribute to my campaign, the incumbent, therefore, was allowed to rebid again. And the incumbent reduced its bid by threequarters of a million dollars. I mean, think about that. You know the new bid was not one where they were going to take a loss or they would have just dropped out, right, and not bid.
So, the year before they had ripped the citizens of the City Philadelphia off for threequarters of a million dollars. They had gorged themselves to the tune of threequarters of a million dollars and nobody cared.
The one thing I am bound and determined to do, and I have said it, is as long as I am here, to the best of my ability and the ability of the people who work with me, nobody is going to take advantage of the City of Philadelphia anymore. Nobody.
We supply waste-water treatment services for a lot of our suburban towns, and the year before I became mayor the water rates were increased. And one of the suburban towns refused to pay the increase. So, I got together with my Water Department people. And they had sued us in court. I said, "Why don't we just shut off the waste water facility?" And they said, "Well, great idea, but under the Federal regulations, you have to give five years notice." I said, "Okay ... “ I said to my Water Commissioner, “.... you call Mayor So and So, and you tell him that your mayor said that he wasn't certain he was going to run for reelection, but the fact that they refused to pay their bill, number one, we are giving you notice today and number two, the mayor has decided to seek reelection because five years from now he personally wants to be there to turn the spicket off." Three months later they settled with us, and they paid their water bill.
No one is going to rip us off anymore; no vendor, no one else.
Thirdly, we went after collection of revenue. Collection of revenue. And in this year's fiscal year, we collected about $42 million more by better collection in fees and in taxes than we did before. And we started taxing people who had never paid taxes before in Philadelphia.
First of all, it was very easy. I found about 18% of the companies that were doing city business, particularly in the construction area, because its bids were from outside the City, didn't even have a business privilege license, no less paid taxes. And they were doing business with us, can you imagine the gall? Could you imagine the gall?
Secondly, lawyers and doctors who had their offices outside the City, but routinely came in to Philadelphia to practice and make big fees, paid no money. We found one doctor who came in, an of f ice in Montgomery County, came in to one of our eye hospitals twice a week, forty weeks a year to perform cataract operations, did somewhere between six and eight cataract operations a year. Last year under our best estimates he made about $2.2 million of income for those eighty days in Philadelphia and didn't pay one nickel of taxes. He does now. He does now.
Well, if you are a doctor, I'm sorry, there is nothing we can do. But be assured that we also got accountants, lawyers, and visiting athletes. Visiting athletes, who nobody ever thought of taxing before. Nobody ever thought of. taxing them before because, gee, they were just coming in to town for a couple of days.
Well, a plumber who lives in Delaware County and came into town eight days last year to work on the Philadelphia Convention Center, our new convention center, we routinely took out Philadelphia wage tax for the eight days of the plumber's income and nobody ever complained about that plumber, nobody said, oh, that poor plumber who makes about $28,000 a year. While Ryan Sandberg of the Chicago Cubs came in to Philadelphia eight days last year and he makes $7.5 million a year. And darn if we were going to take our wage tax away from plumbers from Montgomery County and not taking it way from ball players who make $7.5 million a year.
And the corollary of that, the year before I became mayor, our own baseball team, the Philadelphia
Phillys won a court case where they contended that they didn't have to pay wage tax on their away games. And the court ruled in their favor because that was money earned outside of the City of Philadelphia. Well, if the Phillys don't have to pay wage taxes for the games that they play the Cubs in Wrigley Field, it seems to me very elemental that the Cubs should be paying wage tax and they do now.
And if we hadn't collected $42 million last year in wages and fees and taxes, we would be in desperate trouble.
Lastly, in the general field of productivity and management. This is the field where if you examine the operation of government, there is no telling how much money you can save. There is no telling how much money you can save. We didn't double zip code our mail. A plain and simple thing like that. We didn't double zip code our mail. We do now.
We didn't have a good way of seeking reimbursement from the state for people who came into our District Health Centers. Someone would walk into our District Health Center, and we treat everybody, whether they have. coverage or no coverage.
But we would always ask them, are you covered by Medicaid. They would, yes. We would go ahead and treat them, submit the bill to Harrisburg, and find out they were covered by Medicaid. Or conversely they would say, no, we are not, but we knew from their income profile that they were Medicaid eligible, we would give them a form and say, go home, fill in this form and send it in to Harrisburg, after they received treatment.
It probably wouldn't surprise you that our success rate with that approach was one out of about 500.
Well, we cajoled and cajoled and begged the state, they gave us the computer tapes. We now know who is in, who is out, and before you get treatment at District Health Centers, you now fill out the form right there and then. We will recoup this year about $6 million of additional revenue and in a full fiscal year somewhere between $12 and $15 million.
And there are so many things like that to do. So many of them that it is unbelievable. So, it can be done.
We also changed our management rights, our work rules, our past practices. The Doctor referred to the fact, and it was true, that in Philadelphia under union rules that have been negotiated in prior contracts, it took three people to change a light bulb at the airport, a mechanic, an electrician and a custodian, absolutely true.
We had rules like working down, a ban on working down, so if you were a tractor truck driver for the City of Philadelphia and you came into work and your truck was in the shop, we could not force you to drive a smaller truck, whose driver was out sick that day. You sat there on your can and collected your salary and that smaller truck stayed idle.
We couldn't use volunteer workers. The City of Harrisburg used the State National Guard to clean and seal crack houses. They wanted to do it in Philadelphia. The union said, no, under the prior contract they were barred from coming in. I am happy to tell you that two months ago the National Guard cleaned and sealed its first crack house in the City of Philadelphia and are going to do over a thousand this year.
So, there is no telling what you can do. And it really was easy. And, in fact, if you talk to Philadelphians here, or people from the Enquirer here, they will tell you that we haven't achieved a number of our cost saving initiatives. A number of our productivity initiatives. And they are right. Which is one of the reason that I have abiding hope in the future, because there is so much more we can do.
And we tried to change the culture of the city work force too. We had a city work force that because of civil service and union rules, we had taken every ounce of incentive out of them doing their daily jobs. And we have tried in every way we can to increase incentives.
And let me just give you one example. We instituted something called a productivity bank. In the productivity bank we took $20 million and set it aside. And we have a loan committee, just like a bank, and the loan committee reviews applications from the departments. And most departments will tell you, gee, things are so tight in city government that we never have money to buy the things we need to do our job better or to save money. And that was true. So now we have a productivity bank and you can borrow money from US. But the rules are, we will lend you the money, in five years you have to save double what you borrowed from us. And the department pays out of its budget the money back during that time period with interest to us.
Well, our Revenue Department borrowed $5.8 million for a new package of software, which this year is going to net alone $9 million in increased collections. This one year is almost going to double it.
Our Streets Department borrowed $350,000 for energy efficient lamps in buildings and this year alone they are going to save about $740,000 on that.
The Streets Department borrowed money for a computer system to allow them to deploy their sanitation trucks on a much smarter geographic basis. It costs about $800,000. They will save $4 million in overtime reduction and the ability to eliminate six middle manager jobs.
So, the great thing about it is, that when the money comes in, the savings come in, other than the interest and the repayment of the principal, we give all of the rest of the savings back to the individual departments. It has our 'people on their toes. They are thinking of new ideas, thinking of ways that they can improve their departments. Privatization has them on their toes because not only do workers lose their jobs, or their city jobs when we privatize but managers lose their jobs. And all of a sudden people are thinking about it, let's do it, let's save money. It is no longer other people's money. It is their jobs. And we have put a level of incentive back into the city government.
All of those things are important, all of those things are necessary and we have done a very, very good job. That's the good news.
But there is bad news facing Philadelphia and I would submit to you bad news facing every American city, whether or not they have done the things we have done. I often give the analogy that I was elected to be the doctor of the city. And I found on January 6, 1992, a very sick patient. A patient suffering from two things, one cancer. Cancer that was very serious. Not inevitably fatal, but very serious. And if it didn't receive some good innovative treatment, it would be come, fatal.
And, secondly, the patient was suffering from a gun shot wound to the chest. Well, like any good doctor, you go after the gun shot wound to the chest because if you don't treat that, the cancer is absolutely academic. And it took us eighteen months to treat our gun shot wound, and the good news is the patient will survive. The bad news is the cancer remains unabated. And the cancer is and Dr. Glazer referred to it, the cancer is the terrible debilitating loss of tax base and loss of jobs faced by this city and every other American city. It used to be just the older northern and midwestern cities, but if we can take any consolation up here, the cities that are hurting the worst have names like San Diego behind them. As hard as that is to believe, names like San Diego.
We are all suffering, and we all have a problem. And that problem is that we have hundreds of thousands of citizens and the only difference is the size of your overall population. Philadelphia has a lot more than Atlanta does and we have a lot less than New York does. Hundreds of thousands of citizens who fit this profile, they were born into a single parent family.
In many instances, that single parent, although maybe a loving parent, was addicted to heroin or crack, cocaine, and totally unable to provide any sort of motivation to their son or their daughter. In many cases they lost the child to foster parents, who in many case, and not all, treated children as really just income producers, and provided no motivation for that child.
So, that child went off to school, and I know we've got some school district people here, and I am sure at one point in their career they were teachers, teachers all over our school system tell me that routinely kids in our school system come to school beaten, come to school sick or come to school hungry. Teachers have told me that they will literally dip into their own pockets to buy their kids food the morning of the general testing, the state testing or the national testing, so the kids don't have to sit there for three hours thinking about how hungry they are when taking tests that are important to their future.
So, what happens to that kid? What happens to that kid is by the time it reaches middle school, that kid, that boy or girl is dead on arrival. Dead on arrival. Its basic skills are so far behind the classmates, that nothing can change it.
And we in our school system, and I don't know if it is the same here, we bump that kid up and up and up, because we leave no one behind and then eventually in the 9th and 10th grade that kid is gone, out of school.
Now, if you roll back the clock a quarter of a century, if that man or woman had a good work ethic, could they find a job and get a decent salary and make a life for themselves and their family? Yes, in most cases, because there were jobs that fit that type of lack of skill or training in American cities. There were textile jobs, there were manufacturing jobs, there were warehousing jobs, there were processing jobs. There were a whole host and array of those jobs. Where are those jobs now? They are gone. To the great part, they are gone. Not entirely. Some of them have gone to the Sun Belt, many of them have gone to Indonesia, Nicaragua, you name it.
So, as a result, you've got hundreds of thousands of people in every major American city who may not have a great degree of book learning, but' they aren't stupid and they know that they have no future. They look down the road a little bit and know that they have no hope. And what does that produce? Dr. Glazer talked about the virtual meaningless killings that go out. Well, of course they are meaningless. They are meaningless because one person in that category looks across maybe a table at another person in that category and since the first person with the gun doesn't place any value on his life, because he has no hope, he surely doesn't place any value on the life of the person staring across the barrel of the gun, and bingo, they are gone. Bingo, they are gone.
We have kids today in Philadelphia who use automatic weapons and mow down another mirror image of themselves over disputes over a girlfriend, because there is no value on life because there is no hope. There is crime and there is drugs in every American city for a lot of reasons. And I don't mean to be overly simplistic. But because there is no hope.
Now, one of the things we have prided ourselves in Philadelphia is we cured the bullet wound. We took that budget deficit, didn't raise taxes and did it ourselves. We didn't go whining to Harrisburg or whining to Washington about not getting enough help. One, because the whining ceased to work and two, because it was a cop out and three, because it diverted your energy. We took all of our energy and dealt with our own problems.
And we are going to do the same thing about this cancer, the need to economically develop the city, we are going to try. It is my goal within the next year or year and a half to begin a slow and steady reduction in taxes in Philadelphia. We must reduce our business taxes. We must reduce our wage tax. We must reduce our real estate property tax.
I mean, good lord, we are faced with all of the problems of a global economy, a terrible national economy and we can't further burden ourselves against our most immediate competition, our suburbs, South Jersey and the immediate area by being the most heavily taxed and the poorest bottom line city in the entire area.
So, we are going to take steps to do it. We are business friendly. We are absolutely bears about getting things right. If a business makes a request and we can do it, we get it done and we get it done in record time. But you know what, that is not going to cure the cancer. Unlike the bullet wound, there is nothing I can do. I could be the best mayor in God's creation and I can have the best people working with me in God's creation, and we won't, on our own, cure the cancer.
There are only two ways to cure the cancer in my judgment, and we better start thinking of them very seriously, because hopefully, Mr. Guilliani will come and he will do a lot of the same things that we did in confronting unions and racheting down the cost of the government. But he won't be able to change the basic inherent endemic problems that face this City by himself.
Number one, we need to seriously look at Metropolitan governments. Real metropolitan governments. I don't know what it is like in New York but in Philadelphia we have given lip service to regionalization for years. Every one pats each other on the back and says, we have to act more as a region.
Well, there are three good examples of metro government in North America, one in the City of Toronto, one in the City of Portland and one in the cities of Minneapolis and St. Pauls. And what real metro government means is sharing taxes. And this is an over simplification of what goes on in those three cities.
But for the purposes of our discussion, the cities and the suburban towns and suburban counties keep 60% of their own taxes, put 40% of the taxes into a pool. That pool is distributed by a Metropolitan government made up of the leaders of the counties and the cities, and it is distributed according to common problems and according to need of the region. Unless we do that, we are in big trouble. Unless we do that it is going to take a miracle to save American cities.
Now, someone, we'll do a little test, and I assume the Manhattan Institute is replete with brilliant academicians and business people, what do Toronto, Portland and Minneapolis and St. Pauls have in common with their suburban areas that is not the case in New York and Philadelphia? Anybody. Homogeneous.
In Minneapolis and St. Pauls, and this is a generalization, an over simplification, but Minneapolis and St. Pauls and their suburban areas are all a bunch of blond haired Swedes, so it is pretty easy to share resources. Pretty easy to share resources.
I don't know if 'people are here from the school district, but how do you think the people of Scarsdale are going to react to sharing resources with the New York City School District? Not well. But let me tell you, people of Scarsdale and the people of Villa Nova and the people of Brenmar had better start thinking about it. Because that is way one to effectively deal with the problems of the city.
Way two is for the Federal government to get back involved.
I want to go through another exercise. I want you to close your eyes for a second and think about the Federal government of the country of France. Do you think there is any chance that the Federal government of the country of France would treat Paris and let Paris become what New York City has become? Not on your life. Do you think the Dutch would let Rotterdam decay the way we have let Newark and Detroit decay? Not on your life.
I went on a trade mission to Chile, which is the single biggest importer for the Port of Philadelphia, and the City of Santiago gets 75% of the revenue it needs to operate from the Federal government of Chile.
So, it is time f or the Federal government to step up on the plate and do something for cities. And I am not talking about revenue sharing, I am not talking about massive handouts, I am not talking about great society programs* I am talking about simple things that can help us.
I have been instructed to go into the question and answer period. But I just want to say one more thing before we open it up to questions. We ought to do what I said, and I've got a lot of ideas how the Federal government can help us without spending a lot of money, but we ought to do that for two reasons. One, we ought to do it because it is the right thing to do, because most of the people who are trapped in that hopeless situation that I described, are there from no fault of their own, and they deserve a chance. They deserve an opportunity to work.
But, two, we better do it because it is in our interests.
And I want to close by telling you the Tale of Two Cities? Los Angeles, and a city in Latin America. You all know what happened in Los Angeles. You all know about the riots and how the riots played out. my brother, who is a lawyer was teaching law school at Layola of Los Angeles and about a week after the riots he called me and we went over the events that occurred and he said to me that the scariest part of what had happened in Los Angeles, was that the street gangs who had caused most of the trouble were now talking that if there was another riot they weren't going to do it in South Central, they were going to go up into the hills.
And up into the hills is Mullholland Drive, is Bellaire,, is Beverly Hills. They were going to go up into the hills.
Now, bear that in mind and let's shift to that Latin American city. There is a Latin American city that has one of the most beautiful golf courses and clubs that you can find in this hemisphere. You fly right into the club, the club is protected from everywhere else by a big ten foot stone wall with barbed wire. And they tell you not to go into the city proper.
But a friend of mine was down to the club and he rented a car and he did go into the city. And the city was right at ocean level and at, the top of the city there were hills, beautiful hills. And he drove up in the hills and he said he found houses that were millionaire dollar houses, which would have cost a million dollars in Beverly Hills or Scarsdale or Villa Nova. And he saw all throughout these houses armed security guards carrying automatic weapons. So, finally he stopped and asked one of the home owners, "Why are all these men here with the weapons, is there something special going on?" And the homeowner, said, "No, we the property owners hire them to keep the people down in the city from coming up into the hills."
And down at the bottom of the city he found some of the worst poverty imaginable. People who literally ate mice to stay alive.
So, in Los Angeles, the street gangs say they are coming up into the hills. In Latin America, they hire private security guards with automatic weapons to keep people from coming into the hills. I don't think we want to see America become like that.
So, I think it is imperative upon all of us, and the people who can make change are the people in this room. You're going to have to speak for cities. You're going to have to help cities cure that cancer.
Thank you, very much.
MR. GILDER: I think we have heard a very provocative and interesting address. In view of the passage of time and the fact that we got started late, we will skip questions. I am sure you all have a lot of them. And we want to thank Mayor Rendell for coming to New York and speaking to us.
Folks, one last world. Chancellor Cortines over there. Ray, please come up, it has been a big school night. And I think people would like to meet you, just to look at you in the face. Ray Cortines has been over in Queens on a typical job of School Chancellor. He is meeting with citizens of that borough. But just the same he was able to come here tonight. And many of you have heard about him and we expect so much from him. We just want you to take a look at this fine man.
CHANCELLOR CORTINES: I know it is late, but just let me say, I am very appreciative for the gift to the Manhattan Institute, and it was a very poignant speech tonight about our cities. And it is my belief that if we can improve the education of our children and young people, and especially our very young, that we can indeed change the culture of our urban communities and create a better society.
Thank you for your help and your support.
MR. GILDER: Goodnight folks, we will see you next year.