Businesses planning referendum to block living wage.

Caught off guard by the push to extend the city of L.A.'s living wage ordinance to 12 airport area hotels, local hotel operators and business groups are now gearing up for a ballot box showdown with union and living wage advocates.

The message they intend to take to voters: this is the latest in a series of measures that is making Los Angeles a hostile place to do business, costing the city thousands of existing and potential jobs.

Last week, after heated debate, the Los Angeles City Council voted 11-3 to extend the living wage ordinance to 12 hotels on Century Boulevard, the first time the ordinance has been applied to private companies that do not receive direct contracts or subsidies from the city. The ordinance also covers dozens of independent businesses inside the hotels, such as gift shops and parking lot operators.

In two accompanying ordinances, the council voted 13-1 to require new owners of hotels that just changed hands to retain existing workers for at least 90 days and to pass along event service charges to workers.

The council is widely expected to uphold these votes when the measures come back for a second reading on Nov. 22. Mayor Antonio Villaraigosa has indicated he intends to sign them.

The existing living wage ordinance, passed in 1997, only applies to businesses that receive contracts or subsidies from the city, and indexes the wage levels to inflation. Currently, under this formula the 12 hotels and other businesses targeted in this latest ordinance would have to pay their workers $9.39 an hour with benefits or $10.64 an hour without benefits, even though they receive no direct monies from the city.

"This sends the absolutely wrong message to business, that the city can interfere with private businesses with which it has no contractual arrangement," said Gary Toebben, president and chief executive of the Los Angeles Area Chamber of Commerce. "That was not what was originally promised when the living wage ordinance was first passed in 1997. Now, the question is, 'What businesses are going to be next?'"

The Chamber, along with the Hotel Association of Los Angeles, the Valley Industry and Commerce Association and the Central City Association, spent the days after the council vote deciding whether to pursue a legal challenge or push for a referendum.

While no final decisions had been made as of Nov. 16, a consensus appeared to be forming to proceed with the referendum and then consider legal action should the referendum either fail to qualify, or if voters uphold the ordinance.

Gathering signatures

The idea behind the referendum option is that once the measure is on the ballot, it would be easier to mount a campaign to defeat it. Indeed, a broader living wage ordinance in Santa Monica targeting coastal businesses was defeated in a close referendum vote four years ago. In 2004, a statewide measure requiring employers with 50 or more employees to pay for health care was also put to a referendum vote by business and defeated.

Under L.A. city rules, in order to place an ordinance on the ballot as a referendum, nearly 50,000 valid signatures must be turned in within 30 days after the City Clerk certifies the ordinance. Assuming Villaraigosa signs the measure fairly soon after he receives it, that certification could take place by early December, which would mean the petition drive would coincide with the holiday shopping rush.

Arnie Berghoff, one of the lobbyists hired by the hotel association for this living wage battle, said he expects little difficulty in getting 100,000 signatures over 30 days. (Petition gatherers try for more signatures to ensure enough are ruled valid.) "If you go into a busy mall, you should be able to get lots of signatures," he said.

Then the question will be whether the City Council will place the measure on the May general city election ballot (at a cost of about $2 million) or call a special election, which would cost about $6 million to administer.

The council also has a third choice: it can rescind the ordinance, as it did a few years back when strip clubs turned in enough signatures to place a lap dancing ban on the ballot. Given the stakes, however, few believe the council will do this.

Assuming the measure does get placed on the ballot as a referendum, Berghoff said the campaign would center on the theme that the city has become increasingly unfriendly as a place to do business. "The campaign will be all about how anti-business the city is, how the city is costing jobs by its policies," be said.

Living wage proponents say they will counter with a campaign focused on the widening gap between rich and poor.

"This is part of a national movement. Earlier this month, minimum wage increases passed in a number of states, so we welcome a discussion on the fairness of a living wage. When voters are given a choice between whether they want a city of low-wage jobs or of middle-class jobs, we think that we would prevail," said Vivian Rothstein, deputy director of the Los Angeles Alliance for a New Economy, the organization of progressives and union activists formed 11 years ago to promote the original city living wage.

Complicating this living wage debate is the related worker retention ordinance for the airport area hotels also passed last week by the Council. It is virtually identical to the grocery worker retention ordinance passed by the Council last December that is now in litigation.

"If a judge overturns that ordinance, as we are hoping will occur, it will place in grave doubt the fate of the hotel worker retention ordinance," said George Kieffer, partner in the law firm of Manatt, Phelps & Phillips LLP, who has been retained as counsel by the hotel association.

Kieffer and Berghoff were both brought on board in October, eight months after the issue first surfaced and months after living wage advocates had apparently secured promises of support from a majority of city council members.

Theories abound

Indeed, along with the preparations for a referendum last week, there was also a fair amount of finger-pointing among business types over why labor and living wage advocates were able to outmaneuver business interests on this crucial issue.

Theories abounded, including a breakdown in communications between general business groups like the chamber and the hotel association. Also, cited was a leadership transition at the chamber, since former president and chief executive Rusty Hammer was too ill to take a proactive role.

Whatever the reason, labor and living wage advocates had the field largely to themselves for several months. According to Mike Pfeiffer, executive director of the hotel association, the response by business groups during those crucial summer months was largely limited to commenting on a legislative staff analyst's report on the issue.

It wasn't until October, after a highly publicized demonstration that featured L.A. city council members getting arrested alongside union activists, that business groups realized they had a problem.

"There's been some discussion among the business groups about getting more proactive in the political process and getting more assertive at City Hall," said Brendan Huffman, president of the Valley Industry and Commerce Association. "Business definitely does not have a good track record of doing this."

But now, Pfeiffer said, the larger business community has awakened. "There's a real fear right now, both among other hotel owners and among businesses at large, that they will be next. That's a real strong motivator."

And while not openly admitting it, living wage advocates are not denying they have larger ambitions.

"There is nothing in the offing, but we look at specific situations at specific times. If there is a concentration of low-wage workers in a given industry or geographic area, the living wage is a tool that can be used. And its use will be debated, just as this one has been," said James Elmendor, senior policy analyst with the Los Angeles Alliance for a New Economy.

BY HOWARD FINE 

Staff Reporter