PAY PLAN INTRUSIVE OR JUST? CRITICS SAY CITY NOSING INTO PRIVATE ENTERPRISE.

Byline: RICK ORLOV Staff Writer

City government's effort to extend a ``living-wage'' ordinance to hotels near Los Angeles International Airport has launched a heated national debate over how much power municipalities have in setting wages for the private sector.

The premise of the plan, working its way up to the full City Council, is that about a dozen Century Boulevard hotels benefit from a city asset -- the airport -- and therefore should be required to abide by the living-wage ordinance already in effect at LAX itself.

But that could put Los Angeles at ground zero in a furious national debate over how much local government can leverage its assets to set pay in the private sector.

Business groups around the city already have vowed to join the hotels in fighting the proposal, which they see as a test case that will determine if the concept can be broadened to other areas of the city -- and the nation.

``Our concern is what's next,'' said Brendan Huffman of the Valley Industry and Commerce Association. ``Using the city's argument, this could be expanded to any business near a government building.

``And if they start with hotels, where else will they go? Hospitals? Restaurants? Construction firms? There is no end in sight.''

Councilwoman Janice Hahn, who has been pushing the proposal, insists it is being limited to the Century Corridor and the hotels that she sees as benefiting from their proximity to LAX, its multibillion-dollar planned modernization plan and promised improvements for the area.

``Look, a lot of this was brought on by the hotels themselves,'' Hahn said. ``They benefit from their proximity to the airport, and a lot of us have been talking with them for months to improve working conditions, and they refused to listen to us.''

Under Hahn's proposal, the hotels would be required to pay workers a minimum of $9.08 an hour with health benefits or $10.33 an hour without health benefits.

They also would be required to ensure that employees are given their full pay, including tips collected from service charges.

The hotel operators, who recently organized to fight the proposal, insist that money is not the issue and that they already pay their workers almost double the living wage.

``The question is: How much should the city tell private companies what to pay?'' said Arnie Berghoff, one of the lobbyists hired by the hotels.

Berghoff said union issues also are part of the dispute, as some workers have said they are being prevented from organizing.

``The hotels are willing to have union elections, but they want to make sure the elections are run in a fair manner,'' Berghoff said.

In particular, Berghoff said, hotel operators do not want to sign a union neutrality card that would prohibit them from talking to their workers about unionizing.

Berghoff also said the hotels' use of service-charge money has been misunderstood.

``They do have a service charge, but it includes more than the gratuity to the workers,'' Berghoff said. ``The largest percentage goes to the workers. The hotels include a fee for the cost of linens, breakage and other expenses.''

Hahn said her proposal would require the hotels to separate those charges from the gratuity portion so everyone is clear on the costs involved.

``My concern in this is the workers,'' Hahn said. ``Tourism is the No. 2 business in this city, and a lot of the reason is that people come back to hotels where they feel welcome by a staff that is happy with their work. The hotels are not being fair to their workers.''

The hotels have hired attorneys to look at possible legal challenges if the council votes to impose the living-wage ordinance.

But officials with the Los Angeles Alliance for a New Economy said they are prepared to have their own team of lawyers join the municipal government's to defend the move.

The group was behind the original living-wage proposal adopted by the city more than a decade ago. That was limited to firms contracting with the city for concessions at LAX. The ordinance also required employees be kept on for 90 days when a business changed ownership.

James Elmendorf, the alliance's policy analyst, said his organization is concentrating solely on the hotels.

``We have heard the concerns of the business community and know they think this is just the first step, but we are looking at what we see as injustices at these hotels and dealing with that,'' Elmendorf said.

``We take this as it comes. We are looking at what we see as a specific problem in Los Angeles.''

Across the country, however, increasing numbers of cities -- including Boston, Baltimore and Detroit -- have been enacting living-wage laws.

Usually the laws are limited to contracts directly with a city agency, but Chicago recently passed a living-wage ordinance for big-box retailers that drew Mayor Richard Daley's first veto in 17 years in office.

Businesses, which say living-wage laws are costly, fear expansion in L.A. as the city government seeks to tie pay regulation to city assets.

``We think we can show that these hotels benefit directly because of LAX,'' Hahn said. ``They would not have the business they have if it wasn't for the airport.''

Critics counter that the hotels also benefit the city by providing a service to tourists and others who do business at the airport.

Elmendorf said his group sees the measure as similar to minimum-wage laws.

``Government has a long history of telling employers what they should pay,'' Elmendorf said. ``The federal government has a minimum-wage law, and the state has its requirements that are higher.''

Studies show the hotels along the Century Corridor are among the busiest in the city, but at the same time receive the lowest rates per room.

In addition, workers' wages are about 20 percent lower than at comparable hotels in downtown Los Angeles, according to a report from the city's Chief Legislative Analyst's Office.

Berghoff said that is because of surrounding competition and the need to offer corporate discounts to airlines and air companies to win their business.

And Berghoff and Hoffman argue that city interference sends the wrong message to business at a time when the city needs to be more competitive.

``If you want to talk about being unfriendly to business, this is it,'' Berghoff said.

But real estate consultant Larry Kosmont, author of an annual survey on the cost of doing business in cities, said Los Angeles is in an economic bind.

``It is expensive to live in and have a business in Los Angeles,'' Kosmont said. ``In order to compensate for the cost of living in this city, you have to raise the value of wages, which adds to the cost of doing business. It's unfortunate, but it's a fact of life.

``It's a vicious cycle, but you have to have good jobs at both ends of the scale. I think that this is just part of the cost and complexity of doing business in Los Angeles so that even when you are doing something that is right on humane grounds, you are doing something wrong.''

rick.orlov(at)dailynews.com

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