The Los Angeles City Council may finally have awakened a sleeping giant.

From downtown Los Angeles to the Hollywood hills and the San Fernando Valley, business people last week began whipping out their pens to write checks and sign petitions to place on the ballot a referendum rescinding a package of city ordinances that requires 12 hotels along the Century Boulevard Corridor near Los Angeles International Airport to pay their workers a living wage, which is much higher than minimum wage.

Harvey Englander, a veteran political consultant hired by a business-backed coalition to run the referendum campaign, said the Save Los Angeles Jobs campaign had raised nearly $1 million as of early last week and stood a good chance of gathering at least 100,000 signatures before Christmas.

Among the reasons, the Hollywood Chamber of Commerce was not alone in using its annual holiday mixer last week as a venue for gathering more than 100 signatures.

Englander's goal would be more than twice as many signatures as needed to qualify the referendum for the next available election, likely the City Council run-off in May. The effort is also expected to energize campaign funding.

However, one crack developed in the business groups' solidarity last week when new owners of the LAX corridor's Four Points Sheraton Hotel decided to hire back hotel workers they had fired and ally themselves with ordinance supporters.

But at least some didn't see that as derailing the momentum against the ordinance.

"We call it what it really is a new minimum wage for the city," said Mike Pfeifer, executive director of the Hotel Association of Los Angeles. "If it starts with hotels around the airport that are not city contractors, businesses believe eventually will come to include them too."

The Los Angeles Area Chamber of Commerce will urge members to contribute to its political action committee, which will steer contributions toward the campaign. The Hollywood chamber plans to do the same if its own PAC, which its board approved establishing last summer, is certified in time. Otherwise, members will be encouraged to contribute individually.

Business groups such as the California Restaurant Association, the Central City Association of Los Angeles and the Valley Industry and Commerce Association also are backing the campaign.

David Fleming, local attorney and incoming chairman of the Los Angeles Area Chamber, said that while the broader business community has been slow in the past in putting its foot down when it thought the Council had overstepped accepted norms of a city's powers, the LAX hotel living wage ordinance crosses the line on several levels.

"I believe the business community finally realizes that we have a city government that is ambivalent to job creators," said Fleming. He noted that when the original living wage ordinance was passed nine years ago, city officials promised that it would require only companies that do work for the city to pay the higher wages and that the living wage would not be extended to other businesses.

"The role of city government is not to become the master union for everyone who isn't already unionized," he added.

Fairness issue?

The city's living wage ordinance, which up until now applied only to city contractors, would be expanded to workers at 12 hotels and the vendors within the hotels in the Century corridor. They would be required to pay workers at least $9.39 an hour plus benefits, or $10.64 an hour without benefits. It is to go into effect at the beginning of the year, although enforcement would be suspended if the referendum petition were filed before then.

In addition, the hotel legislation includes a worker retention ordinance nearly identical to a grocery worker version passed by the council last December and which is now in litigation. That would require any buyer of any hotel in the corridor to retain their workers for at least 90 days after the purchase.

The City Council's rationale for extending the living wage is that LAX-area hotels are similar to city contractors because they benefit from their proximity to the airport, which is a city-controlled asset. Ordinance supporters contend the corridor's workers are among the lowest paid of the city's hotel workers, and they see the issue as one of fairness.

Councilwoman Janice Hahn says neither she or Councilman Bill Rosendahl, whose district includes the hotel corridor, were pandering to labor interests when they proposed the legislation. Hahn learned of the low wages prevalent among corridor hotel workers though her work as chairwoman of the council committee that oversees the city's tourism industry.

"We were looking at the (corridor) and began talking with the workers," Hahn said. "Hotel workers are the face of the hospitality industry in the city. Happy workers means more business for tourism industry. I believe hotels there will be able to raise their rates to adapt."

But several corridor hotel managers said the requirement not only unbalances an established hotel industry wage structure, but makes it harder to maintain profit margins which they claim are among the tightest in the area.

When Tommy Spencer left a Santa Monica hotel last September to became general manager of the corridor's Holiday Inn Los Angeles International Airport he was appalled at the hotel's low room rates, which contributed to a profit margin of less than half he was accustomed to in Santa Monica.

He got a rude awakening when he promptly raised rates. Occupancy levels plunged, to a degree that if he hadn't reversed course the hotel would have been down 10,000 room nights in a year. He would have had to cut at least three maids to offset the loss.

"Nothing in the corridor supports room rates higher than they are now," said Spencer, noting that it's the airline crew contracts for cut-rate rooms that help keep occupancy levels high along the corridor. "People stay near the airport because they're on layover, or here for a one- or two-day meeting at a specific hotel. Raise your rate any higher, and they'll book their room in Inglewood or Culver City."

Both Spencer and general manager Harris Chan at the Westin Los Angeles Airport noted that a living wage affects more than their hotel's lowest paid workers. "You end up having to raise the base pay for everyone," Chan said.

Spencer does acknowledge one unintended side effect if a higher prevailing wage comes to the corridor. "We'll end up with one of the lowest turnover rates in the city," he said. "The hotels will be able to pick from the A-List people leaving hotels in Pasadena and Inglewood to apply for work in the corridor. Now how that affects the B- and C-List workers, the people have just come to this country with limited language and work skills but are able to get work here, I don't know."

Mixed feelings

However, Lance Lipscomb, owner and manager of the Travelodge Hotel at LAX already knows the mixed blessing that paying workers above the living wage can bring. When Lipscomb sold the land his hotel was under to the city in 2000 and then leased it back, his facility came under the city's current living wage ordinance.

"We had to accept that our profit margin would change but our employee turnover dropped to 2 percent," he said, noting his 147-room hotel is different in other ways from the other corridor hotels. "Around half of my employees come from just five families. They all realize that their success comes from the success of the hotel."

So Lipscomb likes the living wage, thinks other businesses should pay a living wage, too, and expects the other hotels would be able to adapt if it goes into law. But that didn't stop him from signing the referendum petition to overturn the ordinance.

"I have a problem with targeting a specific industry in a specific geographical area," Lipscomb said. "You want a living wage ordinance? Make it apply to everybody."

For reprint and licensing requests for this article, CLICK HERE.