Local business leaders were reeling last week after they got a closer look at the last-minute deal that was reached to avert a ballot showdown over extending L.A’s living wage ordinance to a dozen airport hotels.

Under the deal announced Jan. 31 by Mayor Antonio Villaraigosa, the City Council rescinded its original living wage ordinance that had upset hotels and prompted the business community to place a referendum on the ballot. City leaders then promised to replace it with a new living wage ordinance containing several provisions designed to allay the concerns of the hotels and the business community chiefly that there would be no further expansion of the living wage.

But as word spread late last week of the language being considered for the revised ordinance, business leaders were dismayed to learn that the “quarantine” of the living wage they had sought was far from ironclad. Without such a quarantine, they fear the quick spread of the living wage to businesses throughout the city.

What’s more, some of the promised benefits, such as a special economic zone around the airport highlighted by a mini-convention center, were vague and undefined.

About the only thing that was certain: unless the hotels could obtain a judicial injunction, later this year they would have to begin paying their workers the living wage of $9.39 an hour if they pay benefits or $10.64 an hour if they don’t.

“VICA is trying to find the carrot at the end of this stick,” said Brendan Huffman, president of the Valley Industry and Commerce Association.

Huffman and other business leaders were left confused by the rapid turn of events last week. One business negotiator said he left the negotiating table on Tuesday night believing business had secured a quarantine, only to find out five minutes before the deal was announced that “the language did not reflect the entirety of what we agreed to.”

But it appears that business’ hand may have been weakened by the results of two polls on the issue conducted in mid-January. One, commissioned and loudly trumpeted by labor, showed 74 percent support for the living wage ordinance.

The other, commissioned by the hotels, was not made public, and there were differing comments on the results. Publicly, hotel consultant Harvey Englander said “our poll did not show that we could not win the campaign.” But privately, one business leader who said he had seen the poll said the results were not favorable for the hotels and that a lot of effort would have to be made to switch many voters’ views.

“The poll results really took away a lot of the leverage that the hotels thought they had gained by placing the referendum on the ballot,” this business leader said. “It meant that when they were at the negotiating table, they didn’t have much to bargain with, and the Council folks knew this.”

Normally, only businesses that do business directly with the city are subject to the living wage. But in passing the ordinance, the pro-union City Council reasoned that the 12 hotels along Century Boulevard must pay their workers the higher wage because they are near a city asset, the Los Angeles International Airport. Business groups fear that logic could spread, forcing even more businesses to pay higher wages.

Hotel owners

Certainly, Councilwoman Janice Hahn, the sponsor of the living wage ordinance, acted on the assumption that a referendum was a loser for business. At a Jan. 19 breakfast sponsored by the Current Affairs Forum, she and hotel lobbyist George Kieffer sparred over the issue. Kieffer repeatedly sought some sign of compromise; Hahn wouldn’t budge. “You’re trying to get a deal because you know if you go to the people, you’re going to lose big time,” she said.

For their part, representatives for the hotel owners were not doing much talking last week. The hotel owners had pushed for an exemption from the living wage for the 30 percent to 40 percent of employees receiving tips; when city negotiators rejected that proposal on Jan. 29, the hotel owners essentially walked away from the negotiations.

(Most of the non-tipped workers already make close to or more than the living wage, so exempting tipped workers would have significantly limited the financial impact of the ordinance on the hotels’ bottom line.)

Late last week, reports circulated that the hotels might sue over the final ordinance. Calls to the hotels and the Hotel Association of Los Angeles were referred to campaign consultant Englander.

“The living wage ordinance was repealed. That’s what the referendum was all about and it achieved its goal,” Englander said. “As for the final outcome, it’s way too premature to talk about that now.”

Indeed, much will ride on the crafting of the ordinance language, both by City Attorney Rocky Delgadillo and by representatives from the council and the mayor’s office. The ordinance is expected to come back before the council’s Tourism, Trade and Commerce Committee later this month.

Tom Saenz, legal counsel for the mayor, sought to reassure business leaders that the language in the ordinance would make it “extremely difficult” to expand the living wage in the future. First, a study would have to be conducted that details the effect of the living wage on industry, consumers and workers. Then a panel of economists including one from labor and one chosen by business would weigh in.

Also, Saenz said that the language would clarify that the justification for expanding the living wage in the future cannot count benefits from common city assets like streets or police stations. Only major assets that generate business in their immediate vicinity sports arenas, airports and ports could be used to justify enactment of a living wage.

One of the major concerns of businesses over the just-rescinded ordinance was that the same justification that the hotels rely on a city asset (the airport) for their customers could be used for a citywide ordinance.

Business leaders were skeptical of Saenz’ promise.

“The concept of a slippery slope comes to mind here,” said Carol Schatz, president and chief executive of the Central City Association.

Overlay zone

Another concern: the “airport economic overlay zone” being proposed might provide another way for the living wage to be extended to more businesses.

Under talking points circulated among the key parties last week, by declaring this special zone around the airport, the city could then provide marketing and economic incentives to businesses located within the zone. Under the existing living wage ordinance, any business receiving direct city subsidies could be subject to the living wage.

Saenz disputed this, saying the existing law only applies when there is an ongoing contract, not a one-time grant of subsidies. But again, business leaders were skeptical of this explanation; one actually scoffed at this interpretation.

Whatever the case, business leaders say they expect to push the council as hard as possible in coming weeks. Indeed, in private, there was still a fair amount of finger-pointing last week among business leaders over who dropped the ball and allowed labor to push through a living wage ordinance virtually unopposed until just three weeks before the Council vote last November.

Business groups vowed not to let that happen again.

“If we are successful in writing the replacement ordinance in the manner that was discussed in the conversations we had with city officials, we will be taking a step forward in improving the business climate in Los Angeles,” said Gary Toebben, president and chief executive of the Los Angeles Area Chamber of Commerce.